As the world grapples with a slowing population growth rate, the focus is often on major economies like China, Japan, Germany, and the United States. However, Africa, with its burgeoning population, presents a contrasting narrative, one that significantly influences the global economy.
Home to 1.5 billion people, Africa’s potential workforce expansion is enormous, with one in three new global workforce entrants by the 2030s expected to be African. This demographic dividend, however, remains largely untapped, posing a significant challenge to global economic growth.
The unfulfilled potential of Africa’s workforce
Research indicates that a 2% growth rate in the working-age population is critical for substantial economic growth, a benchmark previously met by half of Africa. Today, however, fewer African countries are achieving this rate. If Africa could leverage its population growth as effectively as East Asian economies did, its contribution to the global economy would be significantly higher than the current 3%.
However, only a handful of African countries, such as Ethiopia, Benin, and Rwanda, have sustained a 6% growth rate in recent years. This underutilization of the workforce leads to a lack of increase in output per worker, a stark contrast to the Asian economies that boosted productivity by transitioning workers from agriculture to manufacturing.
Challenges in realizing Africa’s economic potential
The route to higher productivity for African countries is less clear-cut than it was for former manufacturing giants, as the global economic landscape has shifted, diminishing the role of manufacturing. Efforts to bypass manufacturing and jump directly into the digital age or service industries have largely been unsuccessful. Meanwhile, the average productivity of an African worker has fallen behind that of their East Asian counterpart.
Corruption remains a significant impediment, with a notable increase in the number of African governments ranking high in corruption indices. Unlike Asia, where strong leadership often spurred economic development, African leaders frequently struggle to establish the fundamental infrastructure necessary for economic growth. Countries like Botswana and Nigeria, which once showed promise, are now experiencing stagnating or declining average incomes.
Despite visible infrastructure development in countries like Kenya, largely financed by Chinese loans, economic growth remains sluggish, and repayment of these loans is a growing concern. The frequent power outages in Kenya symbolize the broader issue of underinvestment across the continent.
The global implications of Africa’s economic stagnation
The demographic dynamics of Africa are pivotal for the global economy. In the next thirty years, the world’s working-age population is expected to grow by 2 billion, with nearly 80% of this growth occurring in Africa. Therefore, Africa’s ability to harness this demographic dividend is crucial for global economic growth. Should Africa fail to capitalize on its workforce potential, the global economy could continue to decline due to demographic challenges in other regions.
In essence, Africa’s untapped economic potential, stemming from challenges in workforce productivity and infrastructural development, has significant implications for the global economy. The continent’s success or failure in leveraging its demographic dividend will be a determining factor in the trajectory of global economic growth in the coming decades. As such, Africa’s challenges are not just regional issues but have far-reaching consequences on the global economic stage.
