Africa to have largest labour force in the world by 2040: IMF conference
A 1% increase in the population of working age can boost gross domestic product by 0.5 percentage points, noted IMF director Christine Lagarde. (Image: IMF)
Africa’s greatest potential is its people, said IMF director Christine Lagarde in her opening address at the ‘Africa Rising’ conference, held across 29-30 May 2014 at the Joaquim Chissano Convention Centre in Maputo, Mozambique.
That Africa must try for inclusive and sustainable growth was the consensus at the conference, hosted by the International Monetary Fund and the government of Mozambique.
The conference seeks to take stock of Africa’s strong economic performance, its increased resilience to shocks, and the key, ongoing economic policy challenges.
Lagarde noted that there are three key areas of importance: to “build infrastructure, build institutions and build people.”
However, she warned that Africa, as “the youngest continent in the world”, faces an enormous demographic challenge.
By 2040, Africa will have the largest labour force in the world – a billion people of working age, more than China and India combined.
“Channeling this increasing reservoir of human capital to productive sectors offers unrivalled economic and social opportunities,” Lagarde said.
“To take full advantage of them will require skilful management and vision,” she noted.
Some estimates, she continued, are that a one per cent increase in the population of working age can boost gross domestic product by 0.5 percentage points. But to achieve this, decent jobs need to be created in the productive, formal sector of the economy.
Lagarde noted that currently only one in five people in Africa have formal sector jobs, and that this must change, since the informal sector is a recipe for “low incomes, low prospects and low productivity.”
She was convinced that more Africans can be employed in formal sector jobs, if there is “wider access to quality education, health care and infrastructure services”.
Particularly key was ensuring that girls have full access to education – Lagarde said that, on some estimates, the gender gap in education causes development countries losses of 90 billion dollars a year.
Lagarde argued that it is also crucial to close Africa’s “infrastructure gap”. She noted that “over the past three decades, per capita output of electricity in sub-Saharan Africa remained virtually flat.
Only 16 per cent of all roads are paved, compared with 58 per cent in south Asia. These shortfalls represent huge costs to businesses – and to people”.
Despite the “daunting costs” of closing the infrastructure gap, she argued that it had to be done, since “high quality infrastructure can be a magnet for foreign investment. It can accelerate diversification and job creation, and support further regional integration”.
However, she also admitted that some IMF approaches in the past had been misguided. She said the fund had moved away from the legendary Structural Adjustment Programmes, which she described as “laundry lists of what had to be done”.
Despite the strong growth in sub-Saharan Africa, “poverty remains stuck at unacceptably high levels”, she admitted.
“If the global crisis has taught us anything, it is the importance of making the benefits of growth more broadly shared. When everyone benefits, growth is more durable.”
Africa’s mineral resources, if properly managed, offer unparalleled opportunities for economic growth and development, said Lagarde said even as she lamented that in too many countries, rents from extractive industries are captured by just a few.
She pointed out that mining “can account for an important share in output and export earnings, but often contributes relatively little to budget revenues and job creation. This corrodes the fabric of the economy and its social cohesion.”
Finally, Lagarde called for “strengthening the institutional and governance frameworks that manage these resources,” adding that “transparency can help increase accountability – and help that these resources are harnessed for the benefit of all.”