This article first appeared in my column in the Business Daily on October 16, 2016
Last week South Africa’s President Zuma made a state visit to Kenya highlighting the relations between the two countries. Beyond the agreements that have been reached, there are key lessons each country can learn from the other in terms of fostering robust and sustainable economic growth.
One key lesson for Kenya from South Africa is education; South Africa’s literacy rate is about 98 percent, Kenya’s is about 82 percent. But the real disparities reside in tertiary education. Currently only 4 percent of Kenya’s student population make it to tertiary education; in South Africa this figure is 20 percent. In terms of leading universities on the continent, South African institutions regularly top the list. In the Times Higher Education Ranking of the top ten universities in Africa, half are South African; and none are below number six. Only one Kenyan university (University of Nairobi) features in the top ten, and at number eight.
Beyond ranking, a key concern of the Kenyan education is curriculum relevance. A report released by the World Bank this year stated that tertiary education in Kenya is characterised by a persistent mismatch of skills between what is taught and the requirements in the labour market. This is not to say that South Africa is perfect but at least there is an active, public interrogation of curriculum with active participation from government. Kenya could certainly learn from South Africa here.
A second lesson for Kenya from South Africa is manufacturing and industry. South Africa is the continent’s most industrialized economy. Manufacturing contributes about 15.2 percent to South Africa’s; while in Kenya this figure has been stuck at 10 percent. This is not to say South Africa’s manufacturing sector is perfect, but Kenya could learn about increasing diversity in manufacturing. Manufacturing in South Africa is diverse constituting of numerous industries such as agro-processing, automotive, chemicals, ICT and electronics, metals and, textiles, clothing and footwear. Kenya’s manufacturing sector is dominated by food and beverages which constitute up to 70 percent of the sector according to some estimates. Again, Kenya can look to South Africa and learn how to diversify the complexity and build the role of manufacturing in the economy.
Now let’s look at what South Africa can learn from Kenya. East Africa is a bright spot in Africa largely because region is not commodity reliant. As the biggest economy in East Africa, Kenya’s resilience against the commodities slump is an important lesson for South Africa. A senior researcher at the South African Institution of International Affairs argues that the importance of commodities to South Africa’s economy cannot be overstated as they generate approximately 60 percent of South Africa’s foreign exchange earnings through exports. Indeed, the analyst makes the point that the commodities slump poses serious economic problems for South Africa, not only because of the extensive connectedness between mining and the rest of the economy, but the financial services sector was built on mining.
A look at South Africa’s export profile reveals that the top exports of South Africa are gold, diamonds, platinum, and iron ore. The commodities slump has fundamentally negatively affected the economy particularly in managing the current account deficit. South Africa’s economy shrunk by 1.2 percent in the first quarter of 2016; juxtapose this Kenya’s robust growth Q1 growth of 5.6 percent. South Africa could learn from Kenya better buffering its economy from commodities slumps.
The second lesson for South Africa from Kenya is black entrepreneurship. Given the complex history of South Africa and the legacy of apartheid, the face of South African private sector does not reflect the racial composition of its population. In fact there is a story that some in South Africa say that if whites knew how much money they would make by ending apartheid they would have voted against it a long time ago. And while programmes such as Black Economic Empowerment sought to rectify economic racial inequality, all it seems to have delivered is a few blacks contributing to white owned companies and hopping from company to another collecting dividends. South Africa has an important lesson to learn from Kenya in building black entrepreneurship. Indeed, some estimates state that the South African economy could grow by five percent in the future if the government and private sector invest R12 billion into 300,000 black-owned small businesses.
Kenya understands the power of black entrepreneurship and as an article in the Mail and Guardian states, perhaps the most meaningful economic change for millions of South Africans can come from a focus on developing small enterprises.
Anzetse Were is a development economist; email@example.com