Africa’s Demographic Dividend and its Economic Future

By AT editor - 23 July 2015 at 3:07 pm

A change in a country’s age structure can provide an opportunity for rapid economic growth. With Thailand and other East Asian tigers seizing this window a couple of decades ago, they are currently enjoying the fruits of their carefully planned policies. Africa, on the other hand, is yet to achieve this demographic transition. Given this scenario, will Africa still have the opportunity to seize the rewards of the demographic dividend and achieve growth?

Compared to the rest of the world, Africa has a relatively younger population. According to a study conducted by the United Nations Department of Economic and Social Affairs (UN DESA), Africa’s population grew at an average annual rate of 2.6 percent from 1950 to 2014, compared to 1.7 percent of the rest of the world. In 2010, there were about one billion Africans, almost half of which at 411 million were children aged 14 and below. And by 2050, the estimates would double up to 839 million children, in relation to the continent’s total projected population of 2.7 billion. It is a promising prospect as an increased number of people potentially entering the labor force in the future can contribute to Africa’s economic growth.

For economic growth to occur, there must me a demographic transition. The decades-long process starts from high fertility and high mortality rates, to a period of low mortality and high fertility rates, before finally entering the last phase of low fertility and low mortality rates. A temporary window called demographic dividend is created during the last phase. The United Nations Population Fund (UNFPA) describes demographic dividend as the phenomenon where the increasing number of young people and the declining fertility both pose a potential to boost economic productivity. The number of people entering the workforce through the years is increasing, relative to the decreasing number of dependents. These non-working dependents are 14 years old and younger, as well as the elderly 65 years and older. As spending on these dependents diminish, more investment could be allocated to infrastructure that advocate economic growth.

What is missing in the African equation in reaping the promises of the demographic dividend is a decreased total fertility rate (TFR). The TFR pertains to the total number a woman can give birth to children in her life time, which usually lasts from 15 to 49 years of age. While marked progress has been achieved in decreasing the mortality rate in the continent, fertility rates in some countries have stalled and even minimally increased over time. With the exception of northern and southern African region, most countries in Sub-Saharan Africa have a very slow rate of decline. At this rate, it would take more than 20 years for them to drop the fertility rate by one child.

For Africa to achieve the last phase of entering the demographic transition, policies to lower the fertility rate must be put in place. The World Health Organization (WHO) emphasized that fertility in Sub-Saharan Africa will decline only if modern contraception methods will be adopted on a large-scale basis. While the northern and southern parts of the continent had begun achieving improvements in this front, Sub-Saharan Africa still has to catch up. Governments need to put more effort in spreading family planning in the region, as only less than 20% of women use modern contraceptive methods. Educating girls and women can also set the stage for this transition. Women aware of how often they can get pregnant, as well as the timing of the pregnancy, can make more informed choices as they are likely to choose fewer children while being employed in the formal sector.

Aside from lowering the fertility rate, investments in human capital through improvement of health and education infrastructure can help achieve a healthy and skilled labor force. From immunization programs during childhood, progressing to reproductive and other health education in their teenage years to adulthood, the people would be Africa’s best capital. Having the necessary educational infrastructure also gives them opportunity to be skilled and be a productive member of the workforce.

But the greatest challenge for African governments is providing employment opportunities to the growing number of young people. If the economies are unable to absorb and productively employ these workers, it can result to unemployment and social unrest. It is up for the government to come up with a strategy that identifies sectors that are labor intensive and can contribute to GDP growth. In doing so, many people would be productive members of the labot force.

However, any program promoting to capitalize on the demographic dividend will not be fruitful, provided that various obstacles continuously exist. African businesses have to contend with bureaucratic hurdles and political instability to remain afloat. With the Boko Haram crisis to the west, the al-Shabaab threat to the east, the migrant crisis to the north and increasing xenophobic sentiments against migrant workers to the south, companies are losing opportunities to grow and, likewise, provide employment opportunities to the growing working population. In the political milieu, the constant threat of political unrest among countries with presidents seeking a third mandate is dragging confidence of investors in the region.

In spite of this setback, the World Bank estimates that Africa still has the potential to capitalize on the demographic dividend. If all goes well, Africa sees 11 to 15 percent of its Gross Domestic Product (GDP) growth by 2030 coming from the demographic dividend. In relation to this, there would be 40 to 60 million fewer poor people by the same year. If significant investments would also be made on educating the labor supply, the growth would be further augmented to 22 percent, with 51 million fewer poor people by 2030.

The demographic dividend provides an avenue for Africa to achieve economic growth. However, before the benefits of the dividend can be achieved, a holistic strategy that simultaneously addresses both economic and population fronts should be employed. As heterogeneous as African countries might be in terms of their priorities, there should be a long-term commitment to harness the potential of the demographic dividend. The hope of Africa and its dividend might be already wearing thin. However, the more politicians’ self-interest be put first ahead of the countries’ interest, the longer it would take to achieve its promises.

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