More broadly, many African countries need to find ways to create more employment – and fast. The share of the working-age population is rising faster in Africa than in any other region. This “demographic dividend” has immense potential. But if job creation stalls, the unemployed or under-employed are likely to become frustrated – a recipe for conflict.
Consider the case of Tanzania. Thanks to President John Magufuli’s effort to mobilize more domestic revenue to support increased development spending, the economy is doing well. But, with roughly 800 000 individuals entering the labor force each year, Tanzania needs much more working capital, better infrastructure, and educational reform aimed at ensuring that workers have the skills, resources, and opportunities to secure decent jobs.
The same is true of Ethiopia. In the last couple of decades, the country has made great strides in export-led growth, supported by a growing industrial sector and large investments from China. Now, it is poised to take over as the economic powerhouse of East Africa. Yet the urban youth unemployment rate stands at 23.3%. Left unchecked, this situation could easily end up fueling ethnic conflict and political turmoil.
Another, related challenge concerns resource mobilization: countries need funds to invest in infrastructure, human capital, and the creation of trade and digital links within and beyond Africa. The AfDB report estimates that, for infrastructure investment alone, the continent needs some $170 billion per year, which is $100 billion more than is currently available. As it stands, Africa receives a total of about $60 billion in foreign direct investment each year.
To close the gap, African governments must attract more money. That will require establishing effective regulatory structures that facilitate long-term borrowing and repayment, while ensuring that lenders do not exploit borrowers, as has occurred everywhere from rural India to the United States mortgage market.
The challenges are daunting, to say the least. But there are lessons that African countries can learn from one another. For example, Ghana’s smooth transfer of power after the December 2016 election set a positive democratic example.
Nigeria’s Lagos State and Tanzania have done a good job of mobilizing internal resources for development. Add to that the emergence of an indigenous intelligentsia in the region, exemplified by organizations like the AfDB, and it seems that Africa’s moment may have arrived at last.
By Kaushik Basu. This article was first published by Project Syndicate