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African Economic Outlook 2017
African governments need to integrate entrepreneurship more fully into their industrialisation strategies, according to the African Economic Outlook (AEO) 2017 released in May 2017. The African Economic Outlook is produced annually by the African Development Bank (AfDB), the Development Centre of the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP).
In 2016, Africa’s economic growth slowed down to 2.2 per cent from 3.4 per cent in 2015 due to low commodity prices, weak global recovery and adverse weather conditions which impacted on agriculture production in some regions. However, it is expected to rebound to 3.4 per cent in 2017 and 4.3 per cent in 2018. This assumes that as commodity prices recover, the world economy will be strengthened and domestic macroeconomic reforms are entrenched.
In fact, there are promising developments across the continent, according to the report. Africa’s growth increasingly relies on domestic sources, as shown by dynamic private and government consumption that, combined, accounted for 60 per cent of growth in 2016.
This growth also coincides with progress in human development: 18 African countries had achieved medium to high levels of human development by 2015. Finally, foreign direct investment, attracted by the continent’s emerging markets and fast urbanisation, stood at USD 56.5 billion in 2016 and is projected to reach USD 57 billion in 2017.
African policy-makers need to create more and better jobs
African governments need to push their agenda for job creation with more ambitious and tailored policies, the authors say. Despite a decade of progress, 54 per cent of the population in 46 African countries are still trapped in poverty across multiple dimensions – health, education and living standards. With the size of the workforce likely to increase by 910 million between 2010 and 2050, creating more and better jobs will remain the core challenge for African policy-makers.
To turn the challenge of higher population growth into an opportunity, making Africa’s new
industrial revolution successful is paramount. Twenty-six African countries today have an industrialisation strategy in place. But most of these strategies tend to emphasise the role of large manufacturing companies, at the expense of entrepreneurs in sectors with the potential for high growth and employment creation, including start-ups and small and medium-sized firms.
Businesses with fewer than 20 employees and less than five years’ experience provide the bulk of jobs in Africa’s formal sector. Additionally, the advent of digital technologies and new business models is blurring the boundaries between manufacturing and the services sector. Industrialisation strategies thus need to support other sectors where African economies have comparative advantage, such as agri-businesses, tradable services and renewable energy. New strategies need to avoid dependence on businesses that are not environmentally friendly.
According to the Outlook, Africa has high untapped potential for entrepreneurship. In 18 African countries for which statistics are available, 11 per cent of the working-age population set up their own firms to tap specific business opportunities. This level is higher than in developing countries in Latin America (8 per cent) and in Asia (5 per cent).