Why Public Policy is the Catalyst for Innovation, Job Creation, and Poverty Reduction

The central theme among government policies in Africa since the 1970s is the desire to stimulate economic growth and job creation to lift their people out of poverty. There have been several calls for strategies through policy framework to reduce unemployment, especially amongst the youth. The situation hasn't changed rather a significant increase in vulnerable employment and no sign of poverty reduction. A report published by the Africa Development Bank indicated that of "nearly 420 million youth aged 15-35, one-third are unemployed and discouraged, another third is vulnerably employed". It further estimated that "263 million young people will lack an economic stake in the system by 2025" (AfDB)

The report acknowledges the fact that significant progress made in the past in reducing vulnerable employment; the situation hasn't been improved. The continent's youth population is rapidly growing at an exponential rate and estimated to double to over 830 million youth by 2050. That means every year; there will be 10 to 12 million youth entering the workforce as against 3.1 million jobs created each year. 

The burgeoning youth population and unemployment is a ticking time bomb for the continent. The increasing youth unemployment in Africa raised significant concern that must be addressed with all urgency collectively by governments and all stakeholders. Unemployment and poverty are two interrelated wicked problems in the world.

But understanding these two wicked problems in a stream of multiple contexts creates a sense of hope for the future. If we critically examined the root cause of youth unemployment and poverty in the region, we will find a causal link between how policy and innovation can help address these two wicked problems.

Greed and lack of resource problems are usually used to define unemployment and poverty. We always interpret it as a lack of money, food, water, housing, education, healthcare, and the list go on and on. But if we start to look at unemployment and poverty through a different lens, we will begin to see it is instead a policy and innovation problem. If we compare countries like China and South Korea to most African countries like Ghana and South Africa in the 1960s in terms of GDP per capita, we will see these African countries were even better off China and South Korea. Ghana's GDP Per Capita was far better of both China and South Korea in 1960 as seen in the chart below;

So, what has happened over the last 60 years that has made countries like China and South Korea to lift their people out of poverty and chart path of prosperity?

The answer to this question is " policy and innovation." These countries innovate, especially around their policy framework, to open their economies for competitions to drive innovation and entrepreneurship. They could not achieve economic growth without "promotion of competition, through innovation and entrepreneurship. Today, South Korea is ranked as one of the most innovative countries in the world, continually being list ahead of other countries for ground-breaking innovations and technology. The government continues to foster an environment to encourage innovation and new products through government spending on research and development. 

Public policy and innovation are the answers for reducing poverty and the creation of prosperity in every economy. If we take a closer look at countries around the world that have made a significant stride in reducing unemployment and poverty, we will find the interconnectedness between public policy and innovation and their impact on these countries. Public policy has been a natural component of economic development models. It plays a crucial role in helping nations to manage their development, within mandated constraints, in such a way as to be able to fulfill the mission of providing development and growth to the greatest extent possible, with steadily shrinking resources. We arrived at a critical juncture in the history of Africa that calls for new policy directions. We need innovative, evidence-based policy theories and intervention to facilitate the policy-making process, especially on entrepreneurship and market-creating innovations that will create a new market for goods and services thereby creating jobs for our youth.

We have seen evidence of how the change in directions of policy frameworks has created innovations with maximum economic returns on the continent. The mobile money revolution from the telecom sector is one example of market creation innovations from the continent that has generated more economical and social benefits. Since its inception in Kenya in 2007, mobile money (M-Pesa) has proved to market-creation innovation that has the potential to reduce poverty and creates jobs. As of 2018, M-Pesa has employed over 285,000 agents in 10 countries and continue. The radical idea to transfer money over the mobile phone in 2007 now generates mobile cash transactions worth $108 million daily. Several businesses have emerged in Kenya as a result of the M-Pesa effect.

The government of Rwanda and Botswana that have adopted a new direction in public policy formulation have equally registered incredible economic growth and development.

So, are there lessons to be learned by most of the remaining countries to catch up with the rest of the world in this "fourth industrial revolution?

I firmly believe it is not too late for governments across the continent to change their policy directions to skip some development stages and technologies, catch up with the rest of the world or even emerge as leaders in selected industrial niches. With innovative, ambitious yet focused and specialized policy formulation, charting a new path for ground-breaking commercial research and innovations, African countries can start to redefine the economic growth and development narrative, their ways, and for the better.

Here are four suggestions I will offer to governments in Africa to become more relevant in the 4th industrial revolution;

1. Governments should start to focus on developing evidence-based policy frameworks that encourage entrepreneurship and market-creating innovations. The first challenge is to "innovate" around policy frameworks that will promote market-driven innovations, thereby creating jobs and lasting economic growth.
2. Governments should make the formation of entrepreneurial activity on top of their radar. Ministers and technocrats must make the formulation of effective policy for the creation of entrepreneurial ecosystems. Most of the current economic policies focus on creating SMEs. SMEs in their nature and status can never create unicorns. Policy formulation must shift from SME focus to start-ups focus driven innovation. This way, the continent will start to produce unicorns owned by Africans, not unicorns owned by the East or the West. The FDI strategy as the donor strategy has all run the continent into the state you see today. The difference between the Chinese and South Korean economies and the Ghanaian economy in their respective countries today is the FDI and donor policy-focused.
3. Governments should prioritize education. Quality education should be on the top of the radar for every government on the continent. Governments through policy framework should increase spending on research and development, STEM-based, and technical and vocational education to develop their professional workforce for the labor market.
4. Governments in respective nations should prioritize infrastructure development. The infrastructure gap is currently at $170 billion a year (AfDB). Besides a conducive policy framework, infrastructure is also another catalyst that can influence innovation and entrepreneurship. For Africa to end poverty and unemployment, it must be industrialized to provide jobs for 12 million young people that will be joining the labor force every year, and infrastructure will play a key role in it. 
5. Africa Union Member states should collectively enforce "The African Continental Free Trade Agreement" signed recently to ensure smooth trade for goods and services among member states. This agreement should not be another rhetoric, as we have seen in the past. Creating a market for 1.3 billion people could potentially create a market worth $3.4 trillion of inter-trade and the spillover effect will be job creation and poverty reduction.

What Africa needs now is strong public policies supported by political will from the government to open the economy for critical investments and innovations. With the right policy responses, countries in Africa can create the conditions needed to champion innovations and entrepreneurship that fosters economic growth. Governments need to start engaging the private sector in the capacity of indirect facilitators but not as managers.

Governments should be aware of the quick trap in developing policies for immediate political gains, and the goal should focus on developing strategies that work and avoid the temptation to try to effect change via direct intervention sponsored programs. In achieving that, government, departments, and agencies have the mandate to focus on the problem and develop effective policies that will address those problems through innovations and entrepreneurship. I firmly believe addressing public policy issues on innovation and entrepreneurship is the pathway to the creation of prosperity. Until governments across the continent start to implement policies that encourage market-driven innovation, there will be no progress in reducing youth unemployment and poverty.