Africa Rising: the impact and advantage
Africa rising. It is time to get serious with development. The advantage presented to us in the form of our population growth - 'the working age'. Will this be the rise or death of us?
The rising population.
We just heard insects are likely to go extinct because of climate change. The result could be “an uncertain future that is expected to have hungrier insect pests, with impacts on crop productivity and food security” – The Conversation. Thankfully or not, Africa will witness a continuous spike in its population growth. Nigeria takes the top 3 positions globally with the highest population, up from the 7th position. It is on the UN report, which projects the world population to hit 9.8 billion in 2050.
But, what does this mean for us as Africans? Driving it home, what does it mean for Nigeria? Economically, it means we will always have a growing class of people capable of working (working-age population), as against countries filled with more aged people nearing retiring against the number of people that can work. This should be our advantage. As the workforce shrinks in developed nations, that of emerging (growth) nations like Nigeria, is on the increase.
An increasing working-age population is crucial for economic growth in Africa. The World Bank estimates that this demographic dividend could generate 11-15% GDP growth between 2011 and 2030.
Two things are likely to affect developing nations from capturing this value: migration and technology. For instance, in Africa, there are inefficiencies in ensuring that the necessary things that drive productivity – roads, power, healthcare etc. to be in place. It causes more people to keep migrating to places like Canada, the USA and Germany. Also, the more automation and artificial intelligence get better at doing the tasks of unskilled workers, the narrative might change.
Zooming out. We’ve got the power.
Nearly 10billion people are estimated to inhabit planet earth in the year 2050 (Report). In many developed countries where unemployment drops, it is because people are leaving the labour force. Not necessarily because new jobs are being created. A lot of these people are either nearing retirement or have retired. Years back, due to the demographic trends initially seen as Africa's recession, the increased population predicted to hit more than 2 billion in 2025 has turned out to be its advantage.
According to an article by WYA Africa; “These include economic benefits such as an expansion of tax bases and increased consumer spending at local businesses, as well as benefits derived from innovations by cultures seeking to keep up with growing populations.”
The emergence of the global middle class. As the size of the working age increases in some countries and decreases in others, the size and the composition of import demand are changing with it, with additional effects on trade flows. For instance, trade in services, such as healthcare and education, is likely to increase (FT).
We are likely to witness the rise of trade flows to Africa. We already notice this in the amount of investment coming into tech in Africa. Recently, Stripe and other foreign investors poured USD200 million into Wave – a US and Senegal based mobile money provider.
The workers in Africa will be relatively young, while populations in Asia — certainly in China and Japan, although less so in India — will become older.
Looking ahead. With great power comes greater responsibilities.
Citing a 2016 article by weforum.org, ‘If sub-Saharan Africa is able to take advantage, and provide adequate education and jobs, $500bn a year to could be added to its economies for 30 years. This is the equivalent of one-third of Africa’s GDP’. This, in itself, should be our advantage. It’s rare to find an investor going global and not found Africa a preferred destination - they talk about our working-age numbers. The numbers available to work and the numbers available to buy.
Let's look at insurance as an instance. To increase the number of people insured in Africa (insurance inclusion) from the current rate, innovative products should be designed and produced. That’s where the power is, the opportunity for the 'middle to lower class' to participate economically. When we have more ways to engage more people economically, the rate of emigration will drop. The developed world is fighting to drive up fertility. The elderly now spend most of their savings on healthcare and having fewer working-age to keep producing. In Africa, we have many young people that are able to build products (working-age) that can be used by the elderly.
Let's talk about healthcare funding. Out of pocket health is on the increase year on year. How do we bridge this acute healthcare financing gap? More than 37% of healthcare funding is out of pocket. This means we have to design solutions that can mitigate the effect of ‘out of pocket healthcare’.
One way again – fix the insurance industry. I have an idea - just an idea. Let's make healthcare providers happy. I assume that proper healthcare funding cannot happen until healthcare providers are happy enough to keep working with the insurance companies (HMO, if you may). The usual challenge between the healthcare provider is the time it takes an insurer to make payment.
One good thing is that – again from the working-age, are releasing innovative products to solve this. Talk about the Helium Credit and the Curacel’s Advance, which allows healthcare providers to access up to 70% of the amount of the claims submitted. The financing is a partnership between Curacel and its financial partners. Providing the working capital for healthcare providers to focus on what they do best – ‘provide better and quality healthcare to patients’. Curacel is particularly interesting because it is helping insurers process claims submitted faster and more efficiently to reduce fraudulent claims submitted.
Let's progress.
Now, there’s also the population exploding growth RISK– the disadvantage. The risk is highlighted by a 2014 UN report that the “lack of meaningful work among young people is playing into frustration that has in some instances contributed to social unrest or unmanaged migration.”
Case in point, six decades after the least developed countries (LDCs) category was created by the United Nations in 1971, sub-Saharan African countries have dominated the list (UNDP REPORT, 2021). Only three countries - Botswana, Cabo Verde and Equatorial Guinea have graduated out of the LDC status, with an addition of two countries expected to graduate in 2024. That is Angola and São Tomé and Príncipe.
The success of this population led growth and advantage in Africa is highly dependent on the government and their seriousness to build the necessary infrastructure that fosters development - to discourage migration spikes. And I am hopeful that AcFTA will help drive this growth instead of it being another camaraderie of the usual gatherings of Africa politicians.
The American Economic Association published a study, authored by Daron Acemoglu of MIT and Pascual Restrepo of Boston University, arguing that robotics and artificial intelligence have the power to offset the negative effects of workers ageing out of the labour force.
PS: If you are a healthcare provider, check out this video by Dr Debo Odulana - Smart Strategies to building a profitable healthcare business.
Image: African Leadership University