Poverty and hunger remain a global challenge. However, fewer people live in extreme poverty in the 21st century compared to previous generations. According to the World Bank, between 1981 and 2008, the proportion of people in the developing world living on less than $1.25 a day fell from 52 percent to 22 percent, and nearly 650 million people were lifted out of poverty.

In addition, despite the 2008 financial crisis and food and fuel price increases, global poverty has continued to fall precipitously. Conversely however, progress has been uneven and more than a billion people around the world remain in dire need.

Poverty is exacerbated in regions of the world where poor health and lack of education deprive people of productive employment, where environmental resources have been depleted or spoiled, and where corruption, conflict and bad governance waste public resources and discourage private investment.

As a result, poverty needs to be confronted on many fronts. These include creating more and better jobs, delivering quality public services and infrastructure, and by protecting vulnerable people such as women, children and the elderly. There is, however, no single solution, with the best strategies depending on the circumstances in each individual country. Definitions of poverty also vary from country to country.

To measure poverty in the world as a whole, a common standard is required — because market exchange rates tend to understate the real incomes of developing countries and overstate the extent of poverty. Purchasing Power Parities (PPPs) are used to compare income and consumption levels between countries. PPPs are calculated to compensate for differences in the price of goods and services between countries. The result is a conversion factor that can be used like an exchange rate to convert values in one currency into those of a reference currency (such as the US dollar). The World Bank’s original “$1 a day” international poverty line was based on the poverty lines in the world’s poorest countries. By focusing on the standards of the poorest countries, the $1 a day line gave the global poverty measure a salience in focusing on the world’s poorest. Using the new 2005 PPP rates, the international poverty line was revised to $1.25 a day, which is the average poverty line of the 10 to 20 poorest countries in the world.

To date, global success in reducing extreme poverty over the past three decades has disguised uneven progress across regions. The greatest drop occurred in East Asia and the Pacific, where the poverty rate fell from 84 percent in 1981 to 13 percent in 2008 and the number of people living on less than $1.25 a day fell by 662 million.

In South Asia, the poverty rate fell from 61 percent to 36 percent over the same period. However, due to rapid population growth, the number of extremely poor people in the region increased and only returned to the 1981 level by 2008.

Closer to home and within an African context, in sub-Saharan Africa the poverty rate rose from 52 percent in 1981 to 58 percent in 1999, as many countries suffered a long period of civil discord and slow economic growth. By 2005, the number of people living in extreme poverty in Africa had almost doubled. But the poverty rate fell to 48 percent in 2008, and the number of people living in extreme poverty fell to 386 million people.

Rising incomes have brought more countries into middle-income status, so that nearly three-quarters of the world’s poor people now live in middle-income countries. In many of these countries, a poverty line of $2 a day or higher is more representative of the extent of serious poverty. There are almost 2.5 billion people living on $2 a day or less, and progress in reducing their numbers has been slow. The number of people living on between $1.25 and $2 a day is expected to remain constant at about 1.2 billion for the next decade.

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Over the last decade, six of the world’s ten fastest-growing economies were in sub-Saharan Africa. Yet, there are troubling indicators that this exponential growth has not resulted in robust growth of “good” jobs. In other words, those offering higher wages and better working conditions – especially for the young.

Youth Bulge

Exacerbated by a delayed demographic transition, the share of youth (aged 15 to 24) in Africa – both north and south of the Sahara — has been rising over time and is now higher than in any other part of the world. This demographic bulge offers the possibility of a growth dividend. As in the case of East Asia, a rapidly growing work force can be combined with capital and technology.

But it can also represent a major threat. Africa is not creating the number of jobs needed to absorb the 10 to 12 million young people entering its labour markets each year, and as recent events in North Africa have shown, lack of employment opportunities in the face of a rapidly growing, young labour force can undermine social cohesion and political stability.

Seen from this perspective, employment policies cannot focus only on the supply side of the labour market. Indeed, while labour market reforms and active labour market policies can make a contribution to solving the employment problem, the greatest traction is likely to come from policies and public actions designed to accelerate the growth of sectors with high value added per worker. Ultimately, from a strategy for structural change.

The Statistics

On the face of it, sub-Saharan Africa does not appear to have a severe employment problem. In 2009, the overall unemployment rate was 6.4% compared with a global average of 4.7%. The regional unemployment rate has been relatively stable since 2000 and ranks third, behind the Middle East, North Africa, Europe and Central Asia.

Between 2004 and 2008, North and sub-Saharan Africa had some of the most employment-intensive growth in the world. According to data from the Africa Development Bank, average employment elasticities of growth were 0.7 and 0.5, respectively. Globally, the employment elasticity of growth is estimated to be about 0.3, and it ranges from a low of 0.2 in East Asia to a high of 0.9 in the Arab Middle East.

Based on the International Labour Organisation definition, youth unemployment rates in many sub-Sahara African countries are relatively low compared to world averages. Worldwide, there is a fairly regular relationship between the overall rate of unemployment and the unemployment rate of the young.

With almost 200 million people aged between 15 and 24, Africa has the youngest population in the world. In a majority of African countries the young account for more than 20% of the population. In 2011, the ten countries in the world with the youngest populations were all in Africa. While the proportion of young people (15 to 24) is projected to decline globally, it will stay at the same level in Africa for the foreseeable future.

At the projected rates of population growth, the number of young people in Africa will double by 2045. By 2030, Africa is projected to have as many youth as East Asia and by 2050 it could also exceed the youth population in South Asia.

The rapid growth of the labour force implied by Africa’s demographic transition will pose serious challenges. According to a McKinsey survey conducted in 2010, by 2040, Africa will have the largest workforce in the world, surpassing both China and India.

Gaining the Correct Skills

This offers an unrivalled opportunity for economic and social development, if these new workers can find places in the productive sectors of the economy. However, it could also present a significant risk, if Africa fails to create sufficient economic and employment opportunities.

However, the role of education will prove paramount. There is a severe mismatch between the skills possessed by young workers and those demanded by employers. According to the World Bank, despite the increase in enrolments in most sub-Saharan African countries – especially at the primary level – the out-of-school population has very low educational attainment. Thirty-six percent of the 15- to 24-year-olds in sub-Saharan Africa have never attended school. Only 28% have completed primary school, and only 8% have completed secondary school. This means that about two-thirds of all young workers in the labour market — about 95 million young people — lack the basic skills needed to be competitive in the labour force.

The key to reducing unemployment and informality – both among the young and in general – is rapid growth of good jobs. These are employment places capable of paying good wages and building skills. If the history of those countries that have successfully sustained growth, job creation and poverty reduction is any guide, creating such good jobs will require significant structural change. Economies that have made the transition from low-income to high-income status typically have experienced significant changes in their economic structure.

Education reforms are essential to improving the skills and problem-solving capacity of Africa’s workers. Perhaps the most urgent reform is to increase the emphasis on post-primary education. In the longer term, the education system needs to be restructured to build the skills needed to compete globally.

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Technological innovation and Information Communication Technologies (ICTs) represent a way for developing world nations to foster economic development, improve levels of education and training, as well as address gender issues within society.

Entrepreneurship is crucial for economic development around the world. In countries such as Nigeria, Egypt and Indonesia, micro-entrepreneurs generate 38% of the gross domestic product. Analysis from the World Bank in 2011 indicates that small businesses create a disproportionate share of new jobs. They generate new ideas, new business models, and new ways of selling goods and services.

Wireless technology and ICT infrastructure development is also vital for entrepreneurship and small business development. In many emerging nations, it is a major challenge to gain access to capital and market information. Developing nations specifically do not have functioning infrastructure or much in the way of financial resources.

In sub-Saharan Africa, for example, approximately 29% of roads are paved, barely a quarter of the population has access to electricity, and there are fewer than three landlines available per 100 people. In Indonesia, 75% of the country has household incomes below $2.50 per day. The combination of poor infrastructure and poverty makes it difficult for entrepreneurs to access financial resources and information.

Below is an example of how a basic form of technology – such as a simple mobile phone – has been proved to assist people to communicate with one another, access market information, sell products across geographic areas, reach new consumers, enter mobile payment systems, reduce fraud and crime, and empower women and the disadvantaged.

The Self-Employed Women’s Association (Sewa) in India includes 1.1 million workers who pool their resources to improve their bargaining power. The organisation sends agricultural workers daily SMSs on commodity prices so farmers can determine the best places to sell their products. Those participating say they have been able to market fruits and vegetables over wider areas, and thereby earn higher incomes.

The Ethiopia Commodity Exchange Program (ECEP) has helped entrepreneurs expand their markets. Before 2008, 95% of farmers sold their products in local markets and were not able to access other areas. Transaction costs were high and they had problems getting fair prices due to the lack of market competition. With the advent of the ECEP, agricultural producers gained access to external buyers and were able to negotiate better prices. This boosted their incomes and improved the quality of food products.

The India-based Hand in Hand Partnership (HIHP) enables women to use mobile devices to launch businesses in the technology area. It provides mentorship, training, credit, and technical support.

In Kenya, the Farmers Helpful Network (FHN) gives agricultural producers access to the latest research through their mobile phones. Farmers can ask questions of experts concerning crop rotation, artificial insemination, and crop insurance. This helps them improve their agricultural production and marketing, and increase their overall income.

Access to mobile technology is particularly important for females because there are 300 million fewer women globally than men who own mobile devices. Overall, there is a 21% gender gap in owning a phone worldwide, but this number rises to 23% in Africa, 24% in the Middle East, and 37% in Asia.

Wireless communications also plays an important role in education and training. In Indonesia, the Global Ready eTraining Center program has trained over 1000 students in technology services. Those enrolled get vouchers for a three-month program. More than 95% of the individuals enrolled completed the class, and 75% said the course increased their income as a result of the skills acquired in the program.

A survey undertaken by the United Nations Development Programme (UNDP) found that 55% of women around the world earned additional income due to owning a mobile phone, and 41% increased their income and professional opportunities.

Mobile payment systems represent a way to reduce the cost of financial transactions and thereby help entrepreneurs. If people can transfer funds quickly and efficiently, it becomes easier for small and medium-sized businesses to sell their products. This improves the efficiency of the marketplace and removes barriers to growth.

Reducing “friction” is very important in African, Asian, and Latin American financial markets because barriers to financial transactions remain quite high. Only 30% of those who live in developing African nations have bank accounts.

In short, mobile technology offers extensive help on various forms of social and economic development. Wireless communications broaden access to information, improve capital access, overcome geographic limitations, and expand market access.

With mobile phones and tablets proliferating at a significant rate, these communications tools enable women, in this case the disadvantaged, and other individuals to access a broader range of investors, suppliers, and customers. Combined with social media platforms, people can extend their reach through mobile devices and pool resources in meaningful ways.

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Africa is the second most populous continent after Asia. Its current population of nearly 1 billion people is expected to rise to 2.2 billion over the next 40 years. Between 2000 and 2010, GDP grew at 5.6% a year, topping 7% in 2002, 2004 and 2007 respectively.

The global economic crisis of 2008 continues to affect the continent, particularly resource-rich countries. Growth in sub-Saharan Africa slowed to 2.8% in 2009 as international banks cut back on letters of credit to exporters. Demand for exports shrank and tourism and remittances declined, but recovered to 5.4% in 2010, largely due to higher demand from China for commodities. However, the future growth path for the continent remains uncertain.

Africa is also a highly diverse continent. The GDP of the largest 10 countries make up more than 70% of the continent’s total, and 34 of the world’s poorest countries are African. The average annual income south of the Sahara – excluding South Africa – is only USD342, and more than 40% of the people in sub-Saharan Africa live off less than USD1 a day.

Africa’s poor economic performance began to improve in the mid-1990s. Macro-economic reforms brought down inflation and opened economies to international trade. Led by the two largest economies – South Africa and Nigeria – many countries built prudent fiscal positions after 1995. Political and macro-economic stability and micro-economic reforms also consolidated the growth path.

Foreign debt as a percentage of GDP and debt service obligations as a percentage of export revenues have both declined dramatically to levels comparable to those of other regions of the world, and sovereign credit ratings in some countries have a much more positive outlook. More countries are now seen as frontier emerging economies with relatively developed financial markets. These countries include: Botswana; Cape Verde; Ghana; Kenya; Nigeria; South Africa; Uganda; and Zambia.

In addition, foreign debt investment has increased exponentially from USD9 billion in 2000 to USD62 billion in 2011. The total foreign capital flows into Africa rose from USD15 billion in 2000 to peak at USD87 billion in 2007. Relative to GDP, that is almost as large as the flows into China. The rate of return on foreign investment in Africa is also higher than in any developing world region.

In part, this is due to improving the business regulatory environment. A study of publicly traded companies operating in Africa between 2002 and 2011 – mostly in the manufacturing and services industry – found that the average return on capital was approximately two-thirds higher than that of comparable companies in China, India, Indonesia and Vietnam. Similar trends were found in foreign direct investment, with US based companies achieving a higher return on African investments than that of those in other regions of the world.

Interest in Africa’s rich mineral resources also accounts for much inward investment on the continent, but higher investment in infrastructure and better education have laid the foundation for other sectors as well.

Analysis indicates that all sectors contributed to the growth surge in Africa, including: resources; finance; retail; agriculture; transportation; and telecommunications. Natural resources contributed only 24% of GDP growth on the continent between 2000 and 2011.

Education needs more attention. The average years of schooling are catching up with those of the rest of the world, after having increased more than fivefold since 1960. Although primary education enrolment rates across sub-Saharan Africa have doubled in the last generation, completion rates are still under 70%, compared to 90% in East Asia. Education and preparation for employment are both poor in quality.     

However, the African continent has a plethora of opportunities at its disposal. Minerals underpin the economic strength of many countries on the continent. Africa holds 95% of the world’s platinum group metals reserves, 90% of chromite ore reserves, 85% of phosphate rock reserves and more than half the world’s cobalt reserves.

There may be a gap between the actual endowments and what has been identified and exploited. As a result, substantial more reserves could yet be discovered over time. There might be a considerable increase in Africa’s commodity exports over the next few decades, changing the economic map as new resource-rich countries emerge from Africa – prolonging and deepening economic growth.

Most African countries have not used their commodity wealth to reduce poverty. The proceeds of oil or mineral extraction have largely been consumed, rather than invested in people and infrastructure. Ugly and costly political contests for control of revenue is still a serious problem in parts of the continent.

Over the next 20 years, other endowments will come to the fore, including a demographic profile that will potentially boost both productivity and consumption simultaneously; infrastructure deficits that present investment opportunities; and large-scale agricultural and agri-processing development, both for domestic consumption and export.

Africa also has the world’s youngest population, and in less than 15 years will be home to one-quarter of the world’s population under the age of 25 years old. Africa will benefit from a large, youthful working age population that will have progressively fewer dependents to support as fertility rates are expected to drop over time.

This generation of young people can greatly expand the continent’s productive workforce, but without education, skills and programs to promote job creation and entrepreneurship, it also poses a major risk.

Approximately 54% of Africa’s youth are unemployed today and nearly three-quarter live on less than USD2 a day. Unless this is addressed, the potential for political instability will always remain great — as events in North Africa have taught us.

The rapid growth in the working-age population will be matched by a dramatic rise in the number of people living in cities. By 2030, it is estimated that over 50% of Africa’s population will live in cities.

As a result, massive urbanization will lead to a fundamental shift in the economic profiles of many African states. Urbanization not only reduces the number of people engaged in small-scale agriculture; it will also facilitate economic diversification. In addition, the combined effects of lower dependency ratios and urbanization should have a further impact on the productivity of the labour force on the continent.

An explosion in consumer demand for mobile telephony will also impact Africa significantly. In the last 10 years, the number of mobile phone subscriptions has risen from 15 million to 500 million, and is expected to increase to close to 800 million by 2015. Over the next five years, East and Central Africa will have the highest mobile subscription growth rates in the world.

Internet access and use have also risen to about 120 million users in Africa. Estimates predict that the Information Communication Technology (ICT) sector attracted over  USD56 billion in investment over the last decade.

Added to this improved ICT infrastructure on the continent, mobile banking is becoming more prevalent; subsequently extending the ease of money flows in and out of Africa as well as between countries on the continent.

Africa must also do more to hold on to its skilled workers. Skilled migration rates are incredibly high on the continent. Africa’s fortunes will depend greatly on how educated and skilled Africans view personal opportunities, as well as how domestic and foreign investors regard returns on investment in the continent.

Less conflict, more transparent regulatory and legal systems, greater openness in trade, and higher investment in infrastructure enabled the stronger economic growth of African economies in the first decade of the 21^st century.

Future success on the continent will depend on these trends being strengthened and accelerated.

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