Africa's Lions: Growth Traps and Opportunities for Six African
Total Page:16
File Type:pdf, Size:1020Kb
BHORAT/ Promises and potential for Africa depend on six key nations. thiopia, Ghana, Kenya, Mozambique, Nigeria, and South Africa: these six countries are poised Eto shape the African continent’s future. Africa’s Lions examines the experiences of these fast-grow- ing or economically dominant countries, with expert researchers offering unique perspectives on the challenges and issues faced by all six. TARP Despite a growing body of literature on African economies, very little research has focused on the relationship between economic growth and employment outcomes at the country level. AFRICA’S Without adequate empirical data and a robust evidence base, policymakers have found informed decisionmaking difficult. Harnessing country-level household, business, and national accounts data—together with existing analytical country research—the authors attempt to bridge this gap. AFR ICA’S Between now and 2030, Africa will experience the largest share of growth of the working-age population worldwide. This volume offers an in-depth analysis of the relationship between economic growth and the structure of each country’s workforce, and the resulting implications—for human LIONS capital development, for the vulnerably employed, and for the working poor. It is an invaluable tool for policymakers and development practitioners as they construct the critical development policy agenda for Africa, a continent that will face significant challenges in the next decades. Growth Traps and Opportunities HAROON BHORAT, Professor of Economics and Director of the Development Policy Research Unit at the University of Cape Town, is a nonresident senior fellow at the Brookings Institution. He for Six African Economies specializes in research on labor economics, poverty, and income distribution. Previously, Bhorat served as economic adviser to several finance ministers and presidents of South Africa. FINN TARP, Director of UNU-WIDER and a member of the World Bank Chief Economist’s Coun- cil of Eminent Persons, is a leading international expert on issues of development strategy and LIONS HAROON BHORAT and FINN TARP foreign aid, with an interest in poverty, income distribution and growth, micro- and macroeco- nomic policy and modeling, agricultural sector policy, household and enterprise development, and economic adjustment and reform. editors Brookings Institution Press Washington, D.C. www.brookings.edu/press Cover design by Michael Accordino Photograph: Danita Delimont/Gallo Images/Getty Images 9780815729495-Africa's Lions_Gasch.indd 1 10/14/16 1:29 PM AFRICA’S LIONS AFRICA’S LIONS Growth Traps and Opportunities for Six African Economies HAROON BHOR AT AND FINN TARP EDITORS BROOKINGS INSTITUTION PRESS Washington, D.C. Copyright © 2016 THE BROOKINGS INSTITUTION 1775 Mas sa chu setts Ave nue, N.W., Washington, D.C. 20036 www . brookings . edu All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Brookings Institution Press. The Brookings Institution is a private nonprofi t organ ization de- voted to research, education, and publication on impor tant issues of domestic and foreign policy. Its principal purpose is to bring the highest quality in de pen dent research and analy sis to bear on cur- rent and emerging policy prob lems. Interpretations or conclusions in Brookings publications should be understood to be solely those of the authors. Library of Congress Cataloging- in- Publication data Names: Bhorat, Haroon, editor. | Tarp, Finn, 1951– editor. Title: Africa’s lions : growth traps and opportunities for six African economies / Haroon Bhorat and Finn Tarp, editors. Description: Washington, D.C. : Brookings Institution Press, 2016. | Includes bibliographical references and index. Identifi ers: LCCN 2016031544 (print) | LCCN 2016031765 (ebook) | ISBN 9780815729495 (pbk. : alk. paper) | ISBN 9780815729501 (ebook) Subjects: LCSH: Africa— Economic conditions—21st century. | Economic Development— Africa. | Job creation— Africa. Classifi cation: LCC HC800 .A57335 2016 (print) | LCC HC800 (ebook) | DDC 338.96— dc23 LC rec ord available at https:// lccn . loc . gov / 2016031544 ISBN 978-0-8157-2949-5 (pbk. : alk. paper) ISBN 978-0-8157-2950-1 (ebook) 9 8 7 6 5 4 3 2 1 Typeset in Electra Composition by Westchester Publishing Ser vices Contents Acknowl edgments vii 1 The Pursuit of Long-Run Economic Growth in Africa 1 An Overview of Key Challenges Haroon Bhorat and Finn Tarp 2 Ethiopia 37 An Agrarian Economy in Transition Yared Seid, Alemayehu Seyoum Taffesse, and Seid Nuru Ali 3 Ghana 77 A Successful Growth Story with Job Creation Concerns Ernest Aryeetey and William Baah- Boateng vi Contents 4 Kenya 109 Economic Growth, Labor Market Dynamics, and Prospects for a Demographic Dividend Mwangi Kimenyi, Francis Mwega, and Njuguna Ndung’u 5 Mozambique 145 Growth Experience through an Employment Lens Sam Jones and Finn Tarp 6 Nigeria 181 The Relationship between Growth and Employment Olu Ajakaiye, Afeikhena Jerome, David Nabena, and Olufunke Alaba 7 South Africa 229 Demographic, Employment, and Wage Trends Haroon Bhorat, Karmen Naidoo, Morné Oosthuizen, and Kavisha Pillay Contributors 271 Index 275 Acknowl edgments There can be little doubt that global sentiment around sub- Saharan Africa has changed signifi cantly over the last de cade. From being viewed as a continent rife with po liti cal and economic uncertainty, together with a tendency toward economic and social collapse, the current dominant view is that sub- Saharan Africa remains the last of the great untapped markets, ripe for rapid growth and development. While research on many of the key themes in African development has increased, there is very little research around trying to understand the relationship be- tween economic growth and employment outcomes at the detailed country level. This book, including its six country case studies of Ethio- pia, Ghana, Kenya, Mozambique, Nigeria, and South Africa, together with the editors’ introduction, is a successful collaboration of the Brook- ings Institution, the Development Policy Research Unit of the Univer- sity of Cape Town, and the United Nations University World Institute for Development Economics Research (UNU- WIDER) to help fi ll this gap and to stimulate further analytical work in this impor tant area. The growth of the global working- age population to 2030 will be driven primarily by Africa, so the relationship between population and viii Acknowledgments job growth is best understood within the context of each country’s pro- jected demographic challenge and the associated implications for em- ployment growth. Furthermore, a better understanding of the structure of each country’s workforce and the implications for human capital de- velopment, the vulnerably employed, and the working poor are critical to informing the future development policy agenda. In this sense, out- puts from the proj ect that led to this volume can help to inform and guide development policy across these African economies. We hereby express our sincere appreciation to our collaborating au- thors who worked with us to implement the African Lions proj ect from its inception in October 2013 to closure in January 2016. They engaged with us in building a quality research team, during which high levels of academic scholarship were maintained, with the results in turn pub- lished here for readers to absorb and enjoy. We wish as well to acknowledge our sincere appreciation for the effec- tive publication support from the Brookings Institution Press and the UNU- WIDER team that helped to publish the working papers. Special thanks go to Sarah Marriott and Toughedah Jacobs for their tireless ad- ministrative support to arrange critically impor tant proj ect meetings and to prepare the book manuscript. Thanks are also due to the director of the African Growth Initiative at Brookings Institution, Amadou Sy, for his continued encouragement and assistance. In addition, Brookings Institution gratefully acknowledges the sup- port provided by the Bill and Melinda Gates Foundation and the Wil- liam and Flora Hewlett Foundation. Brookings scholars, in conformity with the institution’s mission of developing in de pen dent, nonpartisan analy sis, and recommendations that refl ect objective and rigorous schol- arship, will make the fi nal determinations regarding the scholarly activities supported by the gift, including the research agenda, content, product, outcomes, use, and distribution of resulting publications, event attendees, and se lection of personnel associated with the proj ects sup- ported by the gift. Brookings scholars and staff will at no time lobby or other wise promote the interests of any donor. UNU- WIDER gratefully acknowledges the support and fi nancial contributions to its research program by the governments of Denmark, Finland, Sweden, and the United Kingdom. UNU- WIDER recognizes Acknowledgments ix that the value it provides is in the institution’s absolute commitment to quality, in de pen dence, and impact. Activities supported by its donors re- fl ect this commitment. Importantly, the pres ent volume would never have seen the day of light without the stimulating intellectual leadership of the late Profes- sor Mwangi S. Kimenyi, se nior fellow and director of the Africa Growth Initiative at Brookings. This book is dedicated in the deepest re spect to his memory following his untimely passing in June 2015. Haroon Bhorat and Finn Tarp ONE The Pursuit of Long- Run Economic Growth in Africa