African Economic Conference: AfDB Staff Publish Research Results on Human capital

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Can human capital contribute to protecting workers in the event of external shocks? Case study of South Africa during the 2008-2009 crisis

The Fifth African Economic Conference (AEC), in Tunis from 27 to 29 October 2010, was an opportunity for AfDB Research Economists, Marco Stampini and Désiré Vencatachellum; and Ron Leung, from Oxford Center for Study of African Economy, to present a study on the importance of human potential during the 2008-2009 crisis.  Presented under the title: “Can human capital contribute to protecting workers in the event of external shocks?” The paper is a case study of South Africa. The choice of the topic was motivated by the prevailing global crisis, because the economic crisis shook the world that year, and South Africa was particularly  seriously hit by the recession. In his presentation, Stampini stressed the need for African countries, with AfDB’s support, to embark upon statistical data collection, which would help implement similar studies. “Quarterly data and statistical releases provided by South Africa, helped to carry out the survey,” he explained. The study covered sectors such as agriculture, mining, manufacturing, energy, transport, communication, banking, insurance and real estate sectors. The study sought to address three questions: Who will bear the cost of massive unemployment?  Can education and professional experience guarantee job stability and provide protection against macro-economic shocks? How relevant is human potential to economic development?

According to the study, South Africa lost 360,000 jobs between 2008 and 2009. However, workers with high human capital (that is, a good level of education and/or years of experience) were virtually not affected by the crisis.

The experts also point out that African countries can learn lessons from the experience of this crisis. First, policies to support employment during recession should target the unskilled, less educated and less experienced workers. Unemployment mainly affects young people. Furthermore, African governments should, in the long-term, strengthen their human potential development policy, and significantly facilitate access to education and vocational training, as well as reintegration of school dropouts. Once adopted, this policy could help to significantly reduce the probability of losing jobs during periods of crisis.

Strengthening human potential in all African countries is one of the objectives of the Medium-Term Strategy of the African Development Bank Group. There is no doubt that, for decades, African countries have invested in education and training as a means of combating poverty.

The presentation drew a lot of debate. Marco Stampini, as an experienced research economist, raised all the aspects of human capital from its sensitivity to its evolutive nature. Key observations directly on the presentation by the discussant, Nora Aleki from the Institut de recherche économique et sociale (IRES), France, highlighted the importance of human capital in African development process. At the end of the session, participants expressed satisfaction that the presentation was carried out in the most effective way. It will be recalled that the African Development Bank Group was the first organization to prepare a study on this subject, which was also presented in the institution in November 2009 and to the 5th IZA/World Bank Conference on Employment and Development, held in Cape Town in May 2010. After the African Economic Conference, the study will be presented at the annual meetings of the American Economic Association, Denver, CO, USA, in January 2011.