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Under 25s are expected to total 50% of Africa’s population by 2050, causing a demand for employment to reduce poverty in the region. It’s predicted that ‘industries without smokestacks’ will account for 60% or more of new jobs in Ghana, Rwanda, Senegal, and South Africa. Notably, IWOSS industries also offer more employment opportunities for women. Africa’s youth population continues to grow rapidly: In fact, the World Bank predicts that people under the age of 25 are set to comprise 50 percent of the population of sub-Saharan Africa by 2050. Such growth has created now-urgent demand for employment that must be met for Africa to reduce poverty. To examine new strategies for job creation for the region’s youth, the Brookings Africa Growth Initiative (AGI) and its partner think tanks on the continent have been conducting research on how to support promising industries to grow and absorb low-skilled labor. While export-led manufacturing has historically led to job creation, factors like technological progress and the evolving global marketplace have meant that Africa has not been able to capitalize on the gains from manufacturing that other developing regions have. In response, AGI researchers have identified other sectors, termed “industries without smokestacks” (IWOSS), that share characteristics with traditional manufacturing and thus might play a similar role in driving economic growth and job creation. In short, IWOSS are sectors that are tradable, have high value added per worker relative to average economywide productivity, exhibit capacity for technological change and productivity growth, and show some evidence of scale or agglomeration economies. IWOSS include high-value agribusiness, horticulture, tourism, business services, ICT (information and communication technologies)-enabled services, transport, and logistics—all sectors that are growing at a faster pace and have higher labor productivity than non-IWOSS sectors like agriculture. Notably, different sectors of IWOSS can cater to Africa’s youth, whose education and skills vary widely, with tourism and horticulture largely relying on low-skilled labor while sectors like logistics and ICT require more training. The case studies for Ghana, Kenya, Senegal, South Africa, and Uganda were published earlier this year, and the recent paper “Addressing youth unemployment in Africa through industries without smokestacks” synthesizes the major findings and trends from those case studies. Overall, the case studies predict that IWOSS will account for 60 percent or more of new jobs in Ghana, Rwanda, Senegal, and South Africa; however, the share is lower for countries like Kenya and Uganda, which are projected to rely heavily on traditional, “smokestacks” industries to 2035. More opportunities for women Notably, IWOSS industries also offer more employment opportunities for women: In fact, the case studies reveal that most IWOSS sub-sectors employ a greater share of women than other sectors of the economy. Within IWOSS, tourism employs the greatest share of women (56.7 percent), while horticulture and export crops follow second at 53.2 percent. Female employees in ICT comprise only 31.7 percent of the sector; according to the authors, this finding indicates a greater need for training in digital skills for young girls and women. Policy Recommendations While the job creation potential of IWOSS relies on the fact that most roles do not require higher-level skills, a persistent lack of skills at all levels still holds their promise back. More specifically, the authors find that, for IWOSS firms to grow and create jobs, potential workers must demonstrate soft, digital, and intrapersonal skills, which can be taught through postsecondary education but require input from employers and businesses, as each sector has different demands for the skills required. Countries in the case studies have at least a moderate deficit in all six subcategories of skills: basic, problem-solving, resource management, social, systems, and technical. Notably, Ghana, Kenya, Senegal, South Africa, and Uganda have a substantial deficit in all six skills for agro-processing and tourism, and in horticulture have only a moderate gap in social skills but a severe gap in the rest of the skill subcategories. At the same time, the authors point out that gaps in necessary skills are not the only constraint IWOSS face, as poor infrastructure—like unreliable power supply and lack of or poorly maintained roads—pose major challenges for IWOSS development. Lack of competition as well as regulatory coordination issues that do not allow for customs and standards to be implemented also pose challenges. Since IWOSS face constraints similar to those of traditional manufacturing, the authors argue that policymakers are not required to choose between promoting IWOSS and manufacturing, thus enabling them to focus on forming multifaceted policies. Key takeaways of the report include the necessity of prioritizing investment in infrastructure (particularly gaps in the reliable supply of electricity), addressing the skills deficit through a demand-led approach between postsecondary education and businesses, and encouraging a competitive business environment. The individual case studies also provide country-specific recommendations for supporting the growth of IWOSS. This article was published by the World Economic Forum in collaboration with the Brookings Institution. It first appeared here.
Equatorial Guinea’s economy will be in recession over the 2022 – 2026 period according to the International Monetary Fund (IMF)’s latest forecast. Not only will it be amongst the very few economies whose GDP does not grow and recover from the Covid-19 pandemic, it will be the world’s worst performing economy for the next five years and the only one in Africa with a negative GDP growth. 2021 will provide some respite for the country, with GDP growth expected at +4% by the IMF and +2.6% by the African Development Bank (AfDB). It will notably be supported by the rebound in oil prices and the completion of the Alen Gas Monetisation project in February 2021. The project has notably established a link between the Chevron-operated Alen Unit and Punta Europa, ensuring new and reliable supply of gas feedstock to Equatorial Guinea’s methanol, LPG and LNG facilities. But progress stops here because Equatorial Guinea should enter a 5-year recession in 2022. Source: IMF How did the country get here? Equatorial Guinea is one of Africa’s least diversified economy and while other oil producers can often rely on their non-oil GDP to support growth during times of market volatility, Equatorial Guinea cannot. In 2020 for instance, non-oil sectors experienced a decline of -4.7% while investment contracted by 35%, according to the AfDB. Equatorial Guinea does not have a strong agriculture sector, has not developed tourism and is yet to exploit its mining and minerals potential in the Rio Muni. While those represent all tremendous investment opportunities, the country’s risk and corruption perception has deterred investors. In the last World Bank’s Ease of Doing Business Index, Equatorial Guinea ranked 178th out of 190th, preceding only the two Congo’s, Chad, the Central African Republic, South Sudan, Libya, Eritrea and Somalia. More importantly, it performed the least in the “starting up a business category”, demonstrating how challenging its business climate remains for entrepreneurs and new investors. Overall, the country’s main risk factor, beyond the persistence of the pandemic, remains the lack of diversification of its oil-based economy. To this, one must add the structural weakness of inadequate human capital due to under-investment in education and the overall skilling of the population. But the real unexploited potential remains that of its natural resources sector. Equatorial Guinea reached its peak production of oil & gas back in 2005 and all its producing fields are maturing and have been onstream for decades. They include Alba (1991), Zafiro (1996), Ceiba (2000), Okume (2006), Aseng (2011) and Alen (2013). Put simply, Equatorial Guinea has not developed a new major oil & gas project in a decade. As a result, output keeps declining and currently stands at just over 150,000 barrels per day (bpd) including 100,000 barrels of oil and the rest of gas and condensate. This makes the country sub-Saharan Africa’s 7th producer only, after Nigeria, Angola, Congo, Gabon, Ghana, and South Sudan. Equatorial Guinea’s under-performance in developing its hydrocarbons sector is not for lack of potential, far from it. It is rather the result of missed opportunities throughout the past decade. In 2007, the country became sub-Saharan Africa’s second LNG exporter with the opening of the 3.7 mtpa EG LNG export terminal. The one-train facility was supposed to be immediately expanded with a second train: portions of the front-end engineering and design had been completed by the time train 1 was commissioned and a final investment decision (FID) was expected as early as 2008. It never happened. Another major opportunity to develop the country’s rich gas reserves came with the development of the Fortuna, Tonel and Vsicata fields on former Block-R via a 2.2 million tonnes per annum (mtpa) floating LNG unit. Ophir Energy and Golar LNG were expected to commission the project in 2019 but failed to secure financing, leading the government to strip Ophir of its license over Block R (now renamed Block EG-27). While LUKOIL won the acreage in the 2019 bidding round, a formal license is yet to be awarded. Meanwhile, several other FLNG projects have made progress around the continent, including in Mozambique, Senegal, Mauritania, and Nigeria. But the oil sector too has had its bunch of missed opportunities. EG Ronda 2019 did manage to attract the interest of some regional and global players, but delays in awarding licenses and signing PSCs have left bidders discouraged. Meanwhile, ExxonMobil has sought to divest from the giant Zafiro oilfield for a few years, but any potential transaction has been stuck in political considerations or blocked by a government that has become too picky, according to industry sources. Trident Energy, the independent that successfully took over the operatorship of the Okume and Ceiba complex from Hess in 2017, has repeatedly expressed its interest in buying ExxonMobil’s 71% stake in Zafiro. The company has demonstrated its ability to successfully operate brownfield assets but was constantly blocked in its bid to take over the asset. As a result, the field that once produced over 200,000 bpd is now producing well under 100,000 bpd. Last year, ExxonMobil’s net production from Zafiro stood at 31,000 bopd against 53,000 bopd a decade ago. Unless significant strides are made on projects like the Fortuna FLNG, the expansion of downstream gas infrastructure and the redevelopment of producing assets, the IMF’s negative growth forecast is very likely to materialize. Equatorial Guinea has the resource base, geographical location and experience to turn into a significant downstream oil and gas hub in the Gulf of Guinea. But while the ongoing development of the offshore gas megahub is promising, it would need to happen a lot faster and reach the extent where the pooling of stranded offshore gas does more than just maintain nameplate output at Punta Europa. The Alba Plant already exports significant amount of LPG to West and Central Africa, where most markets are hungry for LPG and experiencing LPG demand growth rates or 20% of more. But a new LNG train could also be constructed at EG LNG while additional downstream industries such as
