The socioeconomic impact of the COVID-19 crisis is real. Beyond the deaths and hardships caused by the coronavirus, the pandemic is also devastating livelihoods and disrupting the movement of people, goods, and services.
Virtually every sector that contributes to economic growth is affected: health, education, transport, environment, infrastructure, hospitality, tourism, entertainment, construction, manufacturing, transport, agriculture, and wholesale and retail trade, among others.
With limited public resources to combat the pandemic, the global economy is struggling to achieve positive growth rates and could likely slide into a recession within months.
In response, governments are acting decisively to protect people and businesses from economic collapse. Most governments have introduced stimulus packages to mitigate the negative effects of public health controls, to jump-start fragile economies and to sustain public welfare.
But unlike in the developed world where economic interventions are primarily focused on the formal sector, developing countries face a different dilemma and their interventions are focused on another area of the economy — youth.
The reality in sub-Saharan Africa
This dilemma is most real in sub-Saharan Africa where the informal sector contributes about 55% of the region’s GDP and represents up to 80% of employment.
With three out of every five Africans currently under the age of 25, the challenge for Africa is further compounded by socio-demographics of labor in which the bulk of the workforce is drawn from young people.
In Kenya, for example, the government has refrained from imposing a full lockdown to prevent the spread of COVID-19.
But even so, the existing containment measures are threatening millions of jobs, both in the formal and informal sectors.
The role of young people in Kenya’s economy
What is most worrying, however, is that the informal sector contributes an estimated 35% of Kenya’s GDP, and accounts for almost 85% of total employment, the majority of whom are youth.
From the informal trader selling tomatoes by the roadside, to small scale retailers, livestock traders, hair salons, motorcycle taxis, mechanics, second-hand clothes dealers, and many other informal businesses, the common feature is the youth population.
It is against this backdrop that Kenya has unveiled an economic stimulus package to cushion businesses and households against the impacts of COVID-19.
An economic response to a global pandemic
What is noteworthy about Kenya’s economic stimulus package is its focus on the youth population as a key driver of the economy.
The 54 billion Kenyan Shillings (US$540 million) package announced by President Uhuru Kenyatta in late-May primarily targets the infrastructure, education, health, manufacturing, SMEs, tourism, agricultural and environmental sectors.
Out of this amount, a significant portion will be spent on rehabilitating roads and other public infrastructure; equipping schools with locally made facilities; strengthening health systems; extending credit to small and micro enterprises; boosting tourism; securing food supply chains; protecting the environment; and boosting tourism and manufacturing.
The common thread is that each intervention seeks to create opportunities for youth to thrive and be engaged productively.
For example, under infrastructure, the stimulus package aims to spend about KSh 10 billion (US$100 million) to engage some 200,000 youth in restoring public hygiene standards, urban civil works, and other public undertakings.
Spending big on youth makes economic sense because a larger labour force as a share of total population translates into increased productive capacity and can help to boost savings and investment.
Businesses are stepping up too
In addition, the business community has stepped up in solidarity, too. An example is a coalition of businesses that have come together to assist communities called the National Business Compact on COVID-19. The aim is to complement government efforts and accelerate local action. So far the coalition has fundraised KSh70.2 million (US$651,000) and also in-kind support which is going towards sanitation support and the set up of hygiene centres across the country, public sensitisation, and mobilising retailers and suppliers in the distribution of essentials services and products in low-income and urban slums countrywide. It’s also supporting the creation of a Flexi fund to help the government respond to the emergency crisis.
Partner organizations include The Marketing Society of Kenya, brands in the hygiene business, Kenya Association of Manufacturers, Association of Practitioners in Advertising, Kenya Private Sector Alliance, Public Relations Society of Kenya, AMREF, SDG Partnership Platform, and the UN family in Kenya.
Why we should empower the youth and support the informal economy
Ultimately, a strong, dynamic, and empowered youth is critical in catalyzing and driving the transformations envisioned in the Constitution of Kenya and the Kenya Vision 2030, which is a “long-term development blueprint for the country.”
The example of Kenya demonstrates that the informal economy in Africa is not just a lifeline, but also a kind of social shock-absorber for most communities.
Given the size of the informal sector in Africa, governments should immediately take measures to support people making a living out of it, especially the youth.
And even though future global economic expansion will probably be driven by technological advances, Africa’s lower middle-income and low-income economies still have a lot to gain from a vibrant economy over the coming decades.
In the interim and long run, African governments should support the formalization of the informal sector with emphasis on extending social protection to the sector’s workers.
At the regional level, the African Union can play a role in supporting the productive transformation agenda by Member States.
The African Union Commission can also reposition Africa to take full advantage of the changes expected to happen in the aftermath of the COVID-19 crisis by equipping the youth population with the skills needed to attract multinational enterprises and other global trade players.