According to the United Nations, three quarters of the African population are under 35 years of age.
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According to S&P Global Ratings, the working-age population in sub-Saharan Africa will more than double by 2050 to become the largest in the world and offer unprecedented opportunities for economic growth.
In a report released on Wednesday, the rating agency estimated that working-age population growth over the next 10 years in the subcontinent’s major economies would add up to three percentage points to average annual GDP growth.
According to Satyam Panday, Senior Economist at S&P Global Ratings, the countries in Sub-Saharan Africa are currently experiencing “the most significant demographic change in their history”.
“An unprecedented decline in birth rates, lower child mortality rates and an increase in life expectancy will be critical to the region’s economic prospects for decades to come,” said Panday.
“The age composition of a country’s population is decisive for economic growth. For the region, which has experienced subdued economic growth over the past ten years, demographic change can represent an opportunity for recovery, but it can also be a major cause of instability and fragility. “
The report highlighted that fertility rates have steadily declined, falling from 6.3 children in 1990 to 4.6 children per woman over the course of life in 2019, 2.1 by 2050.
For comparison, the average birth rates in Southeast Asia and Latin America are projected to be 1.85 in 2050, up from 2.2 in 2020, while the Middle East and North Africa are the only region projected to be 2.5 by 2050. will be higher than the natural rate of reproduction. In high-income economies, the current interest rate is around 1.6 and is expected to remain at a similar level.
The trend is not uniform, however, with fertility rates falling sharply in South Africa, Kenya and Ethiopia, while Nigeria still has rates above 5. The UN predicts that Nigeria’s population will reach 400 million by 2050, up from 206 million in 2020.
Politics is critical to reaping the âdemographic dividendâ
At the current rate, the SSA countries could be put on a “demographic dividend,” says the S&P report. The demographic dividend refers to the higher proportion of people of working age compared to the inactive (i.e. children or the elderly). With fewer people to support, a country has an opportunity for rapid GDP growth.
However, government economic policies will be critical to the ability of SSA countries to benefit from the labor boom, and Panday hinted that the region is currently at risk of being ill-prepared to take advantage of demographic change.
âIf jobs are not created at the same time, the demographic dividend could become a source of instability as the relative proportion of young unemployed increases. If governments don’t invest in education, access to quality education will not improve. âReport said.
“In that case, families will not be able to invest in better education for their children, so increasing savings does not increase human capital, not necessarily an increase in investment.”
While historical evidence shows a clear positive correlation between the higher proportion of the workforce and economic growth, the report emphasizes that the falling birth rate at some stage eventually causes the population to age. This means that the time window is limited.
In addition to creating jobs and investing in âhuman capitalâ through education, S&P emphasized the importance of investing in property, plant and equipment, as âcapital deepeningâ increases labor productivity and creates more opportunities for âhigher value creationâ.
âIn Singapore, for example, the capital stock per capita has increased 11 times over the last 50 years, while in Nigeria and South Africa it has only increased by around 50%. In Ghana, the capital stock per capita is almost unchanged, âthe report said.
“Ultimately, a sustainability policy is crucial, as population growth puts more strain on the natural environment. For example, the degradation of agricultural soils can lead to the impoverishment of farmers and unsustainable urbanization.”
The report found that the subcontinent’s five largest economies, known as SSA-5 (South Africa, Nigeria, Ghana, Kenya and Ethiopia) need to create more jobs and increase their investment in human capital in order to emulate East Asian “demographics” Dividend success story. “
By analyzing data, S&P predicted that the East Asian growth scenario is possible for some of the SSA-5s. 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 suggested.