Sub-Saharan Africa’s working-age population to double, revolutionizing its economy
Three-quarters of Africa’s population are under 35, according to the United Nations.
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Sub-Saharan Africa’s working-age population is expected to more than double by 2050 to become the largest in the world, offering unprecedented economic growth opportunities, according to S&P Global Ratings.
In a report released on Wednesday, the rating agency estimated that the growth of the working-age population would add up to three percentage points to the average annual GDP growth for the next 10 years in the major economies of the sub-region. continent.
S&P Global Ratings senior economist Satyam Panday said countries in sub-Saharan Africa are undergoing “the biggest demographic transition in their history.”
“Unprecedented declines in fertility rates, falling infant mortality and increasing life expectancy will be of critical importance to the region’s economic prospects for decades to come,” Panday said.
“The age composition of a country’s population is critical to economic growth. For the region, which has experienced moderate economic growth over the past decade, the demographic transition may present a chance to take off, but can also be a major source of instability and fragility. “
The report pointed out that fertility rates are steadily declining, falling to 4.6 children per woman over a lifetime in 2019, from 6.3 in 1990. The UN predicts that fertility rates will continue to decline. , with some countries in sub-Saharan Africa approaching a natural replacement rate of 2.1 by 2050.
In comparison, the average fertility rates in Southeast Asia and Latin America are expected to be 1.85 in 2050, up from 2.2 in 2020, while the Middle East and North Africa are the only region. which is expected to be above the natural replacement rate by 2050, at 2.5. . In high-income economies, the current rate is around 1.6 and is expected to stay at a similar level.
The trajectory is not uniform, however, with fertility rates falling sharply in South Africa, Kenya and Ethiopia, while Nigeria still posts rates above 5. The UN predicts that Nigeria’s population will reach 400 million inhabitants by 2050, compared to 206 million in 2020.
Politics is crucial to reap the “demographic dividend”
At the current rate, countries in sub-Saharan Africa could benefit from a “demographic dividend”, according to the S&P report. The demographic dividend refers to the increased share of people of working age relative to those not in the labor force (i.e. children or the elderly). With fewer people to support, a country is offered a window of opportunity for rapid GDP growth.
However, governments’ economic policies will be critical to the ability of sub-Saharan African countries to take advantage of the labor force boom, and Panday suggested that at present, the region risks being in trouble. prepared to reap the benefits of the demographic transition.
“If jobs are not created in parallel, the demographic dividend could become a source of instability, since the relative share of unemployed young people would increase. If governments don’t invest in education, access to quality education is not improved, ”the report said.
“In this case, families will not be able to invest in a better education for their children, so increasing savings will not increase human capital. If banking services are not widely available and capital markets are not developed, an increase in savings will not necessarily equal an increase in investment. “
While historical evidence shows a clear positive correlation between increasing the share of employed people and economic growth, the report pointed out that at some point, falling birth rates will eventually cause the population to age. This means that the window of opportunity is limited.
In addition to creating jobs and investing in “human capital” through education, S&P stressed the importance of investing in fixed assets, as “capital deepening” increases the productivity of the workforce. work, creating more opportunities for “higher value-added production”.
“For example, in Singapore, the per capita capital stock has increased 11-fold over the past 50 years, while it has only grown by around 50% in Nigeria and South Africa. In Ghana, the capital stock per capita has remained virtually unchanged, ”the report says. .
“Finally, sustainability policies are crucial, as population growth puts increased pressure on the natural environment. For example, degradation of agricultural soils can lead to the impoverishment of farmers and unsustainable urbanization.
The report notes that the five largest economies on the subcontinent, referred to as SSA-5 (Nigeria, Ghana, Kenya, South Africa and Ethiopia), will need to create more jobs and increase their investments in human capital to emulate the “demographic dividend success” in East Asia.
Through data analysis, S&P predicted that the East Asian growth scenario is possible for part of SSA-5. For example, Nigeria could reach 45% of US GDP per capita by 2050 if it could successfully replicate South Korea’s growth experience, S&P analysts have suggested.