Speeches & Transcripts

Opening Remarks by Anabel Gonzalez, Senior Director of the Trade and Competitiveness Global Practice, for a Panel on Youth Entrepreneurship and Employment at the African Youth Forum

August 4, 2014

·        Good morning. Let me start by thanking the leaders of the WB-IMF Young African Society – Elikia and Yvonne – for organizing this “African Youth Forum” and inviting me to speak.

·        I’m especially pleased to introduce this panel on youth entrepreneurship and employment -- pivotal issues facing the Africa region and two of the central issues that my group is dealing with in the newly established World Bank Group Trade and Competitiveness Global Practice.

·        Helping our client countries succeed in the areas of Trade and Competitiveness will be central to achieving the twin goals of the World Bank Group -- eliminating extreme poverty and promoting shared prosperity.

·        We see economic growth and job creation as critical development objectives of our Global Practice as we work to strengthen competitiveness, increase trade, promote investment, foster innovation and promote entrepreneurship – in partnership with policymakers and the private sector, in Africa and worldwide.

·        I just joined the World Bank Group on July 1, and I’m very excited by this incredible opportunity to deliver the very best with access to all the resources of our Global Practices and the various parts of the Bank Group.

·        The panel that we’re about to hear, will deal with one of the greatest global challenges of them all: the urgent need to promote job creation.

·        As documented in the Bank Group’s “World Development Report” of 2013 – the imperative of spurring job creation is enormous.

·        In the next 15 years, the global economy must create 600 million new jobs –  just to keep up with the world’s pace of population growth, much less to begin to reduce today’s painfully high unemployment rate.

·        As pointed out in a similar report – the “Jobs Study” of 2013, by the IFC – 90 percent of those new jobs must be created by the private sector.

·        The place where the task is most urgent – where the need is most intense – is Africa.

·        Africa faces an enormous challenge – and yet it also offers a great opportunity.

·        Africa is facing an immense demographic transition.

·        More than half of today’s African population is below the age of 25 in the midst of, or soon to enter, their prime working years.

·        The private sector must create millions of productive, good-paying jobs – both in rural and urban areas – to keep pace.

·        The challenge for Africa – and other regions with struggling economies – is that chronic unemployment and intensifying poverty can be the source of social and political instability:

·        As a World Bank Group study found in 2009: Half of the young people who join a rebel movement or an armed insurgency point to unemployment as their main reason for doing so.

·        But there’s huge opportunity for Africa, as well: If the “demographic dividend” can be harnessed to increase productivity, the rising young generation can enjoy higher incomes and improved living standards.

·        If young Africans can be integrated effectively into the labor market, their energy and productivity will increase economic growth.

·        The great task, then, is to find ways to increase job opportunities in the private sector, so Africa can make the most of the “demographic dividend” – and to consider the various constraints they face in Africa.

·        From our research, in Africa, firms in the formal sector generally stay small: They tend not to grow, and they tend not to create enough jobs.

o   African firms in the formal sector, no matter how long they have been in business, tend to be 20–24 percent smaller than firms in other regions of the world.

o   Africa tends to lag behind in labor productivity.

Among the various regions of the world, Sub-Saharan Africa has the lowest GDP per worker relative to the figure for high-income countries.

The weakness of formal firms is due to both external and internal factors.

o     There are market-related factors;

o     And there’s a relatively small internal market:

o     For example, the smallest countries – like Lesotho – suffer because of their small domestic markets and will rely on trade to grow healthily.

o     Regional integration can be significantly improved:

o   African countries are losing out on billions of dollars in potential trade earnings every year, because of high trade barriers with neighboring countries.

o   In many ways, it’s easier for Africa to trade with the rest of the world than with itself.

o     There’s also great room for increase in international trade.

o     According to the WTO, in 2012, Africa contributed only 3.5 percent of the total value of global exports in merchandise and services – a very small number.

·        There is tremendous potential yet to be gained. Africa has huge opportunity for more investment.

·              Although internationally, Africa has some of the lowest inflows of Foreign Direct Investment, domestically: Intra-African investment has been rising by more than 30 per cent a year since 2007. Coming from a low baseline, it proves the great potential for more work to be done in this area.

·        Although across the region, the average ease of Doing Business is pretty weak – 140 out of 185 -- countries across Africa are working hard to improve their business environment.

Mauritius and South Africa are among the top 40 in the global ranking.

·        In the formal sector, the World Bank Group is helping our client countries with both technical and financial assistance.

·        To expand market opportunities and integrate the African economies into global value chains, we’re working on two dimensions:

  1. regional integration, and
  2. improving sectors’ competitiveness to diversify exports.

·        To offer one prominent example: In order to promote regional integration, we’re working in the Great Lakes region,

  •  through the Great Lakes Trade Facilitation initiative, which focuses on the region's critical border communities to provide a safer, more transparent trade environment –  while aiming to foster job growth, allow greater access to markets, improve food security, and – in an important gender-focused element of the program – to reduce harassment of women (especially female traders).

·        To promote export diversification, we’re helping our clients move away from dependence on minerals and commodities to broader-based inclusive export driven growth.

  • In Rwanda, we’ve revitalized the tea sector which was suffering from high costs and low yields.
  • To improve investment in Africa – and to strengthen the overall business environment – our Africa Investment Climate Team supported 45 reforms last year.
  • To offer an example: Small businesses across Burkina Faso have benefited from reforms under the country's Investment Climate Reform Program, which have dramatically improved the business registration process.

·        Costs have been reduced by more than 50 percent, and the time to open a company fell from 134 days in 2004 to 13 days in 2013.

·        These reforms have yielded about $8 million in private-sector investments; the formalization of about 1,000 new businesses; and the establishment of about 2,400 new jobs within the past three years.

·        We’re also supporting the creation of companies by encouraging and jump-starting the “entrepreneurs of tomorrow.”

In Nigeria, we supported the “YouWIN” business plan competition that attracted young entrepreneurs.

·        About 1,200 business ideas in six key regions received financial support, as well as training and mentoring, to help those entrepreneurs effectively enter the market.

·        We now have a similar project in Guinea-Bissau.

·        In addition: our multi-donor program “InfoDev” – focusing on information technologies and startup firms in the tech sector – is fostering high-growth entrepreneurs in such areas as agribusiness supply chains, mobile technology innovation and climate-related technology.

·        Despite the rapid growth in the number of formal-sector jobs, the majority of young people in Africa are likely to work on family farms and in household enterprises –

·        often earning only very low incomes.

·        On the other hand there’s the informal sector which contributes about 55 per cent of Sub-Saharan Africa’s GDP and 80 per cent of the labor force.

o   The rate of informal employment varies from about 20% in Botswana to more than 90% in Mali.

o   Around 70% of informal workers work in street vending.

·        The informal sector is facing an especially severe challenge in terms of low productivity and a lack of skills.

·        The informal sector is very heterogeneous, which requires nuanced and targeted interventions.

·         In the informal sector, the World Bank Group is tackling these issues through targeted interventions.

·        In Togo, for example, we’re supporting informal entrepreneurs, by providing targeted business training and specialized mentoring – to give entrepreneurs new opportunities.

·        In Benin, new laws were introduced that simplified the legal regime specifically designed for small entrepreneurs to facilitate the formalization of informal businesses.

·        Across Africa: In all these ways, and more, we are trying hard to support the creation of employment opportunities – especially for young people.

o   We’re aiming high to deliver integrated and holistic solutions, adapted to meet the specific local conditions of each country and each region.

o   But I also know there’s a tremendous amount of work left to be done.

o   I’m excited by the opportunities that we see as we aim to help our clients provide sustainable job growth – and to provide jobs for Africa’s young generation of workers, entrepreneurs and job-creating industries –

o   we’re determined to help Africa overcome its demographic challenge and reap the full rewards of its potential; demographic dividend.

·        It’s clear to me that generating employment opportunities for Africa’s young people is the key to prosperity and stability – and vital to fulfilling the World Bank’s twin goals.

·        On behalf of our Global Practice, I’m really looking forward to working with all of you and for the opportunity in interact with the Young African Leaders who we’re privileged to have with us today.

·        Thank you very much.