African countries are often listed among the fastest-growing economies worldwide, with the African Development Bank (AfDB) forecasting that by 2024, Africa will be home to eleven of the twenty fastest-growing economies globally. Nevertheless, the stark reality is that despite this impressive growth, job creation remains a formidable challenge. Each year, millions of young people enter the workforce, yet securing opportunities that meet their needs and facilitate a quality life proves to be exceedingly difficult.

The International Labour Organization cautions of an imminent “youthquake” in Africa unless the continent urgently generates new job opportunities, stressing that by 2050, sub-Saharan Africa will require around 72.6 million new jobs for its youth. But which strategies can successfully offer a sustainable resolution?

Mavis Owusu-Gyamfi, president and CEO of the African Centre for Economic Transformation, contends that economic transformation is vital for creating the employment opportunities that Africa desperately needs. She underscores that transformation means diversifying economies through value addition, enhancing export competitiveness, and boosting productivity levels. “While growth is vital, it alone is insufficient. We are experiencing growth but failing to transform in a manner that creates jobs,” she remarks. She warns that countries that overlook transformation are more vulnerable to economic shocks, noting, “Our research indicates that during the last financial crisis, African nations with less transformed economies experienced faster declines and slower recoveries.”

“The only way to achieve transformation is by increasing the value of what we produce. This will help diversify our economies and enhance our export competitiveness,” she asserts.

Skills Gap

However, Owusu-Gyamfi believes that achieving transformation hinges on investing in initiatives that enhance labor productivity. She identifies a significant misalignment between the skills provided by the education system and those demanded by the job market as a central issue contributing to Africa’s persistently low productivity. This gap results in reduced productivity, as workers are not adequately prepared for the demands of modern industries.

“When hiring someone, instead of spending an average of three months to onboard them with your company’s processes, you wind up investing two years retraining them because they do not meet the necessary standards. It’s expensive,” she explains.

Anthony Simpasa, director of macroeconomic policy, forecasting, and research at the African Development Bank, notes that a recent study of South Africa’s mining sector revealed that companies spend nearly $2,000 each year per employee on retraining.

“While mining might be able to absorb this cost, how many other sectors can? It’s not sustainable. The burden of retraining can be quite hefty and impact profitability,” he adds.

Simpasa stresses that policymakers must consider innovative approaches to enhance foundational sectors like education to prevent costly retraining down the line.

“As we shift towards a knowledge economy, technology is becoming increasingly critical, making a focus on STEM fields essential,” he notes.

Scaling the Informal Sector

Raymond Gilpin, chief economist and head of strategy, analysis, and research at UNDP’s regional bureau for Africa, argues that tackling jobless growth and skills gaps must involve the informal sector. “Although often labeled as ‘informal’, this sector has been the backbone of the economy. It’s how education and university tuition are funded, and rents are paid,” he states. “We need to find innovative approaches to support those in the informal sector to help them grow and consolidate. Currently, they encounter numerous obstacles in relation to taxation, regulations, and logistics.”

He asserts that policymakers should shift from a public sector-centered strategy to prioritizing the support of small businesses and the private sector to enhance employment prospects. “That is where job creation will emerge. We must acknowledge that the future does not lie in continued government funding and public sector job creation. That era is behind us. A shift in mindset is essential.”