With a big workforce driven by young people and women, Africa can be this century’s economic success story—if policymakers give them the tools to succeed, renowned development economist Ngozi Okonjo-Iweala says.
Featuring Ngozi Okonjo-Iweala
November 25, 2019
32 minutes and 8 seconds
A short decade from now, Africa will have the youngest workforce in an aging world and the potential to become a spectacular economic success story. Or it could become home to the overwhelming majority of the world’s poor.
“By 2030 or so, we'll probably need to create about 11 million jobs a year,” says Ngozi Okonjo-Iweala, one of the world's leading development economists. “That’s a tall order.”
But not an impossible one, says Okonjo-Iweala, a former managing director of the World Bank and Finance Minister of Nigeria. While the window for Africa to become a job-creating, manufacturing powerhouse like the so-called “Asian Tiger” countries, she says there is still the potential that “smoke-stack-less” industries such as services and technology that are booming in countries like Rwanda could help create an economic African Lion.
Okonjo-Iweala says African policymakers must learn the lessons of the continent’s most recent boom in order to ensure a prosperous future. For the first 15 years of the 21st Century, African economies as a group grew annually by four to six percent, at times outpacing the average global growth rate. African policymakers helped that growth along through better macroeconomic management of things like exchange rates and inflation, and by negotiating down the continent’s huge debt burden.
But falling commodity prices over the past several years exposed a weakness in that success and now African policymakers must push further to support entrepreneurs by investing in infrastructure and education and cutting bureaucratic red tape that can stifle innovation.
Okonjo-Iweala spoke with PolicyCast host Thoko Moyo after a recent visit to Harvard Kennedy School to deliver the Robert S. McNamara Lecture on War and Peace.
For more on this topic, check out Okonjo-Iweala’s lecture, sponsored by the Institute of Politics and titled “The Changing Face of Poverty: Can Africa Surprise the World?”
This episode is available on Apple Podcasts, Spotify, and wherever you get your podcasts.
Thoko Moyo: Thank you very much for joining us. You recently gave a lecture about The Changing Face of Africa in which you tackled the question, ‘Can Africa Surprise the World?’ First of all, I'm hoping the answer is yes, but we'll get to that. But I think to start off, I think there are a couple of things that we probably need to clarify for our audiences because some of them can be quite pedantic.
The first question, it's obvious, but it's always good to be clear. The question refers to Africa Surprising the World by solving its poverty issues, right? That's what we're talking about here.
Ngozi Okonjo-Iweala: Yes, absolutely.
Thoko Moyo: And then I also want to ask the question—even though I'm talking to one of the top development economists of the world who also happens to be African—but some people want to ask and they'll quibble about this. So we're talking about Africa. We're obviously talking about Africa broadly, we're not suggesting that Africa is a country, we're not saying that all the countries are the same. But for purposes of this looking broadly, generally at the continent.
Ngozi Okonjo-Iweala: Absolutely. We know that Africa has 54 countries, 45 in Sub-Saharan Africa. We can't really, we're just making some broad statements, but of course within Africa there is a diversity of experiences.
Thoko Moyo: Exactly. Okay, perfect. I think actually even just the way the question is framed—‘Can Africa surprise the world?’ That in itself suggests that there are some things that have happened that make us concerned that Africa may be going backwards in terms of expectations, that there might be reason to be pessimistic. What's the current status in terms of poverty numbers in Africa?
Ngozi Okonjo-Iweala: Well, first let me step back and comment a little bit on this question of pessimism. With Africa, there are those who see the glass half full, and others who see the glass half empty. So there are people who get very upset if you suggest that Africa is making progress. And quite rightly a lot of them are young people who feel that not enough is happening fast on the continent in terms of its development. They're the glass half empty. And then there those half full who see, "Well, we have made some progress."
What this suggests is that whilst there is cause to be dissatisfied that the continent can make faster progress, we do have some elements of success to build on. How can we build on that to surprise?
Thoko Moyo: Exactly. And I think the point you're making is actually very important because I find myself frustrated as well because Africa's always framed in the extremes. It's either doing really well and it's going to be richness and prosperity for everyone, or it's the other extreme that the economist in the 80s talked about sort of the hopeless continent. There's never sort of a nuanced understanding of Africa, the continent and the distinctions as well between the various countries. I think it's important to have that out of the way as well.
Ngozi Okonjo-Iweala: Absolutely.
Thoko Moyo: Maybe before we actually even get to the current situation, your lecture talked about the changing face of poverty. Maybe let's go back and look at what poverty has looked like over the years. You took us back 50 years, sort of starting in the 70s, what was the lay of the land then and where was Africa in terms of the poverty picture as it were?
Ngozi Okonjo-Iweala: Well, I started my lecture by looking from 1973 because it's the seminar year in which [then-World Bank President Robert S.] McNamara made a lecture and coined the term absolute poverty. And using a tool, which is the Brookings Institutions poverty map, looked at what one would call the face of poverty then. And if you look at it, you see that absolute poverty, those living in what he termed as destitution, malnourished, not enough to eat and no water, poor health, et cetera.
Thoko Moyo: Literacy rates.
Ngozi Okonjo-Iweala: Literacy rates were down, maternal mortality, all that. That they were really the face of that poverty was really kind of worldwide. And if you look at the map, you see it was Chinese, it was Indian, it was Latino, it was African, it was Thai, it was Indonesian, it was all over the world. So the face of poverty was pretty universal.
Thoko Moyo: Right. And on that proportion, Africa wasn't the largest.
Ngozi Okonjo-Iweala: No. In terms of absolute numbers, I think Africa, of about a billion people at the time McNamara spoke, actually 800 million people he called the absolute poor, about 10 percent were Africans.
Thoko Moyo: Okay, interesting. So that was the 70s we're looking at a picture where universally there's poverty, there's no one particular region that you would say is a hotspot for poverty. What then happened as we got into the 80s, was the picture starting to change?
Ngozi Okonjo-Iweala: As we got into the 80s and 90s, so I fast forwarded again to the 90s, mid-90s, 1997 where there was another seminar talk on poverty by Jim Wolfensohn, the then-president of the World Bank, which he called the challenge of inclusion, where he talked about poverty where the world had now made considerable progress. And the literacy rates, without boring people with numbers, but the key indicators maternal mortality, infant mortality, literacy rates, were all improving across the world.
And so the face of poverty was changing and particularly tremendous progress had been made in China. He talked about how China had brought up 200 million people out of poverty in a couple of decades. But the problem was that the progress was uneven. Certain regions, certain parts of the population in some countries were being left behind. And that's what he called the challenge of inclusion. That the world was making progress, but certain regions were not making as much progress as others. So they were being left behind excluded, if you will.
Thoko Moyo: The tragedy of exclusion, you also called it here.
Ngozi Okonjo-Iweala: Yeah. The other side of the challenge of inclusion is the tragedy of exclusion. If you look at the face of poverty then, you will see that East Asia, the absolute poor, it's no longer the problem in East Asia per se. There's more in South Asia centered around India, Africa, This absolute poverty problem has also improved tremendously in Latin America. In the 1997 picture, absolute poverty is now concentrated in Africa, particularly Sub-Saharan Africa. Let me also mention that a lot of the remarks about poverty relate more to Sub-Saharan Africa. You'll see that in the map along with South Asia. So that's the new face of poverty.
Thoko Moyo: And who precisely? Is it in the rural areas? Are you looking at people that are farmers? I mean, in these regions, who has it?
Ngozi Okonjo-Iweala: That's a very interesting question. When McNamara talked about this and even in the mid 1990s, the face of poverty was that of whether beaten face of a poor farmer, male or female in any of these countries. Still from the 70s to the 90s it was more of a rural problem. But the continent that had now escaped was East Asia, particularly China. And it was now South Asia and Africa.
Thoko Moyo: Okay. So things were not looking great for Africa at that point. Let's move into the 2000s, what then happened? Because at this point people were concerned about Africa and I think we mentioned the economists that run I think a decade earlier, the cover that said, "Africa the Hopeless Continent." Things were not looking great, but what happened is we got into the two 2000s.
Ngozi Okonjo-Iweala: Let me talk about what was happening in Africa during this period. But before I do that, let me just do one thing, and say that if you fast forward this map to 2019, you will see that the face of poverty is now concentrated in Africa. That even South Asia has escaped absolute poverty. Those living under $1.90 a day, that's the new absolute poverty sort of measure that is now being used.
And so Africa, but that phase, I want to talk about it a little. What happened is that in the 80s and 90s, Africa did not do well in terms of its growth, its development, et cetera. It fell behind. But as it approached the 2000s, policymakers did a number of things. There was better macro-economic management, you had a better situation in terms of exchange rates, inflation, the fiscal situation and so on. You had just better management of the economy. You had enormous debt relief. The world got together and helped African countries get rid of the enormous debt they were under, which was stopping them from investing in their own economies because they were servicing debt outside. And that was called the highly-indebted poor countries initiative. All of these things happened. And it enabled Africa for one and a half decades, essentially from about 2000 to 2015 to grow. Africa grew at a rate of four to six percent.
Thoko Moyo: Was that higher than the rest of the world, or how did it compare to others?
Ngozi Okonjo-Iweala: In some case, it was even higher than the average global growth rate. Africa performed well. The difficulties that Africa's population it was also increasing fast. Even though it did well, it needed to do even better. Remember that ...
Thoko Moyo: Just to account for the sheer numbers of people?
Ngozi Okonjo-Iweala: ... exactly. For the sheer numbers. And that's where Africa fell behind. So it should, it could do well by growing and growing on a per capita basis, but it needed to do even more. And the growth, the quality of the growth needed to be better. It's not enough to just grow. You have to grow in those sectors that are creating good jobs for young people because you have more and more young people coming on the job market. And if you're not growing those sectors that employ people, then you fall behind.
Thoko Moyo: Because one way that people literally work themselves out of poverty, so jobs are a pathway out of poverty.
Ngozi Okonjo-Iweala: It's a job. And what you notice with African people, if you go to most African communities, people are not really interested in transfers. I think people should really sit with Africans.
Thoko Moyo: You have to explain what transfers are. So this is where you're giving cash transfers to communities that are poor?
Ngozi Okonjo-Iweala: Where people are waiting for the government to handout, sort of income to them or do something. Of course they expect services from government, but then that mentality of ‘I'm waiting for a cheque from the government’—they are not really that. They want opportunity. And that's very interesting to me about Africans. They want opportunity, they want a chance to create jobs for themselves. It's even more so in the young people. I see young Africans are very entrepreneurial, so what they are seeking from their government is: "Could you please put in place the basic services like water, light, roads? Could you kindly?"
Thoko Moyo: And then I can pick it up from there. I can even create something else.
Ngozi Okonjo-Iweala: Yes. I can create my own jobs from there. I don't need you to create jobs for me, I can do it. And basically that's the frustration that the governments are not putting in place these basics. So that's it about Africans, that they are looking for those opportunities and the economy is not giving them the chances without those services, without looking at sectors.
Primarily, I want to mention one key thing that there's a very important school of thought in Africa, driven by people like Carlos Lopez, Brahima Coulibaly, African Economists and others who have done work on this, who say that Africa is undergoing what they call premature de-industrialization. Please let me explain. China and East Asia were able to get out of poverty through large scale industrialization of their economies, where they were able to manufacture things and export them to other markets. Those industries were labor intensive.
Thoko Moyo: And this is the 80s and early 90s I guess?
Ngozi Okonjo-Iweala: Yeah. In the 70s, 80s and 90s. They were able to do this, create those industries and so on, and they were able to employ people. So that really led to their ability to have inclusive growth. That is job creating growth, employing people, changing the structure of the economy, et cetera. In Africa, that has not happened. Manufacturing has stagnated at about 10% of the GDP of the continent of sub Saharan Africa to any rate. And the number of people employed has peaked at even below that in manufacturing. And people are seeing that the world has changed. And Africa may no longer be able to mimic what Asia did. In fact, people like Joe Stiglitz have commented on this and says he doesn't think that there'll be that opportunity for the scale of manufacturing and exports that East Asia used.
Thoko Moyo: And why is that? Is there no demand for manufactured goods?
Ngozi Okonjo-Iweala: He feels that there's technological change that is taking over and leading to more investment in capital and less labor intensive approaches to jobs. Things are just changing. And manufacturing is higher productivity now it's been so successful that you don't need as many people to create things as you did before. Even just by the sheer change of technology that we're experiencing, we are seeing that the nature of manufacturing itself is changing.
Thoko Moyo: Can we just pause that for a second, because we're starting to get into the idea of maybe alternative pathways for Africa's development, alternative sectors. I want to come back to that, but I just want to finish the story. So we got to the 90s and you've explained it's a more nuanced picture. Africa was growing well, but growth itself is not enough. And also you wanted to make sure that, Africa was doing well, but then there's still some sectors where there were opportunities. When we get to now to 2019 where we are today, we're looking at statistics that are actually quite alarming. I was reading the recent report by the World Bank that says I think 90% of the world's poor will be in Africa by 2030 or 2050. I know that the progress in the early sort of 2000s was good but not adequate. But still it was success. Does this mean that today we've gone backwards? What happened?
Ngozi Okonjo-Iweala: Well, in the late starting from the time of the great, after the great, what we call the great recession of 2008/2009 ...
Thoko Moyo: In which Africa did okay.
Ngozi Okonjo-Iweala: ... Africa did okay. But commodity prices fell, the economic management that was so sterling in the continent at the beginning of the turn of the century, not as good as it was and things have just slipped. So growth rates on the continent slipped. They are a little bit on their way back up, but for the past five, six, seven, eight, we've not been doing as well in terms of growth, let alone inclusive growth. So that's what's led some people to start becoming pessimistic again. But what I'm trying to say is, and so if we continue that pattern, there are projections that by 2030, 90 percent of the world's poor will be in Africa. Obviously, we have to take measures to reverse that. And my thesis in trying to give this lecture is to say, to do that, it's important to look at where we succeeded in the past. That growth for one and a half decades from 2000 to 20 was not a fluke. If it were a fluke, it would have been for one year, two years. It showed that Africa is capable, African policymakers are capable of taking measures that can generate growth.
Of course you know that people will argue that commodity prices were high and that is why. But then we've had, you can have periods where you have high commodity prices and everything is squandered and you don't grow. So that's not it. You also need to look below the radar at other factors. And I think a very good point is that policy makers had learned some lessons of the past. So let's go back to that. There was good macroeconomic management in that time. Can we repeat that? I believe, yes. We need to surface what we did well, good macroeconomic management, our countries were beginning to make micro level reforms, to peel away the things that are blocking business from investing.
Thoko Moyo: Such as?
Ngozi Okonjo-Iweala: Such as, the numerous licensing requirements.
Thoko Moyo: Even just to register a business like taking you forever to get a license.
Ngozi Okonjo-Iweala: Just to register a business, it takes you forever. Just to get land, to get work permits, all sorts of things that block businesses from doing what they need to do. They're beginning to realize that, six of the 10 fastest growing countries in the world now are in Africa. Rwanda, Kenya, Ethiopia, Cote d'Ivoire, Senegal, they're all in Africa. And because some of them are doing some of these things. Now comes your point too where people say, "Please don't talk of the continent as one block." That's also important because there are these six countries that are doing the right things. And so we should ask ourselves, "What is it they're doing? What did we do in the past? Are they continuing with that?" My thesis is yes, we need to look at that. A resounding yes and we need to carry it forward.
Thoko Moyo: So these six countries that you noted, so you are saying that the things that they're doing actually we've done before in Africa?
Ngozi Okonjo-Iweala: Yes.
Thoko Moyo: And they were at the core of the successes that we saw at certain periods? Okay.
Ngozi Okonjo-Iweala: Yes. Several of the things they are doing and that is good macroeconomic management. I come back to that. Without that fundamentally, you cannot try to make the other parts of the economy work. That's number one. The second thing is what I talked about beginning to peel away things blocking business, the micro economic reforms that you need to be able to do. The third thing that I notice, or a group of scholars have noticed, I should say, is the fact that there are certain sectors that are actually growing very well on the continent that have the same characteristics as the manufacturing. It's not manufacturing per se, but you've got somewhat, some people have called them ‘smokestack-less industries.’
Thoko Moyo: What does that mean?
Ngozi Okonjo-Iweala: Industries Without Smokestacks. So not your typical-
Thoko Moyo: Manufacturing where you see? You can see something happening with smoke? Okay.
Ngozi Okonjo-Iweala: Yes. These industries without Smokestacks. So I find that a very and the Brookings institution and the UN University are doing a big piece of research. There's an Africa growth initiative at Brookings led by Brahima Coulibaly and they're working on this. Now, what they found ...
Thoko Moyo: And which of these sectors?
Ngozi Okonjo-Iweala: ... that's what I want to mention to you now, that there are several sectors like horticulture, it's taking off in many countries and you now find that Ghana, Kenya, Ethiopia, are part of a worldwide value chain in horticulture that is doing very well. And that employs lots and lots of people, especially women as well. So that's one thing they've noticed. They've noticed that other industries in the arts and creative industries are doing well and we should not minimize it. I mean, and I want to emphasize it in West Africa, I've noticed a lot is going on in the fashion industry, the creative industries, music and art drama. Can you imagine the whole of California, which is like the fourth or fifth largest economy in the world runs on creatives? We have that, and it's Smokestack less. And if we can encourage it, it can employ so many young people. So that's one set. The information and communications technology, okay, it's not big, but you have nodes in Kenya, in South Africa, in Nigeria my country, that are beginning to form. And Rwanda, Rwanda has made a huge effort in this regard.
Thoko Moyo: Just a few weeks ago they announced the first smartphone that was made in Rwanda. Could be amazing.
Ngozi Okonjo-Iweala: So they're really moving forward and so we've got a foothold in that now. So those are just some examples. And we are not saying that if there is a chance to develop regular manufacturing somewhere like Ethiopia is trying to do in textiles and footwear that you should not do it. We are not saying that. These people are arguing that they are seeing these industries grow faster than others on the continent. Some of them, even tourism you can be. We got Rwanda ...
Thoko Moyo: Financial services.
Ngozi Okonjo-Iweala: Financial services, thank you. Mobile money and FinTech. You see Kenya leading, it doesn't get enough credit for having developed mobile money, Mpesa, which is not being used in India, parts of India as well. So financial services, tourism, all these are developing, and so they could also help to transform the continent in ways that are similar to the transformation of East Asia. It's not the same in the manufacturing, but it's the same characteristics of industries that employ a lot of people, are tradable, you can export a lot of these services, be it tourism or ICT.
Thoko Moyo: Because people don't typically think of services as being something you can export?
Ngozi Okonjo-Iweala: But they're exports. When you have tourists coming in and bringing in their foreign exchange, you're exporting something to them. They're importing something into your country. So these are some of the areas where we can look, different types of industries that were not there. To me that's very, very exciting.
Thoko Moyo: Well what about women and sort of within the sort of a context of Africa. I think this is a question that is foremost on my mind. Obviously I'm a woman, but people look at the numbers and say half the population in Africa is women, but they seem to still be excluded outside of the economic opportunities.
Thoko Moyo: Where do they lie in sort of Africa's future and the opportunities?
Ngozi Okonjo-Iweala: I think women just like I talk about youth, because you realize that by 2030 going to 2050 Africa will have more young people working than anywhere else in the world. And we can use that as a resource. Women are extremely important. Why? Because as we speak in many, many countries on the continent, most of the small and medium enterprises are run by women. In my country Nigeria, we have 32 million SMEs, small and medium enterprises, and over 50 percent are owned and run by women. So women are already active in the economic sector. It's just that they face sometimes more barriers than the men face in accessing finance for their business, and getting into the value chain for marketing and others. Those are some of the issues that we need to look at. We cannot expect to develop these economies without looking at what women are doing, both in the economy but also even in society and in politics. We need to include them because they're thinking their way of doing business matters. We need to make sure that they have access to the means of production so that they can also help improve.
Thoko Moyo: And actually let's talk about the youth because that is something that you talk a lot about and you really want us to have a focus on. You mentioned that Africa is the youngest, everybody knows Africa is the youngest continent. And I think the numbers are that 8 million a year are coming into the workforce. So where are these jobs going to come from? And I think another point that you've made as well is that the education or the training has to be relevant for the skills that will be needed in the future. Do you want to just talk about that a bit?
Ngozi Okonjo-Iweala: Yes. There's no doubt that if we look at the numbers, there are different estimates, but there's some estimates by McKinsey and others that by 2030 or so, we'll probably need to create about 11 million jobs a year on the continent. And if you look at that, you can look at our youth as a resource. If we can manage to turn this resource into a productive one, a productive workforce. Why do I say that? The rest of the world is aging. You look at Europe, you look at America, you look even at Asia, even at China. They have an aging problem whereby by 2030 and beyond, a significant percent of their workforce will be 65 years and older. It's already happening. We have the advantage on the African continent of having a young workforce. What do we need to ask ourselves is, "How do we make sure it's relevant?" Because just having young people is not enough. They've got to have the skills to be able to benefit from a changing world. And as we know, technology is changing everything. You don't really know what the jobs of the future will be. So to weather this, we need to change the way we educate, to build skills that enable people to be more analytical, more technically skilled, more innovative in their approach, to be more savvy with the computer and the internet. Because I think these are the avenues that we will be able to build.
What gives me hope is that internet penetration on the continent is 20 percent now, but among the youth is 40 percent. It's double that. So it tells me that those who are going to run the continent in the future and those whom you want to have skills are already using the technology. We just need to push harder to make it better. We have 750 million mobile phones on the continent in a population of 1.2 billion. We also have the mobile technology, the mobile phones to be able to improve services. But the most exciting is this news about what's happening with young people and internet penetration.
Thoko Moyo: I know we're running out of time and I have to let you go. I know you've got a number of people that are vying for your time. What about urbanization and just whether or not we have the infrastructure for people that are moving into the urban areas. What would you want to say about that?
Ngozi Okonjo-Iweala: Well, urbanization again, it's a bit like the youth. It can become a good instrument with which to improve the economy if you manage it well, if you don't, it can become a problem. Right now we're not managing it as well and that's one of the points I make, that it's one of the things we can turn around because right now we have large people migrating to the cities and slums are being created. In fact, I think the numbers are again that by 2030 or so, we may have I think 24 million people joining our urban areas compared to say 11 million in India and 9 million in China. So we are going to be the fastest urbanizing place in the world. The whole world will be urbanizing, but Africa will be urbanizing even faster. The question is, how do you use this?
Because providing services is normally harder where people are dispersed, it's more costly. If they all come now in urban areas, it should be easier to provide access to health, education, water, and electricity at a cheaper rate. So how do we focus on a better urbanization management approach so that we people can have access? And these are some of the things that I think we can turn to our advantage because if you have more of our people clustering, do you have something called agglomeration economies? Just people being closer together can lead to cheaper provision of services, can lead to more creation of jobs, can lead to you harnessing the energy, and entrepreneurship of all these people massed together. And I'm suggesting that we need to pay attention to that in order to turn the situation around. It's one of the instruments that can help Africa Surprise.
Thoko Moyo: Terrific. We're running out of time. So let me just very quickly summarize. So what I'm hearing you say, is that rather than fixating on what went wrong in Africa sort of history and sort of where we are with poverty, the really interesting question and the opportunity for us is to look at some of the things that account for the success that we did once see, build on them and see if that can chart our point of feet away for Africa's future. And you've gone through some of those in terms of what they are.
Ngozi Okonjo-Iweala: Yes. And I'm also suggesting that we should also, and you brought it up very nicely, look at new emerging areas where Africa has an opportunity such as technology. And I'm not trying to be pollyannaish about it and say it will solve everything. So if you look at those successes, you look at some imagined things like this Smokestack less Industries that are coming up and the use of technology, you combine all of that, Africa can indeed surprise.
Thoko Moyo: Okay. And that was going to be my last question. So answer the question for me, do you think that Africa can indeed surprise the world?
Ngozi Okonjo-Iweala: I think that Africa can indeed surprise the world. I said that because I see all the seeds are there. I'm not saying it's going to happen over night, but I think that if you look at the poverty map, if we do all of these things that I say, which is right at our doorstep, which we're already building on, by 2050 that poverty map should be showing also a clean face. Just as it is now for China, for East Asia and for South Asia.
Thoko Moyo: Terrific. And because I didn't ask you about corruption and you've written a whole book about corruption, you have to come back to our PolicyCast.
Ngozi Okonjo-Iweala: Well, thank you. It's very exciting to speak about subjects of growth and development and inclusion and poverty eradication. Thank you so much.
Thoko Moyo: Thank you so much. Thank you very much. This was wonderful.