As Africa seeks new ways to tackle high debt, low pay and inequality, Nobel laureate Joseph Stiglitz believes two countries offer an alternative to the Asian tiger model
There’s a speech that the Nobel-prize winning economist Joseph Stiglitz has been taking around African countries these past few years.
Last autumn the venue was South Africa’s capital, Cape Town, and the issue was among the most pressing facing the continent: how its economies can grow fast enough to keep up with the world’s most sharply expanding and youthful populations, which will include three-quarters of the additional 4 billion people on the planet by the end of this century.
It is a problem that has been troubling many, including the billionaire philanthropist Bill Gates. And Stiglitz’s message is not entirely reassuring.
The Asian miracle of manufacturing export-led growth, he told his audience bluntly, can’t and won’t be repeated in sub-Saharan Africa.
Something different is needed, he said. The question, however, is precisely what.
Stiglitz’s interventions in the debate matter. A series of worrying economic indicators are emerging exactly at the moment of maximum concern over how African countries — and the international aid strategies supporting them — can create sufficient jobs, especially for young people amid a population bulge.
Not least among the various alarm bells that have been rung this year are warnings over faltering efforts to reduce chronic poverty, reflected in the fact that Nigeria — one of the region’s biggest growth economies — has overtaken India in terms of numbers of the very poorest.
Another cause of concern has been the growing indebtedness of African countries, often for costly infrastructure projects backed by China, which some fear may soon be unsustainable. Instead of the “Asian tiger” model — or even suggestions that African countries could model themselves on China — Stiglitz favours a more complex and multi-faceted approach. The economist has singled out countries as diverse as the tiny Indian Ocean island of Mauritius — which he dubbed a “miracle” after a visit in 2011 — and Ethiopia.
While Mauritius ticks multiple boxes as a success story in economic development and adaptability, how far its achievements are exportable is open to question.
The island has a population of 1.3 million, political stability and an effective welfare state providing free education and healthcare, but it is also attractive for other reasons. It has a largely bilingual population, with most Mauritians speaking both English and French, and also has ties to India, China and the African mainland.
Historically, it has managed the transition since independence in the late 1960s from reliance largely on a single resource — sugar —through a period of textiles manufacturing in the 80s and 90s to where it is now, emerging as a hub for offshore financial services (some of them murky), call centres and an emerging tech focus combined. All in addition to the tourism for which it is most famous.
Away from the more familiar images of beaches dotted with honeymooning couples, and the expensive second homes of European expats along the west coast, the Mauritian approach is represented by the growing cyber city of Ebene on the outskirts of the capital, Port Louis, where shiny new office blocks housing banks and call centres jostle by the highway.
Pratima Sewpal of the Mauritius Economic Development Board is among those with an interest in promoting tech businesses and services.
“When we started promoting this in 2004 there were some 60 companies,” says Sewpal, “and now we have around 800 companies employing 24 000 people engaged in various activities. The objective is to create 15,000 additional jobs by 2030 through initiatives put in place by the government.”
That, explains Sewpal, has included doubling the size of the university engineering programme and the promotion of “reconversion” courses to encourage graduates from other disciplines to retrain for the service industries.
If there is a catch-22, it is that roughly 24 percent of 16 to 24-year-olds and 30 percent of women are unemployed, despite labour shortages and an ageing population with a stagnant birthrate, a problem usually blamed on a mismatch in educational skills.
Moreover, despite the region’s impressive growth in the past 10 years, as the World Bank has made clear, the same decade has also brought a sharp increase in inequality, with the gap between the island’s poorest and the richest 10 percent of households increasing by approximately 37 percent.
Akbar Khan is among the more fortunate. Now aged 30, he left school at 13 to work as a casual labourer. He learned to become a car mechanic, earning £2 a day.
His life was transformed by the Halley Foundation, a small organisation run by two lawyers based in his hometown, Nouvelle France. The foundation ran a mentoring scheme to encourage 10 young people a year to establish a business on their own.
“Before joining the scheme in 2015, it was difficult. I didn’t have many prospects, so I wanted to set up on my own. Now I have my own garage and I have four people working for me,” he says.
Many of his friends, he admits, have not done so well. “Some of them are working, in shops and tea cultivation. But others are unemployed.”
While Mauritius has unique advantages that have projected the tiny nation to the top of development tables, regionally the challenges, set against the ongoing population bubble, defy simple solutions.
Despite a large potential pool of cheap labour, costs remain higher than in Asia. The long-vaunted demographic dividend, which some had argued would bring growth and jobs to Africa, no longer seems a given. So, how to square the circle of African economic development and job creation?
For Stiglitz, there is no economic deus ex machina waiting in the wings, capable of delivering a sudden surge in jobs and prosperity – certainly not in the form of a new manufacturing boom.