Abdoulaye Ndiaye is a Senegalese economist and Assistant Professor at New York University. Right for Education sat down with him to talk about investment and economic growth, youth unemployment, and sources of hope in 2020.
R:Ed: Could you tell us about yourself and your work?
My name is Abdoulaye Ndiaye. I am an Assistant Professor of Economics at New York University at the Stern School of Business, and I am from Senegal. I work on issues in macroeconomics and public economics, such as issues around tax, Social Security reform and labor market issues in the US. I’m also interested topics such as development, growth and inequality in Africa. Prior to coming to NYU, I worked at the Federal Reserve Bank of Chicago to gain more exposure to monetary policy.
R:Ed: You mentioned that you’re interested in models of economic growth. Can you tell us about how these models have spoken to your native Senegal’s experiences?
We know growth occurs through improvements in domestic productivity, which improves workers’ output. This happens when education improves and human capital rises. By contrast, there have been many infrastructure programs in Sub-Saharan Africa. Due to the lack of domestic expertise, the contracts for these projects are often part of bilateral agreements with some European countries and China, meaning that these contracts do not increase domestic expertise. This is what I would call “import-led growth” rather than growth which is driven by improvements in domestic productivity. This pattern should be reversed: we should focus more on improving education and increasing investment in science and technology instead of import-led growth, which is just a transfer of technology without skills.
R:Ed: What does sustainably investing in education and improving human capital look like? Have you seen any recent positive examples of projects that have been working towards this?
Firstly, we need to increase the budget towards education and subsidize research and development. Youth engagement also needs to be promoted, and countries like Rwanda have seen many young people start companies. However, not much goes towards these kinds of programs. Infrastructure projects are seen as the flagship projects; after all, it is harder to see the short-term benefits of investing in education and in research and development. Still, we should invest more precisely in these fields.
R:Ed: For these projects, initially capital investment is required. What does the future of lending between African governments and international institutions look like?
Many African countries rely on lending due to the difficulty of raising local funds. Currently, the country that lends money gets to undertake the contract, receive interest from the loan, and count the project as foreign aid. This is a triple win for the lender, but less so for the recipient. We should rely less on bilateral lending and raise money in ways that do not require lending. For instance, state capacity and fiscal capacity should increase. However, there is a large informal sector that remains untaxed. This refers not only to street workers but also to large businesses that operate informally. Incentivizing business formalization is one way to raise funds. This can happen by providing, for instance, unemployment insurance. Finally, I want to talk about the World Bank’s Doing Business Report, which has been used to justify and motivate investment in different countries. However, recently we have seen that these reports are susceptible to manipulation, and that foreign corporations’ tax revenue is often lost. It would be worth reducing the fiscal exonerations that some businesses are receiving in exchange for investing.
R:Ed: Many people have seen China’s increased involvement in FDI in Africa as a part of this shift away from the bilateral policies of the past, but some academics have misgivings about this process. What is your opinion about the role of China in the macroeconomic development of Sub-Saharan Africa?
China’s presence in Africa, especially through the BRICs program, has been increasing. However, there is still no knowledge and skills transfer through their projects. Chinese companies often bring their own workforce, and the projects are undertaken without hiring local talent. This is still more of an imperialistic foray into Africa from China. In my opinion it would be good to switch away from this model by negotiating contracts such that local people are hired as well.
R:Ed: Speaking of employment, youth unemployment in the formal sector is staggeringly high in urban areas across Sub-Saharan Africa. This seems to be a structural form of unemployment that is not decreasing; why is this the case, and what do we do about it?
On the demand side, many formal jobs are in the government in Senegal. There are a few private sector jobs at foreign multinationals, but they mostly hire the highly educated population. If you do not have a college degree or a high school degree, it is impossible to get those formal jobs. This is why 97% of youth employment is in the informal sector, among which many are entrepreneurs. On the supply side of youth employment, a limiting factor is how much education young people have.
R:Ed: This year has been a challenging time for many, so sometimes it is hard to see that there is good news in the world. Where have you gone to in search of these positive and uplifting stories in 2020?
It is definitely a tough moment, and it is important to acknowledge that. Still, there are two positive developments to come from the pandemic. First, this is an opportunity for Africa’s digital revolution. It was previously difficult to embrace online learning in education at a large scale due to a lack of resources. Now, however, we can realize that online education can work because we are forced to use it. This links to online health as well. There are not enough in-person doctors per capita, so telehealth visits are paramount. We have also digitized our social and government services. For example, many governments now use mobile technology to send money to people. Secondly, at the beginning of the pandemic, we were very worried that the health systems in many African countries would overwhelmed but so far this has not been the case. There are many caveats to this, and testing is not perfect. Still, we do not see people dying in droves on the streets. Some scientists are looking at the age structure of African societies, and their larger young populations, as possible explanations for the difference between the death rates per capita compared to the Western world. Additional hypotheses suggest the low COVID rates in Africa could be due to environmental factors, and so on. We need to study this topic further, but overall, there has been less harm than expected. Those are some positive developments that give me hope.
You can follow Abdoulaye Ndiaye’s work here.