Foreign direct investments(FDI) inflows into Africa in 2017 is expected to reach over $57 billion, but the key to successful development in Africa is to nurture the emerging culture of entrepreneurship, according to African Economic Outlook (AEO) 2017 report.
The report, a joint work of the African Development Bank (AfDB), the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme (UNDP), under the special theme ‘Entrepreneurship and Industrialisation’ lunch at the AfDB Annual Meetings in Ahmedabad, India today.
Dr. Akinwumi Adesina, the President of the AfDB at the lunch called on Africa to pay attention to developing its youth.
“Let’s pay attention to skills development of Africa’s youth. Africa can become the workforce source of the world,” he said, noting the growing youth population of Africa. Africa is the only continent with a significantly growing youth population. Projections suggest that in less than three generations, 41 per cent of the world’s youth will be African. By 2050, Africa’s youth will constitute over a quarter of the world’s labour force.
The report affirms to Adesina statement suggesting that 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 – which is now bouncing back at 11% of Africa’s GDP – 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.
The report also pointed out out that unlocking Africa’s growth will require greater investment in human capital – such as in health, education and skills – , stronger capacities to diversify financing and more effective efforts to promote structural transformation, adding that despite a decade of progress, 54 per cent of the population in 46 African countries are still living in poverty.
“It is essential to double efforts to empower Africans with the necessary skills to promote development from the bottom up, driven by domestic innovation and investment. This is why the African Economic Outlook focuses this year on the role of entrepreneurs in Africa’s industrialization,” it says.
In his remarks, Dr. Mario Pezzini, the Director of the OECD Development Centre in Paris noted that African economies cannot miss out on their next production transformation. Entrepreneurs should be lead actors in Africa’s journey into the fourth industrial revolution,” said Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary-General on Development.
According to the Outlook, Africa has high untapped potential for entrepreneurship. In 18 African countries for which statistics are available, 11% 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%) and in Asia (5%).
However, the report noted that few of Africa governments invest on the skills of workers to enhance the efficiency of business clusters – such as industrial parks and special economic zones – and increase access to finance, with more affordable credit and more innovative instruments, for small and young firms.
Dr. Abdalla Hamdok, the Acting Executive Director of the Economic Commission for Africa (ECA) in his comments noted that Africa has the competitive advantage to promote industrialization through agro-processing, and urged the countries of the continent to turn towards that direction.
The report however indicated that Africa’s industrialisation will differ from the experience of other world regions.
“First, the 54 African countries are diverse and will thus follow various pathways to industrialisation. Second, industrialisation will not rely solely on the manufacturing sector, which remains modest at 11 per cent of the continent’s GDP,” it said.
“The continent has the highest share in the world of adults starting or running new businesses, but often in sectors where productivity remains low.
The report pointed out among others that the entrepreneurial culture in Africa is vibrant with about 80 per cent of Africans viewing entrepreneurship as a good career opportunity.
“The continent has the highest share in the world of adults starting or running new businesses, but often in sectors where productivity remains low. New industrialization strategies should focus on leveraging this dynamism and targeting the continent’s fast-growing private enterprises which have potential to create quality jobs,” it added.