YOUTH EMPLOYMENT IN SOUTHERN AFRICA

Southern Africa has just experienced one of the best decades of growth since the 1960s. Between 2000 and 2012, gross h since domestic product (GDP) grew more than 4.5 percent a year on average, compared to around 2 percent in the prior 20 years (World Bank various years). In 2012, the region’s GDP growth was estimated at 4.7 percent—5.8 percent if South Africa is excluded (World Bank 2013). About one-quarter of countries in the region grew at 7 percent or better, and several African countries are among the fastest growing in the world. Medium-term growth prospects remain strong and should be supported by a rebounding global economy. At the same time, many Africans are dissatisfied with this economic progress. According to the latest Afrobarometer data, 65 percent of the surveyed population consider economic conditions in their country to be the same or worse than the year prior, 53 percent rate their national economic condition as “very bad” or “fairly bad,” and 48 percent say the same about their personal economic condition (Afrobarometer 2011–12. www.afrobarometer.org).  

The incidence of poverty has fallen as Southern economies have expanded, yet overall growth in Southern Africa has not been
as pro-poor as growth in other regions. Each 1 percent increase in average per capita consumption has been associated with a reduction
in poverty of 0.69 percent; elsewhere in the world, that reduction has averaged just over 2 percent (World Bank 2013). In part, Africa’s poverty reduction has been less marked because in many countries the source of growth is primarily oil, gas, and mineral extraction, not labor-intensive sectors such as agriculture or manufacturing. Young people, who have weaker links to the world of work than the general population, are therefore doubly disadvantaged. Although the current generation of Africans entering the labor force is the most educated
ever, many are finding that their prospects for employment and earnings differ very little from those of their parents. In a few countries,
they are worse. Youth in urban areas have been vocal about their dissatisfaction. Urban demonstrations  consisting primarily of politically active and disaffected youth have become more common in African capitals. The causes of urban violence undoubtedly include factors much broader than employment status (such as inequality and exclusion), yet dissatisfaction with opportunities, especially in relation to expectations, can be a contributing factor. Understandably concerned, especially in light of the Arab Spring, policy makers in Southern Africa are making youth employment a high priority. Focusing on urban youth, they are seeking policies and programs that can ameliorate the dissatisfaction of young people and ease their transition into adulthood by encouraging the creation of sustainable, productive employment.

But urban youth are only the most visible and audible part of the employment problem. The majority of young people still live in Africa’s rural areas and small towns. Poorer and less educated than their urban counterparts, they too struggle to find pathways to adulthood,
especially to stable, remunerative employment that allows them to support a family. For young women, the pathway can be especially treacherous. As they navigate the school-to-work transition, their control over their own destiny and their employment choices may be limited by social norms.

The challenge of youth employment in Africa may appear daunting, yet Africa’s vibrant youth represent an enormous opportunity,
particularly now, when populations in much of the world are aging rapidly. Youth not only need jobs, but also create them. Africa’s growing labor force can be an asset in the global marketplace. Realizing this brighter vision for Africa’s future, however, will require a clearer
understanding of how to benefit from this asset. Meeting the youth employment challenge in all its dimensions—demographic, economic, and social—and understanding the forces that created the challenge, can open potential pathways toward a better life for young people and better prospects for the countries where they live.
This report begins by laying out the dynamics of the youth employment challenge in Southern Africa today: 
The demographic transition, which created the youth bulge that is entering African labor  markets and can, in the longer term, stimulate economic growth and development

The role of mineral exports—which have shaped the structure of recent economic growth but failed to sufficiently increase the number of wage jobs most desired by youth—and the prospects for reversing this trend in the future
The largely untapped reservoir of opportunities in farming, at a time of high global prices for agricultural commodities and rising local and regional demand for food
The massive expansion in access to education, which is adding many years of schooling, but much less learning, during childhood and youth
The aspirations of youth and policy makers, which focus on the wage employment sector at the expense of more immediate
opportunities in family farming and household enterprises.
Recognizing that it is the private sector that creates jobs, the report examines obstacles faced by households and firms in meeting
the youth employment challenge. It focuses primarily on productivity—in agriculture, in nonfarm household enterprises (HEs), and in
the modern wage sector—because productivity is the key to higher earnings as well as to more stable, less vulnerable, livelihoods. To respond to the policy makers’ dilemma, the report identifies specific areas where government intervention can reduce those obstacles to productivity for households and firms, leading to brighter employment prospects for youth, their parents, and their own children.  

Africa’s Large Youth Population
Sub-Saharan Africa today faces an unprecedented opportunity. Half of the population is under 25 years of age. Each year between 2015
and 2035, there will be half a million more 15-year-olds than the year before. Meanwhile, the population in the rest of the world is, or will
soon be, aging. Africa’s youth bulge offers a range of opportunities. First, the world’s goods and services  cannot be produced without workingage labor. Sub-Saharan Africa, along with South Asia, can be the main supplier of the world’s workforce, either by producing goods and services in the region or by sending workers to regions with a shortage of workers. Second, manufacturing wages in other regions are rising. Africa’s labor force should compete for these jobs. Third, increasing concentrations of workers in urban areas can be a source of innovation and rapid economic growth (World Bank 2008). Young people will be at the forefront of these developments. Finally, if fertility continues to decline, rapid growth in Africa’s workforce will mean that the number of working age adults relative to“dependents” will rise from just around 1 in 1985 to close to 1.7 in 2050, providing the space for savings, investment, and sustained economic growth. Yet the demographic transition is not automatic. A critical concern is that the decline in fertility rates has stalled—or not even started—in many African countries. But it is also a critical concern that those of working age are able to be productive.

 Growth, Jobs, and Africa’s Labor Force—Now and in the Future

Despite 15 years of relatively rapid economic growth averaging more than 4.5 percent a year, almost all African countries still depend on
primary commodities for their exports. The failure of this growth to reduce poverty is stark in several countries, including oil-rich Angola,
Gabon, and Nigeria, and noticeable in others, such as Mozambique and Zambia. Labor intensive manufactured exports—the force
behind employment and economic transformation in East Asia—are far from taking off in Africa. In fact, manufacturing’s share in GDP is
lower in Sub-Saharan Africa today than it was in 1980; over the same period in Asia, it rose in both lower- and middle-income countries.
To understand the challenge of youth employment in this context, we start with where Africans work today (see box O.1 for an explanation of how this report defines employment). Contrary to popular perceptions, measured unemployment in low-income Africa is only 3 percent.1 Even in lower-middle-income countries, unemployment is quite low.

These low unemployment rates may seem counter intuitive, given widespread concern about “unemployed youth,” but most Africans
simply cannot afford to be idle. Very few families can fully support a recent graduate while he or she seeks a job. That the unemployment
rate is highest among university graduates—who mostly come from the top end of the income distribution—is no coincidence. Only
in upper-income countries, with broader safety nets, does substantial unemployment persist,  including among youth. Because the youth employment challenge is configured somewhat differently in Africa’s resource-rich countries and some middle-income countries, they will need to approach the challenge in somewhat different ways .

Where do most Sub-Saharan Africans find employment? About 16 percent of those in the labor force have “wage jobs”—jobs that pay a
regular wage, sometimes with associated benefits. In low-income countries, these jobs are divided roughly equally between the public
and private sectors, although the private share grows with per capita income. The industrial sector (mining, manufacturing, and construction) accounts for less than 20 percent of wage jobs (about 3 percent of total employment). The remaining jobs are either on family farms  (62 percent) or in household enterprises.

percent), which may be collectively described as the informal sector (see box O.5 for a definition of household enterprises). These kinds
of jobs—working a small plot of land, selling vegetables on the street, sewing clothes in one’s home—often generate low earnings, partly
because the “enterprises” tend to be tiny, typically involving only the family. Will this pattern of employment persist?
After all, countries that are not resource rich are creating private wage jobs at a rapid clip—often faster than GDP is growing. The kinds of
jobs that are created will depend partly on the structure of growth that Africa attains. Growth and employment projections for this report
assume that growth will remain strong (5–6 percent a year) and will be fueled by Africa’s natural resources—minerals and agriculture.
The mineral sector is not expected to create very many jobs. Increases in wage employment (as a share of total employment) will come
from continued diversification of output and exports and from increased domestic demand for services as incomes grow. Since service
employment is projected to grow faster than employment in industrial sectors, as it has in the past, most non farm employment will be
created there. Based on these assumptions, the number of industrial sector wage and salary jobs is projected to increase 55 percent over the
next 10 years. The problem is that this growth starts from such a small base that it does not even come close to absorbing the millions of
young people entering the labor force each year. Because of the low base, the share of industrial wage jobs in total employment will
rise only from 3 to 4.5 percent in Sub-Saharan Africa, still below the share in other developing regions. The share of wage jobs in the service
sector is projected to rise from 13 to 22 percent.

In other words, over the next 10 years, at best only one in four of Sub-Saharan Africa’s youth will find a wage job, and only a small fraction of those jobs will be “formal” jobs in modern enterprises. Most young people will end up working where their parents do—in family farms and household enterprises. The employment challenge is therefore not just to create jobs in the formal sector, important as that may be, but to increase the productivity of the almost 80 percent of the workforce who will be in the informal sector—thereby
addressing the underemployment associated with work in this sector. The size of the youth bulge in Africa and the current structure of the economy mean that the majority of this generation’s workers will remain in the informal sector for the duration of their working lives.
To be sure, in the long run these workers (or their children) will move to the formal sector, like their counterparts in East Asia and Latin
America.

This focus on raising productivity in the informal sector may seem unusual, given the publicity around high unemployment among
university graduates and the recent emphasis on creating jobs in the formal manufacturing sector (Dinh et al. 2012). But university
graduates still represent only a tiny fraction (about 3–4 percent) of the labor force, come from the richest households, and have the best
job prospects. Creating jobs in the formal sector is important and should be encouraged, but the reality is that even if African countries
were able to attract an extraordinary infusion  of private investment in very labor-intensive enterprises, the formal sector would draw only a small number of workers from the informal sector in the near future.

Even if it is realistic to emphasize the role of the informal sector, does this mean that we are pessimistic about Africa’s future? That we are
denying African workers the hope of emerging from informal employment? On the contrary, raising the productivity of smallholder farms
and household enterprises is precisely what will enable the formal sector to develop and thrive. It was the key to structural transformation in Asia and Latin America, and it is the key to Africa’s future as well. 

 Youth’s Transition to Productive Employment

Transition is the defining feature of youth (see World Bank 2006). The young leave school for work, eventually settling on a career. They grapple with the many decisions that influence when they start a family and how healthily they live (including decisions to engage in
risky behaviors such as tobacco and alcohol use). Most young people also begin to engage in the rights and duties of citizens, such as
voting in elections. The question, therefore, is how to help youth to make these transitions in a way that puts them on a pathway to productive employment. The particular challenges that young people—especially young women or poorer youth—encounter during these transitions increase the difficulty of finding a pathway to productive employment (although securing productive employment is important for all members of society, as box O.4 explains).

The transition from school to work as well as between sectors of employment (between farming and a wage job, for example) is particularly difficult for young Africans. Many lack the means, skills, knowledge, or connections to translate their education into productive employment. Nor is there a structured path to follow. Many young people combine school with work for many years.
Some move straight into apprenticeships and similar arrangements, but others do not. Evidence from urban Tanzania (Bridges et al.
2013) shows that some young people do odd jobs and are supported by their families for as long as five years before they settle into wage
jobs or (mostly) self-employment. Moreover, first-generation school leavers aspiring to be wage workers lack a family history in formal employment. They may not have networks to help them to find jobs. Young women may be particularly disadvantaged by other dimensions of the transition, such as family formation, compared with
young men. Social norms tend to enforce job segregation by gender. For instance, young women in the household enterprise sector work mostly in narrowly defined fields such as dressmaking, even though a range of other occupations could be more lucrative.

Policy Priorities for Addressing Youth Employment

To understand the challenges constraining productivity and earnings for youth and to orient how policies should be targeted, this
report considers the three main sectors where people work: agriculture, nonfarm household enterprises, and modern wage employment.
It then distinguishes between two dimensions that shape young people’s potential to find a pathway to productive work in the three sectors: human capital and the business environment. Box O.5 describes this framework more fully.
On the human capital side, the role of basic education dominates interventions in all three sectors. As a complement, different approaches
are needed to build post-school skills in agriculture, household enterprises, and the modern  wage sector. On the business environment side, raising farm productivity requires enabling farmers to gain access to finance and secure land tenure; in the nonfarm HE sector, infrastructure services and access to finance as well as a space to operate will play critical roles; to boost modern sector wage jobs, business regulations and infrastructure will be important.  

Human Capital: The Fundamental Role of Basic Education
Sub-Saharan Africa has seen a rapid increase in the number of children who complete primary school, from about 50 percent in 1991 to
70 percent in 2011. The average young Ghanaian or Zambian today has more schooling than the average French or Italian citizen had
in 1960 (Pritchett 2013). The current cohort of youth in Sub-Saharan Africa will be the most schooled ever.
Educational attainment shapes employment opportunities, as reflected in the substantial variation in the educational profiles of young
workers in each sector. Internationally benchmarked learning assessments suggest that many young people nevertheless
lack the skills to compete in a global marketplace. Schooling is not learning. Deep deficiencies in the quality of education mean that the
effect of schooling on productivity is far below its potential. The poor quality of education directly constrains productivity and hinders
individuals from acquiring new skills. 
Learning in primary school is often minimal: 80 percent of Malian third-graders and more than 70 percent of Ugandan third-graders
cannot read a single word (Cloutier, Reinstadtler, and Beltran 2011). Even students who complete primary school have low levels of
basic skills: among sixth-graders 43 percent in Tanzania and 74 percent in Mozambique are at or below the “basic numeracy” level, while
44 percent in Mozambique cannot “read for meaning” (Hungi et al. 2010). A few years of low-quality basic education will not confer
much of a gain in productivity if students never master even basic literacy and numeracy— although so-called “second-chance education”
approaches offer some potential for catching up. For many, however, primary schooling is the highest level of schooling they will achieve.
These results are especially troubling because they suggest that school leavers have a fragile foundation on which to build more specialized
skills. Even students who make it to the secondary level—those who will most likely head to the modern wage sector—are not globally
competitive. In the most recent internationally benchmarked assessment of eighth- and ninthgrade students, 79 percent of Ghanaians and 76 percent of South Africans do not surpass the lowest measured level of math proficiency. For comparison, the international mean is 25 percent, and the corresponding scores are 67 percent for Indonesian students and 45 percent for Jordanian students.2 Beyond these cognitive skills, many youth lack the behavioral and  socio emotional skills, sometimes called “soft skills,” that are needed to get, keep, and be productive in a job. Addressing this lack of learning is not easy.

Surveys of schools reveal substantial failures in service delivery. For example, absenteeism among teachers is between 16 and 20 percent on a given day in Kenya, Senegal, and Tanzania, and primary school students in those countries experience only about two to three hours of learning a day.3 Reforming the accountability framework that allows such poor performance to persist is key. Better information on performance must be complemented by targeted approaches that increase oversight by the people who are most affected: students and their parents. Steps to ensure that teachers are well prepared for teaching and supported in their tasks are critical for creating a cadre of high-performing professionals. The rise of private schools in Africa—schools that often deliver superior performance at lower cost—should not be stifled but should be encouraged and channeled to give larger numbers of students the opportunity to learn.
Improvements in basic education will lay the foundation for improvements in productivity. At the same time, to maximize young
people’s chances of transitioning successfully to remunerative employment, complementary actions are required to improve the business environment and develop human capital. 

 Raising the Productivity of Smallholder Farmers

Agriculture can and should be a sector of opportunity for Sub-Saharan Africa’s youth. The growing demand for food means that there is scope for supply to take advantage of a growing market. And growth in demand is not limited to Africa’s expanding domestic markets. 
Global food prices are at their highest point in several decades, and they are expected toremain high for at least the rest of the decade. Africa is well positioned to produce for this large and potentially lucrative global market. It has plentiful supplies of land and often of water, unlike other regions. If young people can gain access to these resources and use them in conjunction with strategies to make agriculture more productive, the results could be transformative for livelihoods and economic growth. More than two-thirds of the young people who work in rural areas already work in agriculture, and most will remain there, even if the non farm sector develops extremely rapidly. Although agriculture is the most immediate means of generating income and employment for large numbers of young people, efforts to accelerate agricultural growth and improve food security in Africa have been conceptually separated from efforts to create jobs for young people. Yet these goals are highly complementary. Increasing young people’s opportunities for productive work in rural areas is arguably the most important catalyst for Africa to reap its demographic dividend. Low agricultural productivity is the primary
impediment to overcome. Agricultural productivity remains lower in Africa than in any other region of the world, and agriculture is the least productive sector in African economies. This is true, despite the fact that total factor productivity, as well as land and labor productivity, have been increasing in African agriculture since the 1990s (Fuglie and Rada 2013; Nin-Pratt, Johnson, and Yu 2012). Productivity may increase further as food prices continue to rise, because the value of output for the same amount of inputs will increase, but these productivity indicators are far below levels achieved in other regions during their phases of rapid economic growth. Indeed, African countries are not following the trajectory of other regions in which productivity gains on farms, combined with higher productivity and more opportunities off the farm, shifted labor rapidly out of agriculture. The effects of low agricultural productivity extend well beyond rural areas and farm households. An underappreciated result of low agricultural productivity in Africa is high domesticfood prices. Local prices are poorly correlated with global prices, especially in the interior. When domestic prices are high, this increases the cost of food and pushes up wages, contributing to Africa’s overall lack of competitiveness. High domestic prices undermine real earnings

 for everyone except those farmers who are net food sellers and whose production costs are relatively low. Greater agricultural productivity

will reduce the domestic cost of food and create more and better-paying nonfarm jobs for everyone, especially youth. Understanding why the least productive sector is also the largest may provide insight into how farmworkers can increase their productivity. Small-scale farmers may be caught in a trap that prevents them from generating sufficient earnings to invest in expanding production and productivity. The vast majority of African farmers work on tiny plots of land, often under uncertain tenure arrangements.
They cannot take advantage of economies of scale (where they exist), modern agricultural inputs, and mechanization. Poor rural infrastructure (transport, electricity, and irrigation) frustrates farmers’ efforts to obtain affordable inputs such as seed and fertilizer, market their output profitably, or harness new land for cultivation. The lack of irrigation makes agriculture more vulnerable to the vagaries of weather.
Low levels of education and pervasive health problems (two outcomes of the poor delivery of services) prevent farmers from increasing
their own productivity, much less migrating to areas where agriculture or some other occupation might be more productive. Rural youth
have significantly lower levels of education than their urban counterparts. Many endemic diseases are not difficult to manage or cure, but
these areas of health policy often receive little attention despite their high cost to the rural economy. Illness, apart from reducing the labor
available to farm households, can deplete savings through costly treatments and cause distress sales of assets.
For Africa to raise agricultural productivity sufficiently to support overall growth and provide a remunerative livelihood for those
working in the sector, farming must shift rapidly from being an occupation of last resort and low productivity to one of technical dynamism
and recognized opportunity (see box O.6 for a discussion of the link between productivity and jobs in agriculture). With much higher priority accorded to well-designed programs of public investment in agriculture, continued progress on regulatory and policy reform, and some attention to including young people, agriculture could absorb the large numbers of new job seekers and offer meaningful work with large public and private benefits. Broadly speaking, three pathways are available for rural youth in agriculture:

 (1) full-time work on family farms, 

(2) part-time farm work, combined with running a household enterprise, which can include the sale of farm services or inputs, and 

(3) wage work. To increase the productivity of these pathways to agricultural employment, constraints need to be relaxed in at least four areas: credit and financial services, land policies, infrastructure, and skills.   

Credit and Financial Services

Because they work in a risky environment and lack collateral, rural households face major constraints in obtaining capital and credit. Traditional financial institutions do not find it profitable to provide agricultural credit. Instead, various nongovernmental organizations (NGOs) and banks have been innovating with new instruments and institutions, some of which look promising. First started in Niger in 1991, village savings and loan associations (VSLAs)—where members save on a regular basis and lend money on terms determined by the group—have spread to 39, mostly African, countries. They hold great potential for assisting young people to save the funds to invest in a farm and to get access to credit, while also benefiting from the mentoring and access to information that come from being a member. VSLAs could help youth in rural areas to establish themselves in agriculture as well as in nonagriculture sectors. Various institutional arrangements and incentive schemes can also widen access to credit. Examples include different forms of collateral (chattel mortgages and others), leasing (which requires no collateral, such as the DFCU Leasing Company in Uganda), linking credit to extension services (thereby addressing multiple constraints simultaneously, because young people also need information), and contract farming (in which the wholesaler provides credit for inputs). None of these innovations in rural finance is exclusively for young people. Nor should  young people be segregated as a group and offered financial services designed specifically for them. The risks of working with this client base are high, and separating young people from a larger pool for sharing risks would make them even less attractive to financial institutions. A better approach is to support a range of innovations in finance that facilitate outreach to small farmers and rural entrepreneurs. When necessary, additional features should be added to enhance the ability of these programs to serve young people.  

Land Policies
Insecure and unclear land rights, as well as constraints on renting or otherwise using land, pose problems for young people in agriculture.
Some young people own land (albeit small plots), but ownership is strongly concentrated among older adults.
The problem of insecure and unclear land rights can be addressed by developing an inventory of registered land and improving land
registration. Geographic information systems have made this process increasingly practical. Tenure security is also reinforced by improving land titling procedures. When farmers know that their land rights are secure, they are more likely to invest in improving their land. A recent impact evaluation of a land registration pilot in Rwanda shows that more secure land tenure increased investments in soil improvement by 9 percent among male farmers and 18 percent among female farmers (Ayalew Ali, Deininger, and Goldstein 2011).
Once land is registered and titled, land rental markets can develop. Land rental markets have been shown to promote commercial farming in Ghana and to encourage the transfer of land to smaller-scale farmers in Sudan. By contrast,  restrictions on land rental markets have inhibited both the farm and nonfarm sectors, discouraging people with land from taking jobs in the nonfarm sector for fear of losing their land.

Agribusiness can increase productivity, and parts of Africa, especially the Guinea savannah, have huge potential for commercial agriculture on both large and small farms (Morris, Binswanger-Mkhize, and Byerlee 2009). Large commercial landholdings and agribusiness may prove politically contentious, however. How large farms are integrated into a diverse farm structure and how smallholders are compensated for land that they make available to large commercial operators are critical issues to resolve. Other ways of aggregating smallholders, such as producer associations or contract farming, could also be practical approaches for improving productivity when increasing the scale of production will contribute to lower costs.

Infrastructure
In some—but not all—cases, investments in rural infrastructure can have huge rates of return. Typically such investments occur in more densely populated areas (World Bank 2008), but even here, investments should be evaluated case by case and not accepted across the board. For example, paved rural roads are not always a good investment, especially in areas where motorized traffic is low. Paved roads are
more expensive to maintain, so maintenance is often not funded; another issue is that roads are prone to becoming tools of political patronage (Raballand and Macchi 2009).

Skills
Given their low levels of formal education , youth in rural areas can increase their productivity with more and better schooling.
In turn, higher productivity increases demand for schooling, triggering a virtuous cycle. The evidence used to identify externalities in education usually comes from agriculture: farmers learn from neighboring farmers, especially more educated ones, who are also more likely to adopt new technologies (Conley and Udry 2010; Rosenzweig 2012). All of these effects apply more strongly to young farmers.
In addition to basic education, high productivity farming requires specific skills, such as skills in processing, marketing, machinery operation and repair, transport, logistics, and quality control. In some countries, agricultural vocational training institutes (some of which are associated with universities) traditionally have provided these skills. These institutes have a mixed track record, mostly owing
to the disconnect between academic, lecture style teaching and the need for on-the-ground, practical training.

Agricultural extension programs have a disappointing history in Africa, mainly because of poor incentives and accountability. Better
results are coming from new programs that empower farmers by giving them a choice of providers and services from among a range of public, private, and nongovernmental agencies. Another approach, farmer field schools, involves participatory methods of learning, technology development, and dissemination and appears to be especially successful in building women’s skills. Business incubators and rural alliances that bring together commercial buyers with producer organizations are further ways of boosting agricultural incomes. In all  restrictions on land rental markets have inhibited both the farm and nonfarm sectors, discouraging people with land from taking jobs in the nonfarm sector for fear of losing their land.

Agribusiness can increase productivity, and parts of Africa, especially the Guinea savannah, have huge potential for commercial agriculture on both large and small farms (Morris, Binswanger-Mkhize, and Byerlee 2009). Large commercial landholdings and agribusiness
may prove politically contentious, however. How large farms are integrated into a diverse farm structure and how smallholders are compensated for land that they make available to large commercial operators are critical issues to resolve. Other ways of aggregating smallholders, such as producer associations or contract farming, could also be practical approaches for improving productivity when increasing the scale of production will contribute to lower costs.
Infrastructure In some—but not all—cases, investments in rural infrastructure can have huge rates of return. Typically such investments occur in more densely populated areas (World Bank 2008), but even here, investments should be evaluated case by case and not accepted across the board. For example, paved rural roads are not always a good investment, especially in areas where motorized traffic is low. Paved roads are more expensive to maintain, so maintenance is often not funded; another issue is that roads are prone to becoming tools of political patronage (Raballand and Macchi 2009).

Skills 
Given their low levels of formal education , youth in rural areas can increase their productivity with more and better schooling.
In turn, higher productivity increases demand for schooling, triggering a virtuous cycle. The evidence used to identify externalities in education usually comes from agriculture: farmers learn from neighboring farmers, especially more educated ones, who are also more likely to adopt new technologies (Conley and Udry 2010; Rosenzweig 2012). All of these effects apply more strongly to young farmers. 
In addition to basic education, highproductivity farming requires specific skills, such as skills in processing, marketing, machinery operation and repair, transport, logistics, and quality control. In some countries, agricultural vocational training institutes (some of
which are associated with universities) traditionally have provided these skills. These institutes have a mixed track record, mostly owing
to the disconnect between academic, lecturestyle teaching and the need for on-the-ground, practical training. Agricultural extension programs have a disappointing history in Africa, mainly because of poor incentives and accountability. Better results are coming from new programs that empower farmers by giving them a choice of providers and services from among a range of public, private, and nongovernmental agencies. Another approach, farmer field schools, involves participatory methods of learning, technology development, and dissemination and appears to be especially successful in building women’s skills. Business incubators and rural alliances that bring together commercial buyers with producer organizations are further ways of boosting agricultural incomes. In all  restrictions on land rental markets have inhibited both the farm and nonfarm sectors, discouraging people with land from taking jobs in the nonfarm sector for fear of losing their land.
Agribusiness can increase productivity, and parts of Africa, especially the Guinea savannah, have huge potential for commercial agriculture on both large and small farms (Morris, Binswanger-Mkhize, and Byerlee 2009). Large commercial landholdings and agribusiness
may prove politically contentious, however. How large farms are integrated into a diverse farm structure and how smallholders are compensated for land that they make available to large commercial operators are critical issues to resolve. Other ways of aggregating smallholders, such as producer associations or contract farming, could also be practical approaches for improving productivity when increasing the scale of production will contribute to lower costs.

Infrastructure
In some—but not all—cases, investments in rural infrastructure can have huge rates ofreturn. Typically such investments occur in
more densely populated areas (World Bank 2008), but even here, investments should be evaluated case by case and not accepted across
the board. For example, paved rural roads are not always a good investment, especially in areas where motorized traffic is low. Paved roads are more expensive to maintain, so maintenance is often not funded; another issue is that roads are prone to becoming tools of political patronage (Raballand and Macchi 2009). 

Skills
Given their low levels of formal education, youth in rural areas can increase their productivity with more and better schooling.
In turn, higher productivity increases demand for schooling, triggering a virtuous cycle. The evidence used to identify externalities in education usually comes from agriculture: farmers learn from neighboring farmers, especially more educated ones, who are also more likely to adopt new technologies (Conley and Udry 2010; Rosenzweig 2012). All of these effects apply more strongly to young farmers.
In addition to basic education, highproductivity farming requires specific skills, such as skills in processing, marketing, machinery operation and repair, transport, logistics, and quality control. In some countries, agricultural vocational training institutes (some of
which are associated with universities) traditionally have provided these skills. These institutes have a mixed track record, mostly owing
to the disconnect between academic, lecturestyle teaching and the need for on-the-ground, practical training.
Agricultural extension programs have a disappointing history in Africa, mainly because of poor incentives and accountability. Better results are coming from new programs that empower farmers by giving them a choice of providers and services from among a range of public, private, and nongovernmental agencies. Another approach, farmer field schools, involves participatory methods of learning,
technology development, and dissemination and appears to be especially successful in building women’s skills. Business incubators and
rural alliances that bring together commercial buyers with producer organizations are further ways of boosting agricultural incomes. In all  such efforts, the use of information and communication technology can benefit, and benefit from, the participation of young people.

Increasing the Productivity of Nonfarm Household Enterprises
The majority of people who work outside the farm sector are engaged in informal, household enterprises. Often such an enterprise is one pillar of a diversified livelihood strategy: Many households are engaged in the farm and nonfarm sectors at the same time (30–50 percent
of rural households have a nonfarm HE). In urban areas, many households with an enterprise have a family member earning a wage
income, a pattern that is likely to increase over time (Fox and Sohnesen 2012). Although their productivity is relatively low, HEs provide earnings that are usually higher than anything their owners could obtain in the agriculture sector. Most HEs have no employees and are pure self-employment. Few include a family member as additional labor, and only 10 percent hire outside the family. Some are started in response to a local business opportunity (such as increased demand for a service), whereas others are started because the household lacks alternative means to earn a living. What do HEs do? They mostly sell services (hairdressing, repairs) and internationally and locally produced consumer goods (used clothing, household supplies, vegetables, eggs). They also contribute to the industrial sector, transforming agricultural goods or natural resources into charcoal, bricks, iron work, or processed grain. Some pursue artisanal activities such as
woodworking, dressmaking and tailoring, and construction.
HEs sell low-cost goods and services mainly for the local market, which lacks a modern service sector. In urban areas, the traders and hawkers substitute for convenience stores and shopping malls. The low-quality manufactured goods these enterprises produce, such as homemade bricks and furniture, eventually are replaced by higher-quality locally produced goods (made in brick and furniture factories) and imports. As a result, HEs that are involved in manufacturing do not persist as long as HEs that provide services.
Historically, HEs have tended to remain tiny or to disappear; very few grow into even small or medium enterprises. Data from West Africa
show that, even after 10 years of operation, the capital stock of these businesses remains the same. Most enterprises never hire another worker. So the employment they provide, including the employment for young people, comes from seizing a business opportunity and starting a new enterprise.
Despite their small scale, HEs are an instrument for reducing poverty in Africa, with the potential for becoming an even more powerful one. They tend to be found in richer areas. Households with enterprises are less likely to be poor and are clustered in the middle quintiles of the income distribution. Rural households gain a higher hourly income from HEs than from agricultural work. In urban areas, some HE owners make more money than they would from a wage job. In fact, controlling for education and skills, the reported consumption of rural and urban households with an HE in Africa is no different from that of households in wage employment (Fox and Sohnesen 2012).
Indeed, they also report being “happier” (Falco et al. 2013).
Most governments continue to ignore, neglect, or undermine the potential of this sector. Hawkers and sellers are regarded as an
unattractive annoyance to be chased out of the business districts in capital cities. Advocates of formal employment criticize HEs for not
offering the benefits and security of a wage job.  Thinking that HEs can be transformed into small and medium enterprises—for which they have a strategy—governments try to formalize these informal enterprises. This transformation rarely takes place, however, because this is not the intention of the owners. Lacking support, HEs just try to survive. In Tanzania, the law prohibits businesses from operating without fixed premises, but it does not stop the government from collecting taxes and fees from those same enterprises. (This describes 80 percentof HEs.)  

By contrast, Ghana, a country with a richtrading history dating to precolonial times, explicitly incorporates HEs in its strategy documents and the institutions that implement them. In 2006 the government established an objective to “enhance productivity and income/
wages … in all sectors of the economy, including the informal economy” (Republic of Ghana 2006). The Trade Union Congress supports the
development of HE organizations and their integration into the consultative mechanisms between government and the private sector.
To realize the potential of the HE sector for productive youth employment, national strategies that recognize the sector’s potential and
propose a supportive policy framework need to be developed. Such strategies should endorse the creation of independent HE associations to
reduce the costs of reaching individual enterprises and to give this sector a voice in government decision making. Local interventions
need to address three key areas: the local business climate in urban areas, access to credit and financial services, and skills.

Urban Policy
One of the most frequently cited constraints on the productivity of urban HEs is the lack of access to space and sometimes outright harassment, legal and extralegal, by local authorities.Insecurity of premises discourages entry (the main form of growth in this sector) as well as investment in the enterprise. Governments can help rather than hurt this sector by incorporating the growth of HEs in planning processes. Without planning, traders and vendors crowd sidewalks and roads, leading to massive congestion. Usually the situation escalates to a crisis, and authorities use police or security forces to “decongest” the city. Because the eviction policy is rarely permanent, the cycle usually resumes. If governments had planned for the growth of HEs and provided adequate space for them in the key areas of foot traffic in the city, employment growth and social stability would have followed.
Alongside planning, national policy makers can clarify land rights in urban jurisdictions, giving local governments scope to provide HEs
with locations to operate. Overlapping land regulations and responsibilities make it difficult to implement the law—if there is one. For
example, in Dar es Salaam, Tanzania, local governments are not empowered to decide whether hawkers can use the land next to national roads. Just as land rental markets can facilitate access to agricultural land, they can facilitate access to space for HEs to do business.
In addition to secure space, HEs need services, such as security, sanitation, electricity, transport, and water supply. For the most part,
they are willing to pay for these services (and do pay for them) through fees and taxes. In fact, 

HEs pay local business taxes at a higher rate than large businesses but often fail to receive any services. HEs have little leverage to improve
this situation (Fox and Sohnesen 2012). Local authorities are not accountable to HEs, because ineffective political decentralization and weak legal status deprive HEs of a voice in local governance. 

Credit and Financial Services
Lacking access to formal sources of finance, young people struggle to raise capital to start and operate a business. The problem is exacerbated by the fact that business and household finances are linked, so that lumpy household expenditures (school fees, repairs, and so on) and external shocks (family illness) spill over to the business. Virtually all HEs in Africa today report that their own funds or loans
from friends and relatives enabled them to start their businesses, and the overwhelming majority of existing businesses report that they did not obtain any type of loan over the last 12 months. An expansion of credit cannot make  up this gap and may even make it worse, as recent experiences in India have shown. To use credit effectively, a borrower has to be able to put aside money regularly to service the loan.
For this purpose, the establishment of a savings mechanism is critical. At the root of the credit problem for HEs is the lack of financial inclusion among households in Africa (World Bank 2014). Households not only lack sources of credit but also have difficulty finding reliable places to safeguard their savings. As a result, it is challenging for them to accumulate the funds to start or expand a business. This problem is especially acute for youth and for females. Research has shown that  access to a secure place for savings is particularly

important for women’s ability to build up savings for a business (Dupas and Robinson 2013). The challenge of providing access to financial services for poor people is a common one. Because of economies of scale, the spread of formal banking services (banks, postal savings,
formal savings institutions other than banks) usually rises with income and urbanization— banks go where the money is. But this is not
the whole story in Africa. FINDEX data show that even at the same level of income per capita, national policies can produce very different
results. Low- and lower-middleincome countries such as Ghana, Kenya, and Rwanda have achieved greater financial access than other African and non-African countries at similar income levels. They have done so primarily by reducing the costs of serving small savers and those in remote areas. In Kenya, banking access increased through the pioneering use of mobile banking technology. By increasing branchless banking, mobile banking allows accounts to be maintained at relatively little cost to savers and borrowers. Today, about half of the adult population of Kenya uses mobile banking. In Rwanda, government provided incentives for banks to develop low-cost products for small savers and for households to use banks by channeling payments to households through banks, including microfinance banks with a client base among lower-income households.4 Ghana developed a system of rural banks to process payments to cocoa farmers; today these banks provide low-cost accounts in rural areas. Ghana and Rwanda are both encouraging the spread of mobile banking to further widen access to financial services. Countries in the Western and Central African monetary unions using the CFA currency (UEMOA and CEMAC) are also changing their regulations to foster more inclusion. Benin, which encouraged the establishment of microfinance institutions, was an early mover in this group.

Skills
Training can help to structure a pathway to youth employment in HEs. Training programs—both for entry and for improving incomes and sustainability—are the most commonly provided government and donor intervention to support HEs, whether or not they
target youth. Programs provide (1) technical training in a specific sector (such as tailoring, metalworking, operating a bakery); (2) business  skills or financial literacy (such as basic accounting or money management); (3) behavioral and

life skills; or (4) a mix of these skills. Programs specifically intended for youth focus primarily on providing the skills needed to enter the HE sector and have included all four types of training. Programs targeted at existing HEs tend to focus more on business skills to strengthen or expand HEs.
The good news for youth employment is that programs designed to facilitate entry (versus those focusing on productivity) appear to have had some success, so positive models are emerging. Apprenticeships and on-the-job training can help young people, provided that these programs are closely tied to market signals. For this reason, private providers, including existing businesses, are often the best source for this training. Youth often face multiple constraints in entering the HE sector, and the most promising pilots are delivering interventions that tackle multiple constraints (offering behavioral, business, or technical skills training together, or combining training with measures to tackle credit constraints through savings groups, grants, and other means). Many of these “bundled” interventions have been  expensive, however, and they are yet to scale up in Africa.
Overall, despite the large number of training programs, evidence of their effectiveness in the HE sector in Africa remains thin. More
systematic use of careful evaluations is clearly required, including impact evaluations that measure outcomes among program participants and compare them to a relevant group of nonparticipants. At the very minimum, governments should encourage all programs to
track and report outcomes. At the same time, governments should not attempt to deliver training directly but rather focus their efforts on market-enhancing programs that disseminate information about training opportunities and enable disadvantaged youth to access training that is already available.

Improving Competitiveness to Boost Modern Sector Wage Jobs
Although small (16 percent of the labor force), the formal wage employment sector represents the engine for employment and growth in the medium to long term for Africa. No country has developed without this sector coming to dominate employment. This is the sector that
can exploit economies of scale and produce for export. The multiplier effects to the household economy from the creation of wage jobs
are strong. Most secondary-school graduates aspire to work in this sector. When these aspirations are not fulfilled and graduates must
resort to working in the household enterprise sector, for example, the risks for social instability and political violence are high. While
Africa’s young people seem to have no special advantage or disadvantage when it comes to modern wage employment, they remain a
consistent share of that employment when it grows. The modern wage sector has been creating jobs at a fairly rapid pace in Sub-Saharan Africa—usually faster than GDP growth. The problem is that the sector has grown from such a small base that it still cannot absorb the millions of young people entering the labor force every year. To generate jobs at a rate that is commensurate with growth in the labor force, the export-oriented enterprises—with their potential to sell to global markets—will have  to be the engine for job creation in this sector. 

Since most African economies are small, access to external markets is the key to unleashing the modern wage sector’s full potential. The
scope for trade is wide. Even services are traded internationally, although these tend to call for relatively high-level skills still lacking in much of Sub-Saharan Africa. Moreover, the employment effects of trade go beyond exporting firms, as rising demand from the export sector—for inputs, consumer goods, and services—increases opportunities in other parts of the economy.
What factors are constraining exportoriented enterprises in Africa today? The main constraint on the growth of an export-oriented sector in Africa is low productivity. The underlying causes are not identical across the continent, even if they have similar effects. In some countries, the cost of complementary inputs to labor (electricity, overland transport, and so on) is too high. Clearly, the cost of transporting goods across borders is prohibitively high in the region, and the need for better transport infrastructure, simpler customs procedures, and expedited inland border crossings is acute. In other countries, bureaucratic red tape delays investors’ access to land or permits. The high costs of financial intermediation are starving firms and entrepreneurs of the capital needed to implement good ideas. In many countries, poor connectivity has fragmented local markets, suppressing competition and reducing the pressure to improve productivity. These business climate issues would be a problem for productivity (and hence, youth employment) even if firms only produced for domestic markets. What can be done to increase Africa’s low labor productivity? The entire business climate comes into play here, with some exceptions. For example, labor market regulations—considered an important determinant of productivity elsewhere—do not play a major role in Africa, except for South Africa. In many settings, regulations may exist on the books, but they are rarely enforced  

Skills
Is demand for secondary-school graduates simply insufficient in Africa’s modern wage sector, or is there a skills mismatch? In fact,
both of these problems appear to be present. Secondary and post-secondary graduates say they have trouble finding a job because of lack of demand. There is a much larger supply of labor for unskilled (factory floor) jobs than for skilled jobs as mechanics and factory engineers or for office jobs as accountants and managers. Meanwhile, employers are requesting permits to import experienced skilled labor. Graduates at all levels without technical training and some work experience (where they can acquire and demonstrate the equally valuable “soft” skills) face an especially crowded job market, reflecting an “aspirational” mismatch as much as a skills mismatch.

As with the farm and HE sectors, perhaps the most important step toward resolving these problems in the modern wage sector is to get
basic schooling right. Foundational skills are important for all types of wage workers, partly because they facilitate further training and on the-job learning in firms. To avoid creating more unemployable university graduates, higher education policies and curriculums also need to be geared toward private demand. Financing in public universities should include a private component (especially for those who can pay), so that signals from the private sector are received (Devarajan, Monga, and Zongo 2011). Such a shift would improve equity in access to higher education as tuition payments become means-tested rather than free across the board. Also, those who pay will
demand value for money.

The Sub-Saharan African experience with technical vocational education and training (TVET) has been disappointing. Secondary
and post-secondary vocational training costs at least three times more than basic secondary education, yet often provides no better
foundation for private sector jobs. Training in government-run programs has not been geared to private sector needs.

Governments in Sub-Saharan Africa should focus on support for public goods in TVET such as quality assurance and information. To
promote access to training for poor and disadvantaged youth, governments should provide financial support for training in either the public or the private sector. Information about the returns to alternative training options can help to align young people’s training choices with the realities of the labor market. To the extent that governments support specific training options, those options should emphasize portable skills rather than the firm- or job-specific skills that employers should already have an incentive to provide. They should ensure that programs are closely linked to the private sector, potentially through public-private partnerships. Programs for disadvantaged youth that integrate training with internships show promise. The visibly poor management practices in African firms suggest considerable scope
for improving productivity by investing in business and management skills training and perhaps even in individualized management
consulting. The evidence for such programs is mixed but promising, and governments should  consider testing and refining them through careful piloting.