Delivering Growth to People through Better Jobs

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Policy Responses

Sub-Saharan Africa faces the challenge of creating better jobs for more people. This will require an ecosystem that facilitates firm entry, stability, and growth as well as skill development that matches business demand. A strategy that enables firm growth and delivers high-quality jobs would rest on the following pillars: (1) fiscal stabilization and debt reduction, (2) political stability and a stronger institutional framework to support markets, and (3) demand-driven skills and improved organizational transformation of work.

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To bolster economic stability and manage inflation in Sub-Saharan Africa, enhancing tax collection methods, expanding the tax base, and investing in crucial sectors are key. Implementing new taxes, digitalizing tax systems for efficiency, and addressing illicit financial flows could substantially increase fiscal capacity. Simultaneously, adopting transparent, accountable debt management practices and promoting fair debt restructuring agreements are vital for sustainable public finance.

To strengthen the democratic process in Sub-Saharan Africa, a people-centered approach that boosts community resilience and restores trust between citizens and the state is essential. Improving the delivery of public goods and services, particularly in vulnerable areas, is key to enhancing state legitimacy. Building state capacity is crucial for market functionality, involving the provision of security, infrastructure, and investment in human capital, thereby fostering economic growth and reducing conflict. Additionally, creating regulatory frameworks that promote transparency, competition, and innovation is vital for supporting a robust business environment and ensuring property rights, investor protection, and contract enforcement. Strengthening national and regional institutions to support cooperation and integration can spur technological advancement and competition, with the effective implementation of the African Continental Free Trade Area (AfCFTA) playing a significant role in realizing these goals.

Boosting skill development and labor mobility is essential for improving productivity, expanding employment, and increasing wages in Sub-Saharan Africa. Effective human capital development requires prioritizing learning outcomes over mere school attendance, with emphasis on basic literacy and early nutrition. Cash transfers have shown success in increasing girls' education and reducing pregnancies. Vocational training tailored to individual aptitudes and inclusive participation can address underemployment and educational gaps. Private sector reforms should focus on regulatory efficiency and strategic enforcement to enhance firm growth and attract investments. Supporting entrepreneurship and integrating competition principles across regulations can stimulate economic activity and promote gender equality. Avoiding size-dependent policies can prevent economic distortions. Expanding markets and attracting international business, particularly through the effective implementation of the African Continental Free Trade Area (AfCFTA), are critical, although challenges in trade agreement execution and non-tariff barriers need addressing.

Delivering Growth to People through Better Jobs

Main Messages

The continued slump of the region’s large economies is dragging down Sub-Saharan Africa’s economic performance, and there have been increased incidences of attempts to destabilize governments by unconstitutional or violent means in recent years. This increased conflict and violence in the region weigh on economic activity, and this rising fragility may be exacerbated by climatic shocks. More than half of the countries in Sub-Saharan Africa (28 of 48) have been downgraded in their 2023 growth estimates.

 

Inflation has been receding, but it is still above central bank targets in most countries in the region. It is expected to decline from 9.3% in 2022 to 7.3% in 2023. Yet, 18 countries in the region have average annual inflation rates of two digits or more in 2023. Inflationary pressures are dominated by higher food and fuel prices and weakened domestic currencies - thus, eroding household income and weighing on private consumption.

 

Debt overhang continues to weigh heavily on Sub-Saharan African economies. Debt distress remains widespread, with 21 countries at high risk of external debt distress or in debt distress as of June 2023.

 

Sub-Saharan Africa’s growth has delivered poor job creation and slow poverty reduction. The region faces the challenge of creating better jobs for more people. This will require an ecosystem that facilitates firm entry, stability, and growth as well as skill development that matches business demand.

 

The urban employment share of the working-age population has remained roughly 22-23% over the past two decades. Much of the population in the region remains rural and employed in agriculture, which is strongly associated with poverty.

 

Lack of firm growth holds back the creation of good quality jobs, as 96% of firms have fewer than five employees. Policies that disproportionately affect larger firms—through taxes, regulations, or uneven enforcement—inhibit workforce expansion and lead to misallocation of resources. Even with strong improvements in labor demand, the region will need to provide a path to employment for the most vulnerable to meet the job growth required by the demographic transition.

 

To a large extent, the gender wage gap reflects employment segregation, representing a loss of potential productivity from the misallocation of female labor. Similarly, poverty can lead to self-reinforcing cycles of joblessness and poor productivity through worse education, health, and productivity-enhancing inputs. In fragile and conflict-affected countries, internally displaced populations, refugees, and migrants are especially vulnerable and many have difficulty accessing local opportunities and resources.

Data

Growth across Sub-Saharan African Countries in 2023