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This year’s Ibrahim Index of African Governance concluded that while African economies are growing, they are not translating to sustainable economic opportunities.
The report does not define what it means by sustainable economic opportunities, instead it assumes that this is common knowledge.
By implication, however, the report seems to suggest that sustainable economic opportunities and employment opportunities mean the same thing.
The report goes on to show that increasing GDP among several African countries has risen significantly over the course of the past decade.
This GDP growth. however, does not correspond with stagnant employment creation. This is of course concerning. The report takes the view that this should change.
But I’d like to point to a more complex picture.
Economists Raúl Prebisch and Hans Singer identified a major fault-line in the international economic system of the 1950s, making a case for the doctrine of unequal exchange between developed and developing countries.
They argued that developing countries were locked in a dependency economic relationship with advanced nations in the following way: first, poor countries export raw materials to advanced nations, who then manufacture and sell back manufactured products to these same countries at much higher prices.
The price of manufactured goods increases over time, while the price of raw materials decreases, which means developing countries need to export more raw produce to make the same profits, while the reverse would be the case for advanced nations.
Second, as technology improves, advanced economies are able to retain the savings, since they can retain higher wages and profits through developed unions and commercial institutions.
In developing countries, companies and union workers are weaker, and have to pass on technical savings to their customers – in advanced nations – in the form of lower prices.
Through this system, all of the benefits of technology and international trade accrue to the advanced nations.
Prebisch and Hans are as relevant today as they were in the 1950s.
African countries still export raw materials, from cash crops to mining commodities.
Most advanced economies – who possess the manufacturing capital and technologies – value-add raw materials and export them back to developing countries at much higher prices.
Let me illustrate my point more clearly:
A few years ago, I was involved with a group of South African women in Melmoth, northern KwaZulu-Natal.
The group was organised in a cooperative to farm essential oils.
After harvesting they would transport their produce to nearby Ulundi and sell to a distiller at nominal prices.
This was where their economic participation ended.
The distiller exported the distilled essential oils to France for manufacturing of body perfumes, following which these perfumes were then exported back to South Africa, and elsewhere in developing nations, with the price of 100ml perfume bottle ranging from R300 to R1 500.
Even the essential oil farmers in Melmoth could not afford the finished product.
There have been concerted efforts from global institutions for African economies to industrialise, or in cases of some like South Africa, re-industrialise.
The logic is that the four industrial revolutions are largely responsible for development of the now advanced economies, of course in different patterns and levels.
The first industrial revolution was shaped by iron and textile industries, along with the development of the steam engine.
The second industrial revolution mainly refers to the expansion of steel, oil and electricity technologies, which were responsible for mass production.
The third industrial revolution was brought about by digital technology inclusive of mobile phones and the internet.
The fourth (and current) industrial revolution is characterised by robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, and the like.
These four technology ages relate differently with employment on one hand, on the other, growth.
All the industrial revolutions have created more capital on both national and global levels, and therefore they have all led to GDP growth. But the following is how they’ve related to employment.
The first and the second industrial revolutions created manufacturing jobs on a mass scale, therefore reducing unemployment and poverty in the now advanced nations, in a significant way.
The third industrial revolution balanced out growth and employment, and therefore sustained high employed in advanced nations, effectively mopping up some unemployment in developing nations although not as significantly as the first two.
The fourth industrial revolution mainly creates a technology-eat man-scenario.
There will be profound growth with no employment.
The shift from manufacturing based growth to services led growth is already evident, even in African economies.
Several African economies including Kenya and Rwanda are leapfrogging from agricultural economies to service sector based economies.
In so doing, growth is evident, but it is largely high skilled, technology guided growth; which leaves most semi-skilled or unskilled citizens in the cold.
What the Ibrahim Index of African Governance report tells us is that Africa is facing a new economic reality.
The future will not be low growth and low employment as it has traditionally been.
It will be almost a permanent state of high growth and low employment outlook.
The solution will not lie in the traditional policy framework of cushioning unemployment through social safety nets.
African states will need to look for more complex, deliberate and permanent employment creation solutions to the fourth industrial revolution.
• Dr Jason Musyoka (PhD) is an Development Economist (Associate Researcher) at the University of Pretoria’s Centre for the Advancement of Scholarship.
