This is the 32nd post in a blog series to be published in 2022 by the Secretariat on behalf of the AU High-Level Panel on Emerging Technologies (APET) and the Calestous Juma Executive Dialogues (CJED)

The African Union Agenda 2063 Aspiration 1 strives for a prosperous African continent based on inclusive growth and sustainable development. This aspiration regards youth development as imperative to ensure and provide African youth with resources to ascertain decent income, jobs, and work.[1] However, the African youth are confronted with a progressively complex socioeconomic and political context, hindering their socioeconomic development and growth. Africa has the youngest population compared to other regions of the world, with a median age of 19.7 years.[2] Unemployment in this population block substantially reverses the modest developmental goals that AU Member States have accomplished.

Typically, a young population would represent a large, active workforce, which can be advantageous for any region's economic prospects. However, youth's inability to find work across Africa continues to squander their potential.[3] The African Development Bank has reported that only 1 in 6 of Africa's 420 million young people between the ages of 15 and 35 were employed in waged jobs in 2015.[4] That left a third of this population unemployed or working in vulnerable conditions. The African Development Bank further shared that while 10 to 12 million young Africans enter the workforce annually, only 3 million formal jobs are created each year.[5]

Worth noting, youth unemployment remains an impediment to the continent's socioeconomic development and growth. For example, Southern Africa has reported some of the highest unemployment rates, with approximately 51% unemployed young women and 43% unemployed young males.[6] The high unemployment population represents untapped potential because African communities, and subsequently, the nations, barely benefit from the potential of Africa's youth.[7] However, other continents benefit from Africa's youth, based on the brain drain continually observed of youth leaving the continent in search of better opportunities. Furthermore, challenges in finding and maintaining a job reduce the youth's lifetime productivity and remuneration, further complicating their capacity to escape and overcome generational poverty.[8]

The formal sector generates only one job for every four young people entering the labour force, leaving a large portion of the population scrambling for work[9]. As such, Africa's youth has turned to the informal business sector to search for better employment and job creation possibilities besides agriculture. Non-agricultural employment in the informal economy accounts for about 66% of total employment in Sub-Saharan Africa and 52% in North Africa.[10] As such, self-employment accounts for a substantial share of non-agricultural informal employment than paid employment. This accounts for up to 53% of non-agricultural employment in Sub-Saharan Africa and 31% in North Africa.[11] In most African cities, the vitality of the informal sector is difficult to miss as food street vendors are actively involved in distributing food products. In addition, the transportation industry is ferrying workers into different parts of the cities and country to keep the cities and the economy moving. Individuals in the service industry are also significantly operating in African cities.

The African informal work sector's importance to the continent's development in providing jobs for the youths cannot be overemphasised. However, the sector's full potential to accommodate the ever-growing youthful population across the African continent is yet to be realised.[12] Currently, the informal sector is not creating sufficient jobs to absorb all new entrants because low productivity is common in informal enterprises, resulting in low and inconsistent revenues. This is exacerbated by a lack of access to essential amenities such as water and power, as well as a dedicated operating area and access to high-value markets. Therefore, alternative economies, such as the informal sector, should be expanded and supported in Africa to bolster youth employment and job creation.

Informal enterprises are often not financially integrated into the economic framework, which impedes their capacity to conduct dependable business transactions, obtain financing for profitable investments, and save consistently to prepare for unforeseen threats.[13] For example, this weakness was demonstrated by the significant adverse impacts of the COVID-19 pandemic.[14] Consequently, the COVID-19 pandemic emphasised the need for AU Member States to support and strengthen the development of the informal sector. This can decrease risks and threats that the informal economic sector practitioners are particularly exposed to and address the lack of access to occupational safety and health measures.

The African Union High-Level Panel on Emerging Technologies (APET) recommends enhancing and promoting informal sector development. APET is also challenging AU Member States to appreciate the significance of informal businesses in building Africa's economic competitiveness. In this way, informal businesses can be formalised to comply with enabling taxation provisions and obligations and further offer support to strengthen their capacity and productivity. Therefore, the formalisation of the industry should be supported with well-coordinated policy and strategic implementations. However, this approach requires a robust legal framework, effective governance, better public services, improved business climate, and better access to funding instruments, technology, and infrastructure. In this way, African governments can support, promote, and influence the growth of the informal economy.

African governments should proactively encourage informal entrepreneurship to transition to a more formal economic activity, so they can access official financing instruments such as microcredits to grow their businesses. Furthermore, it remains important to influence commercial banks to have much more favourable loans and financing instruments for Africa's informal businesses.[15] This includes enabling informal businesses to access information on these financial instruments whenever needed to expand operational capacity. In addition, the activities of the informal sector should also be visible to gather pertinent data to determine the economic impact of the informal sector. This includes tax revenue, employment prospects, working conditions, and business productivity.[16]

APET also notes that technology can help informal entrepreneurship to enhance market access, information sharing, and innovative trade. Digital technologies can expand the African Continental Free Trade Area by enhancing participation in the continental market value chains. Smartphone applications and solutions can enhance cross-border trading by facilitating formal credit options and foreign currency transactions. However, a continental legal framework to harmonise regional payment systems should be instituted so to facilitate cross-border payments and eliminate unofficial cross-border payment platforms.  

AU Member States such as Nigeria are promoting the informal sector for the youth by implementing enabling policies that can potentially boost youth's participation in the informal sector. For example, the YouWin youth initiative[17] is assisting the youth to develop their entrepreneurial skills by incentivising establishing their enterprises and hiring other young people instead of simply seeking employment.[18] For instance, in this programme, each applicant's chosen business plan is funded between US$5,000 and US$20,000 over the course of three instalments under the scheme. The idea is to enable start-up companies to hire at least 10 employees. As such, since the inception of the programme in 2010, approximately 5,000 entrepreneurs have benefited.[19]

The Malawi government has also established the National Economic Empowerment Fund to assist unemployed youth in accessing capital and boosting their informal businesses. Since 2014 when this fund was established, it has funded over 130,000 businesses, with a majority being youth-based.[20] This fund has also created more than 150,000 jobs between 2020 and 2022.[21]

Furthermore, Ghana, Mauritius, and Zambia have also made efforts to alleviate youth unemployment and boost the informal sector. Ghana has established national youth service and empowerment programmes to provide college graduates with the necessary skills and to assist them in finding employment. Mauritius devised a strategy to encourage young people to pursue technical and vocational education. Zambia established a national youth policy and a youth enterprise fund to promote job creation.[22]

This demonstrates that reorganising the informal sector can make it profitable and further contribute substantially to Africa's socioeconomic development. However, it is imperative for AU Member States to formulate and implement viable policies for the informal sector to empower youth employment.

Featured Bloggers – APET Secretariat

Justina Dugbazah

Barbara Glover

Bhekani Mbuli

Chifundo Kungade

Nhlawulo Shikwambane

 

[1] https://www.africaportal.org/features/incorporating-africas-youth-into-the-au-and-un-developmental-goals/.

[2] Africa’s youth and prospects for inclusive development, Regional situation analysis report. https://www.ohchr.org/sites/default/files/Documents/Issues/Youth/UNEconomicCommissionAfrica.pdf.

[3] https://www.ivint.org/south-africas-youth-population-unemployment-and-economic-growth-prospects/.

[4] https://www.afdb.org/fileadmin/uploads/afdb/Images/high_5s/Job_youth_Africa_Job_youth_Africa.pdf.

[5] https://foreignpolicy.com/2021/10/19/africa-youth-unemployment-crisis-global-problem/

[6] Nearly half of SA women are out of the labour force in Q2:2022. https://www.statssa.gov.za/?p=15668.

[7] South Africa’s youth continues to bear the burden of unemployment. https://www.statssa.gov.za/?p=15407.

[8] https://www.prb.org/resources/reducing-youth-unemployment-in-sub-saharan-africa/.

[9] https://www.nepad.org/news/moving-needle-youth-unemployment-africa-learning-employment

[10] https://www.ilo.org/africa/whats-new/WCMS_377286/lang--en/index.html.

[11] Five facts about informal economy in Africa. https://www.ilo.org/africa/whats-new/WCMS_377286/lang--en/index.html.

[12] Supporting Africa’s urban informal sector: Coordinated policies with social protection at the core, MELIS GUVENRAPHAELA KARLEN, DECEMBER 03, 2020. https://blogs.worldbank.org/africacan/supporting-africas-urban-informal-sector-coordinated-policies-social-protection-core.

[13] https://blogs.worldbank.org/africacan/supporting-africas-urban-informal-sector-coordinated-policies-social-protection-core.

[14] Small Businesses, Job Creation And Growth: Facts, Obstacles And Best Practices, https://www.oecd.org/cfe/smes/2090740.pdf.

[15] 2nd OECD CONFERENCE OF MINISTERS RESPONSIBLE FOR SMALL AND MEDIUM-SIZED ENTERPRISES (SMEs), PROMOTING ENTREPRENEURSHIP AND INNOVATIVE SMEs IN A GLOBAL ECONOMY: TOWARDS A MORE RESPONSIBLE AND INCLUSIVE GLOBALISATION. https://www.oecd.org/cfe/smes/31919278.pdf.

[16] Measuring the informal economy: From employment in the informal sector to informal employment, Working Paper No. 53, Ralf Hussmanns. https://www.ilo.org/wcmsp5/groups/public/---dgreports/---integration/documents/publication/wcms_079142.pdf.

[17] https://en.wikipedia.org/wiki/YouWin!.

[18] Promoting Youth Entrepreneurship in A Policy Brief – 2020 Africa. https://au.int/sites/default/files/documents/39541-doc-promoting_youth_entrepreneurship_in_africa_-_en.pdf.

[19] https://core.ac.uk/download/pdf/234674803.pdf.

[20] MALAWI NATIONAL ECONOMIC EMPOWERMENT POLICY AND ACTION PROGRAMME, PART 1, NATIONAL ECONOMIC EMPOWERMENT POLICY STATEMENTS. https://sarpn.org/documents/d0001262/P1496-policy-paper_malawi_May2004.pdf.

[21] https://www.neef.mw/.

[22] https://www.un.org/africarenewal/magazine/may-2013/africa%E2%80%99s-youth-%E2%80%9Cticking-time-bomb%E2%80%9D-or-opportunity