Unemployment has been a constant talking point in the US since the recent Financial Crisis. The current official unemployment rate is around 5.5% down from a peak of 10%. Though many argue that the rate is understated (labor participation has gone down), the US rate has remained much lower than the unemployment rate in Sub-Saharan Africa which was largely untouched from the crisis. Persistent unemployment is a panacea on the continent as shown in the picture below.
In Uganda data is hard to get (Uganda has no data in the picture) but a 2014 study estimated that the unemployment rate among the youth (15-24) is roughly 83%. Rather than going into the devastating consequences that unemployment causes, it is more revealing to start to understand why it is so difficult to create jobs in Africa and for that I actually want to turn to a success story. There are thousands of explanations on why things fail but learning how to succeed in job creation in Africa shows what it takes and how to replicate it, if possible.
Ethiopia and Roses: A “Success” Story
The first rose farm appeared in Ethiopia in 2000. Since then industry has grown in leaps and bounds and now employs an estimated 85,000 workers. Average family size in Ethiopia is around 5 so that means 425,000 people are directly affected because of that first farm and probably thousands more because of indirect effects like transportation, irrigation, and construction. Export earnings for roses are expected to be $500 million all because of that first farm.
This is exactly the sort of story we want to replicate all over Africa. Think about all the kids who can stay in school because their parents have jobs in the rose industry. Think about all the illnesses that have been both treated and avoided due to the increase in incomes. That is the impact of job creation.
But is it that easy? Are there all these ideas that people just need to try or is there something more standing in the way? The full story of the rose industry sheds light on these questions.
The first farm was founded by Ryaz Shamji who is the son of the head of a major Ugandan conglomerate. That is the first red flag. The man who started the farm was already wealthy but let’s keep going. Ryaz looked to acquire 20 acres of land which took him over a year because there are no property rights. He finally acquired the land after meeting with multiple high ranking government officials. Second red flag. He also received a soft loan from the state-owned Ethiopian Development Bank for 30% of the financing and Ryaz has since said that without this loan the farm wouldn’t have been built. In short the first rose farm required both wealth and government connections. How many people in Africa have that?
In a nutshell that sheds a little light on how difficult it is for the poor to do much of anything of scale. It reveals why there are almost no small and medium sized businesses in Africa because you need money and connections to get beyond all the obstacles. That isn’t feasible for nearly all Africans and keeps power and wealth consolidated for those already in power.
Africa has incredibly potential but as shown the challenges are overwhelmed for the poor to create their own success. Too often job creation is at the whim of the elite. This is the exact opposite of China for instance which fostered competition between smalls firms and reduced the excessive burdens facing them. Africa creates more and more barriers for the poor so that only the people and industries that they want to succeed do. This isn’t of course the case in every situation but while exceptions exist, they are few.