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The Informal Economy in African Cities: Key to Inclusive and Sustainable Urban Development

Blogs 04/04/2017

By Martha Alter Chen, Harvard University and WIEGO Network

The informal economy consists of economic activities and units that are not registered with the state and workers who do not receive social protection through their work, both wage-employed and self-employed. The reality of the informal economy in Africa cannot be denied. In fact, informal employment accounts for two-thirds (66%) of non-agricultural employment in Sub-Saharan Africa. But, variation within the region is significant. Informal employment accounts for a smaller share of non-agricultural employment in southern Africa (33% in South Africa and 44% in Namibia) relative to countries in other sub-regions (82% in Mali and 76% in Tanzania) (Vanek et al 2014). Informal employment is a greater source of non-agricultural employment for women (74%) than for men (61%) in the region overall. In seven cities in West Africa with data, informal employment comprises between 76% (Niamey) and 83% (Lomé) of employment. In all seven cities, proportionally more women than men are in informal employment (Herrera et al 2012).

A deeper analysis shows that self-employment accounts for two thirds of all employment, both formal and informal, in Sub-Saharan Africa (UN Statistics Division 2015). Self-employment is comprised of employers, own account workers and contributing family workers. In Sub-Saharan Africa, employers represent only 2% of informal employment outside agriculture, own account workers (those who do not hire others) represent 53% and contributing family workers represent 11%. A higher percentage of women informal workers (76%) than men informal workers (58%) are self-employed in Sub-Saharan Africa, with women far more likely to be own account and contributing family workers while men are far more likely to be employers. The same pattern holds true in the seven cities with data in West Africa: with women more likely to be self-employed than men, particularly as own account and contributing family workers (Herrera et al 2012).

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Authors : Dominique Puthod, Celestin Tsassa

  • Real GDP growth declined to 2.9% in 2016 from 4% the previous year, mainly due to the lower price of oil.
  • Economic diversification should take account of high unemployment levels, notably among youth (46% of those under 25 are jobless), and a 34.3% poverty rate.
  • In order to encourage entrepreneurship and industrialisation, the government is focusing on developing vocational skills among youth.

Gabon had a difficult year in 2016 due to a negative economic environment linked to the low price of oil. A barrel of Brent averaged USD 42.6 over the year. This low price had a negative impact on tax revenue from oil and from other sectors of the economy. The public investment programme, which depends on oil revenues, is a driver of economic diversification. Fewer public commissions therefore adversely affect implementation of the Strategic Plan for Emerging Gabon (PSGE). At the same time, the presidential election of 27 August 2016 led some economic operators to adopt a wait-and-see attitude. Nonetheless, certain drivers of growth are strengthening, as shown by the relative growth of agriculture as a share of GDP. Recent projections indicate that the non-oil sector is experiencing stronger growth than oil and gas. Since the price of a barrel is not expected to surpass USD 60 over the next few years, economic diversification will be all the more crucial as a foundation for growth.

Despite this difficult context, the authorities continued implementing major reforms to improve public finances, stimulate the economy and ensure provision of the social benefits envisaged under the country’s human investment strategy. The main efforts involved controlling payroll expenditure, rationalising operating expenses and making major budgetary trade-offs to protect social spending and public investment. In addition, almost all public subsidies for petrol prices at the pump were eliminated in early 2016. A large share of public investment went towards organising the Africa Cup of Nations football tournament held in January-February 2017, and this should stimulate economic growth. Still, the short- and medium-term priority will be to clear arrears to the domestic private sector, which are estimated at XAF 600 billion (CFA Franc BEAC) and which handicap growth and economic diversification. Gabon has thus expressed interest in reinforcing its co-operation with the International Monetary Fund (IMF), beginning in 2017.

Development of entrepreneurship is struggling, particularly among youth and women, notably due to: i) the low level of entrepreneurial culture (young would-be entrepreneurs face a socio-economic environment that does not support entrepreneurial spirit); ii) difficult access to adequate, long-term finance; and iii) a shortage of skilled manpower for business management. Aware of these challenges, the Gabonese authorities drew up the PSGE, a roadmap for economic emergence and diversification. One of its objectives is progressively to reduce dependence on oil resources, notably through economic diversification. Another very short-term objective is to increase the share of agriculture in the national wealth. Although Gabon has undertaken an ambitious reform programme to cope with the drop in oil prices, further significant action is needed to promote inclusive growth, structural transformation and economic diversification.



International Conference on the Emergence of Africa

Events 28/03/2017

Based on the lessons learned from the 1st edition in 2015, it has been decided to discuss the theme of the “effective implementation of the plans for emergence” at the second edition of the 2017 ICEA, one of the “soft spots” of several African countries.

More precisely, the second edition will focus on “the governance of institutions” and “structural, inclusive and sustainable transformation”, as outlined by Minister Nialé Kaba.

Visit the conference website

Encouraging entrepreneurship in Africa is vital to achieving the Global Goals

Blogs 28/03/2017

By Dr. Amy Jadesimi, CEO, LADOL

Next week, the OECD Global Forum on Development will convene in Paris to discuss the critical role the private sector must play in achieving the 17 Sustainable Development Goals (SDGs or Global Goals). Private sector funding, innovation, entrepreneurship and sustainable business models can rapidly reorient the global economy towards achieving prosperity through business models that align with the goals.

Here’s what we know: At least USD 12 trillion could be added to the global economy by 2030 if the private sector embraces sustainable business models in the1 four key development areas of energy and materials, health and well-being, food and agriculture, and cities. Embracing sustainable business models in other sectors will push this figure even higher. This level of private sector engagement could create 380 million new jobs, primarily in low income, high growth countries.

Low income, high growth countries (LIHG) are crucial to ongoing and future global stability and prosperity. The United Nations projects that by 2050 Africa will account for more than half of the world’s population growth and 25% the world’s nine billion people, most of which will be under the age of 30. The global propensity to treat Africa as a source of raw materials and short-term high returns must end quickly. The coming population boom will be a global boom, just as the population boom in America led to the country’s sustained prosperity. This prosperity was driven by local entrepreneurs and long-term investors.

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The Global Goals’ Business Opportunity in Africa

Blogs 17/03/2017

By Lord Mark Malloch-Brown, Chair, Business & Sustainable Development Commission, former UNDP Administrator and Ex-UN Deputy Secretary-General, and UK Minister of State for Africa, Asia and the United Nations

A critical transition from a heavy reliance on international public development finance to locally generated private sector solutions to development problems is underway. Earlier this year, the Business & Sustainable Development Commission launched its flagship report, Better Business, Better World, which makes the case for why the Sustainable Development Goals (SDGs) offer the private sector a growth strategy that opens new market value and helps solve significant social and environmental challenges at the same time. The Commission shows how sustainable business models could unlock economic opportunities across 60 “hot spots” worth up to USD 12 trillion and increase employment by up to 380 million jobs by 2030. In Africa alone, sustainable business models could open up an economic prize of at least USD 1.1 trillion and create over 85 million new jobs by 2030.

Digital solutions and entrepreneurs will be critical to unlocking many of these new opportunities. In Africa, entrepreneurs are bringing new solutions to social and environmental problems in remarkable ways. Affordable housing is one market hot spot that could create over 13 million jobs. In the case of food, Africa offers significant opportunities, reflecting the continent’s large share of cropland and currently low levels of productivity. Health and well-being opportunities are concentrated in developing countries, where access is currently low.

Investments in African tech start-ups have been increasing — up nearly 17% in 2016 over the previous year. In Rwanda, Nigeria, Egypt, South Africa and Kenya, digital technologies are breaking new ground, bringing life-changing products and services to underserved communities. South Africa’s Vula app, for example, connects rural health workers to specialist support and information, boosting the level of patient care. In Rwanda, where motorcycles account for 80% of traffic accidents, compared to 23% globally, the SafeMotos app allows customers to catch a moto ride with a driver equipped with technology that monitors speed, acceleration and GPS location, making for a safer journey.

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Girls robbed of their childhood in the Sahel

Blogs 09/03/2017

By Laurent Bossard, Director, Sahel and West Africa Club Secretariat (SWAC/OECD)

In Mali, Niger and Chad, 40% of children under five suffer from stunting. These children do not receive enough nutrients. Their bodies — their brains, bones and muscles — do not get enough calcium, iron or zinc or enough vitamins (A, B2, B12 etc.), so they do not have enough energy to grow and develop. Many of these children will suffer from chronic diseases and will have cognitive problems — so they won’t be able to go to school for long, if at all. As adults, they will have little chance to flourish and, secondarily, will have low economic productivity. Many will also die very young, often before turning five.

In these countries, at least 100 children out of every thousand die before reaching the age of five. That’s 10 times more than in Sri Lanka, 20 times more than in Canada and 50 times more than in Luxembourg. Why are these children dying and why are they doomed to a hopeless future? 

It’s happening because the girls in these countries — as in many others — are being mistreated.

Niger is, from this point of view, a sad textbook case. More than three-quarters of the girls in Niger get married before they turn 18 and 28% are married by age 15. About 85% of girls under 24 are illiterate and half of Niger’s girls have never gone to school. This explains why the children of these women have such poor outcomes. Everything is linked in a vicious circle of abject poverty, lack of awareness and subjugation.

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Can higher education reduce inequality in developing countries?

Publications 01/03/2017

Developing countries often face two well-known structural problems: high youth unemployment and high inequality. In recent decades, policymakers have increased the share of government spending on education in developing countries to address both of these issues. The empirical literature offers mixed results on which type of education is most suitable to improve gainful employment and reduce inequality: is it primary, secondary, or tertiary education? Investigating recent literature on the returns to education in selected developing countries in Africa can help to answer this question.

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Six key challenges to improving nutrition through social protection in the Sahel and West Africa

Blogs 14/02/2017

By Jennifer Sheahan, OECD Sahel and West Africa Club Secretariat 

The Sahel and West Africa region is home to some of the most nutritionally insecure people in the world. In 2015, 19 to 21 million children in the region under the age of five were affected by stunting. This figure is growing and may exceed 22 million by 2025. Today, strong evidence exists linking social protection to improved nutrition. In December 2016, the 32nd Annual RPCA Meeting focused political attention on some of the key challenges to be overcome in this area.

Prevalence of stunting

First, links between humanitarian assistance and social protection systems must be strengthened. Humanitarian assistance provides short-term relief in emergency situations. By contrast, social protection increases resilience over the long term by enhancing the capacity of vulnerable groups to escape from poverty and better manage risks. Synergies between humanitarian assistance and social protection systems must be forged so that they complement each other, providing support in response to specific shocks and helping populations to build resilience over time against future shocks.

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West Africa’s diet transformation: Will the region capitalise on its changing food demand?

Blogs 15/12/2016

By John Staatz, Professor Emeritus in the Department of Agricultural, Food and Resource Economics at Michigan State University, and Frank Hollinger, Economist at the Investment Centre Division (TCIA) of the Food and Agriculture Organization of the United Nations (FAO).


Demand for food in West Africa is changing dramatically, opening great opportunities to create new wealth and jobs. But will most of the wealth and jobs be created in West Africa or in the countries that export food to the region? The decisions made over the next few years by West Africans and their development partners will largely determine who benefits from this massive opportunity and its attendant challenges.

Rapidly evolving demand

Driven by strong population growth, urbanisation, rising incomes and changing consumer preferences, West Africans are not only eating more food each year but are also changing what they eat. As incomes rise and most consumers — including the nearly half of West Africans who now live in cities — become increasingly time-poor, people are demanding a more diverse diet that is easier to prepare and consume. Amongst the rising middle class — now a quarter of West Africa’s population — demand for perishable foods, such as fruits, vegetables, and animal-based products, is rising quickly. Safely and efficiently producing and delivering these to consumers entails tight co-ordination along all stages of the food system — from seed to the consumer’s table — requiring upgraded “hard” and “soft” infrastructure, such as reliable cold chains and improved product grades and standards. The good news is that if such improvements can be made, the production, processing and marketing of these products are much more labour-intensive than those of cereals, offering the opportunity to create many new jobs for West Africa’s burgeoning labour market.

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Burkina Faso: Resilience building is underway

Blogs 14/12/2016

By Julia Wanjiru, OECD Sahel and West Africa Club Secretariat

Burkina Faso is a poor, land-locked West African country, with about 18.5 million people, a number that is increasing fast at 3.1% per year. Categorised as a Least Developed Country (LDC), Burkina Faso regularly ranks at the bottom end of the Human Development Index (183 in 2015). Poverty is mostly rural (50.7% rural poor compared with 19.9% urban poor). Food insecurity and malnutrition remain a chronic concern (Global Acute Malnutrition = 8.6%).

Despite the large number of people living in poverty and the fact that the people of Burkina Faso are among the most vulnerable in the world, they also are very resilient. The Burkinabe ability to adjust and cope with shocks (climate-related, social or political) is outstanding. Indeed, Burkina Faso (and many West African countries) would be an interesting case for the OECD Better Life Index, which measures people’s well-being and societal progress.

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Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation, says the African Economic Outlook 2017

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