World Economy

IMF Warns of Rising Joblessness in Africa

IMF Warns of Rising Joblessness in Africa
IMF Warns of Rising Joblessness in Africa

Unemployment in Nigeria, sub-Saharan Africa's largest economy, is running at more than 14% and climbing; in South Africa, the second largest economy, it is over 27%. For youth in both places, it is far more.

This may seem bad enough, but according to International Monetary Fund calculations the sub-Saharan Africa region's jobs travails are in danger of reaching uncharted territory in less than two decades. That is, unless the economies can create jobs for their burgeoning, young population, reported.

"By 2035, sub-Saharan Africa will have more working-age people than the rest of the world's regions combined," the IMF wrote in a blog post. "This growing workforce will have to be met with jobs." This has major implications for the region's economy, its security and wider immigration patterns.

In the past, some of the jobs strain has been taken up by the so-called informal economy which is dominated by street vendors, household workers and off-the-radar cash jobbers. Typically, these workers pay no tax and do not come under regulation, but they do add to a country's wealth.

The informal sector in sub-Saharan Africa was around 38% of gross domestic product in 2010-14, according to the IMF.

This represented a steady decline from nearly 45% in 1991-99, possibly a reflection of more formal growth in some parts of Africa. But up to 90% of jobs outside agriculture are still in the informal sector. It is not generally by desire.

Informal Employment

The International Labor Organization goes further. "Some of the characteristic features of informal employment are lack of protection in the event of non-payment of wages, compulsory overtime or extra shifts, lay-offs without notice or compensation, unsafe working conditions and the absence of social benefits," it notes.

"Women, migrants and other vulnerable groups of workers who are excluded from other opportunities have little choice but to take informal low-quality jobs." For the economy, informal sector work can be both positive and negative for growth. In some cases, for example, it represents entrepreneurship and startup businesses.

But a lot of it is far from opportune for growth. The informal sector tends to be low productivity work, partly because it attracts lower skilled workers. "In a country where the informal sector is large, the rate of economic growth is reduced," the IMF said.

This would suggest that countries such as Tanzania and Nigeria, where the informal economy is 50 to 65% of GDP, will fare worse than others such as Mauritius, South Africa and Namibia, where it ranges from between 20 to 25%.

Balanced Approach Needed

Africa is not alone, of course. Indeed at the moment the region where the informal sector plays the biggest role is Latin America and the Caribbean. It also amounts to around 15% of GDP in developed countries.

But with the large working age population about to explode, the countries of the region are facing a crunch.

"Countries need to adopt a balanced approach in the design of policies to grow the formal sector. This means focusing on ways to increase the productivity of the informal sector, while working to support the expansion of formal businesses," the IMF said.

It also called for improved access to finance to create the right kind of jobs.

Full-Blown Recession

The reasons for the high level of youth unemployment have been discussed ad nausea, and, of course, the downgrade of South Africa’s sovereign credit rating by the three most important ratings agencies, Moody’s, Fitch and S&P, come into play, as does the country’s nosedive towards a full-blown recession, reported.

There is, however, an additional reason why so many youngsters sit at home, frustrated and at the end of their wits. Older South Africans grew up in a world where they and their parents worked for huge parastatals like the railways, Iscor and Armscor.

It was quite normal for employees to stay at one company for 35, 40 years or even longer, while taking advantage of great medical aid and pension benefits. After the worldwide recession in 2008, the picture changed considerably.

Young people no longer found permanent employment as a matter of fact, and the benefits were greatly reduced. Some figures peg youth unemployment for jobseekers between 18 and 24 years old at as high as 48%. This means almost one out of two is unemployed.


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