What Recovery Efforts Should Be Considered to Create More Jobs and Opportunities for Young People in Africa post-COVID?
What is the Paradigm Shift in the COVID-19 Policy response?
Generally, the policy reaction to this economic crisis has been very different from all other economic crises in human history. In previous economic crisis, it used to be the case that a handful of global north countries will initiate some fiscal and monetary initiatives to mitigate the impact of the crisis on households and firms – even that, they would either face political resistance, be accused of “doing little” or “acting too late”, depending on the country’s political dynamics. An example is the last global financial crisis suffered about a decade ago – where the Obama administration faced fierce political resistance from right-wing leaning conservative politicians in the US legislative arm of government, and the Eurozone being accused of acting “too late” to mitigate the impact of the global financial crisis on businesses and by extension, save jobs. In Africa, nothing significant was done to even be described as “little” or “acting too late”. But the global reaction to this COVID induced economic crisis has been completely different. All governments, both in Africa and everywhere else, acted quickly and significantly with policy measures, which received political cooperation from political opponents, to mitigate the impact on households, businesses and jobs. A recent report by the Organization for Economic Cooperation and Development (OECD) asserts that the global economy will see a less severe contraction than initially anticipated. This is perhaps, a testament of the fact that the stimulations during the peak of the crisis may have worked – although among Economists, the jury may still be out there on the extent of the effectiveness and the evenness of the stimulations.
The paradigm shift in policy response during this economic crisis should inspire us to even take bolder and more daring policy initiatives to recover fully and build a better global economy which is more inclusive and create more opportunities for our teeming unemployed in Africa. I discuss below some of the policy actions that governments and supranational development agencies need to embark on or support to create better economies post-COVID that create more opportunities.
Opportunities for More Sustainable Inclusive Growth to Create Jobs for Young People
Politicians must maintain the political will and cooperation shown during the peak of the crisis. This crisis has shown us that, politicians although may disagree on issues, can cooperate to deliver results on critical matters that affect ordinary people, especially in Africa. If we are to recover from this COVID-19 induced economic crisis and recreate economies that are more resilient and generate more decent and sustainable jobs, we need the political cooperation shown on the policy actions taken to mitigate the socioeconomic impacts of COVID – to be sustained.
Secondly, the COVID crisis exposed inherent vulnerabilities and weaknesses in the health systems across the world – even in the so-called advanced and developed countries. In recovering from this crisis, we need to focus on fixing the weaknesses and vulnerabilities in our health systems as exposed by the COVID crisis. Fixing these weaknesses and vulnerabilities in themselves creates sustainable jobs for the youth in the sector.
As a result of the disruptions caused to global value chains or supply chains during the height of the COVID-19 crisis, some are calling for the deglobalization of manufacturing networks. While I agree that China alone controlling a third of global supply chains is a weakness and an over-concentration of global supply chains in one country, I would rather call for focusing on strengthening global value chains by fixing the weakness exposed by the crisis as opposed to complete de-globalization of supply chains because evidence from the World Bank’s 2020 World Development Report shows that Global Value Chains create jobs and lift people out of poverty. One way to do that is to diversify manufacturing networks, and make them evenly distributed across the developing world, where much of the world’s teeming unemployed youth are located, to create more opportunities for the youth. Correcting the weaknesses of the Global Value Chains require more trade liberalization and shunning protectionist trade policies (from all governments) because the data from the 2020 World Development Report reveals that the rapid growth of Global Value Chains in the late 1990s and the early 2020s was aided by trade liberalization policies enacted in many parts of Asia.
As a follow up to the preceding point of diversifying Global Value Chains to other developing regions like Sub-Sahara Africa, attracting manufacturing networks post-COVID to create more opportunities for the youth, demands huge investment in human capital that is not only cheap but also quality and efficient. In recent times, evidence from the October 2018 edition of Africa’s Pulse strikingly shows that Africa’s Human Capital is not only low but also inefficient. Moreover, Africa’s current participation in Global Value Chains is largely forward – thus, trading in only raw materials and commodities, which explains why much of Africa’s foreign direct investments (FDIs) are resource-seeking investments and not efficiency-seeking investments – unlike China and other emerging markets with higher (both forward and backward) participation in Global Value Chains. For Africa to start attracting efficiency-seeking FDIs that create decent, well-paying and sustainable jobs, the continent must work to improve its business operating climate as well as building quality human capital.
Although I would expect the Africa-wide trade liberation under the Africa Continental Free Trade Area (AfCFTA) to further aid Africa’s integration into Global Value Chains, quality and highly-skilled labour will be key in attracting global manufacturing networks.
More efficient public spending is needed post-COVID to create more opportunities for the youth. This is particularly important because the stimulus packages given during the COVID crisis in most countries were debt-financed; which means that countries are going to dedicate a significant portion of their resources to meeting bigger debt obligations post-COVID. We need to cut wasteful public expenses. In a recent IMF report, it is estimated that about a whopping third of infrastructure expenditure globally is lost to inefficiencies. For low-income economies like Africa, the report notes that it could be more than a staggering 50%. In other studies, it is estimated that the health sector loses about 15% globally to efficiencies – this could be worse in low-income countries. Therefore, we need to take measures to significantly cut down losses to free-up more resources post-COVID to be able to invest in creating more inclusive opportunities for our teeming youth – which include strategic resource allocations to develop the blue and green economies for sustainable development.
Undoubtedly, COVID-19 has taught us all, including policy-makers and politicians, very important lessons that we need to apply going forward to better prepare for the next crisis – in whatever shape or form they may emerge.
By Bismark Elorm Addo
Associate Consultant with Konfidants, Africa focused Research & Advisory Firm