Aurelia Butler

Africa has a huge and rapidly expanding young workforce. And those young workers need productive jobs.We know what is needed to generate these jobs: enterprise. Not informal microenterprises, such as smallholder farms. It is organisations with enough formal structure to raise finance for investment, and sufficient managerial competence to reap the productivity gains from scale and specialisation.Yet Africa is desperately short of such organisations. They exist in Europe, North America and China, where workforces are ageing and shrinking. Meanwhile, the young workers with the energy and appetite for adapting to new technologies are in Africa.For decades, African leaders kept their countries trapped in the slow lane, building networks around patronage. Many businesses that entered Africa in these conditions bribed their way into local monopolies and contrived to take the resulting high profits out of the continent. Once expectations become anchored around patronage and privilege, they become self-fulfilling.

Paul Collier

Breaking free of these expectations is challenging. But, recently, a few governments have done so. There are influential models of successful transitions, such as the transformation of Singapore under its long-serving first prime minister Lee Kuan Yew, who jailed corrupt colleagues to make change credible.But Africa today is different to Singapore of the 1960s.The government of landlocked Rwanda, for example, crafted an ingenious pathway around tourism: high-quality short holidays piggybacked on attending conferences. Rwanda is now the third-most popular destination in Africa for conferences — and tourism is job-intensive. An equivalent pathway for Ghana, coastal and resource-rich, will exploit different opportunities.These transitions offer huge long-term potential for international business. Their success is also existentially important for the west to deflect African governments from alternative options.But transitions are precarious. Once Covid-19 hit, Rwanda closed its borders. It contained the spread of the virus and ensured that more than 60 per cent of its population of 13mn are vaccinated — on a par with European levels. The country has since reopened and aims to double tourism receipts to $800mn by 2024. However, the shock illustrates that transitions need underpinning.Rwanda’s airline, hotels, game parks and other businesses faced the same financial stresses as those in advanced economies. Affluent governments provided huge fiscal support for their businesses. Now, as Covid recedes, the patterns of demand and costs have so changed that some companies will close. But, having preserved the organisational capacity of business, other enterprises will be well-positioned to grow, helping to offset job losses.

Transitions in Africa required fiscal support from the international community to enable governments to provide similar assistance. The need for such support remains acute: they are short of private sector organisational capital and can ill-afford Covid-inflicted bankruptcies. Yet, during the pandemic, this capital was not sufficiently forthcoming.In the wake of Covid disruption, business opportunities are becoming apparent around the world: some businesses should be allowed to close, but many should be financed to survive, and others marked for rapid expansion.Providing similar assistance for African transitions is a massive global public good: they need support to enable them to become the role models that will inspire other countries.Fortunately, there is a way of linking the fiscal resources of affluent governments with many of those businesses in Africa which, in the global public interest, they should be financing. The money involved would be trivial both absolutely and relative to the likely pay-off.Between them, the governments of affluent countries own about 40 development finance institutions, most doing business with African enterprises. If they pooled information, they could rapidly estimate the total cost of the necessary support and report it publicly to the G20, the international financial institutions, and the African Union. A coalition of willing states could commit to share the modest sums involved.This would set a precedent: African transitions would be safeguarded against derailments beyond domestic control. This would make the continent more appealing to global investors and help prime it for growth.Paul Collier is Professor of Economics and Public Policy at the Blavatnik School of Government, Oxford university, and a director of the International Growth Centre More

Protests over job shortages have been frequent in Tunisia since the uprising that overthrew dictator Zein al-Abidine Ben Ali, in 2011. Rising unemployment and falling living standards have fuelled disillusionment with the country’s democratic experiment among many Tunisians.This, analysts say, explains the welcome received by Kais Saied, the populist president elected in 2019, who has since taken steps to increase his power through a new constitution voted in last month. Despite opposition warnings that it represented the final unravelling of Tunisia’s democracy, the charter was adopted by referendum on a turnout of 30 per cent amid widespread apathy.“The absence of development has everything to do with this moment [Saied’s restoration of one-man rule],” says Monica Marks, Tunisia specialist and assistant professor at New York University Abu Dhabi. “It is not the whole story, but it is the biggest part of it.”Since 2011, a succession of weak coalition governments has failed to deliver the jobs, or the improvements to state services and economic prospects, that Tunisians expected under a new democratic era. People in long-neglected inland provinces and the poorer neighbourhoods of coastal cities remain marginalised, facing high unemployment.Until President Kais Saied seized power, Tunisia had been seen as the only example of a successful democratic transition among Arab countries © Fethi Belaid/AFP/Getty Images“Our demands have all been related to jobs and development,” says Khalifa Bouhawash, an unemployed university graduate and one of the leaders of the Kamour movement, which halted oil and gas production in 2017 and 2020 at the crucial Kamour plant in Tataouine, southern Tunisia, as part of a campaign for jobs.This month, Tunisia hosts the Tokyo International Conference on African Development, led by the government of Japan and co-hosted by the World Bank and the African Union Commission. But Bouhawash notes: “Development here is very limited and the state of hospitals remains poor. Unemployment has grown and young men are migrating to Europe, leaving behind women, children and the old.”Economic growth averaged just 1.8 per cent between 2011 and 2020, when it shrank 9.3 per cent because of the pandemic. Unemployment is averaging at 16.8 per cent, rising to 38.5 per cent among the under-25s. The value of the dinar has halved against the dollar since 2011 and inflation is at its highest level for more than 20 years.Protesters blockaded oil and gas production at Kamour in 2017 as part of a campaign for jobs © Zoubeir Souissi/ReutersAlthough the country is already heavily indebted, the government, which subsidises bread and fuel for Tunisia’s population of 12mn, has said it needs an extra $7bn of financing this year.Until Saied seized power, Tunisia had been seen as the only example of a successful democratic transition among the Arab countries that rose up against dictatorship in 2011.Olfa Lamloum, Tunisia director of International Alert, a non-governmental peace-building organisation, says little has changed there in the past 10 years.

“The province of Kasserine, for instance, still has the three poorest districts in the country, where the poverty rate is above 50 per cent,” she says. “In Kasserine, Tataouine and Kairouan provinces, when the Covid crisis started, there wasn’t a single intensive-care bed or intensive-care specialist. In some parts of Kasserine town, unemployment is at 40 per cent among youths between 18 and 34.”Bouhawash points out that the closest well-equipped hospital for anyone needing serious medical care in Tataouine is 250km away. “We produce 40 per cent of the country’s oil production, but there is no decent public hospital and, if you need an MRI, you have to travel to another province,” he says.Protesters halted production at the Kamour plant for four months in 2020, only ending the blockade when the government agreed to provide work for 4,000 people, and loans to 120 others to buy livestock. But most of the jobs are temporary, in areas such as cleaning, security and gardening for public-sector companies.Lamloum says such “precarious” low-paid work was also common under Ben Ali’s regime. “There was no break with the past,” she says. “These are structural problems that relate to social and regional inequalities and that require new development strategies, new public policies and a real redistribution of wealth.”She says the temporary jobs “do not solve any problem” and are just aimed at soothing public anger. “Democracy is only real if it extends to social and economic areas,” she argues. “It’s not just about having elections every five years.”

Shutdown: protesters have twice halted production of oil and gas at the Kamour plant © Fathi Nasri/AFP/Getty Images

Marks and others are sceptical that Saied will be able to tackle the entrenched social and economic problems. He is seeking a loan from the IMF that will require austerity measures, which are likely to run into popular resistance.Meeting expectations for jobs and development will be his “Achilles heel”, says Lamloum, pointing to the protests of the past decade.Bouhawash, who was handed a two-year sentence by a military court for his role in the Kamour protests, says he aims to leave Tunisia once he has successfully appealed against the ruling.“I know governing a country in these economic conditions is very difficult, but going back to one-man rule is even more dangerous,” he says. “To muzzle the press and every free voice will not be accepted by young people and the educated. They won’t accept it from their own fathers, let alone the state.” More

When KY Amoako was growing up in 1950s Ghana, he hung on every word of Kwame Nkrumah, the liberation leader and, later, the country’s first prime minister and president. Amoako, who spent a lifetime working in “development”, remembers the heady feelings that Nkrumah inspired in a young man whose country and continent were on the verge of throwing off colonial oppression.“Africa was going to be prosperous, strong, united, and respected,” he wrote of Nkrumah’s project to “raise up the lives of our people” in what would become 54 independent nations.Amoako built a career at the World Bank in the 1970s and became head of the UN Economic Commission for Africa — two institutions he believed could help realise Nkrumah’s vision. Writing in his memoir some five decades later, he was clearly disappointed: “So why is Africa still poor?” he asked.The answer to that question is complex and disputed. Much research points to factors such as poor leadership, weak institutions, corruption, and lack of infrastructure. But these proximate causes fail to explain why those elements are present or lacking — and why similar obstacles have been at least partially overcome elsewhere, particularly in Asia.The depredations of the transatlantic slave trade and the short, brutal history of European colonialism go some way to explaining subsequent disappointments. New countries with random borders struggled to build modern nation states and to break free of the extractive economic models they had inherited.Yet such analysis goes only so far. As Stefan Dercon, professor in development economics at Oxford university and author of Gambling on Development, says: “The only lesson here is: get a better history.” The key to breaking free, he argues, is what he calls an “elite bargain” in which those who control the levers (and wealth) of their new states agree to roll the dice in favour of development and expanding economic opportunity.

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In Dercon’s view, development is primarily a matter for countries themselves. Outside assistance in the form of overseas development aid, loans, or technical transfer can only play a peripheral role, he says, bolstering nation-building projects that are already under way. In some cases, he argues, overseas assistance can warp incentives and actually do damage.Whatever the reasons, Africa remains the world’s poorest continent by almost any measure — a picture that did not seem inevitable when leaders like Nkrumah were fighting for independence.According to the World Bank, in purchasing power parity (PPP) terms, which adjusts for local costs, oil-rich Equatorial Guinea, at $18,000, has the highest per capita income of any continental African country, though highly unequal distribution renders that figure near meaningless. The poorest country is the Central African Republic which, along with others such as South Sudan, Niger and the Democratic Republic of Congo, barely clear income levels of $1,000 per capita.To take another measure, the average gross domestic product per capita in sub-Saharan Africa, again in PPP terms, is $4,120. But that compares with south Asia’s $7,000, east Asia’s $20,300, and a world average of $18,700. Nkrumah’s Ghana, though a relative African success story, is often contrasted unfavourably with South Korea — which was equally poor at independence but now has a per capita income of $47,000, making it nearly eight times richer.

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“From that point of view, African development has been disappointing,” says Akihiko Tanaka, president of the Japan International Cooperation Agency, which administers Tokyo’s overseas development budget. “But, since the beginning of the 21st century, many sub-Saharan countries have registered quite significant economic growth, with a 5-6 per cent growth rate fairly common.” Growth, Tanaka adds, is not the sole measure of success, though it helps to raise tax and improve services.“Development is the expansion of freedom,” he says, referring to the definition of Amartya Sen, the Indian Nobel Prize-winning economist. Sen has argued that the definition of success is when people can live their lives as they please, not as poverty or other constraints dictate.By this measure, some progress has been made. In August, the World Health Organization reported that healthy life expectancy in Africa had risen by a remarkable 10 years since 2000. At 56, it is still eight years below the global average, but it has caught up five years since 2000, an indication that some countries may have turned a corner.Among the new factors in that time are improved democratic accountability, debt forgiveness and the arrival of new investors, notably China.

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This rise in healthy life expectancy — and other improved indicators, such as big falls in child and maternal mortality — are described by Matshidiso Moeti, WHO regional director for Africa, as “testament to the region’s drive for improved health and wellbeing of the population”.But such development gains, she warned at a recent conference, were now being threatened by multiple shocks. The Covid pandemic damaged health programmes, closed schools and squeezed economies, while the war in Ukraine has sharply raised food prices. “Progress must not stall,” she said.A further threat to progress, however, is a lower appetite among some richer countries, the UK chief among them, to provide development aid. Although experts such as Dercon argue that external assistance plays only a marginal role in development, in areas like health it has had an outsized impact.Foreign governments, multilateral institutions, and private organisations, such as the Bill & Melinda Gates Foundation, have funded vaccination and anti-malaria campaigns, provided antiretroviral medicines for HIV patients, and helped build bottom-up health services in many countries.Organisations such as the UN World Food Programme have provided essential food aid in regions including the Horn of Africa, the Sahel, and Madagascar, where a three-year drought has badly affected the south of the country.But while the assistance has helped stave off crisis, it has not had a lasting impact, says Lalaina Rakotondramanana, prefect of Ambovombe in Madagascar’s south. “We don’t need emergency support any more, we need development,” he says, noting that international agencies have pumped billions of dollars into Madagascar in the past 30 years. “Where has that money gone?”A suspicion that international assistance may be wasted has allowed the UK to cut its development pledge from 0.7 per cent of gross national income (GNI) to 0.5 per cent with little public outcry. In July, the British government blocked non-essential development payments on concerns that the cost of relief work would breach that lower spending cap.Advocates of development assistance fear the UK is setting a dangerous precedent. Japan, which is organising the Tokyo International Conference on African Development in Tunisia in August, spends 0.34 per cent of GNI on overseas development assistance, according to Tanaka of JICA — a sum he would like to increase. “Now the UK has decided to do this, I worry if those anti-ODA [official development assistance] people could use this as an excuse to not to agree on the expansion of development co-operation,” he says. “I hope that others will not follow the UK.”

Under Emmanuel Macron, France has been edging in the opposite direction, seeking to raise the proportion of money it spends. “France has probably surpassed the UK government with 0.55 per cent of our [gross national income] in ODA,” says Rémy Rioux, president of the French Development Agency, a government-owned financial institution.Of Paris’s push to bolster assistance to Niger, a poor country that is threatened by growing insecurity, Rioux says: “The work of development is to identify something we can support. It is not about decrees from outside. It is: do we have the tools to unlock the dynamism and positive developments in the countries themselves?”Not long before he died, Kofi Annan, former UN secretary-general, told the FT: “I think aid is important, but no nation can expect to develop on the basis of assistance from outside. My own view is that Africans would prefer to stand on their own.” More

For Navalayo Osembo, the “Made in Kenya” tags on the running shoes her company produces are a hard-won source of pride.“It has been an extremely difficult job,” says the founder and chief executive of Enda, the first manufacturer of professional running shoes in Africa. “I was saying: ‘I want to create this product, there’s no infrastructure to create it, there’s no skillset to create it.’”Enda — Swahili for “go” — started out in 2017 making whole shoes in China. But it has since moved much of the work to Kenya. Depending on the model, between 40 and 80 per cent of work is now done in the country, which is home to some of the world’s greatest runners.But, after six successful years — taking annual production to 24,000 pairs of trainers, creating 80 direct and 2,500 indirect jobs in Kenya — Osembo is considering outsourcing most production to China again, leaving only the design and marketing in Kenya. “I think we can be a Kenyan brand without necessarily being made in Kenya, because the business has to survive,” she explains.Many countries globally have pursued economic development through manufacturing and exports. In east Africa, for example, Kenya, Ethiopia and Rwanda have all sought to emulate approaches taken by South Korea or Mexico.However, manufacturing has recently gone backwards in many African countries, as local producers such as Osembo face being overwhelmed by rising costs, infrastructure problems that hamper logistics, high energy prices, unreliable power grids, tax and customs burdens, as well as cheap Chinese imports.

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In Kenya — despite the country’s reputation as a freewheeling business environment — manufacturing has struggled to sustain a transformative rate of growth. As a sector, its share of GDP almost halved from a peak of 13 per cent in 2007 to 7 per cent in 2021, according to the World Bank.Osembo cites high import taxes on supplies, customs bureaucracy and supply chain disruption among reasons to move manufacturing to Asia: “I am such a big believer in development, but also from a practical perspective, I need to be able to plug in the global supply chains.”Rajan Shah, chair of the Kenya Association of Manufacturers and of Capwell Industries, a food processor, says that “low competitiveness, regulatory burden, and then tax unpredictability are probably the three major challenges”.He says corporate taxes and levies raise manufacturing costs by about 45 per cent. “If you compare that with other developed economies, that’s probably where they are — but, in a developing economy, where we are still building a middle-income class, it’s high.”

In some countries, such as Rwanda — where, four years ago, Volkswagen rolled out the country’s first domestically built car — manufacturing has gained ground. Nevertheless, it still represents just 12 per cent of GDP across sub-Saharan Africa, according to World Bank data. That compares with 16 per cent in Latin America and 15 per cent in South Asia.A growing specialised workforce and a focus on renewable energies offer fresh advantages, however. Roam, founded by Swedish entrepreneurs in Kenya, has launched an electric motorcycle and bus made in Nairobi and developed alongside Kenyan engineers. For the motorbike, sophisticated components including the power train and batteries are currently imported from China and India, but other parts are made locally.William Ruto, Kenya’s president-elect, has told the Financial Times he wants to boost manufacturing, especially the textile and leather sectors, as his country currently imports most fabrics, including the local kitenge staple, from Asia. “We can produce that in Kenya with our cotton farmers,” he says. “Strong manufacturing also goes along the chain of leather — we’re talking about the whole chain from production all the way to value addition and manufacturing at the very end.”In Ethiopia, since 2016, manufacturing has been underpinned by a garment sector fuelled by state-led investments. To develop a strong textile and leather sector, Ethiopia built industrial parks able to manufacture at lower costs. This initially attracted global investors such as PVH Corporation, owner of the Calvin Klein and Tommy Hilfiger brands.

But local inefficiencies and political uncertainty spilled over into manufacturing. In November, PVH closed a facility in Ethiopia, transitioning to a local manufacturing partner, soon after the country lost duty-free access to the US over the conflict in the Tigray region.“Behavioural response from investors and buyers that are sourcing in Ethiopia is one of the challenges,” says Ethiopia’s industry minister, Melaku Alebel. “Buyers are choosing to place new orders outside Ethiopia, investors have temporarily scaled back operations, and manufacturers like PVH have exited.”He says the government is negotiating with the US, and believes the African Continental Free Trade Agreement offers a “new opportunity”. Analysts say it could establish Africa as a global manufacturing centre and smooth cross -border trade.“It is often cheaper to import from China,” says Landry Signé, a Cameroonian senior fellow in the Africa Growth Initiative at the Brookings Institution. But he adds: “Trading between African countries will contribute to unlock Africa’s manufacturing potential.” More

TOKYO (Reuters) – Japan is seeking to organise a Sri Lanka creditors’ conference, hoping it could help solve the South Asia nation’s debt crisis, but uncertainties cloud the outlook for any talks, three people with knowledge of the planning said.Tokyo is open to hosting talks among all the creditor nations aimed at lifting Colombo from its worst debt crisis since independence, but it is not clear whether top creditor China would join and a lack of clarity remains about Sri Lanka’s finances, one source told Reuters.Japan would be willing to chair such a meeting with China if that would speed up the process for addressing Sri Lanka’s debt, estimated at $6.2 billion on a bilateral basis at the end of 2020, this source said.President Ranil Wickremesinghe told Reuters last week that Sri Lanka would ask Japan to invite the main creditor nations to talks on restructuring bilateral debts. He said he would discuss the issue with Prime Minister Fumio Kishida in Tokyo next month, when he is expected to attend the funeral of the assassinated former premier Shinzo Abe.Tokyo, the number two creditor, has a stake in rescuing Sri Lanka, not just to recoup its $3 billion in loans but also its diplomatic interest in checking China’s growing presence in the region.S&P Global (NYSE:SPGI) this month downgraded Sri Lanka’s government bonds to default after it missed interest and principal payments. The island nation of 22 million people off India’s southern tip, with debt at 114% of annual economic output, is in social and financial upheaval from the impact of COVID-19 pandemic on top of years of economic mismanagement.An International Monetary Fund (IMF) team met Wickremesinghe on Wednesday to discuss a bailout, including restructuring $29 billion in debt, as Colombo seeks a $3 billion IMF aid programme.The president met the same day with Japan’s ambassador.Tokyo believes a new “platform” is needed to pull creditors together, the sources said.”Sri Lanka is running out of time since it defaulted on its debt. The priority is for creditor nations to agree on an effective scheme,” one source said.”Japan is keen to move this forward. But it’s not something Japan alone can raise its hand and push through,” said the source, adding that the cooperation of other nations was crucial.Japan’s Foreign Ministry declined to comment. Sri Lanka’s central bank and Finance Ministry did not immediately respond to requests for comment. An IMF spokesperson declined to comment.NEW FRAMEWORK NEEDEDConcerns include rivalry and territorial tensions between big creditors China and India, while Sri Lanka would have to commit to reforming its finances and disclose more information about its debt, the sources said.Last month, shortly after Wickremesinghe took office when his predecessor fled the country, Chinese President Xi Jinping wrote to him that he was “ready to provide support and assistance to the best of my ability to President Wickremesinghe and the people of Sri Lanka in their efforts”.But the sources said getting Beijing’s cooperation on a debt restructuring was complicated by factors such as a large number of lenders and that China was baulking at taking a “haircut” on its loans and at reducing Colombo’s debt burden.A Chinese foreign ministry spokesman told Reuters that Beijing was “willing to stand with relevant countries and international financial institutions and continue to play a positive role in helping Sri Lanka respond to its present difficulties, relieve its debt burden and realise sustainable development.”Japan hopes to see a new debt restructuring framework resembling one set up by the Group of 20 big economies targeting low-income countries. Sri Lanka does not fall under this “common framework” because it is classified as a middle-income emerging country.”It must be a platform where all creditor nations participate” to ensure they all shoulder a fair share in waiving debt, another source said. The third said, “Until these conditions are met, it would be difficult for any talks to succeed.”The common framework, launched by the G20 and the Paris Club of rich creditor nations in 2020, provides debt relief mainly through extension in debt-payment deadlines and reduction in interest payments.Some people involved think an initial creditors’ meeting could be held in September, but one source said it would “take a little while, possibly several months”.Restructuring talks are only possible after the IMF scrutinises Sri Lanka’s debt, the sources said. More

Maduro’s government has succeeded in lowering consumer price growth, which was 137% year-on-year through July, by increasing the supply of foreign cash in local banks, limiting the expansion of credit, reducing public spending and increasing taxes.But in recent weeks the central bank has sold fewer dollars and the government has increased spending, raising demand and sending the official dollar exchange rate soaring by 21.7% in six days.”It’s impossible to think of exchange stability with the level of prices in Venezuela,” said economist Luis Arturo Barcenas. “The balance between the official rate and the non-official one was very fragile because it was based on the injection of foreign currency.”The central bank on Wednesday proposed a new strategy to deal with demand for dollars, asking banks to share the foreign currency figure needed by businesses and propose an exchange rate that will then be evaluated by the government, two sources said.The central bank did not respond to a request for comment.”The changes this week (in the dollar) have been very strong and those who are disadvantaged are those of us who earn bolivares,” said 62-year-old snack seller Alicia Rodriguez, who feared the cost of her merchandise may increase by up to 30%.The minimum wage in local currency is equivalent to some $19 per month.Venezuela’s economy grew 17.04% year-on-year in the first quarter of 2022, the central bank said on Tuesday.”All the indicators show progress in the first half of the year,” said economist Leonardo Vera, referring to food production, tax collection and other indicators.But oil production may stagnate in the coming months, he added, which would diminish growth.Faced with lower oil production and U.S. sanctions, Maduro in 2019 relaxed currency controls, breathing new life into certain sectors. More