Some years ago, I asked an IMF economist who worked on African economic issues if the continent would ever see sufficient growth to reach upper-middle income levels.
He said Africa would have its day, as all the other regions in the world had emerged from poverty. But, he cautioned, this would probably take some time.
There are economic laws, but these do not operate with the same certainty over time as those of physics. In economics, the key variables are often political and policy choices – largely failings in Africa’s development.
There is no inevitability that Africa will reverse its poor development record. It will require the right politics to ensure that sound policy choices are made.
The continent has been left way behind by the success of China and India. Nearly 40 percent of Africa’s population live in extreme poverty, which amounts to 67 percent of those who live in this condition across the world, although the continent only accounts for 19 percent of the world’s population.
According to the World Bank, progress in reducing extreme poverty as a share of the population has stalled over the past decade in Africa. And the income gap between Africa and the rest of the world is still widening, as the continent has not generated sufficient growth to narrow the gap.
After decades of disappointment, Africa may soon have a new, more optimistic story to tell as it enters a period of demographic opportunity.
Right direction
In his recently released book, Africa’s Road to Prosperity, 10 Things to Know, Jakkie Cilliers, founder of the Institute for Security Studies, and now head of its African Futures and Innovation programmes, writes that demographics might be aligning in the right direction for African economies to enter a virtuous circle of development.
Fast population growth means that low population density is no longer an African problem.
Cilliers’ argument is that the demographic outlook could emerge as a disaster or a boom.
A demographic dividend – an increase in the working-age population who have fewer dependants to support – would mean a surge of success. This has been the basis of the Asian economic miracle and the demographic and big growth spurts elsewhere in the world. On average, African countries will only enter this new demographic window provided by a decrease in fertility in twenty-five years’ time.
Africa’s present dependency ratio – the number of working-age adults per dependant – is 1.4. By 2050, this ratio will be at 1.7, the level that opens this demographic window of opportunity, as it is at this point that labour supply begins to support economic growth.
Around 2050, Africa will benefit from a decline in its population growth rate and could be on a virtuous circle. Young societies are more prone to ideological extremism and political violence. Very young societies tend to have authoritarian governments, and when they try to democratise, they are frequently unstable.
Disaster scenario
But without sound policies and leadership, and a rise in employment, demographic trends could turn into a disaster. In a disaster scenario, the population will rise, push up unemployment, and pave the way to rising poverty and social frustration. The risks of social instability with rising unemployment are high.
As Cilliers points out, there is a growing bulge in the youth population who are active on social media and well aware of the disparities in their lived reality.
On the other hand, a large, young, and growing population could mean disaster. That could force millions to migrate and create problems for SA and the rest of the world. Without sustained job creation, there will be strains on the state and no stability. The result would be a rise in poverty, pressures to emigrate, and severe social instability.
Whether a disaster or a dividend emerges depends on whether the continent can generate enough jobs for a growing young population.
“How …the continent [can] generate sufficient productive employment for its rapidly expanding populations” is what Cilliers describes as the “single, overriding” development challenge for the continent.
That is Africa’s key challenge, and with a youth unemployment rate of more than 50 percent, it is SA’s core problem.
Employment-intensive growth
Cilliers would like to see an employment-intensive growth path through improved productivity in agriculture and the informal sector, more jobs in tourism, information technology services, and agro-processing, and the better alignment of education and skills training with opportunities.
Export-oriented manufacturing is indispensable in generating employment. In an age of AI and robotics and Chinese domination of manufacturing, it is difficult to see a large role for Africa in this area.
That is why governments should simply focus on creating the right conditions for development.
Cilliers is not big on democracy as being favourable to development. For him, it is political stability that matters the most for economic development. Stability, he argues, must precede or accompany democracy rather than be presumed to flow from it. The problem is that while democracy is strongly supported across the continent, the evidence suggests, he writes, is that in low-income, high-fertility countries, democracy does not produce rapid economic growth.
But for stability, it is democracy that can arguably deliver improved accountability. And the development record of many of Africa’s autocrats is appalling.
Cilliers is also not too keen on free-market policies and wants the state to play something akin to a leading role, albeit by partnering with the private sector. He does advocate strong property rights and sees customary collective land ownership as a serious impediment to development.
“Generally, Africa needs deliberate state-enabled modernisation,” he writes. So, the state should lead in producing electricity and ensuring broadband, and should establish the regulatory networks.
Excessively bureaucratic
Yet the state is almost universally poorly run in Africa, excessively bureaucratic, and too large. It is more a mechanism for the distribution of patronage rather than service delivery. And it is often used as an ethnic or regional power base rather than for development needs.
So, the “deep partnerships” between the government and the private sector that Cilliers wants are unlikely to go far enough. African countries are excessively burdened by their governments.
Slower population growth is vital, but the mismanagement and misuse by the state have been crippling. Through much of the independence era, the state has been self-serving and discriminatory in pricing policies against agriculture and other sectors. The right demographics make development a smoother path. But policies still play a pivotal role. They can mess up all the favourable demographic trends.
The continent certainly has the critical mass of population to become a major economic power. At around 1.58 billion people, the continent’s population is above that of India with 1.48 billion and China with 1.4 billion. For international investors, Africa is the next big opportunity, if only the continent can generate a fresh investment story.
There are 54 countries on the continent, and given this large number, there will always be a wide variation in performance. Look at Ethiopia, Guinea, Uganda, Rwanda, and Côte d’Ivoire. All have projected growth rates of between 7 and 9 percent this year. Yet SA is only projected to grow by one percent this year.
African continental success remains some way off. But at least demography could be pointing to an improved destiny.
[Image: by LightFieldStudios]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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