Economic growth in Africa has accelerated substantially over the past few years. But commentators point out it rarely translates to poverty alleviation and job creation.
Professor Niek Schoeman, Director of the bureau for economic policy and analysis at the University of Pretoria, says the economic drive in Africa is related to ‘— the increase in commodity prices [Africa’s main exports] and also the capital inflow, which boosts infrastructure, such as telecommunications networks.”
He says that growth is generally not sustainable and so far, growth has not translated into accelerated employment.
He cites the major problem with economic growth in Africa as a massive supply-side constraint.
‘Increased demand on the supply side is not met with increased domestic production. In this case, accelerated growth as measured in terms of increased expenditure on gross domestic product does not translate into an equal increase in employment on the one hand and shared income on the other.”
He says: ‘Using South Africa as an example, economic growth creates an increased domestic demand, this is met with increased imports, which negatively impact on the deficit of payments and pushes up inflation. This occurs especially when the currency is under pressure because of poor trade ratios between exports and imports.
Although mechanisms exist to protect countries in crisis from severe economic fluctuations, this may not translate as direct benefits to the overall gross domestic product.
‘Although traditional policies based on the Washington consensus have contributed substantially towards stabilising both fiscal and monetary scenarios in many African economies, the increased growth rates have proven to be unsuccessful in making significant progress towards poverty eradication by addressing the unemployment, redistribution of wealth and associated socio-economic problems in these economies.”
Schoeman says this points towards problems that are structural rather than cyclical impediments to employment and consequently output growth. He says that cyclical problems are in fact contributing very little to the current high and unresponsive rate of unemployment.
He says: ‘The inability of output growth to translate into significant employment creation and poverty reduction has created dualistic economies with a vast number of people restricted to ‘second economy’ activities. These offer limited opportunities to improve their skills or better their socio-economic conditions.
The result is increasing dualism with sticky unemployment in the formal sector (which in some cases is only limited to government jobs) with a large part of the population living in extreme poverty.”
Schoeman believes a new paradigm has to be found — one where employment creation and poverty alleviation is not merely accepted as a by-product of economic growth, but where creating employment is viewed as the key accelerator of such economic growth. ‘In this regard, innovative social development targeted at the ‘human factor’ should come into play more vigorously,” he says.
‘The focus here should be on designing and implementing policies that empowers and mobilises this untapped potential of society towards higher levels of growth rather than awarding handouts.”
‘Such a massive initiative in favour of developing human skills and improving living conditions will also address corruption and other problems with ‘good governance’ which seriously hamper growth and development.”