Brookings AGI at the Annual Meetings: Accelerating job creation for a prosperous Africa

LANDRY SIGNÉ: Hello, I am Landry Signé, a Senior Fellow in the Global Economy and Development Program and the Africa Growth Initiative at the Brookings Institution. Welcome to the Foresight Africa

Podcast, where I engage with distinguished leaders in policy, academia, civil society. And business to share your unique insight and innovative solutions to Africa’s challenges, while highlighting opportunities to advance engagement between Africa and the rest of the world.

Today, we are fortunate to be meeting during the Annual Meetings of the World Bank and International Monetary Fund. A yearly gathering of the world’s most prominent figures in development finance, whether we speak about central bankers, ministers of finance, the heads of global and regional financial institutions, corporate CEOs, entrepreneur and civil society leaders.

Welcome to the Brookings Institution’s Foresight Africa Podcast Show.

ANDREW DABALEN: Thank you. Pleasure to be here.

  LANDRY SIGNÉ: Before we begin, could you please state your full name and title for the recording? I am.

ANDREW DABALEN: I am Andrew Dabalen, I’m the World Bank Group Chief Economist for the Africa Region

LANDRY SIGNÉ: I am delighted to have you join us during this very busy week. Thank you for making the time. We truly appreciate you sharing also your wonderful insights. Dr. Dabalen, as you take part of this year’s annual meetings, which priorities do you see as the most essential for driving sustainable, inclusive growth and why?

ANDREW DABALEN: What you find is that a lot of the delegates here are concerned with primarily one thing, and that is how to create jobs that will provide for income, growth and prosperity. Now. To get jobs, of course, you need investments. Massive investments, both public and private, but public investments are constrained for a lot of countries because there’s a lot of debt problems.

That is especially true for the region and the countries that I cover, such as Africa. There’s a huge debt burden and so their public investments are constrained. So, what that means is that the option they have is to mobilize a lot more private investments and to mobilize a lot more private investments means that in fact trade has to be protected, because that’s where productivity growth will come from, that’s where jobs will be created.

That’s where with, higher paying incomes, you will get poverty reduction, especially in Africa. So those are the kinds of concerns that are. Jobs at the top, how to create that through investments and how to reduce debt in order to be able to invest. And that means maintaining global trade.

LANDRY SIGNÉ: Fantastic. And what insights or lessons from these discussions or from your broader work should global leaders act upon to strengthen resiliency and address today’s most pressing challenges especially the economic and social ones.

ANDREW DABALEN: The best way to achieve resilience is to have prosperity. You will see this, right? Rich people are more resilient than poor people.

LANDRY SIGNÉ: Absolutely.

ANDREW DABALEN: Rich countries are more resilient than poor countries. So, what that tells us is that the best way to build resilience is actually to engineer prosperity in all these countries. That means protecting global growth.

Now to protect global growth, it’s really important that markets are open, right? That private capital flows go to places where investments are needed, and more importantly, that there is cooperation. Global cooperation around these risks. Risks around, shocks, risks around conflict, risks around pandemics, risks around climate. This is crucially important. So, the idea is to really try and have a return to growth across the board because growth in the world has actually been declining and has been relatively tepid. But we need to have more growth because that’s where jobs will be created.

That’s where prosperity will come from, and that’s how you know we will have resilience.

LANDRY SIGNÉ: Fantastic. Dr. Dabalen, your office has just launched a new edition of your publication, Africa Pulse, subtitled Pathway to Job Creation in Africa. In your view, what are the key takeaways from this report?

ANDREW DABALEN: Thank you for asking.

Let me give you the context. So right now, what we see is that Africa’s economic activity has been relatively resilient. So, we are projecting that in fact, growth will be around 3.8% this year, and that’s an upgrade from 3.5% last year. And that is because, the region has been able to maintain low levels of inflation, currencies are stabilizing, the central banks are reducing the, the cost of borrowing, and so that is, supporting or propping up private consumption and modest recovery in investments. But what is really missing is jobs and the Africa’s jobs challenge is unlike anything we’ve seen in recent memory. About 600 million plus people will be added to the working age populations in Africa in the next 25 years.

So that’s massive. So, there is an urgent need to create jobs at scale for this rapidly increasing working age population. The second challenge is that Africans do work, but they work in low productivity jobs that do not provide for prospects for income growth, exiting poverty, and therefore having social mobility.

So there these two challenge, first just the numeric number, but also the quality of jobs. Certainly. So, what the report says is we have a framework in the World Bank about how we can actually create these jobs at scale. And that means, first of all, fixing the things that actually increase costs of businesses to expand and for new businesses to enter. So, reducing costs to businesses so that they can hire more people, is the key to creating jobs at scale. And that means, for example, reducing the cost of power or energy, make it reliable. Make you know, general purpose technologies like digital affordable.

Making sure that the transport networks connect, production networks from cities to city, from rural to city, and so on, and make sure that the population is skilled. In order that when these businesses are expanding, they actually have the kind of workers that come with the right skill sets, with the right knowledge, with the right, problem solving skills and so on, right?

But beyond that, there are also these business environment, kinds of regulations, cost of capital licensing and so on that are really crucial. And finally, businesses need market access in order to expand. Domestically that means competition, regionally that means integration.

So that’s what the report says. I encourage everyone to read it.

LANDRY SIGNÉ: This is very insightful, I like the comprehensive take on this very complex issue, but extremely important. And how is Africa comparing to other regions from that perspective?

ANDREW DABALEN: Africa is the epicenter of this challenge.

So, if you look back, all the other regions in the world, so let’s say East Asia, more recently South Asia or even Middle East, right? At the time when they were experiencing this surge in working age population, they’ve never had to deal with this. First of all, this type of numbers and two, they were slightly richer than African countries, right?

So, the per capita income at the time when these other regions are also experiencing this surge was higher than the per capita income in Africa today. They didn’t have the same levels of debt that African countries have today. And more importantly, the institutional qualities were better than what African countries have today.

So, the challenge African countries are dealing with is something that hasn’t been seen before. That doesn’t mean that it cannot be solved. It just means that they have to recognize that this is a serious challenge and they need to really step up with reforms that are going to usher in new prosperity.

LANDRY SIGNÉ: Fabulous. What bold, actionable ideas from this week do you see shaping policy and practice, and how do you plan to translate them or helping countries you are working with to translate them into tangible outcomes?

ANDREW DABALEN: So, the bold action, is really around how to create jobs at scale. That is the ultimate focus especially for the region.

So, what are the bold actions? The bold action is there’s no country that will prosper without this really fundamental core infrastructure. In particular in Africa, they need to fix electricity energy access. Not just access, but reliability. Not just reliability, but also affordability, right? So those three things have to go together: access, reliability, affordability.

The second thing is the bold action African countries need to take in order to be able to actually create these jobs at scale will be to open up the market. Have more competition and integrate more, right? Because a lot of African countries are too small in terms of population. These are small markets. If you are an entrepreneur who really have ambition to serve people with a product that you think is actually gonna be attractive and is solving a problem, it’s better to actually solve that problem for a hundred million people, it’s much more profitable, much more attractive to enter and solve that problem than say 5 million people.

So, this idea of market access integration and competition is really important because that’s what’s gonna attract big businesses. That are usually the centers of productivity, growth, and employment growth. That’s what will attract them to the market. Okay.

And the final thing is you have to establish some level of stability, both political and macro. A lot of countries in Africa are in conflict. It’s hard for businesses to enter or even to invest, even the ones that are there already, right? So, a sudden level of stability, but at the political level and macro level is important and especially bringing down debt levels and managing those debts so that you free up the capital for investing in people, in infrastructure and so on. So, those are the bold actions that are needed in order.

LANDRY SIGNÉ: What a beautiful way to conclude. Thank you so much for joining us today.

ANDREW DABALEN: You’re welcome. Thank you. Thank you for having me.