Kathy Gibson is at the World Economic Forum on Africa in Cape Town – Unemployment and under-employment top the list of risks that could derail South Africa as it seeks to embrace the Fourth Industrial Revolution.

Other stumbling blocks to realising our potential could include a water crisis, a failure of national governance, profound social instability and a failure of critical infrastructure.

Overall for the sub-Sahara African region, executives rate unemployment and underemployment as top risks for doing business, followed by challenges related to governance, energy prices, infrastructure and debt.

These are among the findings of the Sub-Saharan Africa Risks Landscape report, published ahead of the World Economic Forum on Africa, starting today in Cape Town.

It comes at a time of modest economic growth across the region. This is set against a backdrop of rapid population and labour-force growth that is outstripping job creation.

As the number two risk facing Africa’s business leaders, governance comes into focus at a time when Africa appears to be consolidating recent progress towards stability. The region has experienced 27 leadership changes since 2015, highlighting a continent-wide push for greater accountability and democracy. The report also notes that the region experienced 15 elections in 2018 and will see a further 20 in 2019.

The focus on jobs and governance is preventing business leaders from being able to tackle longer term challenges such as climate change and health. This could be a potential blind spot in terms of long-term planning.
It has been estimated that as much as 48% of the region’s GDP will be vulnerable to extreme climate patterns by 2023.

According to the report, the overwhelming consensus on unemployment or under-employment highlights the profound challenges that the region faces on this issue, particularly in light of the demographic and technological changes that lie ahead.

The International Labour Organisation places the unemployment rate in sub-Saharan Africa is 6%.

However, this figure masks deep-seated problems. More than 70% of the region’s workers are in vulnerable employment – compared to a global average of 46%.

In addition, people in sub-Saharan Africa are still disproportionately likely to enter the labour market at a young age, and the region has the world’s lowest levels of access to higher education – a combination that is likely to perpetuate a cycle of low skills and working poverty.

However, despite these risks, there are some positive trends. Economic and social conditions have improved over the past 20 years, with real per capita incomes rising 50% on average.

Moreover, Africa’s population of young people is expected to double to approximately 830-million by 2050 – representing 29% of the total world youth population – a trend that could open new economic opportunities for the continent.

The analysis draws on data from the Forum’s Global Risks Perception Survey 2018-2019 that polled 916 experts and decision-makers around the world. It also uses responses from the Forum’s Executive Opinion Survey 2018, which polled 12,548 business leaders across the globe, including those in 34 sub-Saharan countries.

“Sub-Saharan Africa is seeing social and economic growth; however it is clear that job creation needs to accelerate in order to absorb the rising labour market,” says Emilio Granados Franco, head of global risks and geopolitical agenda at the World Economic Forum. “Failure to tackle this will jeopardize the substantial political and societal progress that has been made in the region.

“Climate change and health-related risks represent a potential blind spot for business. These issues could significantly exacerbate traditional economic risks.”

Executives from the following countries participated in the Executive Opinion Survey: Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad, Cote d’Ivoire, Democratic Republic of the Congo, Ethiopia, Eswatini, The Gambia, Ghana, Guinea, Kenya, Lesotho, Liberia, Malawi, Mali, Mauritania, Mauritius, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Tanzania, Uganda, Zambia and Zimbabwe.

The risk of underinvestment in infrastructure

One hurdle for economic growth on the continent – and the future employment of Africa’s current younger generation – is the challenging state of its infrastructure. According to the AfDB, there simply is not sufficient “infrastructure in power, water and transport services that would allow firms to thrive.”11 The World Bank estimates that the continent’s infrastructure gap reduces productivity by approximately 40%.12 Indeed, business leaders in sub-Saharan Africa surveyed by the Forum ranked “failure of critical infrastructure” as the fourth leading risk to business in the region. According to the Infrastructure Consortium for Africa, out of a total of $81.6 billion committed to infrastructure development in Africa in 2017, 42% was from governments, 24% from China and 24% from bilateral donors, multilateral agencies and African institutions.13 Just 3% of investment came from the private sector. The upcoming implementation of the African Continental Free Trade Area (AfCFTA) – which will create the largest single market in the world for goods and services, as well as the free movement of investments and people – makes the need for investing in proper infrastructure even more pronounced.14

A risk of fiscal crises

One reason for the challenge around infrastructure investment is a mixed fiscal picture on the continent. The region’s GDP is expected to grow at 3.8% in 2019 – an improvement over the 2.6% rate of 2018.15 The aggregate growth rate for the region would be higher – 5.7% – if Angola, Nigeria and South Africa, which are growing collectively at an average of 2.5% and are the region’s largest economies, were excluded.16 However, according to the Brookings Institution, “The number of African countries at high risk or in debt distress has more than doubled from eight in 2013 to 18 in 2018”; and almost 40% of subSaharan African countries are at risk of slipping into a major debt crisis.17 The region’s debt-to-GDP ratio has increased significantly over the past decade (from 23% in 2008 to 46% in 2017), and the high proportion of public borrowing creates conditions for potential future debt crises and limits policy-makers’ short-term flexibility: The IMF and the AfDB have already noted that rising debt-servicing costs are diverting public spending from investment. The Forum’s Executive Opinion Survey reflected concern about these risks, with business leaders ranking “fiscal crises” as the fifth highest risk. Four countries ranked it in the top three risks (Burundi, Chad, Eswatini and Namibia). Thus, it is likely that debt-servicing demands will create pressures for government policy-makers to increase taxation and reduce public spending, including on development priorities such as health or education. In addition, governments may choose to take out loans to pay off existing debt. Such measures would make it more difficult for the region to achieve the African Union’s Agenda 2063 targets.

Political change across the continent

Executives in sub-Saharan Africa ranked “failure of national governance” as the second leading risk to business. This may not be surprising given recent political developments across the continent. According to the Brookings Institution, “Since the beginning of 2015, Africa has experienced more than 27 leadership changes, highlighting the continent-wide push for greater accountability and democracy.”18 In 2018, 15 African countries held general elections, and in 2019 at least 20 nations are holding elections.19

Notably, presidential elections were recently held in subSaharan Africa’s two largest economies, South Africa and Nigeria. In May 2019, Cyril Ramaphosa was elected president of South Africa with a commitment to deliver a “new dawn” for the country by promoting economic growth and fighting corruption. And in February 2019, Muhammadu Buhari was re-elected as president of Nigeria on a similar pledge fight corruption, while strengthening national security and the economy.20 The political changes taking place offer an opportunity to address citizens’ concerns and priorities. However, leaders – and economies – will face considerable risk should policy agendas fail to deliver results. According to opinion surveys by Afrobarometer, there is a strong demand for jobs, better economic management and reduced inequality and corruption, as well as better healthcare, education and infrastructure.21 At the same time, in addition to protests, voters are increasingly using technology and social media to hold their governments accountable.

Increasing climate risk
The Forum’s Global Risks Perception Survey of close to 1,000 stakeholders showed continuous global concern with environmental issues; environment-related risks dominated the survey for the third year in a row, accounting for three of the top five risks in terms of likelihood and four of the top five in terms of impact. Yet the issue ranked somewhat low among business leaders in sub-Saharan Africa, with the Executive Opinion Survey showing that “extreme weather

events” and “failure of climate-change adaptation” did not rank within the top 10 concerns of respondents. This is particularly notable given the projected impact of climate change on the region. Indeed, the accelerating effects of climate change and the need to avoid much larger impacts in the future bring urgency to scaling up action on adaptation and resilience. This urgency was highlighted in March 2019 by Cyclone Idai – one of the worst weather-related disasters ever to hit the southern hemisphere – followed by Cyclone Kenneth a few weeks later. The World Bank estimated that the total damages from Idai across Malawi, Zambia and Zimbabwe amounted to at least $2 billion – approximately 4% of the three countries’ combined GDP.22 According to the BBC, “Africa is expected to be one of the continents hardest hit by climate change, with an increase in severe droughts, floods and storms expected to threaten the health of populations and economies alike.”23 When taking into account population growth, nine out of 10 of the countries most vulnerable to climate change are in sub-Saharan Africa – a region whose population is projected to double by 2050.24 Sub-Saharan Africa has at least 10 vulnerable coastal cities with a population of more than 1 million, including Abidjan, Accra, Dakar, Dar es Salaam, Douala, Durban, Lagos, Luanda, Maputo and Port Elizabeth.25 The amount of GDP in African nations vulnerable to extreme climate patterns will grow from $895 billion in 2018 to $1.4 trillion in 2023 – representing 48% of the entire continent’s GDP.26

Ebola: A risk reoccurrence

Similarly, while disease outbreaks, particularly Ebola, have had deadly consequences across west and central Africa, business leaders in sub-Saharan Africa did not rank this as a risk in the Forum’s Executive Opinion Survey. The World Bank estimated that the three countries most affected by Ebola in 2014-2015 – Guinea, Liberia and Sierra Leone – suffered combined GDP losses of $2.2 billion.27 When including the cost of associated social burdens – direct impacts on health and indirect effects on food security and employment – that figure jumps to $53 billion. Many on the continent believed the risk of Ebola had passed, yet the disease has re-emerged over the past year. The World Health Organization (WHO) has declared the Ebola crisis in the Democratic Republic of the Congo (DRC), ongoing since August 2018, a “public health emergency of international concern” – a rare designation the WHO gives to diseases that pose a global threat. With more than 2,500 confirmed cases and more than 1,600 confirmed deaths, the outbreak in the DRC is the second largest in history

Building interconnected resilience

The consequences of macroeconomic challenges, climate change and disease-related crises present risks across all sectors of sub-Saharan Africa. These risks can also exacerbate one another, heightening the severity of each and forming a complex, multilayered risk environment. Building risk resilience therefore requires cross-sector and multistakeholder partnership, with the public and private sectors working together in concert to ensure the region is prepared to address these challenges, but also to capture the opportunities that lie ahead.