Africa needs new growth model amidst rising Gen-Z agitation

October 7, 2025 in Investment, Policy by Editor

Most new labour market entrants find work in low-productivity, informal sectors. These offer limited prospects for rapid income growth, reduced poverty, and improved social mobility. The increasing agitation amongst so-called Gen-Z segments of the populations across the continent and most recently in Morocco, Madagascar and Kenya, is a reflection of lopsided labour market.

Sub-Saharan Africa needs a new growth model to cater for the estimated 620 million people who are estimated to be entering the job market between now and 2050.

However, multiple headwinds notably conflict, climate change, and weak fiscal positions mean governments and policymakers have little room to maneuver on top of responding to increasing levels of geo-political uncertainty.

According to the October edition of Africa Pulse published by the World Bank, although the regional GDP growth rate has recovered following a trough in 2023, then rebounding to 3.5 percent in 2024 and 3.8 percent in 2025 most new labour market entrants find work in low-productivity, informal sectors. These offer limited prospects for rapid income growth, reduced poverty, and improved social mobility.

Due to their relatively low trade exposure to the United States, Sub-Saharan African countries are well-positioned to weather the impact of higher US tariffs. Nevertheless, uncertainty around the implementation and duration of current trade measures remains elevated.

This lingering uncertainty, coupled with subdued global investor appetite and a tightening supply of external finance, could constrain growth prospects. Elevated risk of debt distress across many countries in the region leaves them vulnerable to external shocks, limiting their ability to respond effectively to global economic disruptions.

The increasing agitation amongst so-called Gen-Z segments of the populations across the continent and most recently in Morocco and Madagascar is a reflection of lopsided labour market.

Wage-paying jobs make up only 24 pc of employment, and less if Southern Africa is excluded. Sub-Saharan Africa requires a new growth model anchored in medium-sized and large enterprises, which are critical drivers of productivity and job creation.

The report states that the region’s twin jobs challenge is to accelerate the creation of jobs for its fast-growing working-age population and ensure that those jobs offer better pay, stability, and opportunities.

The labour force participation rate in Sub-Saharan Africa, for men and women, is among the highest in the world (at 75 pc and 65 pc, respectively, for men and women aged 15 or older in the region).

However, most new labour market entrants find work in low-productivity, informal sectors that offer limited prospects for rapid income growth, reduced poverty, and improved social mobility. Wage-paying jobs make up only 24 pc of employment, and less if Southern Africa is excluded.

The World Bank suggests Sub-Saharan Africa requires a new growth model anchored in medium-sized and large enterprises, which are critical drivers of productivity and job creation.

Current growth patterns are not translating into sufficient wage employment: a one percentage point increase in GDP yields only a 0.04 percentage point rise in wage employment.

This underscores the urgency of shifting toward a more inclusive and productivity-driven growth strategy that generates better jobs across all sectors.

The region needs more organized and efficient production systems, which depend on a greater share of medium-sized and large firms to unlock economies of scale and generate specialized, higher-quality employment. Yet, most businesses remain small and informal, limiting their ability to create productive jobs.

With 73 pc of employment concentrated in own-account and family-run enterprises, the region lacks the firm size and efficiency needed to drive productivity and expand formal job creation at scale. This calls for a structural shift in Africa’s growth model.

Large-scale job creation in the region will occur when reductions in the cost of doing business enable existing enterprises to scale and attract new high-growth firms to enter the market.

Achieving this requires addressing foundational constraints to private sector development through policies that: (1) improve the provision of essential infrastructure and workforce skills, (2) foster a more conducive business environment, and (3) strengthen the capacity of states and institutions.