South Africa and the Arab World: Facing Common Challenges

Today the Arab countries of the Middle East face a challenge familiar to all South Africans: to create jobs for the large cohort of young people reaching working age. Over the next decade or so, the region may experience population growth of 150 million people—the equivalent of adding two Egypts (table 1). In demographic terms, the task is similar to that facing South Africa—only larger. Rising labor force participation by women only increases the pressure. The task is immense, and the stakes are high. The picture is not entirely bleak, however. On the back of rising oil prices, economic performance has improved in recent years. But this windfall is felt unevenly across the Arab world, as some of the most populous states are not well-endowed in oil, and whether these prices will be sustained is an open question. In some Arab states—and not merely the oil exporters of the Persian Gulf—foreigners, not locals, account for most of the new hires over the last five years, again a phenomenon that finds its echo, albeit on a smaller scale in South Africa. This development is even more acute if one looks only at private sector employment, since nationals disproportionately enter the public sector. With a few exceptions, employment has not been growing in industries where productivity is increasing—that is, it does not appear to reflect an expansion of activity in rising dynamic sectors. Simply maintaining past performance, even the relatively good performance of the last several years, will be insufficient to generate the necessary jobs. One method of rapidly creating a sustainable increase in employment is through an expansion of labor-intensive manufacturing or services exports. But outside the petroleum sector, the region's track record is inauspicious. Manufacturing exports are modest and, like those from South Africa, face increasing competition from China and India. Foreign investment flows have surged in recent years, but they are largely the product of intraregional petrodollar recycling. Commodity prices