East African economies are not creating enough jobs or making life significantly better for the region’s youth, new data shows, calling into question the effectiveness of the bloc’s economic policies.

The majority of the youth in the region are employed in the informal sector — self-employed in precarious conditions with low or volatile pay, or employed on a casual basis without a contract and social security, according to the newly launched Millennium Development Goals 2014 Report (MDG 2014). 

This is one of reasons why rapid economic growth in the region has not substantially reduced poverty, states the report. The report shows that although an increasing number of youth are entering the labour market in Africa, the available job opportunities are too few.

Africa has one of the highest youth unemployment rates in the world, with 27.2 per cent of young people without work in 2013, up from 26.6 per cent in 2012.

Of all those unemployed, 60 per cent are young people; youth unemployment rates are double those of adult unemployment in most African countries, the report notes. 

“Youth, who should be the powerhouse of productivity, are mostly left out of the growth process. This not only increases the dependency ratio, but also weakens the capacity of the middle class to transform economic growth. For instance, on average, 72 per cent of the youth population in Africa live on less than $2 per day,” the report notes. “The incidence of poverty among young people in Nigeria, Ethiopia, Uganda, Zambia and Burundi is over 80 per cent.”

The report, which is a joint product of the Africa Development Bank and the United Nations Economic Commission for Africa, the African Union and the United Nations Development Programme (UNDP), shows that although poverty rates in Africa have been declining since 2005, the pace is still too slow to meet the poverty reduction target.  

Africa’s poverty rates have continued to decline, according to the report, despite the adverse effects of recent food, fuel and financial crises in the Eurozone.

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The proportion of people living on less than $1.25 a day in Southern, East, Central and West Africa decreased from 56.5 per cent in 1990 to 48.5 per cent in 2010. However, this figure is 20.25 per cent off the 2015 target. In South Asia, the percentage is 4.1.

Unemployment is markedly high in North Africa, where 27.7 per cent of young people in the labour force were without jobs in 2013, up from 26.6 per cent in 2012. This is partly attributed to the failure of many countries to develop their private sector to generate enough jobs to reduce underemployment.

In addition, there is limited value addition and low productivity in sectors that have significantly contributed to economic growth in many countries, in particular the extractive industry and the agriculture sector.

“If you look at the African economy, you see that over 50 per cent of the activities that constitute the entire gross domestic product are from the informal sector, and if you go to some specific countries, it could be as high as 70 per cent.

Ayodele Odusola, the chief economist and head, strategy and analysis team, regional bureau for Africa UNDP told The EastAfrican, “The informal sector is characterised by three main attributes — low productivity, low salaries and very poor working conditions.”

He added that informal sector employment, which is sometimes born out of necessity for those who are not able to find formal jobs, has given rise to underemployment and vulnerable jobs that count as employment.

“Because they are employed does not mean they are fully employed — most of them are underemployed — they are not fully happy about the conditions but they have to go on because they see the informal sector as a coping strategy,” he said.

African governments, he said, must put in place measures to improve the productivity of the informal sector, create enabling environments for small scale enterprises, and build relevant skill sets among the population and especially the youth. He said the informal sector creates vulnerable employment characterised by low salaries, which contributes to poverty.

“We have to be mindful of the mismatch between skills and job market demands — our universities focus only on certification, not skills development,” Mr Odusola said, calling for increased investment in vocational training.

The proportion of workers in vulnerable employment is estimated at 77.6 per cent for Southern, East, Central and West Africa as a group, according to the report. But the report shows that most national official statistics do not show unemployment as a serious challenge in Africa because of the large informal sector. 

“In the absence of data on underemployment, the unemployment rate in Africa, in particular Southern, East, Central and West Africa, is understated.

Policymakers should see the creation of decent jobs as an important solution to tackling poverty and inequality,” the report says.

Productivity growth in Africa is one of the lowest in the world, the report shows. Labour productivity growth declined in Africa, mirroring a global trend between 2012 and 2013.