The African Century
IMF Blog, August 3, 2015
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Bibliographic details
- Authors: Antoinette M Sayeh, Abebe Aemro Selassie
- Published: August 3, 2015
Population and demographics
- Authors: Antoinette M. Sayeh, Abebe Aemro Selassie
- Date: August 3, 2015
- Key observation: Most countries in sub-Saharan Africa are on the cusp of a demographic transition—the years when the share of young and old in the population declines and those in working age range (15-64 years) increases.
- Channel to higher incomes: An increasing share of working age population can raise per capita incomes as more workforce employed implies greater economic output and labor income per household.
- Dependency on policy: Much of the demographic dividend will depend on the quality of economic and social policies.
The global dimension
- By 2030 or so, sub-Saharan Africa’s contribution to the increase in global labor force will exceed that from the rest of the world combined.
- Global entrants into working age are forecast to decline from around 2 percent annually between 1980-2000 to 0.5 percent or so for 2030-2050.
- For economies accounting for over 60 percent of current global GDP (G7 countries, China and Russia), the working age population had peaked by 2010.
- Policy implication: Integrating Africa’s labor force into global supply chains could substantially benefit the global economy given aging populations elsewhere; this should rise in priority in international economic discourse across private and public sectors.
The regional angle
- Mechanisms to harness the dividend:
- Increase in number and quality of human capital: a growing labor force that is better educated and healthier.
- Build physical capital: upgrading public infrastructure and continued private capital formation.
- Higher aggregate saving: saving rates tend to be higher for working age individuals, allowing more funding of investment.
- Increased female labor force participation: declining fertility rates tend to be associated with higher female labor force participation, which supports higher and more inclusive growth.
- Policy focus areas:
- Remove legal and institutional impediments to female participation.
- Ensure the economic environment does not hamper saving and that savings are efficiently allocated to productive investments.
What experience says
- Comparative lessons:
- East Asia captured a larger demographic dividend than Latin America due to:
- Faster demographic transition aided by policies encouraging couples to reduce childbearing and investment in human capital.
- Flexible labor markets that enabled reallocation of workers toward labor intensive manufacturing with higher productivity.
- Financial development that channeled increased saving to investment.
- Intense structural transformation, faster increases in average productivity, and integration in global trade, bringing foreign investment and technology transfers.
In a nutshell (findings and policy recommendations)
- Key constraints to address urgently:
- Gaps in infrastructure, mainly electricity and transport.
- Gaps in skilled human capital: improving health and education systems.
- Policies to promote:
- Foster saving and investment—including from abroad.
- Enhance competitiveness to boost exports and generate employment for young job-market entrants.
- Outlook: Contingent on these policies, the authors’ view is that the demographic transition will leave sub-Saharan Africa in a much stronger position by boosting savings, investment, and thus raising economic growth.
Source: The African Century, Antoinette M. Sayeh and Abebe Aemro Selassie, August 3, 2015.
Content in this bundle
- Regional Economic Outlook: Sub-Saharan Africa; April 2015