It is the season for forecasts and outlooks of all sorts, as the annual meetings of the IMF and World Bank open in Marrakesh, Morocco, on Monday.
The meetings are held in Washington DC only in two years out of every three, but the last time Africa hosted one of the meetings was 50 years ago when they were held in Nairobi. That they are back on the continent this year, with the two Washington-based institutions opting to stay with the plan despite the severe earthquakes that shocked Morocco not long ago, has been much celebrated in the run-up to the meetings. It has also given the sessions and seminars this week leading up to the two institutions’ formal board meetings more focus than usual on Africa and on the developing world generally.
Sadly, the picture painted in early reports is somewhat discouraging. The IMF’s flagship economic outlook reports will be out only later this week. But the World Bank last week published a new edition of its Africa Pulse report, this time including a detailed study on job creation in Sub-Saharan Africa.
The bad news is that the region is forecast to grow slower than any other region this year. It is expected to rebound next year. But the even worse news is that the continent, which is the world’s youngest and is showing the fastest growth in the number of working-age people, is also the world’s worst at creating paid work for them.
“Sub-Saharan Africa’s economic outlook remains bleak amid an elusive growth recovery,” says the World Bank. It has cut its forecast for the region to just 2.5% for 2023, which is one of the slowest growth rates for decades. This is expected to pick up to 3.7% in 2024 and 4.1% in 2025. But as the region’s economies have not grown fast enough to keep pace with its rapid population growth, in per capita terms growth in Sub-Saharan Africa has not increased since 2015, when the most recent commodities boom ended. And it is projected to contract at 0.1% annually over the decade from 2015 to 2025.
Success stories
We talk of a lost decade in SA but its neighbourhood too has seen a lost decade. The two are not unconnected: there are large variations among the countries of the continent, but SA — one of Africa’s largest economies — is dragging it down, with other large economies such as Nigeria, and Sudan.
The World Bank’s bleak view arguably doesn’t give enough airtime to the success stories in the region. A good few countries are “pockets of resilience”, in its own words. They have been growing at 5%-6% and have turned their fortunes around and attracted investment, even if their politics remains fragile.
The big problem however, is jobs. Many have trumpeted the demographic dividend the continent supposedly should enjoy thanks to it having a youthful population while those of advanced economies are ageing. But that dividend works only if Sub-Saharan Africa can indeed create sustainable jobs for all those young people entering the workforce, and the World Bank’s evidence is that it doesn’t. For the same amount of economic growth, the region creates far fewer paid jobs than other developing regions such as East Asia. Only one-sixth of the region’s working-age people even have wage work, compared with one in two in high-income countries. More than 10-million youngsters join the workforce each year but current growth patterns generate just 3-million formal jobs annually. We may bemoan SA’s exceptionally high unemployment rate but it is hardly alone among its neighbours.
The World Bank doesn’t advise throwing money at public employment projects or the like. Rather its recommendations focus on making it possible to create and sustain more companies so that they can create more jobs. It also points out that the more growth there is, and the more consistent that growth is, the more likely it is that firms will be emboldened to invest and create jobs.
And the recipe is all the obvious ones: macroeconomic stability to keep inflation low and the public finances in good shape is a precondition but so too is more and more high-quality and affordable infrastructure.
“Political stability and a stronger institutional framework to support markets” is part of the prescription too, with the World Bank urging more competitive markets and regulatory frameworks that enable the private sector as well as urging countries to diversify their exports.
It is not rocket science, even if it is politically very difficult for many countries to pull off, our own included. If they fail, however, the overall picture could remain bleak, despite the resilient bright spots.
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