Investing in human capital – the way forward for Africa

By Megan Bybee [i]

Towards the end of August China’s stock market fell significantly, sparking global repercussions across the globe. Emerging markets were sent into a frenzy, and the South African Rand dropped to an all-time low, briefly reach R14 to the US Dollar. The downturn in China’s economy, which contributes approximately 15% of the world’s GDP according to the International Monetary Fund, reinforced the reversal of the commodities boom, severely knocking economies, especially many African economies, which rely on the exportation of commodities like copper, steel, coffee and platinum.

The ‘Africa rising’ narrative that has been touted across headlines and magazine covers in the past two years has mostly been linked to the continent’s wealth of natural resources. However, as the recent fall in the markets illustrated, relying solely on volatile commodities is a risky strategy for sustainable economic growth on the continent. More and more analysts are advising African leaders and policy-makers to diversify their economies and become less resource-dependent in order to ensure sustainable growth in the long-term.

Incidentally, Africa’s potential is not only tied to minerals and natural resources. In fact Africa’s diversity and human capital are increasingly being regarded as the continent’s greatest asset. Africa’s growing young population has the potential to catalyse growth and development on the continent. By 2030 it is estimated that more than 60% of Africans will be of working age and by 2040 Africa is expected to have a larger working population than China and India. So while most of the developed world’s population ages, Africa will have a young workforce for decades to come, ensuring a new generation of workers and entrepreneurs. This is of course if countries can upskill their populations, and with haste, in order to minimise the effect of digitisation and mechanisation on the availability of employment opportunities, particularly for more low-skilled vocations.

In order to reap the benefits of its demographic dividend, African leaders will need to invest in and develop their country’s human capital to help it reach its full potential. In essence this entails prioritising and investing in the various factors that influence a nation’s human capital, namely:

  • Good governance
  • An enabling economic environment
  • Healthcare and infrastructure
  • Education and skills development
  • Flexible and favourable labour market policies

Creating political stability through good governance, sound and transparent institutions is first on the check-list for enabling an environment with which the labour force can flourish. Corruption and political instability stifle growth, limits development and inhibits the ability of the other variables mentioned above to advance human capital.

Linked to a country’s political environment, is its economic climate. In order to capitalise on a young and growing population, creating an enabling economy is essential. Creating an economic climate which attracts investors, has sound economic policies, and encourages business in the country will improve a country’s economic outlook and stimulate economic growth which can be fed back into essential infrastructure and important basic services like education and healthcare, further improving the conditions of the population and the potential of talent available.

Once sustained economic growth has been achieved, the benefits thereof can be re-invested into essential infrastructure which has a significant impact on the calibre of a nation’s human capital. Establishing quality healthcare systems with a high proportion of medical personnel and facilities that are made equally accessible to all citizens and effective healthcare policies that seek to combat diseases including HIV/AIDS, malaria and tuberculosis will ensure that a country has a healthy and therefore productive workforce.

Perhaps of the most important and feasible ways of maximising Africa’s human capital potential is to invest in education and skills development in order to develop high-level skills that are necessary to expand and enhance the continent’s potential talent pool. This is particularly pertinent given the following trends:

  • The share of the employed workforce in low-skilled occupations like agriculture and mining in Africa is declining.
  • Sectors which require highly skilled individuals, like the financial services sector, retail and services, are beginning to employ a greater proportion of the labour force as economies become increasingly driven by knowledge-based activities. As such a skills gap is emerging, and addressing needs to become an urgent priority.
  • Africa suffers from a low level of adequate managers. In Ethiopia for example, managers made up only 0.5% of the employed workforce. This lack of managers is perhaps one of the greatest contributing factors to Africa’s poor productivity, financial management and service delivery.

Encouragingly, significant improvements in education have been observed throughout the continent over the past two decades, with enrolment rates increasing, levels of educational attainment improving, literacy rates that are higher, the quality of education is improving, and a growing number of tertiary graduates. Some notable achievements are listed below:

  • Throughout its post-conflict rehabilitation, the Democratic Republic of the Congo has seen tertiary enrolments increased by almost 200% between 1990 and 2012
  • The mean years of schooling in Angola has risen from four years in 2005 to ten years in 2012, thus improving the level of educational attainment of its population.
  • In Mozambique the percentage of the female population with no education decreased substantially from 40.5% to 29.1% over the eight year period between 2003 and 2011.

There is of course, still much that needs to be done, especially in terms of creating equal education and opportunities for all African citizens. Government partnerships with private sector businesses could prove to be an essential link here in continuing to improve education throughout the continent by aligning curricula to labour market demands.

Finally, improving labour markets and its policies will be essential to advancing the continent’s human capital potential. Job creation, especially for the 10-12 million young people entering the African labour market each year, is of utmost importance and is increasingly being prioritised on national development agendas. Akinwumi Adesina, the president-elect of the African Development Bank, Tweeted:

Tweet

Creating bridging opportunities for young graduates, including apprenticeships and internships, will help to ready new entrants for the realities of the workplace, creating an immediately productive and effective workforce.

While it is easy to sit behind a computer and devise a list of the numerous ways in which African countries can stimulate growth and development by enhancing human capital, actually affecting this change is an immense task. As such if Africa is serious about creating sustained economic growth and improving living standards on the continent, effective and immediate action needs to be taken to harness the potential of its demographic dividend. Creating partnerships with the private-sector, NGOs and development agencies may be the first step to effectively target the priority areas listed above.

Catalysing long-term sustainable socio-economic growth by harnessing Africa’s demographic is not just an elusive pipe dream. Yes, there are a seemingly endless amount of obstacles and systemic barriers that need to be overcome including corruption, slowing economic growth, poor infrastructure, poverty and inequality. However, with good governance, strong leadership and effective partnerships with thriving private-sector businesses, creating a skilled workforce that is able to drive economic growth and development can be achieved in Africa, and the continent may indeed be able to live up to its ‘Africa rising’ narrative.

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[i] Megan Bybee is a research analyst for KR and does research on human capital and labour trends in various African countries. To learn more about the Human Capital Research Portalclick here.

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