Africa is a young, increasingly urban and job-hungry continent. Its population is expanding faster than any other region – and, unlike Asia and Europe, it is getting younger. The working-age population is set to grow by 800 million in the next 30 years. The promise and potential are enormous – but so are the perils.

While populations in many economies elsewhere are falling or stagnating, Africa’s is forecast to reach 4 billion by 2100 – almost matching Asia. Its working-age population will increase by 2 billion while the rest of the world’s potential workforce contracts by 600 million.

The initial demographic dividend as Africa’s consumers become producers, family sizes shrink and more women work will enable greater investment in health and education. But a second dividend can come through increased savings and investment raising productivity.

However, better governance and market-orientated policies that boost competitiveness and output are crucial to ensuring these opportunities are not wasted.

One prospect for strong job creation could see Africa becoming a hub for labour-intensive manufacturing as wages rise in China and East Asia. But this requires addressing obstacles such as inadequate infrastructure, poor access to finance, political risks, and the challenging business environment.

The continent’s failure to industrialise may mean relying on farming and horticulture but growth could come from ‘leapfrog’ industries. India has shown that low-income nations with poor infrastructure can benefit from digital applications such as online banking and shopping or mobile communications.

With other regions’ populations ageing, Africa’s share of the global working-age population will almost treble to 42 per cent by 2100. This can support productivity and per capita growth.

Africa’s demographic transition started later than elsewhere, and from a lower base, and countries vary. While Botswana, Ghana, Kenya, Lesotho and Namibia are more than halfway through their evolutions, most nations still have many decades to go.

These laggards include Nigeria – expected to become the world’s third most populous country by 2050 with 340,000 youngsters reaching working age every month. But harnessing the demographic dividend will require avoiding the risks of rapidly rising youth unemployment and social tensions.

Over the next two decades, 25 million people a year will reach working age, meaning that until 2050, more than 30 per cent of the working-age population will be aged under 24. Youth unemployment across Africa is relatively low, at 11 per cent, but it is 39 per cent in Nigeria and exceeds 60 per cent in South Africa.

A bigger workforce produces an automatic dividend, but the return is even greater if young workers are productive. One key lesson of the ‘Asian miracle’ was to combine a rapidly growing working-age population with export-oriented policies that boosted labour demand; another was that countries with high education levels benefit most from the demographic dividend.

Africa is urbanising: by 2030, there will be about 100 cities of 1 million people and 18 with more than 5 million inhabitants. But its roads, railways, ports and energy networks lag other regions. The World Bank estimates that sub-Saharan Africa’s annual GDP growth per head would increase by 1.7 percentage points if the infrastructure gap is closed.

 

First published 16th September 2021.

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