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Cape Town - The most crucial aspect for Africa to successfully benefit from its own greatest asset - its growing young population - is job creation, according to Abel Myburgh, associate director of BDO South Africa.
He pointed out that by 2040 Africa will be home to one in five of the world’s young people and the size of the continent's labour force will top China’s.
"It has been reported that Africa has more people under the age of 20 than anywhere else in the world. Sub-Sahara Africa (SSA) is a region where people aged between 15 and 29 will continue to constitute about half of the population of most countries for the next three to five decades. Currently, the estimated average age in sub-Saharan Africa is under 19," said Myburgh.
The African Development Bank (AfDB) recently reported that of Africa’s nearly 420 million youth aged 15 to 35, 31% are unemployed and discouraged, 35% are vulnerably employed, 19% are inactive and only 15% are in wage employment. Of the 10 to 12 million youths entering the workforce every year only 3.1 million jobs are available to them.
"We are failing to capitalise on Africa’s greatest asset for growth. It is our view at BDO that solutions have to be further explored and developed by governments and private sectors in order to provide meaningful employment to the continent’s rapidly growing young population," said Myburgh.
He proposes that multi-national companies with their vast business expertise invest in new business operations in Africa, and further participate by adopting or developing programmes through mentorship schemes, to encourage entrepreneurship.
Initiatives
"There are a number of initiative already in existence. Moreover, these potential entrepreneurs require start-up capital or better access to capital and in our view, provides investors with the biggest opportunity to participate in securing future growth in Africa," said Myburgh.
A couple of decades ago limited domestic demand and lack of infrastructure prevented the growth of strong local markets. But this has changed with the rapid economic growth in many African countries, he pointed out.
"Urbanisation is one of the most powerful growth engines the world has experienced and is especially evident in Africa. By 2025, the population of Dar es Salaam is predicted to grow by 85%, Nairobi by 77%, Kinshasa by 72%, Luanda by 69%, Addis Abba by 62%, Abidjan by 53% and Dakar by 52%. Compare this to a predicted growth of only 13% for Durban and 12% for Johannesburg and Cape Town respectively. As the proportion of the population living in cities increases, so will productivity."
The higher density of the population allows for the creation of domestic markets, the demand to emerge and local entrepreneurs to develop in an economic environment that is much more business-friendly than 20 odd years ago, according to Myburgh. It is reported that the African consumers increased from 59 million households in 2000 to over 106 million in 2014.
"There is no doubt that Africa is the most commodity-dependent continent on earth, partly because manufacturing still accounts for a relatively small share of output. Most goods are exported in a raw state without being processed, refined or having had value added to them in other ways," said Myburgh.
Economic growth in Africa remains, however, linked to commodity prices and is especially susceptible to swings in the global commodity prices as is evident with the oil exporting countries such as Angola, Gabon, Nigeria and Algeria.
Manufacturing
"On the upside, Africa stands at the threshold of a shift towards the services and manufacturing sectors, driven by a rising middle class and technological advancements. For the foreign investor, this socio-economic shift opens the door to a wide spectrum of services and manufacturing opportunities, especially in the downstream activities," said Myburgh.
"Therefore, the development of the manufacturing sector will provide a country with sufficient means to increase the direct benefit derived from its own natural resources, including improved tax potential and a larger set of job opportunities. We have seen a number of countries developing free trade zones offering investors a menu of tax incentives."
At the World Economic Forum on Africa in Rwanda the AfDB introduced its “Jobs for Youth in Africa Strategy 2016 – 2025” in order to create 25 million jobs and reach over 50 million Africans by driving inclusive growth across the continent.
One of the key points raised at WEF Africa, according to Myburgh, was that for Africa to transform its economy it has to industrialise - exploring the opportunities of adding value through manufacturing and most importantly addressing its unemployment challenges.
