Africa: Critical need for new macroeconomic policies

By African Bulletin on November 4, 2010

“The United Nations Conference on Trade and Development (UNCTAD) estimates that for creating jobs and fight the poverty, it is necessary  first to ensure a steady expansion of the domestic demand by strengthening the collective purchasing capacity of consumers and boosting investment in fixed assets and technological innovation”.The last thirty years of growth strategies, led by developing countries were mainly based on export. Most of these countries have become overly dependent on exports, however, they will not all keep on developing these type of strategies (export) and succeed.

Therefore it becomes important to focus more on the internal forces that are growth and job creation. In many developing countries, especially the poorest, most of whom are African, the public employment programs are tools that can be very useful in the fight against unemployment and poverty. Not only they do have a direct effect on reducing unemployment, but they create purchasing power which will have indirect effects on employment throughout the economy. The Policy reforms implemented over the last twenty years have had only limited success, and the production structures are still similar to those of the colonial period, with a predominant role of agriculture and mining. Nonetheless, with the soaring commodity prices, the international banking institutions’ debt reliefs and the end of a number of long-delayed internal conflicts, however, have contributed to a positive growth recovery since 2003. Growth has continued on its positive slope in recent years despite the global crisis, but there is no indication so far that the structure of employment has actually evolved. The official employment rate remains high in sub-Saharan Africa, confirming that the problem is not a shortage of jobs in absolute terms, but the lack of acceptable and productive jobs. Agriculture activities are going down, progressively decreasing though the employment, mainly the informal. As a consequence, urbanisation is progressing, but agriculture still represents over 60% of total employment. At the same time, there was an increase in employment – mainly informal, too – in urban services and small commerce. The employment Wage, in the formal sector, represent only 13% of employment, and 60% of the employees are “poor workers”. As an immediate consequence, the households cannot and will not afford their basic needs to live in dignity with the incomes they receive. Wages and prices would fall until full employment was restored. Thus, for improving the employment situation, these developing countries have to faster their GDPs growth. That means necessarily export industries’ incomes must have a positive impact for the rest of the economy. In fine, all this will depend on the business inputs application, on the consumption increase of the domestic products to boost the domestic market, and finally on the public spending increase through higher taxes paid by the exporters. The way forward then requires a fundamental shift away from what have been done in these last 30 years towards new policies, that may vary depending on particular country situations, based on  the experiences and lessons learned that can be useful today. New Macroeconomic policies should strive for both short-run stability and long-term development. Therefore, public investment for building up infrastructure, technological capabilities and human resources is critical for growth and productive employment generation and, hence, a Social Knowledge Economy is also  necessary for poverty reduction and wealth