In last week’s article, I brought to light the labour dynamics of Zambia’s economy, arguing that youths constitute a huge unexploited labour reserve, and that youths in Zambia are generally ill-placed in society and the economy more broadly to be fully and efficiently made use of. It was argued that failure to fully utilise this demographic dividend was a tragedy! A number of structural and institutional barriers hinder youths from fully and efficiently participating in the economy, reflecting the structure of the Zambian economy more broadly, underpinned by low levels of industrialization and agricultural development as well as an institutional architecture which fails to legally bind the state to its commitments concerning the interests of the youths.
While commendable strides have been in the policy space in launching the Youth Policy in 2015, and, in practice, creating some platforms for youths to access material resources, there are concerns that entrepreneurship as a solution to youth unemployment remains problematic, both conceptually and practically. Taken to its logical conclusion, entrepreneurship amongst youths amounts to self-employment, which, within the context of the structural contradictions of the Zambian economy, is nothing more than arbitrage of goods rather than innovation as would be understood in more advanced economies. In general, low levels of productive capacity in its wider sense handicap the Zambian economy from being regionally and internationally competitive. ONE OF THE recommendations made was that spurring industrialization remains a crucial strategy in solving the youth unemployment matrix. This recommendation has its roots in historical empirical experiences of early and late industrialisers across the world, whose developmentalism was fuelled by structural transformation, in turn underpinned and driven by an explosion of industrial activity. Today’s article follows this thread of reasoning; it is argued that deciphering the youth unemployment puzzle requires, to a large extent, a drive towards industrialization. The article starts by giving some empirical data on the levels of industrialization in Zambia, proxied by the manufacturing sector value added as percent of GDP. Upon showing that low levels manufacturing sector value added are associated with low levels of employment in the manufacturing subsectors, the article offers recommendations for what can be done to accelerate manufacturing sector growth. The focus on industrialization is crucial because, at early stages of capitalist development, industrial development has long been associated with rising incomes and wages, including technical progress and productivity growth, attributes which are known to have driven rapid economic growth in industrialized countries. Industrial development also maximizes backward linkages with the agricultural sector and fortifies the economy from the vagaries of the external sector. Further, as Zambia moves to integrate itself deeper into the AfCFTA, industrialization serves as a strategic vehicle if the country is to exploit the wider gains from the vast continental market.
In the 1980s, South Africa’s manufacturing sector contributed about 24% of GDP, dropping by more than half to just over 11% in 2019. The stagnation of the manufacturing sector in South Africa over the past two to three decades has meant that the sector has failed to raise levels of employment, leaving the country exposed to high levels of youth unemployment standing at 55 percent in 2018, markedly higher than comparable upper-middle-income countries. Zambia, with a much smaller GDP, recorded only 7.5% manufacturing value added as a percent of GDP in the third quarter of 2020. There are variations amongst the manufacturing subsectors: ‘paper and paper products’ and ‘textile, clothing and leather’ are the least contributors: each accounting for a paltry 1.3% of total manufacturing sector value added and only 0.1% of GDP. ‘Wood and wood products’ account for 2.7% of manufacturing sector value added, while ‘Food, Beverages and Tobacco’ are the largest contributors, accounting for 2% of GDP and 27% of manufacturing value added. In terms of employment, the 2019 Labour Force Survey shows that the manufacturing sector hosts 7.9% of employed persons (only 236,858 persons out of 2,995,103 persons). Undoubtedly, low levels of manufacturing sector development are associated with low levels of employment within the sector.
In last week’s article, it was pointed out that the inadequately skilled youth labour force held back youths from penetrating the labour market. Thus, it is recommended that the government creates a platform to enhance skills of youth as an army of workers for the manufacturing sector. A holistic and comprehensive industrial policy strategy should aim to bolster sector-specific skills. Take the ‘Textile, clothing and leather’ subsector, for example; the low levels of output in the subsector suggest that skills gaps and shortages abound. The subsector requires a wide range of skills and professions, from engineering technologists and digital specialists to specialists with specific craftsmanship and artisanal skills. It is impossible to raise value added in this sector without building the requisite skills and competences.
The Flying Geese pattern of industrial development in East Asia has shown that early stages of capitalist industrial development require selective targeting of manufacturing sector activities. Typically, the sequence is such that from initially developing the textile industry, there is a shift towards chemicals before developing steel and electronic industries. Importantly, industrial growth and upgrading at different stages calls forth different types of skills and competences.
Overall, a la Robert Wade writing about industrial policy in East Asia, the state can pick and create winners. This requires selection of manufacturing activities and industries, offering targeted support through fiscal incentives and credit facilities, while bolstering productive capacities via skills development and technological upgrading.
About the Author
Dr Gabriel Pollen is a Senior Researcher (Public Finance Management) at the Centre for Trade Policy and Development (CTPD) and a Lecturer with the University of Zambia, Department of Economics.