GROWTH FACTORS IN AFRICA

PRODUCTIVITY IN SUB-SAHARA AFRICA:

FRIEND OR FIEND GROWTH FACTOR

Dr Christopher D. Mlosy Development Economist

CMlosy@csir.co.za

Dr David EC RogersPrincipal Scientist DRogers@csir.co.za

SOUTH AFRICA

24-26 November 2011

Abidjan (Côte d’Ivoire) 

TABLE OF CONTENTS OF THE MAIN PAPER

Executive Summary iv

1. Introduction 1

2. Productivity, Economic Growth and Employment 42.1 The Macro-economic Relationship - Productivity and the Quantity of Employment 102.2 Productivity Measurement in Sub-Saharan Africa 112.3 The Importance of Productivity in the Economic Growth in Sub-Saharan Africa 132.4 Strong and Sustainable Economic Growth in Sub-Saharan Africa 152.5 Lesson on Republic of South Africa 16

3. Productivity: Friend or Fiend in Sub-Saharan Africa? 213.1 A Fiendish Relationship 243.2 A Friendly Relationship 25

4. Conclusion 265. Acknowledgement 28Appendices 28References 29

HOW AFRICA IS GROWING

BURNING ISSUES IN AFRICA

• Africa is deeply concerned about the high incidence of poverty, unemployment and underemployment due to low productivity, especially in the urban informal economy and in rural areas where more than 60% of the poverty occurs. Corruption is a Disease.

• A common fear of workers in many countries with industrialized economies is that the industrialization of the poor nations and in particular Africa will lead to massive unemployment in their countries. They believe that the African countries, with their immense labour pools and lower pay scales, will produce goods so cheaply that competition becomes difficult.

• Weak economic growth, poor economic management, corruption, social inequality and discrimination together with the quality of governance are, among others, the major factors that cause and /or exacerbate unemployment and poverty in Africa.

• High and sustainable growth is a necessary in Africa, but not sufficient condition to reduce unemployment, sustainable development and poverty reduction also requires the development of cooperatives and adequate investment in productive sectors that enhance employment opportunities.

PRODUCTIVITY, ECONOMIC GROWTH AND EMPLOYMENT

1. The fundamental reason for addressing the three issues together is based on the simple observation that a substantial share of poor people in the world is already at WORK: It is not the absence of economic activity that is the source of their poverty, BUT the less productivity nature of that activity.

2. It is not just work that can raise people out of poverty. What is needed is PRODUCTIVE WORK. The ILO Employment Policy Convention, 1964 (No.122), promotes freely chosen, PRODUCTIVE employment. The UN Millennium Development Goals articulate the objective of decent “Productive” employment for young people.

3. Sub-Saharan Africa is the only region where labour productivity decreased over the past decade. Between 1993 and 2003 productivity declined 0.2% a year. Nowhere has this decline been more severe than in agriculture, the mainstay of most. Economic growth, employment growth and competitiveness require an increase in labour productivity in Africa.

4. Therefore there is a need to more aggressive in using the skill development mechanism, which focuses in use of the technology demanded by new growth industries with productivity incentives.

Continues 5. The prime source of productivity growth is technological change.

Technological changes, in turn relies on innovation, which itself is influenced by an array of institutions, the quality of the supply of human capital, competitive market dynamics, spending on research and development (R&D),and investment in general.

6. Productivity contributes to a country’s standard of living, as the most fundamental barometer of living standards is the earning that people make, and the determinant of those earnings is the productivity with which people work. Source of productivity growth also depend on macro-economic institutions and regulatory factors.

7. 75% of the world’s poor live in rural areas where agriculture is the mainstay of the economy. Agriculture sector employs 40% of developing countries' workforces and contributes over 20% the GDP. Therefore, what Africa need is to build a continent in which all states have equal RIGHTS and EQUAL OPPORTUNITIES in which all can live in peace with neighbours without suffering or imposing injustice, being exploited or exploiting and in which all have a gradually increasing basic level of material welfare before any individual lives in LUXURY.

8. .

ECONOMIC GROWTH PROCESS

LESSON ON REPUBLIC OF SOUTH AFRICA

• South Africa’s economy displays many world-class features. These include a financial and physical infrastructure and telecommunications and energy supply networks that are a highly developed compared to most other developing countries.

• South Africa has a sophisticated financial structure with the JSE Securities Exchange, a large and active stock exchange that ranks 18th in the world in terms of total market capitalization.

• The single most significant factor distinguishing South Africa from other African countries is its experience of APARTHEID. Africans make up 76% of the population, their share of income amounts to only 29% of the total. Whites, who make up less than 12% of the population, take away 58.5% of total income.

• QUESTION: What about other sub-Saharan African countries?

UNEMPLOYMENT

0

10

20

30

40

50

60

70

80

16-19 20-24 25-29 30-34 35-39 40-49 50-64

Participation

Employment

Unemployment

PRODUCTIVITY: A FIENDISH RELATIONSHIP

1. Economic growth continue to go hand with hand with structural change, which often entails a fair amount of creative destruction as old jobs are lost in declining industries an new jobs are created in expanding sectors of the economy.

2. For a variety of reasons both internal and external to sub-Saharan Africa, a skilled labour force is increasingly important to its economy. As we have seen, most countries in the sub-continent is not alone in facing this challenge.

3. The complex relationship between productivity, economic growth and employment create conditions where policy initiatives can easily become misdirected and generate results that run counter to what was intended. Currently, employers are demanding workers with certain types of high-level skills that the unemployed and the working labour force do not posses.

2. There is a need to reform training and education systems as to improve both the quality and quantity of the skilled workforce.

PRODUCTIVITY: A FRIENDLY RELATIONSHIP

1. Productivity improvements allow companies to pay higher real wages to their employees and greater returns to their shareholders without jeopardising their competitive position.

2. Similarly, at the national level, productivity is the single most important determinant of sustained improvements in the standard of living.

3. Productivity in the employment strategies underpins a nation’s quality of life. Productivity improvement and wealth creation would facilitate increased spending on social programmes, health care, education, etc.

4. Economic growth, employment growth and competitiveness require a central focus on increasing labour productivity. This requires effective workers involvement to share the gains of productivity because without labour support the conditions of increased productivity cannot be met.

CONCLUSION

1. This analysis has shown that innovation is increasingly crucial to competitiveness, be it at the level of a firm, industry, sector, nation, or region. Improved productivity is critical to boost the growth and long-term labour absorptive capacity of the economy.

2. Knowledge has an increasing role in African and global economy that is not limited to just high-technology sectors. Increased globalisation was also shown to be reinforcing and perpetuating this accelerating importance of innovation, knowledge, and learning.

3. In terms of the quality of employment, productivity was seen to be primarily skills biased for several decades now. The causes of this skills bias were discussed with the increasing importance of knowledge being seen to be a significant demand-side force as was the strategic potential of an increasingly skilled labour force to reduce competitive threats because of further innovation.

Successful Nations

Successful nations in the twenty-first century will be those who are willing to take informed

decisions concerning their affairs in the light of their own specific realities and goals on

Sustainable Economic Growth in order to Curb Unemployment, and Sustain Regional and

Continental Integration Dynamics

THANK YOU