WASHINGTON, Dec 7 (IPS) - Structural adjustment programmes (SAPs) in Africa largely have failed to create new jobs or thriving economies and ‘'investment-led'' strategies are needed where the state plays a leading role, says a new U.N. report.

In a harsh assessment of SAPs, the report by a joint task force of the International Labour Organisation (ILO) and the UN Development Programme (UNDP) charges that structural adjustment in sub-Sahara Africa has been ‘'purchased at the price of economic contraction, high unemployment and massive poverty.''

The report, ‘Jobs for Africa,' urges greater public investment in key sectors, particularly in labour-intensive infrastructure projects. ‘'Employment creation is the most effective mechanism for reducing poverty,'' it asserts.

‘'Governments which have attempted to follow a path of structural adjustment through reallocation have regarded public sector investment, and indeed public spending in general, as competitive with private sector investment,'' according to the 91-page report. ‘'This view, however, urgently needs to be reassessed.''

‘'The process of reform has to be deepened by going beyond structural adjustment stabilization programmes, and by launching investment-led growth strategies that maximise employment and reduce poverty,'' writes Samir Radwan, who coordinated the preparation of the report. Africa, he adds, ‘'has no alternative.''

The report, released here Sunday, was mandated by the 1995 World Summit on Social Development in Copenhagen. It was produced by the ILO/UN Development Programme task force on Employment Generation and Poverty Reduction, and financed by the New York-based UNDP.

While the economic performance of many African countries has improved in recent years, according to the report, ‘'the employment situation remains critical.''

Despite the implementation of SAPs, ‘'unemployment and underemployment rates are increasing rapidly, with average urban unemployment rates on the continent having almost doubled over the past 15 years, to over 20 percent and projected to approach 30 percent by the year 2000.''

The result is increasing poverty, projected to reach about 50 percent by the end of the decade. Currently, 61 percent of Africa's work force is engaged in agriculture and about 76 percent of the African work force is engaged in non-wage employment.

According to the report, the single most important structural change in African employment patterns of the past 25 years is the expansion of the urban informal sector. As SAPs, which normally require sharp cuts in the public sector, have taken hold, more and more laid-off workers have moved to the informal sector.

Structural adjustment, according to the report, was designed to achieve three major results:

SAPs, usually designed by the International Monetary Fund and the World Bank, have been implemented in almost every African country over the past 15 years. A flaw in the way adjustment has been implemented, however, lies in the incorrect assumption that, as production shifted from, say, manufacturing to mining, the human and physical assets could be quickly and painlessly redeployed, the report argues.

In fact, it goes on, ‘'the physical capital used in a brewery, or a textile mill or a food processing plant cannot be converted for use down a mine shaft...,'' and ‘'the worker on an electronics assembly line ... cannot be transformed into an underground miner...''

The result is the loss of jobs and production in manufacturing, and stagnation in the more-profitable export activities, like mining. ‘'Structural adjustment is purchased at the price of economic contraction, high unemployment and massive poverty,'' the report says.

The response of aid donors has been to construct ‘'safety nets'' to alleviate the worst of the hardships. But these have been inadequate to deal with the hardships caused by the economy's contraction.

‘'The resources required to construct an effective safety net would ...be enormous and such an undertaking is not feasible given the sharp decline in available resources,'' says the report. ‘'...What is needed is not so much a safety net as policies that put the economy on a different path of adjustment.''

Such ‘'adjustment through investment'' would try to avoid contraction by ensuring that production is not reduced in any sector, according to the report which cites the experiences of China and Vietnam as examples where expansion took place in all sectors of the economy while market reforms were introduced.

"Structural adjustment along this path is part of a growth strategy [...] designed to increase investment in physical, human and natural capital and to channel that investment into economic activities which have become highy profitable as a result of changes in the structure of incentives,'' according to the report. Structural adjustment through investment ‘'does not result in a rise in unemployment, a fall in average real incomes or an increase in poverty.''

Moreover, the report says, SAPs have also failed to realise their promise of sharply boosting exports or investment. In more than two-thirds of the 31 countries covered by the study, export earnings and investment actually grew at a slower rate than population between 1980 and 1994.

Instead, reforms must address "the urgent need to increase investment and to improve its allocation among sectors and projects," according to the report.

Incentives should be restructured so that investment is responsive to the needs of the vast majority of people, particularly for education and health care, but also for improvements in capital markets to improve access to credit for women, the mushrooming informal sector, and small farmers, the report says.

In addition, the state should invest more in human, physical and natural capital, including transport, power, water and sewage facilities, vocational training, health and nutrition, and applied agricultural research. Labour-intensive public projects should be encouraged as much as possible.

In agriculture, the report recommends diversication away from large-scale commodity production and land reform. It notes that small farmers are not only more productive but also absorb more labour per hectare than large proprietors. (END/IPS/jl/mk/97)

This article was reprinted with permission from InterPress Service.