Figure of the week: A case study comparison of industries without smokestacks in South Africa and Uganda
Unlike developing countries in Asia, African countries are not relying on export-led manufacturing to drive structural transformation but instead pivoting to service-oriented sectors. While many services are less productive and absorb less low-skilled labor than manufacturing, certain subsectors, according to recent Brookings Africa Growth Initiative research, can be the catalyst for economic growth and job creation in the changing global marketplace. Termed “industries without smokestacks” (IWOSS), these sectors share characteristics with manufacturing, including being tradable, having high value added per worker relative to average economy-wide productivity, exhibiting capacity for technological change and productivity growth, showing some evidence of scale or agglomeration economies, and being amenable to absorbing large numbers of low-skilled workers. These sectors include, among others, agro-processing and horticulture, tourism, information and communication technologies (ICT), transit trade, and financial and business services.
To examine the potential and constraints of IWOSS to spur inclusive growth, economic transformation, and job creation for workers with different skill levels, AGI and its partner think tanks have been conducting a number of case studies, including in South Africa and Uganda.
Major trends in South Africa
South Africa’s youth are particularly afflicted by a lack of jobs: The country has a youth unemployment rate of 56 percent, far higher than comparable countries in sub-Saharan Africa.
According to the Development Policy Research Unit’s South Africa case study, IWOSS accounted for 66.7 percent (8.8 million) formal private sector jobs in South Africa in 2018. Like many of the other country case studies in the project, South Africa’s economy has been shifting toward IWOSS, but, unlike in the other case studies, that shift has not been taking place in IWOSS subsectors particularly poised to absorb low-skilled labor. Indeed, the authors find that finance and community, social, and personal (CSP) services—sectors that require labor that is slightly more skilled—have seen the most growth. More specifically, the finance sector comprised 13.4 percent of the country’s GDP in 1980, increasing to 22.4 percent by 2018. In contrast, the contribution of non-IWOSS sectors fell: For example, mining’s contribution to GDP dropped from 19.5 percent to 8.1 percent between 1980 to 2018 (Figure 1). Thus, DPRU’s findings are nuanced, as the team finds that the IWOSS overall has the potential to absorb labor, but tourism and horticulture specifically are more likely to absorb low-skilled labor and are poised to experience tremendous growth if certain constraints are addressed. (See the full case study for more details.)
Figure 1. Contribution to GDP by industry, South Africa, 1980 and 2018 (percent)
Source: Allen, C., Asmal, Z., Bhorat, H., Hill, R., Monnakgotla, J., Oosthuizen, M., and Rooney, C. Employment creation potential labor skills requirements, and skills gaps for young people: A South Africa case study. (Washington, DC: Brookings Institution, 2021).
Major trends in Uganda
In Uganda, the growth rate of the population remains higher than job growth, creating unemployment or underemployment, including for the 600,000 youth entering the labor market each year. Underemployment is particularly a problem since much of the youth engage in unofficial services like food vending and are not able to secure higher-value jobs in formal sectors.
The Economic Policy Research Centre (EPRC) in Uganda found similar broad trends as DPRU in South Africa, but also noted that different subsectors in the East African country are contributing to its growth. In other words, like in South Africa, the prominence of IWOSS has grown in recent years, especially compared to manufacturing, but the fastest-growing subsectors have been agro-processing and tourism (Figure 2). Tourism in particular has been a major contributor to Uganda’s economic growth, comprising 7.7 percent of the country’s GDP as of 2019.
Figure 2. Uganda’s tourism performance: 2000-2017
Source: Guloba, M., Kakuru, M., Ssewanyana, S., and Rauschendorfer, J. Employment creation potential labor skills requirements, and skills gaps for young people: A Uganda case study. (Washington, DC: Brookings Institution, 2021).
Recommendations for unleashing the potential of IWOSS in South Africa and Uganda
Notably, such growth in either country is not yet robust enough to produce the volume and types of jobs demanded there: For example, as noted above, most IWOSS growth in South Africa has been in financial and community services, which require more high-skilled workers and leave low-skilled workers unemployed. Some of the recommendations from the authors include: increased investment in infrastructure, especially in engineering and town-planning fields, and greater support for postsecondary education and mentorship programs from employers to develop the necessary sector-specific skills.
Like in South Africa, in Uganda, horticulture, agro-processing, and tourism have the potential to create much-needed jobs, and the case study authors find that irregular and erratic business policies hinder the growth of those sectors. EPRC also finds the need for improved curricula aimed at developing digital and problem-solving skills, as well as more investments in road network infrastructure in order to improve transport and communications. To better support horticulture and agro-processing, the authors recommend that the government create policies that would encourage the uptake and adoption of technologies that shorten the wait for clearance at customs and licensing applications.
For more on the South Africa case study, please see the full report, COVID update, and summary blog. For Uganda, please see the full report, COVID update, and summary blog.
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The future of money: The end of cash and the rise of digital currencies
Are we heading for a cashless future? Eswar Prasad, a senior fellow at Brookings and author of the forthcoming book, “The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance,” thinks so. Credit card and cell phone payments have disrupted the physical cash market already, but Prasad says the real driving force will be central banks—as new cryptocurrencies continue to emerge and their popularity expands, central banks will react by developing their own more stable forms.
On September 13, the Hutchins Center on Fiscal and Monetary Policy and the Global Economy and Development program at Brookings will host a virtual conversation between Prasad and Glenn Hutchins, co-chair of the Brookings Board of Trustees, on Prasad’s argument that the world is approaching a tipping point where cash phases out and digital currencies reign supreme. This will have far-reaching implications for individuals, businesses, banks, and governments: improved efficiency, increased flexibility, and improved market access, particularly for the unbanked. But the risks include market instability, minimal accountability, and decreased privacy.
Following the Prasad-Hutchins conversation, the Financial Times’ Gillian Tett will moderate an expert panel focused on the government’s role in managing and regulating digital currencies, maximizing benefits, and minimizing risk.
During the live event, the audience may submit questions at sli.do using the code #FutureofMoney, or join the conversation on Twitter using the hashtag #FutureofMoney.
Climbing a High Ladder – Development in the Global Economy
Climbing a High Ladder – Development in the Global Economy
Ed tech and educational opportunity during the COVID-19 school closures
The purpose of this study is to identify gaps and challenges in the use of education technology (ed tech) in Chennai, Tamil Nadu during COVID-19. Specifically, we investigated how use of ed tech differed by type of school (government or private), household socioeconomic status, and student gender—and how it changed during the COVID-19 school closures. Ultimately, we wanted to know how the use of ed tech may exacerbate or mitigate the unequal impact of school closures on student learning.
Through phone surveys of 201 households and a total of 271 primary-school-aged children in February of 2021, we sought to understand households’ educational practices in Chennai pre-COVID-19 and during the school closures. Our survey data showed that access to ed tech in schools and households before the pandemic was extremely limited and differed by household socioeconomic background and the type of school (government or private) children attended. Thus, we also explored educational activities from non-ed-tech sources that may have taken place.
Our survey findings indicate that during the pandemic-related school closures, students in private schools and those from high-socioeconomic status households have more access to digital devices and are more engaged in regular educational activities during COVID-19 than their peers in government schools and from low-socioeconomic status households; findings also indicate that girls are more likely than boys to have access to digital devices for learning and to engage in more regular educational activities. Unsurprisingly, parents turned out to be a major source of educational activities of young children during the school closures.
Alarmingly, 1 in 5 children in our sample were enrolled in schools that do not offer any remote instruction during the school closures, and even among the children whose schools had begun remote instruction, only slightly more than half attended all the classes.
Altogether, these preliminary results shed light onto a likely growing inequality of educational opportunity in India and around the world, suggesting the need for policymakers to broaden access to continuous and equitable learning opportunities across the student population.
Read the full report»
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How has education technology impacted student learning in India during COVID-19?
India has been one of the hardest-hit countries by COVID-19. Beyond the staggering impact on human life, COVID-19 has greatly disrupted access to education in India, with 247 million primary and secondary school students out of school. While school systems in India and across the world have made efforts to reach students at home through various means, recent estimates of the impact on learning and socio-emotional well-being suggest that the poorest children will be hurt the most by the pandemic-related school closures.
Indeed, school closures have compelled education systems to quickly devise and apply different modes of remote learning such as radio, TV, and various other types of online tools. But access to this education technology (ed tech) differs across and within countries—with students in high-income countries and communities much more likely to have access to online, virtual schooling than their peers in low- and middle-income countries and communities. Thus, an important question is to what extent will student learning and progression in school, especially among primary-school-aged children in low- and middle-income settings, be affected by the global school closures? Further, how will the COVID-19 school closures cause inequality in learning among girls and boys, among poor and affluent children, and across communities and countries of varying income levels?
To answer these questions, we conducted a household survey in February of this year in a southern city of India—Chennai in the state of Tamil Nadu—with financial support from the Asian Development Bank and in collaboration with J-PAL-India. Chennai is the largest urban center in Tamil Nadu and is India’s sixth most populous city. Due to Chennai’s dense population, families typically have several nearby private and government school options, which provide a ripe setting to explore how the use of ed tech differed between different types of schools—both prior to and during the COVID-19 pandemic. Additionally, India offers a fertile environment for this study’s data collection as a leader in large-scale education reform and ed-tech application among developing countries. The diversity in its large population offers useful lessons applicable to many different contexts.
Alarmingly, 1 in 5 children in our sample were enrolled in schools that do not offer any remote instruction during the school closures, and even among the children whose schools had begun remote instruction, only slightly more than half attended all the classes.
Our goal was to get a better picture of primary school-aged children’s daily educational experiences during the COVID-19 school closures, and especially how students and teachers are using ed tech. We were particularly interested in understanding how these learning experiences may differ among children from low- and high-income households and between children attending private and government (publicly funded) schools.
Our survey findings
Alarmingly, 1 in 5 children in our sample were enrolled in schools that do not offer any remote instruction during the school closures, and even among the children whose schools had begun remote instruction, only slightly more than half attended all the classes.
Our findings further indicate that during the pandemic-related school closures, students in private schools and those from households with high socioeconomic status (SES) have more access to digital devices and are more engaged in regular educational activities than their peers in government schools and from low-SES households. As Figures 1 and 2 show, children enrolled in private schools and from high-SES households had higher rates of access to digital devices—such as smartphones, internet, and computers/laptops—than their peers in government schools and from low-SES households. These preliminary results shed light into a likely growing inequality of educational opportunity and suggest the need for policymakers to support access to regular learning opportunities at home for children from low-SES households in government and private schools. Other emerging evidence from the COVID-19 school closures suggests that ensuring students have access to even low-tech interventions, such as SMS text messages and phone calls, can help mitigate the potential learning losses.
Figures 1. Share of students with access to educational resources, by household income
Source: February 2021 Brookings phone survey.
Figure 2. Share of students with access to educational resources, by school type
Source: February 2021 Brookings phone survey.
Prior research has shown that the impact of school closures in low-income countries may differ by gender, as girls are often expected to help out with household chores and/or assist parents in caring for younger siblings. However, our study shows an encouraging pattern, where girls are more likely than boys to have access to digital devices for learning and to engage in more regular educational activities (see Figures 3 and 4). Nevertheless, this finding suggests the need for further analysis into why boys may be losing out on educational opportunities, and what strategies may be most effective to increase learning among both girls and boys in India and other low-income countries.
Figures 3. Share of students with access to educational resources, by gender
Source: February 2021 Brookings phone survey.
Figure 4. Frequency of engagement in educational activities, by gender
Source: February 2021 Brookings phone survey.
Altogether, these preliminary results shed light onto a likely growing inequality of educational opportunity in India and around the world, suggesting the need for policymakers to broaden access to continuous and equitable learning opportunities across the student population.
Looking ahead, it will be crucial for governments to enact strategies to help students recover from the learning losses suffered during the school closures and to return to school. Such a strategy may include:
Working closely with the health authorities, plan to reopen schools safely as soon as possible.
Assess each child’s foundational literacy and numeracy skills as soon as possible to help teachers and parents develop personalized interventions to ensure that each child can get back on track to develop these critical skills.
Expand access to digital devices and connectivity among educators and students, along with guidance and support to teachers on ed-tech resources that are best aligned to each student’s learning level. While ed tech is not alone going to ensure children learn, it can be a tool for educators, students, and parents to facilitate learning continuity during school closures and allow for more student-centered, engaging instruction in and outside the classroom.
Provide socio-emotional support to educators and students, recognizing that the pandemic has not only caused learning loss but also emotional trauma in too many households.
You can access the full report here.
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Africa in the news: Zambian election, impacts of the Taliban’s Afghanistan takeover, and health updates
Zambian opposition leader Hichilema wins presidential election
On Monday, Zambia’s electoral commission declared opposition leader Hakainde Hichilema the winner of the southern African nation’s recent presidential election. Hichilema garnered 2.8 million votes, or 50.1 percent of the total, narrowly eclipsing the 50 percent mark needed to win without recourse to a second round. Addressing the nation on Monday, the current president, Edgar Lungu, announced that he would “comply with the constitutional provisions for a peaceful transfer of power.” On July 14, Lungu had criticized the elections as “not free or fair,” but he ultimately earned only 1.8 million votes, a sum that the Financial Times suggests was insufficient to support a legal challenge to the result.
Since the election was called, the value of the kwacha has risen nearly 11 percent against the U.S. dollar. The prices of Zambia’s defaulted U.S. dollar-denominated bonds have also risen. Now, Hichilema will try to navigate Zambia out of its current debt crisis, which has it paying 30 to 40 percent of its revenue on interest payments after becoming the first African country during the pandemic to default on its obligations.
The Taliban’s takeover in Afghanistan will likely have implications for Africa
According to Deutsche Welle (DW), the Taliban’s recent takeover of Afghanistan has heightened worries that extremist groups in Africa will be emboldened by that victory. In fact, in a recent radio interview, Kwesi Aning, director of the faculty of academic affairs and research at the Kofi Annan International Peacekeeping Training Centre in Ghana, warned that the events in Afghanistan “can potentially put all of us in Africa and the Sahel at risk.” DW notes that many Islamic militant groups in the region have an affiliation to al-Qaeda, which was formerly based in Afghanistan.
Recent years have seen surges in extremist activities across the continent despite national government efforts to stamp out such activities and the presence of thousands of U.N. troops in extremist hot spots. In fact, Nigerian President Muhammadu Buhari suggested this week that the war on terror is not over but is moving to Africa. Nigeria itself has been fighting Boko Haram since 2009 and that conflict has spread to areas in Cameroon, Chad, and Niger. Just earlier this month, in northern Burkina Faso, suspected extremists ambushed a government convoy, killing 30 civilians and 17 soldiers. Other extremist groups in Africa include al-Shabaab in Somalia, Jama’a Nusrat ul-Islam wa al-Muslimin (JNIM) in the Sahel, and the Islamic State West Africa Province (ISWAP).
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The Taliban’s resumption of power in Afghanistan comes after the U.S. withdrawal from the region after 20 years of military presence and has raised questions over other foreign military pullouts in many African hot spots. For example, in July of this year, France announced that it will reduce its military presence in the Sahel, withdrawing over 2,000 troops from the region. Some experts, including Ryan Cummings, a senior associate at the Center for Strategic and International Studies, warn that France should now reconsider its decision to avoid a potential repeat of the Afghanistan scenario.
In related news, Uganda has agreed to take 2,000 Afghan refugees at the request of the United States. Uganda’s camp Bibi Bidi is the world’s largest refugee camp, and Uganda alone currently hosts about 1.4 million refugees escaping conflict. Afghan refugees will be housed temporarily in Uganda until relocated by the U.S., but, at this time, there is not a set date for when the refugees will be moved.
Vaccine inequity; confirmed case of Marburg virus in Guinea; Ebola in Côte d’Ivoire; cholera in Nigeria
On Wednesday, health officials in the U.S. announced plans to begin rolling out COVID-19 booster shots in October to all U.S. citizens. In response, Africa director for the World Health Organization (WHO), Matshidiso Moeti, criticized the decision, stating that such actions “make a mockery of vaccine equity” since wealthy countries have, on average, distributed more than 103 vaccine doses per 100 people, while in Africa only six doses have been distributed per 100 people. In other words, less than 2 percent of Africa’s population is fully vaccinated.
Indeed, vaccine access in the region remains difficult as well as controversial. While the region has demonstrated that it has the capability to mass produce the Johnson & Johnson (J&J) vaccines through manufacturers like Aspen in South Africa, many of those doses have been exported to Europe. In fact, as The New York Times reported this week, South Africa waived the right to ban vaccine exports from the country, sparking outrage from health activists like Fatima Hassan of the Health Justice Initiative, who called the decision to export the vaccines “scandalous, immoral, and unconstitutional.” While wealthy countries have promised to donate shots through the COVAX program, most of them will not be delivered until next year.
Meanwhile, as Guinea deals with its third COVID-19 wave, on July 25, doctors confirmed West Africa’s first-ever case of Marburg virus, two months after the country declared a new outbreak of the Ebola virus. Guinean health officials continue to monitor 172 people who were in contact with Marburg patient zero, who died on August 2. The Marburg virus, which is in the same family as Ebola, causes symptoms similar to Ebola and is transmitted between humans through bodily fluids. The government of Guinea, its neighbors, and the WHO are using the control system developed within the country to deal with Ebola in an attempt to stop the spread. In related news, neighboring Côte d’Ivoire declared its first case of Ebola in 27 years this week. The patient had traveled from Guinea last week and is currently being treated in intensive care.
Also in West Africa, Nigeria is currently responding to a cholera outbreak with more than 30,000 cases and 800 reported deaths this year. The disease is waterborne and is spread by poor access to clean water, open defecation, poor sanitation, and other hygiene issues, according to the Nigeria Centre for Disease Control (NCDC). The NCDC instructs Nigerians to only drink or use water that is boiled and stored safely to prevent infections.
20210820 AP Douglas A. Rediker
[Even if the Taliban could get money from the IMF…the process] would take, I think, months at the earliest, if at all. […] The U.S. still retains a lot of political heft in the global, political and economic systems to twist some arms. The Taliban are not going to be popular.
The COVID boom we could do without
Before Covid-19, the value of mergers and acquisitions in Australia hit its peak during the global financial crisis. More than $348 billion of deals were made in a single year as struggling companies were snapped up by their rivals.
The trend has shown no signs of declining since the pandemic set in, with the 2020 figure topping $372 billion. Correcting for inflation, the annual value of mergers and acquisitions each year in Australia is a whopping eight times bigger than it was back in 1990.
Should we be worried? Mergers and acquisitions have benefits and costs, and if the former are greater than the latter then they should be welcomed. But a growing body of research shows that their benefits, while large in theory, are not so big in practice. The costs, on the other hand, appear to be bigger and more persistent than ever.
Mergers and acquisitions have two main benefits. Bigger businesses benefit from economies of scale: their size and improved efficiencies mean they can produce more goods and services at a lower cost, boosting productivity. And bigger businesses can generate greater economies of scope, saving on costs a bit like a petrol station that also sells milk.
Mergers are an easy way for a business to gain these benefits by expanding into new markets, new locations and even new countries. They allow a business to expand from retail into wholesale, from wholesale into manufacturing, and from manufacturing into distribution and logistics. They can also be a way to save a failing business.
But mergers can create problems, and many of them relate to competition. When competing firms merge, we lose a competitor. This is not necessarily a problem if lots of other competitors exist or if new ones can enter the market quickly. But when a merger reduces competition, it causes all the things we are struggling with in Australia: high mark-ups, low wages growth, low investment and low innovation, all contributing to greater inequality.
Problems can arise even when a merger doesn’t involve competing firms. When mergers result in a business becoming vertically integrated, new competitors find it hard to compete with an incumbent that has its own manufacturing, wholesale, retail and distribution networks. When mergers allow businesses to sell bundled products or services, it becomes harder for customers to change from one supplier to another, reducing competition.
The most common argument in favour of mergers and acquisitions is a fallacious one: that Australia needs big businesses to compete internationally. Most of Australia’s economy isn’t “trade exposed,” and even the parts that are exposed to international competition don’t benefit from being allowed to become dominant — and often inefficient — in the Australian market.
The reason our athletes won so many medals in Tokyo isn’t that they were wrapped in cotton wool back home. They did well because they’ve spent many years competing fiercely against other Australians. The same is true for businesses. Allowing them to get big and lazy at home doesn’t make them more competitive overseas; indeed, it makes them less competitive. Competitiveness overseas first requires competitiveness at home.
The productivity benefits of mergers may also be overstated. Bruce Blonigen at the University of Oregon and Justin Pierce at the US Federal Reserve used detailed firm-level data to study the impact of mergers and acquisitions on productivity and market power across all US manufacturing industries. They found that mergers were associated with increases in average price mark-ups but did little to boost productivity.
The two economists also found little evidence of other claimed efficiency gains from mergers, such as reallocation of activity across plants and scale efficiencies in non-productive units of the firm.
Some studies question whether mergers provide much value to the acquiring company, too. Recent studies found that companies that make lots of small acquisitions tend to increase in value while big, one-off mega-deals tend to be riskier. Mergers might also be bad news for startups. The Economist reported that the FAANGs — Facebook, Amazon, Apple, Netflix and Google — are surrounded by a “kill zone” in which companies are either acquired or quashed.
Mike Driscoll, a partner at investment firm Data Collective, says that technology conferences increasingly “send shock waves of fear through entrepreneurs… Venture capitalists attend to see which of their companies are going to get killed next.” This has made some venture capitalists more reluctant to invest in customer-focused startups.
So what, if anything, should we do about the Covid boom in mergers and acquisitions?
As a first step, we should be more cautious about mergers in industries where there are already too few competitors. More than half of Australia’s markets are concentrated — meaning the four biggest firms control a third of the market or more. Mergers in these industries should logically attract more scrutiny than mergers in less-concentrated industries. Imposing a public interest test on mergers in concentrated industries, having more post-merger reviews, and making more firm-level data available for public scrutiny would lead to better decision-making.
Such measures are important because mergers are hard, if not impossible, to reverse. It would be unwise to allow a one-off pandemic to result in long-term structural changes that weaken the competitiveness of Australia’s markets. This would worsen all the economic problems we have been struggling with for decades.
Covid-19 will have many long-term consequences for Australia. Weakened competition shouldn’t be one of them. •
A proposal for long-term COVID-19 control
Introduction
Four successive waves of COVID-19 have buffeted the United States for the past year and a half. With each wave, we have bet on different measures to push us through: First, public health measures, then drugs and treatments, and now, with our fifth wave, we hold out hope for vaccine-led recovery. But from the outset, we have underestimated this virus and its ability to maneuver the public health battleground; it is escaping the best defenses we are able to muster and finding new avenues of attack.
In this paper, I propose a multimodal strategy for long-term COVID control, one that sets up multiple barriers of protection so that we are able to not only contain SARS-CoV-2 and eliminate COVID-19 as a major life-threatening disease, but also return to a new social and economic life. The strategy uses the best of what we have on hand today—a rapidly growing arsenal of vaccines and antiviral drugs and public health measures— with an eye towards future improvements and developments.
The most immediate priority should be supporting additional research on the molecular biology of SARS-CoV-2, of which we still know surprisingly little. This is particularly important since there is great likelihood that COVID-19 will become endemic. Unlike the viruses that cause smallpox or polio, SARS-CoV-2 has demonstrated an impressive ability to adapt and thrive in both humans and animals, including our much-loved pet, cats and dogs. Even if we can eliminate the disease from our own communities, it is unlikely we can do the same across the globe and for all our animal populations at the same time.
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The best we can hope for is containment of COVID-19 at levels we can tolerate both personally and economically. We have to use all the tools we have at our disposal— being aware of the inequities and disparities from country to country and within countries—that have made this and other diseases so hard to address.
Download the full working paper
Figure of the week: Potential for youth and female employment in industries without smokestacks
Africa’s youth population continues to grow rapidly: In fact, the World Bank predicts that people under the age of 25 are set to comprise 50 percent of the population of sub-Saharan Africa by 2050. Such growth has created now-urgent demand for employment that must be met for Africa to reduce poverty. To examine new strategies for job creation for the region’s youth, the Brookings Africa Growth Initiative (AGI) and its partner think tanks on the continent have been conducting research on how to support promising industries to grow and absorb low-skilled labor.
While export-led manufacturing has historically led to job creation, factors like technological progress and the evolving global marketplace have meant that Africa has not been able to capitalize on the gains from manufacturing that other developing regions have. In response, AGI researchers have identified other sectors, termed “industries without smokestacks” (IWOSS), that share characteristics with traditional manufacturing and thus might play a similar role in driving economic growth and job creation. In short, IWOSS are sectors that are tradable, have high value added per worker relative to average economywide productivity, exhibit capacity for technological change and productivity growth, and show some evidence of scale or agglomeration economies. IWOSS include high-value agribusiness, horticulture, tourism, business services, ICT (information and communication technologies)-enabled services, transport, and logistics—all sectors that are growing at a faster pace and have higher labor productivity than non-IWOSS sectors like agriculture. Notably, different sectors of IWOSS can cater to Africa’s youth, whose education and skills vary widely, with tourism and horticulture largely relying on low-skilled labor while sectors like logistics and ICT require more training.
The case studies for Ghana, Kenya, Senegal, South Africa, and Uganda were published earlier this year, and the recent paper “Addressing youth unemployment in Africa through industries without smokestacks” synthesizes the major findings and trends from those case studies.
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Overall, the case studies predict that IWOSS will account for 60 percent or more of new jobs in Ghana, Rwanda, Senegal, and South Africa; however, the share is lower for countries like Kenya and Uganda, which are projected to rely heavily on traditional, “smokestacks” industries to 2035 (Figure 1).
Figure 1. Projected share of new jobs created by 2035 by sectoral grouping
Source: Coulibaly, B. and Page, J. Addressing youth unemployment in Africa through industries without smokestacks: A synthesis on prospects, constraints, and policies. (Washington, DC: Brookings Institution, 2021).
More opportunities for women
Notably, IWOSS industries also offer more employment opportunities for women: In fact, the case studies reveal that most IWOSS subsectors employ a greater share of women than other sectors of the economy. Within IWOSS, tourism employs the greatest share of women (56.7 percent), while horticulture and export crops follow second at 53.2 percent (Figure 2). Female employees in ICT comprise only 31.7 percent of the sector; according to the authors, this finding indicates a greater need for training in digital skills for young girls and women.
Figure 2. Share of female employment by IWOSS sector
Source: Coulibaly, B. and Page, J. Addressing youth unemployment in Africa through industries without smokestacks: A synthesis on prospects, constraints, and policies. (Washington, DC: Brookings Institution, 2021).
Policy recommendations
While the job creation potential of IWOSS relies on the fact that most roles do not require higher-level skills, a persistent lack of skills at all levels still holds their promise back. More specifically, the authors find that, for IWOSS firms to grow and create jobs, potential workers must demonstrate soft, digital, and intrapersonal skills, which can be taught through postsecondary education but require input from employers and businesses, as each sector has different demands for the skills required. Countries in the case studies have at least a moderate deficit in all six subcategories of skills: basic, problem-solving, resource management, social, systems, and technical. Notably, Ghana, Kenya, Senegal, South Africa, and Uganda have a substantial deficit in all six skills for agro-processing and tourism, and in horticulture have only a moderate gap in social skills but a severe gap in the rest of the skill subcategories (Figure 3).
Figure 3. Skill gap by skill category and sector
Note: See the full paper for an extensive definition of each skill category.Source: Coulibaly, B. and Page, J. Addressing youth unemployment in Africa through industries without smokestacks: A synthesis on prospects, constraints, and policies. (Washington, DC: Brookings Institution, 2021).
At the same time, the authors point out that gaps in necessary skills are not the only constraint IWOSS face, as poor infrastructure—like unreliable power supply and lack of or poorly maintained roads—pose major challenges for IWOSS development. Lack of competition as well as regulatory coordination issues that do not allow for customs and standards to be implemented also pose challenges. Since IWOSS face constraints similar to those of traditional manufacturing, the authors argue that policymakers are not required to choose between promoting IWOSS and manufacturing, thus enabling them to focus on forming multifaceted policies. Key takeaways of the report include the necessity of prioritizing investment in infrastructure (particularly gaps in the reliable supply of electricity), addressing the skills deficit through a demand-led approach between postsecondary education and businesses, and encouraging a competitive business environment. The individual case studies also provide country-specific recommendations for supporting the growth of IWOSS.