African countries must prioritise the creation of decent jobs as a central pillar of macroeconomic policy in order to attain the MDGs and eradicate poverty, according to the recently published UN Economic Commission for Africa / African Union Commission joint Economic Report on Africa (ERA) 2010. ERA 2010 argues that the current global economic crisis offers African countries an opportunity to lay the foundation for sustainable, employment intensive, high growth rates. The report also argues for structural transformation as the mechanism for achieving high employment growth.
“Africa’s long-term growth prospects and ability to sustain high rates of employment generation and broader social development depend on success in economic diversification,” the report says.
For most people, gainful employment is the only way out of poverty. This is especially the case for youth and other disadvantaged groups. Unfortunately, unemployment and underemployment rates in Africa are high and continued to rise even during the period of rapid economic growth that came to an end with the global economic crisis in 2008.
Appropriate investment in infrastructure and human capital, renewed and creative efforts at domestic resource mobilization, factor market reforms, incentives to support private-sector employment and efforts to increase productivity and incomes in the informal sector, are needed.
The report is organized into two parts. The first part, consisting of chapters 1 to 3, discusses current trends in the global economy and their implications for African economies. The second part, covering chapters 4 to 6, is the thematic part and deals with how to use the challenges created by the recent global economic crisis as an opportunity to develop and implement policies that lead to the structural transformation of African economies. Special attention is paid to reducing unemployment among vulnerable groups.
ERA 2010 also monitors the performance of African economies and finds that GDP growth in Africa declined from 4.9 per cent in 2008 to 1.6 per cent in 2009, but is expected to grow by 4.3 per cent in 2010. The volume of export growth is expected to recover from -4.9 per cent in 2009 to 4.2 per cent in 2010; the current account and fiscal balance and savings and investment rates all declined.
Commodity prices, an important determinant of growth in many African economies, fell at the beginning of 2009, but have since rebounded and are expected to stabilize in 2010 and rise moderately in 2011. The rebound in 2009 was mainly due to increased petroleum prices, resulting in part from increased demand from China following its stimulus package as well as the upward revision of expected world demand. However, as a result of the depreciation of the United States dollar, 2009 commodity prices were below their 2008 levels in real terms.
There were considerable regional variations in growth in 2009 across African regions and countries. Growth was highest in East Africa at 3.9 per cent, followed by North Africa at 3.5 per cent, West Africa at 2.4 per cent and Central Africa at 0.9 per cent, while Southern Africa posted a negative growth rate of 1.6 per cent.
Another major challenge facing Africa is climate change. The report states that agricultural output is expected to decrease by 50 per cent in Africa, resulting in severe undernourishment as a result of unchecked climate changes. The health burden and conflicts will increase as populations fight over dwindling resources. The need for Africa to develop adaptation and mitigation strategies cannot be overemphasized.
The costs of adaptation and mitigation are, however, extremely high and beyond the means of African countries. It is estimated that the cost of adaptation could be anywhere between 5 and 10 per cent of continental GDP. It is therefore important for the international community to help in financing the cost of climate change adaptation and mitigation in Africa.
Background: The Economic Report on Africa is the annual flagship publication of the United Nations Economic Commission for Africa and the African Union Commission. It is the major African Report tracking performance on African economies and raising challenging themes to stimulate policy debate globally on Africa. The report will be a major item of discussion in the annual joint meetings of the AU Conference of Ministers of Finance and the Economy; and the ECA Conference of Ministers of Finance, Planning and Economic Development.
Download the full report.