Behind the Insights season 2 episode 5
Flying below the radar – The untapped potential of the African youth workforce
This is Behind the Insights, a vodcast series by MetrixLab. We talk to experts from all over the world to find out what’s really driving today’s hottest topics in brand insights.
In this episode, join MetrixLab South Africa’s Managing Director, Nanzala Mwaura, and Professor of Economics at the University of Cape Town, Haroon Bhorat, as they break down the African labor force and the role of the African youth in it. Understand the workings of the current market and how the African youth still struggle to break the barriers of education and status despite their massive potential and ambitious mindsets. With Africa being on track to account for almost half the world’s youth by 2100, it is vital that businesses and corporates understand the value of this workforce today, to ensure they can rise to success tomorrow.
Check it out and stay tuned for our new season next year!
Or if you prefer, read the full transcript below.
Intro: Welcome back to Behind the Insights, a vodcast Series by MetrixLab. We talk to experts from all over the world to find out what’s really driving today’s hottest topics in insights.
Nanzala: So welcome, Prof. Bhorat. We’re really honored to have you here on Behind the Insights today. We have a lot planned for this episode. To start off, my name is Nanzala Mwaura. I’m the Managing Director of MetrixLab, South Africa. Prof, we know each other. Having done some wonderful work in the past. But please introduce yourself.
Haroon: Yes, thanks, Nanzala. I’m Haroon Bhorat, professor of economics at the University of Cape Town and director of the Development Policy Research Unit, which is also at the University of Cape Town.
Nanzala: Thanks, Prof. So, diving right in. We would like to talk about the youth in Africa. In your paper titled Jobs, Economic Growth and Capacity Development for Youth in Africa, you make some very important points about the youth dividend in terms of population growth. And the main challenge you outlined was sustainable employment. As we prepare to launch MetrixLab in the region, we did a 12-country study on affordability.
It was a household survey where the respondents were the household decision makers, basically the people who make and manage the household budgets. It was an online survey and an urban skewed study. I’m just giving that context so that as I give you the results, you know, you view it in that context. So what we found was that 57% of the households are headed up by the youth, which we are defining as the 18 to 34 year olds.
And we found that 45% of these youth headed households earn less than $250 a month, just about $8 a day. We found that income is directly related to education and skill. And having said that, we also found that of those employed, 17% are from the working poor, meaning they cannot afford food and basics.
So now, Prof., I have a few questions for you. Can you tell us a little bit about the youth population dividend and how the current labor market looks like in Africa?
Haroon: Yes, sure, Nanzala. I mean, if we step back, there are a lot of discussions around the youth dividend in sub-Saharan Africa and in Africa as a whole. And it’s always referred to that as a sort of qualified opportunity or qualified dividend. And the reason for that is, you know, and I’ll talk about the statistics, but as much as the share of young people in the world economy will grow dramatically as they emanate from sub-Saharan Africa, that dividend, as we call it, is conditional on creating sufficient employment opportunities.
So, you know, that’s a really important place to land on, which is job opportunities are what are required if you’ve got a fast growing youth population in a region or in an economy. So what do those numbers look like? Well, for Africa as a whole, you currently have half a billion young people. And here I’m using the 15 to 34 age cohort, which is your one as well.
But that’s going to grow from half a billion to 1.2 billion by 2100, according to the UN population stats and projections. So just to put that in proportions, currently about 19% of the world’s youth reside in Africa. So 19% by 2100. So make it about 80 years from now, that ratio is going to be 46%. So think of it this way that by 2100, 50% of the world’s youth will reside in Africa.
Now that’s a massive growth in young people as they’re accounted for within Africa. That means, convert that dividend into the challenge is a disproportionate share of the world’s employment challenge. If you want to just do a simple metric, 46% of the world’s employment challenge in 2100 will reside in our continent, in Africa. So, you know, if you remember I said one and a half billion, right?
1.2 billion, let’s say, will be the youth population by 2100. So we’re saying that the growth of that will come from ten countries, two thirds of the growth of that. So which of the big contributors? Nigeria is the first, obviously, because 20% of that full growth will come from Nigeria alone. What are the other big countries? The DRC, Tanzania, Angola, and Niger.
So another way to think about it is that five countries account for half of this total observed increase to 2100. So in many ways, the African jobs challenge, which we bedrock around a youth population growth challenge, is a ten-country challenge. And I think that’s a really important sort of heterogeneity to keep in mind.
Nanzala: Absolutely. I think when we were doing the study, we actually selected the countries based on population and we found that very few countries account for such big populations of the region than the other smaller countries. But yes, I do agree with you on that. So from the work that you’ve done, what have you found about where the youth jobs will originate from?
Haroon: A lot of work has been going on in terms of structural transformation and trying to understand patterns of growth in sub-Saharan Africa. The problem is that we’ve seen patterns of premature deindustrialization. So the sectors, such as manufacturing, that should be creating jobs are not in fact creating jobs in Africa. And in many ways, people are entering into the informal sector.
So many of the workers or the young people in your survey, I would almost hazard a guess, a calculated guess, are in the informal sector and, in particular, urban informal employment. And so a lot of urbanization patterns are revealing young people and people in general, older workers as well, moving from rural to urban areas, but not out of agriculture into low wage manufacturing jobs, which is sort of the East Asian early industrialization patterns from the UK, Japan and South Korea and so on.
But they’re rather moving from agriculture into urban jobs in the informal sector. And those are low productivity jobs, they’re not sustainable, and they’re certainly not wage employment.
Nanzala: Yeah, actually, that is what we found. We found that as much as the youth are highly educated, in this particular group that we talked to, 80% of them had tertiary education or some technical training, 8% of them were unemployed, 40%, as you just said now, employed in the informal sector. So what would you say is the issue?
Is there a disconnect between the education and the needs of the labor market or what exactly is going on here?
Haroon: Yeah, so that’s a big, big question, Nanzala. I mean, there are a whole lot of what we call supply and demand side reasons for that. I mean, a lot of the collapse of manufacturing or if you like, the flatlining of manufacturing in Africa has to do with competitiveness from East Asian countries, not just China, but the new economies, Vietnam, Bangladesh and so on.
Barriers to trade in sub-Saharan Africa that relate to everything from infrastructure, right through to tariff regulations and so on. But I think skills are a part of that. So I think you’re right that one does find an insufficient sort of accumulation of human capital amongst the African workforce. So that’s a pure quantity effect. So you do find that there’s too few individuals that have got human capital levels that are at the tertiary education level.
And that alone precludes sectors or firms, foreign investors moving into those kinds of sectors in Africa, where you need highly skilled workers just because there’s a shortage. The other really important thing, though, is conversion rates. So that links to the higher education story. But the conversion rates from schooling into higher education are also low in sub-Saharan Africa.
Young people get into the schooling system, and in fact, enrollment rates in primary schooling are really high. But that drops off, right, into secondary schooling and then drops off even further into tertiary schooling. The third problem, Nanzala, is the quality. The quality of both schooling and tertiary education. So what we found consistently is that when you look at quality adjusted years of schooling in Africa.
So in other words, even though you’ve got a grade 12 or high school certificate formally, quality adjusted in fact, it may actually be equivalent to a grade nine, grade eight, or a grade ten certificate. And what you find when you compare countries across the world is that quality adjustment gap is much larger in low income countries and therefore sub-Saharan Africa than other countries.
And so, for argument’s sake, imagine country X, that’s not in Africa, where the person has a grade 12 certificate, quality adjusted, it’s maybe grade 11. But in the average African country, or low income African country, it’s not grade 11, it’s maybe equivalent to a grade nine certificate. And so what that means for employers, and this runs through the higher education system, is that they’re getting formally certified young people but with a very low quality of human capital.
And all of that, combined. Never mind infrastructure, foreign direct investment, concerns around foreign exchange volatility, macro stability, governance issues, you add all of that. But you just focus on education and that’s a big enough obstacle to absorbing young people into employment.
Nanzala: Well well, that’s quite something. So anyway, finally, I just wanted to ask you one of the things and I mean, we’ve seen this over and over is that the youth are highly optimistic and very entrepreneurial. So there’s a whole new way in which the youth are operating now. They’re not going the cookie cutter way, you know, go to school, work hard, get a job.
They’re trying all manner of things and really trying to work on their own, on themselves, and building their futures and so on. Now, what advice would you give to corporates operating in the region in terms of supporting the youth to help them improve their income levels? LikeF what can people do in small pockets, but specifically corporates? What advice would you give them?
Haroon: I mean, in many ways, you know, as much as you have the challenges around formal certification and quality levels within the schooling system, there’s a lot of latent or unobserved ability amongst young people. But people in general and corporates can find a way to extract those individuals in the workforce with those latent abilities.
And corporates have done that in selected cases where you actually have, for example, a standardized form of interviewing that doesn’t involve whether you have a grade 12 or this degree or that degree, but they actually test mathematical ability or coding ability just informally through your standardized test without the formal qualification. And I think in that way, corporates could actually extract high performing individuals that they could absorb as young people and train up into the specific requirements for the job in a much more creative way than simply looking for “okay, who has the formal degree requirements?”
Nanzala: Absolutely. So, thank you very much. I think you’ve given us some great points. Thank you for joining us. This was quite inspiring, and I hope to do this again sometime soon.
Haroon: Right. Thanks, Nanzala.
Nanzala: Thank you.