Cutting through the unemployment debate

Some people out there are hurting. They are hurting, because unemployment – the inability to obtain a job when one is willing and able to work – is real and means the following: spending power on basic necessities decreases drastically, standards of living plummet, and in certain circumstances those affected revert to crime

Some people out there are hurting. They are hurting, because unemployment – the inability to obtain a job when one is willing and able to work – is real and means the following: spending power on basic necessities decreases drastically, standards of living plummet, and in certain circumstances those affected revert to crime. 

However, while unemployment sticks out like a sore thumb among developing countries, many developed countries have also been affected from time to time. In fact, among members of the Organisation for Economic Cooperation and Development (OECD), for instance, unemployment has been prevalent in the last five years.

 

To illustrate, OECD’s Q3 2014 unemployment report indicates that Greece’s unemployment rate was 26.3 per cent, South Africa 25.2 per cent, and Spain 24.2 per cent. Among major economies, the US recorded unemployment rate of 6.1 per cent, UK 5.9 per cent, Germany 5 per cent, while Japan and South Korea coped better, at 3.6 per cent and 3.5 per cent, respectively. 

 

So, while unemployment is due to too many and complex causes for there to be any one simple cure for it, it is my opinion that in Rwanda, unemployment whether or not we are talking about single or double digit unemployment rate as has been contested on social media, the causes have been largely exacerbated by Rwanda’s historical dependence on an agrarian economy.

 

Now, don’t get me wrong, there is nothing wrong with an agrarian economy. In fact, for centuries, Rwandans cultivated land and reared animals both for domestic and commercial use, a factor highlighted by tea and coffee as our main exports for many decades.

However, when you consider that the Rwandan agrarian economy relied, and to a large extent, still relies heavily on livestock farming and crop production, not to mention land used as the main factor of production with labour and capital playing a very limited role, sooner or later when alternative sectors emerge like they have in a form of services and manufacturing, a significant mismatch between skills required and skills available is inevitable, and rectifying it doesn’t happen overnight.

You see, for a nation like ours where 90 per cent of the labour force has been traditionally ‘employed’ in the agriculture sector, a sudden emergence of sectors like industry and services is bound to affect the labour force, particularly in terms of employability. This factor hits home when you appreciate that a mere sixteen years ago, at least 48 per cent of Rwandans could not read or write. How then are they suddenly employable in the manufacturing and service sectors?

Unfortunately, the agrarian path that our country took those many years ago did not only fail to modernise the sector, at least half of our labour force was also illiterate, which inevitably can lead to a severe shortage of professional personnel capable of partaking in other sectors.

This may also explain why our education system has been long accused of failing to respond to market needs. The fact of the matter is that if 90 per cent of the labour force worked in agriculture, education institutions are less likely to churn out retail managers, customer service officers, bankers, computer scientists, doctors and so on. If they do, many of the graduates are likely to be theoretical than practical with paper qualifications and not enough skills. 

So, what is the way forward? Well, thankfully, we are on course to rectify this problem. This is because plans are underway to transform the economy from an agrarian one to a knowledge-based economy. 

There are many reasons for this transition, solving unemployment being one of them, but the main one is that even if we were to modernise agriculture and achieve high productivity, agriculture alone would not guarantee a competitive economy that generates jobs. Services and manufacturing are needed to unleash new opportunities.

More importantly, a knowledge-based economy, which is based on knowledge and information, is widely recognised as the driver of productivity and economic growth in many leading economies where Information Communications Technology (ICT) plays a major role in increasing the productive capacity of factors of production; land, labour, and capital.

The key factor will be improved labour productivity through the use of knowledge and information, where better technology and improved labour productivity will enable a higher output in the service and manufacturing sectors which will ultimately lead to increased incomes for workers. 

A practical way to look at it is this; in 2010, Rwanda’s exports amounted to a value of $454 million. That is almost the same amount of money Airbus would make if they sold just one Aircraft – the A380-800. It is that kind of thinking – thinking big, that our long-term vision targets. But, of course, we have to start somewhere, and we have. Today we are assembling computers, and who knows, perhaps in five years we will be innovating new high value products.

Rwanda’s medium to long-term goal is to have a service-sector led economy with firms diversifying in banking, computer and IT services, tourism, hotels, transport, insurance, retail, entertainment, restaurants and cafes, and so on. Once this happens, jobs will surely follow.

That’s why I conclude by highlighting the current steps being taken to help with the transition from agrarian to a knowledge-based economy. The government has invested heavily in technical and vocational education and training (TVET), academia, ICT infrastructure, public and private sector reforms, regional integration, women empowerment, all designed to strengthen a competitive economy. 

Gradually, the above steps will yield results. For instance, the move to reform both the public and private sectors in order to ease doing business is already paying dividends. This year alone over $1.5 billion of foreign direct investment has been registered, which is encouraging when you consider that in 2010, that figure was $251 million. 

So, sure we have unemployment and many people are hurting. But, at least there are steps being taken to ensure that you and I operate in an environment where we can use knowledge and information to create jobs and earn meaningful wages instead of relying on agriculture alone.

Also, it is important to remember that while it is true that the government’s role is to create a favourable environment for the creation of jobs, it is also everyone’s responsibility to adapt and acquire the necessary skills to reduce the current skills mismatch. We all have a role to play.

Email: junior.mutabazi@yahoo.co.uk

Twitter: @Jsabex

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