Job creation
With so many young workers joining the labour force, more than 600 million jobs must be created by the end of the decade just to maintain today’s employment levels. The vast majority—90 percent, by most estimates—must come from the private sector. There is no alternative.
Advertisement
IFC, the world’s largest global development institution focused on the private sector, has decades of experience financing and advising private firms throughout the developing world. We sum up our thinking on job creation in a new IFC Jobs Study that has been released. The study, produced with support from our Dutch, Swiss, and U.K. donor partners, complements the World Bank’s recent World Development Report 2013-Jobs.
In many developing countries, several factors hold back private sector growth:
Investment Climate: Red tape and taxes are excessive
Infrastructure: Power outages are frequent, roads are bad, ports are clogged.
Access to Finance: Banks often won’t lend to smaller firms; investors won’t invest in them
Skills: Job applicants lack relevant abilities
Steps can be taken, however, to remove these and other major obstacles. This frees up local entrepreneurs to create the stable, well-paying jobs with good working conditions that are essential to the fight against poverty.
Increasing access to finance, especially for the smaller firms that dominate local labour markets, is one of the most critical steps for job creation, the study indicates. It is also one of IFC’s top priorities.
Collectively, the micro, small, and medium enterprises receiving loans from IFC-backed financial institutions worldwide provide 100 million jobs, research shows.
Africa is emerging fast—investing in itself, creating its own jobs. It is still the poorest continent, where almost 70 per cent of the people live on $2 a day or less. But a continent-wide GDP growth rate of 5 percent, improved infrastructure, and investment climate reforms are attracting more and more private capital—creating stable, formal sector jobs that break poverty.
And today that capital is starting to come not just from foreign investors, but from Africa itself.
Three rounds of IFC financing and advice since1999 have helped build SAFAL Group, a local steel processing group whose affordable metal roofing is popular with homeowners at all income levels.
When we first backed the firm, it was primarily one flagship company, Mabati Rolling Mills in Kenya. But today SAFAL operates in 11 African countries and is considering new markets like Burundi, the Democratic Republic of Congo, and South Sudan.
Fast-growing and widely respected, earning Company of the Year honours in Kenya in 2011, Mabati and other subsidiaries of SAFAL Group now employ 4,200 workers, giving competitive wages, transport, medical insurance, and meals to all. Yet our analysis shows it supports almost six times as many jobs—24,000 at the latest count—at Africa the many wholesale and retail outlets that sell its products. Most are low- and unskilled labour positions that dramatically boost workers’ incomes.
Joseph Muki left a teaching job 10 years ago to open a small hardware store near Mabati’s plant outside Mombasa. Lacking financing or business training, he struggled at first. But carrying Mabati roofing made the difference.
Today it accounts for 70 percent of sales at his three stores. Together they employ 45 people: drivers, loaders, cashiers, and others.
Nearby, Peter Katwa, 23, looks proudly at the new house his truck driver father is building. “It will be much better than the small one we rent in town now,” he says. “We always wanted it to have Mabati roofing. It’s the best.”
IFC’s latest $15 million loan is helping upgrade SAFAL plants in Kenya,Tanzania, and South Africa that feed its business in interior countries. The growth fuels a wise reinvestment of earnings, including creating a nonprofit vocational school that has trained more than 1,500 impoverished Kenyan youths who had to drop out of school, unable to pay the $450 annual fees.
Almost all get auto mechanic, welding, dress-making, or other jobs with area employers soon after completing the two-year, $150-a-year course.
“We focus on those who have the ability but not the opportunity,” says Mabati Technical Institute Principal Norman D’Souza. “It’s making a difference.” IFC/GB
