The Future of Work is Local Jobs - A Case Study
In the first episode of this season, we argued that the future of work is a traditional development playbook. Considering the nature of most African markets today - informal, fragmented, subscale - and considering the fact that most employment comes from the agriculture sector, the traditional development playbook says that development starts by increasing the productivity of the informal sector and the agriculture sector, in particular.
These jobs are local jobs. In the context of Africa's rising population, millions of jobs need to be created and millions of local jobs will need to be created. But where are newfound local jobs going to come?
This episode is a case study. We'll explore the decentralized renewable energy sector, or DRE, to see what job creation from a nascent industry could look like.
Where there are sectors that are growing in importance in size, like the clean energy sector, how can African markets take advantage?
2:59 - The seeds of this episode's exploration were planted during a conversation with Shortlist's Paul Breloff. There are significant opportunities for sectors that are actually creating local jobs, and one sector they are bullish on is decentralized renewable energy.
4:28 - We dig into Power for All's Powering Jobs Census, to explore the scope of DRE's local job creation, with its research director, Carolina Pan.
10:51 - Exploring the second-order benefits of DRE, including indirect and induced jobs.
Justin Norman: In the first episode of this season, we argued that the future of work is a traditional development playbook. Considering the nature of most African markets today - informal, fragmented, subscale - and considering the fact that most employment comes from the agriculture sector, the traditional development playbook says that development starts by increasing the productivity of the informal sector and the agriculture sector, in particular.
These jobs are local jobs.
Later on in the season, we're going to make the argument that African countries won't create enough local jobs for such a fast-growing working-age population. And this is where remote work comes in.
But it's worth revisiting the scope here. We spoke about this last episode, and I think these are statistics that are worth repeating in every episode of this season. Africa's population is 1.4 billion people. It's not only huge, but it's the youngest and fastest-growing continent. Its population will double by 2050 and its urban population will triple. In the next 80 years, the global population will grow by 3 billion people. 2.7 billion, or 87% of that global population growth, will come from sub-Saharan Africa.
So millions of jobs need to be created and millions of local jobs will need to be created. But where are newfound local jobs going to come?
This episode is a case study. We'll explore the distributed renewable energy sector, or DRE, to see what job creation from a nascent industry could look like.
Where there are sectors that are growing in importance in size, like the clean energy sector, how can African markets take advantage?
Justin Norman: Before we start, we'd like to thank MFS Africa for their sponsorship of the entirety of season four of The Flip. One of the things that's always impressed me the most about MFS Africa is the scope of its payments network. It's a truly pan-African company, and I spoke about that scale with Rashi Gupta, COO and Managing Director of MFS Africa's Payment Hub.
Rashi Gupta: So we are connected to over 400 million mobile money wallets across Africa, 200 million bank accounts, and over 200,000 agents. Plus we have issued over half a million cards across Africa. We connect to over 35 different countries - the numbers ranges from 35 to 40 depending on what we do in those countries - and we connect to all major mobile money wallets and all major banks.
We strive for true interoperability across the various stores or channels of payments whether it's mobile money, whether it's banks or cash pickups, forex, regulation, technology issues, everything we take care of. What we want to be is Africa's omnichannel payments partner for the world.
Justin Norman: Welcome back to The Flip. I'm your host, Justin Norman. The seeds of this episode's exploration were planted during a conversation I had with Paul Breloff, the Co-founder and CEO of Shortlist.
Paul Breloff: Some of the places we've seen significant opportunities, first off, for sectors that are actually creating local jobs as opposed to digital remote jobs. One area we've been very bullish on is the distributed renewable energy and clean energy sector, where we see the prospect of creating potentially millions of jobs.
Justin Norman: The question for Paul and Shortlist is, where can they catch a wave? What industries are growing on the continent and what needs to happen to capture the opportunity from an employment perspective?
A sector like distributed renewable energy is growing and it's creating tens of thousands of local jobs and counting. So what work needs to be done to ensure that there is a talent pipeline to fill the increased demand in the sector? And how can we ensure that this opportunity is nurtured and maximized?
Paul Breloff: We're running a number of programs to try to raise awareness among youth that this is a sector. I mean, think about it, the clean energy sector barely existed 15 years ago. So I think one of the things we can do is just raise awareness around opportunities like that, and then of course prep people for them.
Justin Norman: Speaking with Paul about the renewable energy sector sent me down a rabbit hole and led me to Power for All - an organization whose mission is to grow the market for distributed renewable energy, in an effort to end energy poverty. In support of this mission, Power for All has conducted research to show the degree of job creation from this sector, with a focus on local jobs in particular.
It’s a case study worthy of further exploration. So I spoke to Carolina Pan, the organization's Research Director, about its findings.
Carolina Pan: This is the second time around we're doing the Powering Jobs Census. So the census is an effort to inform about job creation in the decentralized renewable energy sector. And part of the discussion in the energy transition is that some people fear that there's going to be some job loss, and we try to show that that's not going to be the case. In fact, a lot of jobs are going to be created in the transition.
Justin Norman: So DRE, these are a set of technologies that include pico solar systems, solar home systems, mini-grids, and standalone commercial and industrial solar systems.
Most of this technology is deployed outside of the urban centers and in rural areas, in particular, where grid extension is deemed too costly, especially considering the income levels of the consumers in question. But as a result, the decentralized nature of this technology and its deployment outside of the main economic hubs has positive implications from an employment perspective.
Carolina Pan: All of these more traditional fossil fuel-based energy companies are super centralized, which means that they provide employment in the capital cities, and then what they do is they extend the grid. And there's very little local hiring out there in the village. Whereas with decentralized renewable energy, what you have is that each village will have its own employees that come from the centralized, renewable energy company. So if you have a mini-grid in the village that will operate locally in the village, it means that you need to have people working there and maintaining that, et cetera.
Justin Norman: And one of the most interesting findings in my view is that the DRE sector in Kenya actually employs about six times more people than the utility-scale power sector based on estimated employment of the Kenya Power and Lighting Company. And in Nigeria, the number of DRE jobs is fast approaching that of the oil and gas sector, which currently employs only about 15,000 more people.
Carolina Pan: We find that both in Kenya and Nigeria, the number of direct jobs, direct means directly employed by a company, are close to 50,000. And then for Uganda it's close to 30,000, for Ethiopia, it's about 14,000.
Justin Norman: The volume of jobs depends on the market, of course, but these are formal jobs in an otherwise highly informal environment.
Carolina Pan: In terms of informal or formal, a critical finding has been that most of these jobs are actually formal jobs. And this is very shocking to me because we're talking about countries that have a very large share of informal employment in their economies. So the fact that this is reversed when it comes to decentralized renewables was very shocking and intriguing.
Justin Norman: And we're starting to see an evolution of these jobs as well, which is correlated to an evolution of the DRE sector.
Carolina Pan: In all of these countries, the sector started with the sales of very small appliances like pico solar appliances, let's say a charger or some lanterns. And that mostly involves sales and it's most likely to be in the form of informal employment. But then as the sector matures and you start selling solar home systems and companies become larger, then you transition to commercial and industrial standalone systems and even to mini-grids, it's more likely that you become more formalized.
Justin Norman: And likewise, a more formal and mature DRE sector requires more skilled labor.
Carolina Pan: When you see the breakdown between skilled and unskilled, you see differences across countries. For instance, in Ethiopia, you see that the largest share of employment is unskilled, whereas in Nigeria the largest is skilled. And Nigeria is a country where there's been a lot of donor interest and a lot of activity with respect to mini-grids. Mini-grids involve more skilled type of labor because you need technicians, you need people to install them, whereas markets that are mostly centered around the sales of small pico solar appliances don't necessarily require that technicity level, so there's more unskilled labor, and that's exactly what we see.
Justin Norman: And then the need for more skilled labor means a requisite investment in training. And this is largely what Paul Breloff was referring to earlier in terms of positioning the labor market to take advantage of the growing DRE sector.
Carolina Pan: It's not surprising given the maturity of the Kenyan market that you would need to train people. And the training is crucial because part of what we try to do in our work is create awareness about the needs for these types of skills so that local people can be hired as opposed to bringing somebody from abroad and just having them do whatever is necessary to install the mini-grids or repair them. It's very important for the sector to develop that the know-how is in the country. So, training is for us is number one priority here.
Justin Norman: When we come back, we'll talk about second-order effects with Carolina. But first, a quick word from our sponsor, MFS Africa.
Earlier in the show, we heard from MFS Africa's COO, Rashi Gupta, about the scale of the MFS Africa payment network.I was also curious about the work involved to manage such a network across so many different countries and regulations and payments channels and consumer preferences. Rashi took us behind the curtain.
Rashi Gupta: There's a lot about, one innovation, so just looking at the different problems that we are trying to solve or different stores of value that we are trying to connect to, seeing what are the specificities of each one of them, and designing a product according to that rather than a generic product that may or may not work for the different countries or different technologies.
The second being really present on the ground. And for us, that understanding of on-the-ground realities has been very important to making our technology and network successful. There are certain preferences in certain countries which are not in others. If in a country mobile money is more prevalent, we focus on mobile money. If it's banks, we focus on banks. If it's cash pickup agents, we focus on that.
So we have not used the same brush to paint all 54 countries. Rather, we understand each country, the specificities of it, and then cater a solution for it. And when we are able to account for that in our technology innovation, that makes a much more successful network than others.
Justin Norman: Now, in discussing the growth of the DRE sector, there are first-order benefits: the creation of high-quality, formal jobs that have also been proven resilient to COVID shocks, a growing number of these jobs, as well as the investment in training to support the sector's growth. And notwithstanding the benefits of renewable energy from a climate change perspective, there are also second-order benefits from increased electrification. This is what researchers call indirect jobs.
Carolina Pan: Indirect jobs would be jobs like upstream jobs, like for importers. So the more you sell, let's say solar home systems, the more you're importing either parts and you assemble locally or you're importing the systems. There's logistics involved, so there's obviously transport, et cetera.
Justin Norman: And then as the deployment of DRE technology is largely in rural areas, it has positive implications for the agriculture sector, in particular. And so rural electrification goes hand-in-hand with the increased productivity of the agriculture sector, as well. And this is what researchers call induced jobs.
Carolina Pan: The jobs that arise from people being electrified and being able to be more productive at work. And farming is a fantastic example because farming is the number one economic activity in sub-Saharan Africa. So the fact that farmers have access to electricity means irrigation for them, means better fertilizers or better methods to fertilize, means milling and drying that can be done with power much faster and more efficiently. It means cold chain. It means a lot of things that just make jobs way more productive and expand economic activity and create more jobs in turn.
Justin Norman: And like many new technologies, DRE is proving to not only be more accessible and impactful, but more affordable.
Carolina Pan: There's a huge opportunity to actually leapfrog. And instead of going to the traditional business-as-usual way to electrify it, we can use decentralized renewable energy technologies. And leapfrogging, many think is more expensive, but in fact, we're showing that it's even less expensive.
Justin Norman: Kind of like the leapfrog story of mobile phones and land.
Carolina Pan: With energy, we're saying, something similar. We don't need to do grid extension across the entire territory just because some other countries in the world years before it did it. But now these technologies are becoming cheaper and cheaper. Much cheaper than the traditional, business-as-usual grid extension in rural or very low-density population areas. And at the same time serving this purpose of providing these local jobs.
Justin Norman: That's it for this episode of The Flip. If you enjoyed this episode, we'd be very grateful if you considered cheering with a friend or a colleague who you think may enjoy it as well. For more from the Flip, you can follow us on social media @theflipafrica or subscribe to our newsletter at theflip.africa.
Thanks as always for listening. And we'll see you next time.