3 Things to Know About Demographics in Africa
Investors should take note that Africa’s demographics bode well for a strong and sustained rise in economic output on the continent over the coming decades.
Here are three of the most important demographic trends in Africa for investors to understand.
1. Africa is by far the youngest continent. Africa’s 1.2 billion people had an average age of only 19 in 2015, rising to 24 by 2050. This means that for a vast number of Africans, their most productive years are ahead of them. This is in contrast to the aging regions of the rest of the world, such as China, Europe and North America, where a large percentage of the population is past its point of highest productivity and consumption.
2. Africa’s working age population is growing faster than that of any other continent. Between 2015 and 2050, the United Nations projects that the global working age population will increase by 1.27 billion people—and fully 69% of this increase is expected to come from Africa. By 2030, Africa’s working age population will be larger than China’s.
3. Africa has the fastest rate of urbanization of any continent. Increased urbanization correlates closely to stronger economic growth for a simple reason: people in urban areas are, on average, far more productive than people in rural areas. According to McKinsey, the average rural African generates $3,300 of annual output whereas the average African city dweller generates $8,200. This strong trend of urbanization in Africa is expected to last decades and will also favorably impact consumer spending across the continent.
Risks and Challenges. Africa’s young and urbanizing population does, however, pose significant challenges and risks as well. To accommodate the surge in the working age population, African policy makers will have to improve education and to enact more job-friendly legislation so that Africa’s young have opportunities for employment and to better their standards of living. Governments, to stave off political unrest, will also have to keep transitioning toward more transparent and responsive democracies. Young people in Africa, many of whom have internet access, know what is going on around the world. They are demanding the ability to choose their own leaders and are increasingly holding their elected officials accountable for corruption and ill-advised policies. While a few longstanding dictators remain, democracy is undeniably on the rise in Africa and should, in turn, bolster continued growth in African economies.
To learn more about our investing strategy, go to: Africa Investment Strategy . Or contact me directly at peter@africacapitalgroup.com
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