IN 2050, sub-Saharan Africa’s income per capita could be 25% higher than it will be at current growth rates. By 2100 it could be up to 55% higher.
It gets better: these figures could further double as the result of a significant demographic dividend and the right economic choices, a new report on the African region by the International Monetary Fund (IMF) says.
“For many countries, this represents the potential to graduate from low-income to middle-income status,” the multinational lender said in its economic outlook titled Navigating Headwinds released Tuesday.
But such robust growth will depend on how fast infant mortality and fertility rates decline.
On the surface this seems counterintuitive. How does ensuring more Africans survive into adulthood in a region with already high rates of unemployment, and convincing women to have less children on a continent where they are culturally seen as riches, translate into such vastly better economic prospects?
Surprisingly, is already happening, and has been for the last three decades. Most of sub-Saharan Africa is undergoing a demographic transition, with infant and mortality rates falling, although at varying rates.
Hands to work
This has led to an increase in the working age population—those aged between 15-64 years. By 2035, the number of sub-Saharan Africans in this bracket will exceed that of the rest of the world combined, United Nations data show. This is both due to rapid population growth in Africa, and also because the rest of the world’s working age population will start to decline by 2050.
By 2100, sub-Saharan Africa’s share of the global labour force would have risen to 37%, from just 10% five years ago, meaning the continent could through migration become a net supplier of labour to the rest of the world.
“This is a trend with potentially significant implications for the both the region and the global economy,” the IMF said.
In East Asia and Latin America, the other comparable parts of the world where this transition has already started, the rapid increase in population and the demographic transition led to higher savings and investment, further raising growth.
There is a stark warning though, the lender notes. If the economic performances of countries were to weaken, the implications of such major demographic shifts would be dire, as the numbers show.
Sub-Saharan Africa’s current population of 800 million will by 2050 more than double to 2 billion, and grow to 3.7 billion by 2100. These are figures modelled on what the UN terms a medium-growth picture—in a high-fertility scenario, the region’s population could actually increase to nearer 5 billion by 2100.
In the next 35 years, the region’s working age population is expected to triple to 1.25 billion people, twice the number of those 14 and under, and 12 times those older than 65 years.
But for Africa to realise its demographic “dividend” out of these populations it will need to make some tough choices—many of which would meet strong resistance if not communicated adequately.
Mortality and fertility rates anchor the speed of transition. While average fertility in sub-Saharan Africa has declined to 4.7 children per woman, the IMF says this remains high in many countries, reflecting high infant mortality rates, cultural preferences and limited access to family planning options.
How does it work? A demographic transition involves many stages. First, the increased share of the working age population tends to directly increase per capita incomes. When there are fewer people to support, countries have the chance for rapid economic growth as evidenced by the Asian Tigers, whose “economic miracle” rise since the 1970s was significantly pushed by demographic shifts.
If this increased workforce is employed, the result should be greater economic output, and more income from about from each household.
Declining fertility rates are generally associated with higher participation of females in the labour force, as they have less children to attend to. This means the total number of people in the workforce increases, leading to even more reductions in fertility rates—working women tend to delay or have less children.
Essentially, when child survival improves, parents become more confident about having less children, leading to a gradual reduction in fertility rates. Fewer children means more income to invest elsewhere for the family.
The reduction in the number of children, and the attendant increase in life expectancy (contrary to African cultural perception, it is having less children that increases their odds of survival) means more private investment in education and healthcare, further increasing the productivity of the workforce.
Additionally, saving rates rend to be highest for working age populations, and to the extent that these savings are channeled into investment, a country receives an attendant bump in economic growth. This would be through helping firms expand, giving household enterprises better access to credit, and allowing individuals to create their own job opportunities.
Big challenges remain
Despite such benefits, the main challenge is getting the buy in from both governments and populations. Rising populations in the initial phase mean more public spending on social needs, often at the expense of more “visible” projects such as mega-infrastructure, with a potential to cost votes.
Households would also use more to maintain the children, resources that would have been deployed in other ways to develop more sources of income.
But the national economic benefits far outweigh these concerns, organisations say. In 1960, Indonesia and Nigeria had similar ratios of working age to non-working age populations. In the intervening period, Indonesia’s fertility rates begun falling, while Nigeria’s did not.
Africa could look into the morass if it misses out on the opportunity. (AFP)
The observed result is that Nigeria’s per capita Gross Domestic Product (GDP), which was higher than Indonesia’s in 1960, is now at about half of the Asian country’s. Last year, the World Economic Forum (WEF) suggested that if Nigeria puts in place the right policies which would lead to demographic dividends akin to that of Indonesia and other East Asian economies, its GDP per capita income would rise 12% by 2020, and 29% by 2030.
Policies, an area the region often struggles with, thus are the crucial bridge in helping sub-Saharan Africa attain this growth. Programmes to encourage couples have less children, investment in the workforce to increase productivity and a shift to labour-intensive jobs are among the more low hanging ones that could be rolled out.
Every year, some 120 million youth enter the job market globally. Additionally, some 90% of the 400 million jobs in the low-income countries are in the informal sector, such as agriculture and self-employment.
The challenge for Africa’s dividend is how to absorb its share of entrants to the workforce—450 million between 2010 and 2035. The IMF says sub-Saharan Africa would have to create high productivity jobs at an average of 18 million jobs annually until 2035, a huge undertaking but the alternative is more challenging.
“Failure to create sufficient jobs could result in severe economic and social problems,” the IMF said. It is pushing for more agricultural productivity, diversification onto labour-intensive jobs and household enterprises, roping in of the private sector and meeting key infrastructural needs such as energy and communication.
Sub-Saharan Africa thus has the tools to a more solid Africa Rising narrative, but also the path to reverse gains of the last decade or so.