Innovative State Solutions for Job Creation

Current discourse within the public space and the narrow power circles of the nation, is all about the upcoming congress of the Revolutionary Democrats. Preparations are underway for what would be the second congress since the days of the late Meles Zenawi, a prominent policy and political mind within the ruling coalition, who doubled as chairman of the party and head of the government. Security procedures are in place in Mekelle, the host city, where the congress of the Tigrayan People’s Liberation Front (TPLF), a member of the coalition, has also been held since Thursday, August 20, 2015.

Usually, the congresses of the EPRDF are platforms where internal power struggles take solid faces, implicit political alliances consolidate, presumptive differences precipitate and partisan stances are strengthened. Yet, at the face of all this will be discussion on the development of the nation and the best ways forward.

If history could serve any purpose in making judgments, congresses of the ruling EPRDF are key events that analysts and commentators cannot afford to sideline. They are events that define the direction of the political wind in the days to come, and the liabilities to be blown away by the turbulence.

All appearances suggest that the upcoming congress will be predominated by talk of good governance and service provision, issues considered illusive for the majority of lower level cadres of the ruling coalition, as well as job creation. But it seems that the jobs issue will be the dominant agenda item, possibly overwhelming the congress.

The issue of job creation is not just an economic agenda in today’s Ethiopia. It is a sticking point for both political decision making and social policymaking. With the nation’s population pyramid skewed towards youth and 40pc of the population being 16 to 35, creating sufficient economic opportunities for this sector of the population is not just smart economics, but also smart politics.

There is enough understanding within the ruling party that empowering the youth is crucial for the stability of the nation. It has become common to see heavyweights of the ruling party openly declaring how important the issue is. The problem seems to be in changing the rhetoric to reality.

The figures that depict the reality are not as rosy as the official line is. Youth unemployment is high in the country. Urban unemployment stands at a little over 25pc (four million), according to sample surveys conducted by the Central Statistics Agency (CSA). The case with rural areas is not better with unemployment standing at 17pc (12.5 million). These figures do not include those involved in the risk engagements of the informal sector and those who are underemployed. The case will certainly be bleaker if aggregate lag times within seasonal employment are to be added.

At the heart of this problem lies the working population of the nation. The labour force is, however, not homogenous. It entertains differentials of age, education, health, location and access to resources. In a broader sense, the population of unemployed (or underemployed), could be categorised as rural and urban. What seems to be missing from the policy and political circles, therefore, is the pro-activity to craft economic policies meant to absorb this section of the population into the economy.

Existing policies targeted to do this very job, revolve around enhancing agricultural productivity and supporting small and micro enterprise (SME) in rural and urban areas, respectively. Whereas the first set of policies have been in the sphere since the EPRDFites came to power in 1991, the second set was introduced after the ultimate defeat the ruling party faced in urban areas during the highly contested national election of 2005. In both cases, however, policymaking has been rather linear, passive and redundant. No surprise, then, that the results have also been mixed.

Agricultural productivity has increased, but much of it has come from intensification. This means the productivity rise was not matched with an increase in labour absorption and reduction of redundant labour. With average landholding size in the nation standing at 0.5ha and land tenure remaining fragile, production fragmentation continues to be the dominant trend. The labour stress in this aspect has only been getting relief through rural-urban migration and immigration to various countries.

The urban side of the equation is no better than the rural one. The organisation of SMEs has been facing considerable challenges in the form lower productivity, poor quality of production, market fragmentation, low aggregate demand, financing constraints and bureaucracy. Even in construction, where the experience has been largely positive, rising production cost and red-tape has been limiting the job creation potential of policies.

It therefore seems that the time is crucial for the EPRDFites. On the one hand, they cannot risk the political and social stability they have brought into the system by kicking the can down the road. On the other hand, their old policies of just increasing agricultural productivity through intensification and facilitating urban development by organising SMEs seem to have reached their natural limits. Certainly, they need new ways of skinning the cat.

What seems to be in high demand at the time is transforming the state from a passive and slow learning apparatus to a proactive one that focuses on creating a conducive environment for individual entrepreneurs and business establishments. The days of the state trying to do everything on its own, ought to come to an end. If anything, what those days have brought is a state that takes pride in solving the symptoms, rather than finding the essential cure.

In the rural setting, the strategic shift entails moving away from the farm-only focus. Off-farm business activities ought to be facilitated and supported. The state needs to spend its resources in creating an enabling environment for rural youth to engage in such establishments. In this way, both forward and backward linkages with farm activities could be created and strengthened.

From a policy perspective, the shift entails having a consolidated plan of actions, such as land use planning, financing mechanisms, training and coaching systems, and marketing support, that can help move the redundant labour away from the farm activities. As much as such a policy will create an endogenous absorption capacity, it will have the potential to reduce rural-urban migration. Through its backward linkage, such an approach would also further enhance agricultural productivity.

On the urban front, the focus could be on creating linkages between SMEs and large industries. Another possibility is to help link the SMEs with global value chains. This, of course, is in addition to pushing the shift from a service sector oriented investment framework to one that gives the necessary incentives for industrial investments.

In both aspects, though, the whole focus has to be on creating essential economic fundamentals for the private sector to grow. It has become evident that a state-led growth impetus could not satisfy job demands that are growing in leaps and bounds. After all, the state has its own limits.

As they get into their popular convention, therefore, the EPRDFites ought to understand that the stakes are high on the jobs issue. They cannot afford to extend their passivity towards the agenda. Not only would such passivity be risky for the economy, it would also be dicey for the political and social stability of the nation. Hence, the only option is to be creative in tinkering over both the problem and the possible solutions.

It seems to be time to think “outside of the box”, as the saying goes. In their case, the box is their statist inclination and desire to do everything through the state. Their box seems to also downsize the importance of individual entrepreneurship and the role of the private sector.

Yet, the fact is that the future of the economy lies in the hands of the ingenuity of Ethiopians and the essential profit motive that runs private businesses. What the state ought to do is create a favourable environment for this entrepreneurship reveal itself in full form and operate freely. Then, the unemployment problem would find a structural solution.


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