UN urges Africa to invest in the services sector

The UN on Tuesday urged the African countries to invest in the services sector so as to boost employment opportunities.

UN Economic Commission for Africa (UNECA) Associate Economic Affairs Officer Ottavia Pesce told an investment conference in Nairobi that the expansion services sector tends to go hand in hand with economic expansion.

"Services is a labor-intensive sector that can have a role in Africa's growth by supporting local industries as well as creating a large number of quality jobs," Pesce said during the Supporting Economic Transformation (SET) Workshop in Nairobi.

She said services are the main contributor to Gross Domestic Product (GDP) in 35 out of 54 African countries, and the services industry supports the growth of other sectors as it is a key input to other businesses.

According to the UNECA official, over the past 10 years, the movement of workers in Africa has been out of agriculture and into services.

"However, for most countries in the continent, the growth in services is still driven by low-productivity activities such as informal and non-tradable services," she added.

Pesce said African governments need to find ways to catalyze high-productivity services, adding that the service industry is a huge magnet for Foreign Direct Investment (FDI) into Africa.

"A thriving services sector is essential for attracting investors as it allows businesses to source support services they need locally," she said, adding that hotels and restaurants are one of the most promising services sectors attracting FDIs in Africa.

In addition, Pesce observed that African countries that are resource poor tend to have a relatively high share of services in GDP. She said the key African service exports are mostly travel and transport.

"However, tourism remains below potential due to transport inefficiencies, insecurity, low quality of services expensive air travel as well as limited and costly accommodation in capital cities," she said.

The UNECA official said Kenya is quickly becoming a regional leader in highly-productive tech services. "The East African nation is leading the pack in technology services thanks to a strong private sector and to a supportive business environment."

Dirk Willem, Director of Supporting Economic Transformation (SET) with Overseas Development Institute (ODI), a Britain-based independent think tank, said in the next 25 years, more than half of Africans will be city-dwellers and 20 African cities will be mega-cities.

"The rising middle-class will drive demand for high-quality services," Willem said, adding that a more stable and prosperous continent will favor services development.

He urged the continent to implement effective policies that can help services deliver economic transformation.

The director said regional value chains can also catalyze the continent to exploit the different national capabilities as well as boost competitiveness.

"Some countries, such as Kenya and Rwanda, are already well positioned to become services hubs in their respective regions," he said. Endi