Africa’s demographic dividend

History has often illustrated the power of the maxim, coined by the French socialist thinker, Auguste Comte, that “Demography is destiny”. The post war baby boom helped drive growth in Europe and North America through the 1950s and 1960s. In the 1970s Asia enjoyed similar, population-driven, gains.

History also shows that Comte’s dictum could, more accurately, but less elegantly, be rendered as, “Demography and policy are destiny”. To realize the potential of an expanding population a country needs to invest in education and infrastructure, and to have sound government.

While Asia largely got these things right in the 1970s, Latin America, which saw similar population growth, did not. Recent research by the International Monetary Fund shows that poor policy and insufficient investment hindered Latin America’s ability to benefit from a growing population.

Asia and Latin America both witnessed a 20% increase in their working age populations between 1965 and 2010. Asia turned its population growth into a seven fold increase in GDP per capita. Latin American managed only to double its GDP per capita.

This episode matters enormously for Africa, a continent which now sits on the cusp of a similar demographic transition. Africa already has the youngest population in the world. Falling mortality rates, high fertility and growing number of women of reproductive age are set to quadruple Africa’s population, to more than four billion people, by 2100. By the start of the next century about two-fifths of the world’s population, and its workforce, will be African.

This change brings with it opportunities and risks.

The greatest risk is that there are insufficient jobs for the millions of new workers. The African Development Bank suggests that the continent creates only 3 million new jobs for the 10 to 12 million people who enter the African labour market every year.

Unemployment creates political as well as social and economic risks. Unemployed youth are more likely to turn to crime, to join rebel groups or armies or make perilous trips in search of a better life overseas. If Africa is unable to provide work for its burgeoning population the risks to stability at home and the likelihood of mass migration increase.

In the last decade war and poverty have caused significant numbers of people to flee the Middle East and Asia for Europe. Migration and borders have moved centre stage in the European political debate.

The best response to such forced population movements is to create good government and opportunity at home. This lesson will not be lost on European policymakers conscious that Sub-Saharan African has a far larger, and faster growing, population than the Middle East and North Africa combined.

There is plenty countries can do to get things right. We often think of in terms of whole continents as if the regions and countries within them are homogenous. Yet neighbouring countries, sharing geography and demography, can achieve radically different outcomes with different policies.

In Latin America, Chile and Bolivia border each other but Chile has a GDP per capita more than four times that of Bolivia. In Africa Rwanda has become a beacon of economic reform and rapid growth. Rwanda ranks ahead of countries such as Luxembourg and China in the World Economic Forum’s latest Ease of Doing Business tables. Rwanda, and Ethiopia, both of which have made significant progress on governance and stability, have reaped the benefits in terms of growth rates which are among the highest in the world. Neighbouring Congo, which ranks 184 out of 190 in the Doing Business Survey, underscores the power of policy – good and bad - to transcend geography or history.

So if governance and investment hold the key to growth and jobs how is Africa doing?

As a whole Africa has become more peaceful and stable. The level of armed conflict in Africa is lower now than any time since the 1970s. The World Health Organization report that deaths through conflict in Africa declined by 95% between 2000 and 2012. The story on governance is mixed and varies by country. But in terms of the business environment things do seem to be getting better. Most African nations have upped their ranking on the Doing Business table in recent years.

Most significantly Africa continues to post decent rates of growth.

In the 1990s growth in Sub-Saharan Africa averaged roughly 2.0% a year, a slow rate by the standards of other developing economies. Between 2000 and 2007 Sub-Saharan Africa nearly tripled its growth rate to 6.0% a year. Since then weaker commodity prices have hit the continent’s resource-dependent economies. Nonetheless, since 2008 growth has averaged 4.6% a year, faster than in the 1990s and better than big emerging economies such as Brazil or Russia.

Much is going right in Africa. A burgeoning population provides a huge opportunity to further raise African prosperity. More investment and better governance will enable the continent to do so.