- Informal Economy Not Enough to Handle Africa’s Workforce Explosion
Unemployment in Nigeria, sub-Saharan Africa’s largest economy, is running at more than 14 percent and climbing; in South Africa, the second largest economy, it is over 27 percent. For youth in both places, it is far more.
This may seem bad enough, but according to International Monetary Fund calculations the sub-Saharan Africa region’s jobs travails are in danger of reaching uncharted territory in less than two decades. That is, unless the economies can create jobs for their burgeoning, young population.
“By 2035, sub-Saharan Africa will have more working-age people than the rest of the world’s regions combined,” Reuters quoted the IMF to have written in a blog post.
“This growing workforce will have to be met with jobs.”
This has major implications for the region’s economy, its security and wider immigration patterns. In the past, some of the jobs strain has been taken up by the so-called informal economy which is dominated by street vendors, household workers and off-the-radar cash jobbers. Typically, these workers pay no tax and do not come under regulation, but they do add to a country’s wealth.
The informal sector in sub-Saharan Africa was around 38 percent of gross domestic product in 2010-14, according to the IMF.
This represented a steady decline from nearly 45 percent in 1991-99, possibly a reflection of more formal growth in some parts of Africa. But up to 90 percent of jobs outside agriculture are still in the informal sector. It is not generally by desire. The IMF found that a third of new entrepreneurs in sub-Saharan Africa said they were doing what they were doing out of necessity.
“Most would prefer a job in the formal sector, but don’t have that option,” it said. The International Labour Organization goes further.
“Some of the characteristic features of informal employment are lack of protection in the event of non-payment of wages, compulsory overtime or extra shifts, lay-offs without notice or compensation, unsafe working conditions and the absence of social benefits,” it notes.
“Women, migrants and other vulnerable groups of workers who are excluded from other opportunities have little choice but to take informal low-quality jobs.”
For the economy, informal sector work can be both positive and negative for growth. In some cases, for example, it represents entrepreneurship and start-up businesses.
But a lot of it is far from opportune for growth. The informal sector tends to be low productivity work, partly because it attracts lower skilled workers.
“In a country where the informal sector is large, the rate of economic growth is reduced,” the IMF said.
This would suggest that countries such as Tanzania and Nigeria, where the informal economy is 50 to 65 percent of GDP, will fare worse than others such as Mauritius, South Africa and Namibia, where it ranges from between 20 to 25 percent.
Africa is not alone, of course. Indeed at the moment the region where the informal sector plays the biggest role is Latin America and the Caribbean. It also amounts to around 15 percent of GDP in developed countries.
But with the large working age population about to explode, the countries of the region are facing a crunch.
“Countries need to adopt a balanced approach in the design of policies to grow the formal sector. This means focusing on ways to increase the productivity of the informal sector, while working to support the expansion of formal businesses,” the IMF said. It also called for improved access to finance to create the right kind of jobs.
COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020
Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.
This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.
In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.
The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.
Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.
She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.
She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.
Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.
“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.
Crude Oil, Other Commodities Closing Price for Monday
Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.
Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.
The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.
Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
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