UNCTAD Board focusses on creating jobs, reducing poverty in Africa

 

UNCTAD Secretary-General Supachai Panitchpakdi said: “We’d like to look for solutions to this puzzle.”  He noted that UNCTAD has tried to encourage greater investment in productive capacity in Africa, of the sort that should lead to more and better jobs.  Africa has become more open to the global economy and “has done the right things,” he said.

 

But what appears to be needed is good basic strategy for attracting foreign direct investment, including into agriculture and including more effective South-South economic cooperation  – and less red tape, Dr. Supachai said.  A number of African countries “are doing this and are moving in the correct rational direction,” he said.  But he added that “We still aren’t seeing the employment growth we would like to see.”

 

Industrialization “has not really taken hold in Africa,” he told the meeting.  The process is delicate – for example, openness of African economies can make industrialization difficult because of exposure to strong international competition.  “In fact, African economies have become more dependent on commodities trade,” he said, and there continue to be structural difficulties, including with small-holder agriculture and with limited intra-Africa trade – an area of high potential which has not been exploited.

 

One solution could be the development of “sectoral economic development policies” for such things as industrialization, agricultural development, and services, Mr. Supachai said.  For example, he said, a way must be found to begin “the first green revolution in Africa,” to find seeds and farming methods that work and boost harvests on the continent. 

 

H.E. Mr. Mothetjoa Metsing, Deputy Prime Minister of Lesotho, told the meeting that job creation in Africa is an “urgent priority.”  Challenges include high rates of population growth, investment in sectors that do not lead to large numbers of new jobs, and rapid technological advancement in the global economy, which makes it hard for African countries to keep up, he said.  To that, Mr. Metsing said, he would add a shortage of financing and other economic opportunity for the poor – obtaining investment, financing, and other means of founding businesses and creating jobs is still difficult for many African nations.

 

The recent global financial crisis and uncertainty over access to foreign markets – for example, access for Lesotho’s exports to the United States, its most important trade partner – also are significant, Mr. Metsing said.  His nation and many other African nations often are reliant on a small basket of export goods, he said, and that leaves them vulnerable to shifts in markets or to changes in rules or programmes for market access.  Needed investment depends in part on certainty about the future, and African countries often don’t have such certainty.  Full access for Africa to global markets – such as might come from a successful conclusion to the Doha round of world trade negotiations -- is crucial, he said.

 

H.E. Mr. Robert Sichinga, Minister of Commerce, Trade, and Industry of Zambia, said the current experience of Africa is “growth without jobs.”  In Zambia, poverty has remained a serious concern despite significant government effort, and the contribution of industry to the economy has been declining in recent years, Mr. Sichinga said.  Some 68% of the population is under age 25, and many of these young people are moving to urban areas to look for jobs – creating a huge challenge for the country, especially when combined with poor and inadequate infrastructure; lack of alternative or affordable credit -- especially for small- and medium-sized enterprises; a minimal contribution of FDI to job creation; and a significant negative impact caused by HIV/AIDS.

 

The economic growth process is more important even than the growth rate, Mr. Sichinga said – what matters is “creating inclusive, encompassing growth.  The question is, where will all these young people find jobs?  The remedies must address these inadequacies.  Employment creation is not optional.  It is mandatory.  We just need to learn how.”  Most job creation is in small firms and in the informal sector, he said, and the Zambian Government now is focusing, among other efforts, on supporting small- and mid-sized firms, on adding jobs in rural areas, on boosting intra-African trade (including through establishing Intra-African Trade Centres), on channeling FDI into “multi-facility economic zones and districts,” on establishing industrial clusters “building on our existing natural agriculture and water endowment,” and on improving infrastructure and human skills and financing.

.

Serving as discussants following the initial presentations were Mr. Heiner Flassbeck, Director of UNCTAD’s Division of Globalization and Development Strategies, and Mr. Taffere Tesfachew, Director of UNCTAD’s Division on Africa, Least Developed Countries, and Special Programmes.

 

Mr. Flassbeck focussed on the necessary macroeconomic conditions for African job creation are extremely low interest rates – that is, rates below economic growth rates – and availability of such financing to small businesses and potential entrepreneurs.  Currently, Mr. Flassbeck said, interest rates in many African countries “are not conducive to growth.”  In some cases, the cause is as simple as lack of competition in the banking sector.  It also is necessary to have “participation of all” in the economic growth that is achieved – that is, it is important to tie wage increases to productivity. Otherwise, Mr. Flassbeck said, economic progress “is not sustainable.” 

 

He cited as an example the United States, where interest rates are now zero.  Wages have not increased – they have been compressed – and unemployment is high.  As a result, consumer demand has stagnated, Mr. Flassbeck said, and economic growth has stalled despite progressively lower interest rates.  If the government doesn’t intervene to boost wages, “they will never pull out of the slump,” he said.

 

Mr. Tesfachew said poverty reduction has occurred in Africa, but it has been “slower than in other regions,” particularly when compared to Asia.  “We are not trying to claim nothing has happened.  There has been a lot of progress in some countries,”  he said, but the difficulty is that poverty reduction and job creation in Africa haven’t closely tracked economic growth as they have in other regions.  In part, that is because African growth has been driven by the commodities boom, and because there “has been very limited structural change,” Mr. Tesfachew said.  “In fact, the commodities boom has re-enforced the traditional pattern of trade, which is dependence on commodities.” 

 

Meanwhile, Mr. Tesfachew continued, the share of industry in African economies has been declining.  Agricultural productivity also has not been increasing.  A massive investment is needed in agriculture, he said – farm productivity must be improved, both for employment reasons and for reasons of food prices and food security.  Mr. Tesfachew said furthermore it is vital to spur intra-African trade -- Asia, for example, has weathered the recent financial crisis in great part through thriving intra-Asia trade.

 

In the ensuing interactive discussion, delegates welcomed the focus of the Board’s High Level Segment on the development challenges facing Africa. “While these are multi-dimensional and hence not amenable to one-size-fits-all solutions, certainly there were models of development to be taken as examples from other regions”, the representative of South Africa suggested. In addition to intra-regional trade and economic cooperation, delegates from Nepal and Egypt cited issues such as the role of the development state, the complex requirements for least developed countries’ integration into global value changes, how green growth may be achieved, and how Africa can attract innovative sources of finance.