Request for advice on 'Digitalisation and Employment in Africa'July 8, 2019
Professor Jaap de Hoop Scheffer
Chairman of the Advisory Council
on International Affairs
P.O. Box 20061
2500 EB The Hague
Date 26 April 2019
Re Request for advice on ‘Digitalisation and Employment in Africa’
Dear Professor De Hoop Scheffer,
In large parts of Africa, high unemployment among a rapidly increasing young population poses an obstacle to further sustainable and stable development. Approximately three million new jobs are created annually, while high population growth means that 10-12 million young people enter the job market every year. In rural areas as well as in the expanding cities there is a huge shortage of sufficient sources of income for the young population, in both the formal and informal sectors.
An important underlying problem is the lack of structural transformation of African economies. This process, in which traditional agrarian economies give way to modern economies with a much greater share for industry and services, is only slowly getting under way in Sub-Saharan Africa.
In a recent report,1 the Policy and Operations Evaluation Department (IOB) noted that economic growth in Africa over the past few decades is primarily the result of the increased export of raw materials and crops. Mining, however, is very much an economic enclave, with a limited impact on the rest of the economy. Its added value is meagre, and studies speak of ‘jobless growth’: growth without the creation of many new jobs. On balance, the agricultural sector, with its often low productivity levels, is still the main source of employment in Sub-Saharan Africa. In industry, the construction sector in particular is dominant, and growing in many countries. Apart from South Africa, hardly any other country has a significant manufacturing sector (with the possible exception of Ethiopia, where it is emerging).
The services sector, however, has become much more important to Africa’s economy. A new development is the growth of commercial services such as banking, insurance, ICT and tourism (the latter in particular creating a large number of jobs). According to the IOB report, the rest of the services sector in Sub-Saharan Africa consists primarily of government and of rapidly growing, low-productivity informal services, which have expanded dramatically due to growing urbanisation.
In the meantime, the world is on the eve of the next phase in the digital revolution. This will bring about major changes to economic structures and prospects. The Future of Jobs and Skills report by the World Economic Forum and the World Development Report 2019 describe how the world of work is set to change in the coming years. Many routine and low-paid jobs will disappear as a result of robotisation and automation. This will not necessarily lead to higher unemployment, but rather to different types of jobs requiring more cognitive skills and a higher level of education. As knowledge, technology and data increasingly become crucial factors of production, this may lead to greater inequality between rich and poor, between the poorly and highly educated, and within and between countries.
The topic of this request for advice is how the coming waves of digitalisation and automation will affect employment and job opportunities for young people in Africa and how Dutch development policy can respond, building on the policy document on foreign trade and development cooperation (BHOS) entitled ‘Investing in Global Prospects’. Your report may also play a role in implementing the Digital Agenda for Foreign Trade and Development Cooperation, to be presented to parliament this summer.
On the one hand, the rapid automation of production processes will mean that the availability of cheap labour will play a smaller role in manufacturing companies’ investment decisions. Africa can thus only partly benefit from an increasingly prosperous Asia.2 Another question is whether Africa, in light of its digital lag, will be able to catch up quickly enough to benefit from the new economic structures. Education and other forms of training aimed at strengthening digital skills will be crucial factors here.
On the other hand, digitalisation offers opportunities for achieving the SDGs and creating new jobs and types of employment. Digital hubs and startups are already appearing in several African cities. Digital applications, for example in the agricultural sector, offer opportunities. New information services and products are emerging which can lead to better business decisions and higher profits. New business models may develop, for example in the platform economy. Young people in particular find this appealing and use the opportunities offered by these applications.
The government therefore requests an advisory report from the AIV on the following questions:
- With a view to improving economic prospects for the rapidly growing young population in Africa, what opportunities and risks does the next wave of digitalisation pose?
- In what areas is there scope in Africa for taking advantage of the employment opportunities offered by digitalisation while limiting the risks?
- How can the government shape policy that will support Africa’s digitalisation process with a view to boosting youth employment? What types of education and training offer the best prospects in this regard? What role could cooperation with Dutch knowledge institutions, businesses and civil society organisations play?
- In this regard, what can specifically be done to improve the economic position and digital skills of women and girls?
I look forward to receiving your report.
Sigrid A.M. Kaag
Minister for Foreign Trade and Development Cooperation