Economic Growth and Jobs in Ethiopia: Achievements and Challenges

By IndepthAfrica
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Sep 8th, 2013
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By Belayneh Akalu

It has now been almost a decade since Ethiopia started to register some impressive economic growth indicators. For much of this time, the country enjoyed double digit economic growth rates that are backed by concrete improvements in all sectors of the economy. Radical shifts have been recorded in exports, manufacturing, construction and the service sectors to mention just a few.

The impact of a continuous considerable growth over such a long time obviously comes in the form of improved infrastructural, educational and health conditions. As can be expected, there have been impressive achievements in the expansion of infrastructural facilities throughout the country. The coverage of roads, potable water, telecommunication and electricity has gone up by folds during these years. The reach of primary education has gone close to 100 percent with huge enrollment increases in secondary and tertiary educational institutions as well. Health facilities have also become closer to the people within this period.

The huge expansion of educational, health and other social infrastructures coupled with increased economic activities of the country within itself and with other countries has resulted in the creation of millions of jobs. It is this section of the economic growth of the country that we will deal with in this article.

Achievements

Few days ago the Ministry of Urban Development and Construction (MoUDC) publicized that well over two million Ethiopians have joined the working section of the population in what can be considered as the success of the ministry during its journey to the third year of the ambitious development plan of the country – the Growth and Transformation Plan(GTP).

The MoUDC gave a brief account of details on how much of the labor force was shared among some of the sectors of the economy during the past fiscal year. According to the data, most of the employees have been recruited for the major GTP projects; the Ethiopian Grand Renaissance Dam, national sugar projects and road and railways to mention a few. These projects amassed 797,995 people in their payrolls last year.

Considering most of these mega projects are deemed capital intensive, it is no wonder that their construction has a huge human resource uptake. Once constructed, either the outputs or the inputs of these projects still provide great opportunities for the employment of a large number of people. For instance, the 6 GW of electricity produced by the Grand Renaissance Dam would create favorable conditions for the establishment of numerous industrial and agro-processing companies that in turn take up a large number of employees. The sugar industries under construction, on the other hand, would avail jobs for labourers, skilled people and various intermediaries in the distribution process. The future impact of these projects on employment is, therefore, going to be much bigger.

Both the construction and trade and services sectors were noted as the next most contributors to employment opportunities, the MoUDC explained to the MPs last week. The construction sector absorbed some 482 thousand individuals while the trade and services sector aggregated some 467 thousand in just about the last fiscal year of Ethiopia. The construction sector in particular has been associated with a large intake of female workers. The housing projects being carried out in the capital and other regional cities have provided young women with wide opportunities of employment. The government’s commitment to encourage both local and foreign investment has surely paid off in recent years as thousands of businesses are being registered and resuming operation in the country. Such trends coupled with the bigger size of the economy have resulted in the expansion of trade and the service giving sector in general. The consequence has been the rise in the number of work force engaged in the sector.

A notable 123 thousand more made their ways to work for the manufacturing sector while a little over 150 thousand still found a way of winning their daily bread in the areas of urban agricultural practices. With recent international studies suggesting Ethiopia would be one of 16 countries to replace the shrinking manufacturing prowess of China, the future holds even better news for the sector in our country. Leather, textile and mobile phone production industries are expected to flourish even further in the coming years. There have also been various reports tipping Ethiopia to be a main shoe exporting African country in the near future. Floriculture and other urban agricultural activities related to agro-processing also have great potential as big sources of employment.

If we go on quoting the MoUDC more, we might settle our train of thought in a way that in just about a year, some two million people have joined the labor market. Graduates of universities, colleges and technical and vocational trainees make up 70 thousand of the total figure. In what definitely is an unfavorable circumstance, only 14 thousand of the university graduates have the opportunity of joining the labor force out of the 80 thousand that graduated only last year from the 20 or so universities. For an economy like ours that is growing at annual rates of up to 11 percent, the appetite for skilled human resources would be dire than even before. The increased economic, social and political interactions of the country both at national and international levels obviously demand a huge number of educated manpower. Therefore, the tremendous gap in the employment of fresh university graduates could most probably be attributed to the lack of coordination and planning of the responsible authorities.

The tremendous effort the authorities are putting in to equip graduates with entrepreneurial, financial and planning skills is commendable. The ability and knowhow of graduates to start up their own business has increased over the years as the result of the support provided to them by governmental bodies. There, however, needs more to be done to ensure that larger number of graduates will be self employed in the coming years.

As identifying problems is the first step in finding solutions, the responsible authorities should recognize the short coming and find a way to turn things around. The creation of jobs that require expertise and tertiary educational training should be given the due attention it deserves. With a further strengthened effort to help graduates venture into entrepreneurial endeavors, the reality could change for the better in a very short time.

It would be well understandable if residents of Addis Ababa do not have a rosy image of road and rail construction presently as the temporary inconveniences are apparent in their everyday lives. Although traffic conditions might be very hectic, residents are aware of the change they would have in their lives once the projects are complete. It would also be a further consolation to think that the road sector has lifted out some 313 thousand people out of joblessness, according to the annual progress report of the GTP, launched February this year.

The government of Ethiopia recurrently pronounces the great leap made by micro and small enterprises to carry themselves as notable employers. That is understandable considering some 1.6 million people were reported operating in the micro and small enterprises in Ethiopia last year, according to the Ministry of Finance and Economic Development (MoFED). The number is indicative of the raised awareness regarding the sector. The stereotypes associated with the sector have run long enough for them to phase out and their real potential has gradually started to take the turn. Accordingly, the capacity of micro and small enterprises has been built over the years and the future holds for them to become middle sized semi-industrial organizations. As the size and complexity of the tasks they carryout increases, the number of people they hire will also increase implying yet a bigger potential for employment.

Developing the private sector to become a major force of economic growth and employment has been another area of focus by the government. Promotion of private local and foreign investment by providing various incentives along with efforts to make the country easy for doing business have resulted in a huge registration of businesses in the country. The expansion of such private businesses in the country has helped raise employment apart from the original purpose of these businesses.

The Addis Ababa City Administration has in the last month launched a new five year development plan. It aims to realize the required structural transformation of the city through addressing the educational, health, employment, potable water and infrastructural needs of residents. It aspires to increase its current job creation capacity by fourfold at the end of the newly formed administration’s term. The plan sounds quite ambitious and exciting; so all we can say now is God speed and hope it works out.

Challenges

According to the Central Statistics Agency (CSA), the institution in charge of the national census and other vital statistical data, the unemployment rate in our country decreased to 17.5 percent in 2012 from 18 percent the year before. The unemployment rate in Ethiopia averaged 20.67 percent from 1999 until 2012, reaching an all time high of 26.4 percent in December of 1999 and a record low of 17.5 in December of 2012. In our country, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force. The rate of youth unemployment stands at 16.5 percent.

Although the writer could not access data on rural unemployment, there are reports of rural youth migrating to urban centers or even abroad as a result of insufficient or even no land to till. This problem complemented by insufficient rural job creation has made things go chronic. Such conditions mostly add up to the number of unemployed in urban areas. Therefore, rural development efforts in the country should get even broader to cover such issues and put a strain on the temptation of migrating to urban areas.

According to the CSA, women hold a huge rate of unemployment rate in the country. Young women make up close to 30 percent of the unemployed as opposed to the 16 percent their male counterparts contribute. Considerable portions of Ethiopian women are still piled in sectors very informal to the economy. The high take up of women by the horticulture, construction and textile sectors in recent years has, however, resulted in improvement in women unemployment. The anticipated further expansion of these sectors coupled with growth and expansion in other sectors is also expected to lift the number up even further in the coming years.

The overwhelming fact of the labor market in Ethiopia is the rapid growth of the supply of labor. The labor force is growing much more rapidly than the population as a whole because of Ethiopia’s demographic profile and there are many more under 15 year olds entering the work force each year than there are old people leaving the labor force.

Another big challenge contributing for unemployment has to do with socio-cultural constraints. The attitude of the youth to shun the so-called menial jobs and prefer to remain unemployed than take on those jobs has always been a problem. The fact that our society is one that has strong social bonds means people can depend on someone else without themselves making a living for quite a long time.

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