Will Africa Reap a Demographic Growth Dividend from its Young Population?

Africa is the continent with the fastest-growing population in the world. From 2000 to 2015, population numbers increased by more than 370 million from 814 million to almost 1.2 billion. According to United Nations projections (medium scenario), the population will rise to almost 1.7 billion in 2030 and almost 2.5 billion in 2050.6 Africa’s share of the world population is predicted to increase from currently around 16 percent to almost 20 percent in 2030 and above 25 percent in 2050.

A young and growing population is generally seen as providing a “demographic dividend” to GDP growth and GDP per capita growth through labour supply. The underlying reason is growth of the labour force and the proportion of population of working age. In coming decades, Africa will have the most favourable demographics in the world, in terms of the development of people at working ages. Its population at working age (defined as 15-64) is increasing rapidly and faster than the total population. This absolute and relative increase of potential labour supply opens a window to boost Africa’s annual growth of GDP per capita by up to half a percentage point over the next 15 years.

However, measuring the positive mechanical demographic effects on labour supply and growth only provides a starting point for analysis of the effects. It is important to also consider the labour market and productivity. The positive labour supply effect on growth will only materialise if enough jobs are created. Otherwise, people will be discouraged from entering the labour force (causing labour market participation to fall) or, after entering the labour market, will be unable to find a job (causing unemployment to rise). This requires a fundamental change in policy, as Africa has failed in the past to create enough good jobs despite higher economic growth The demographic effect on productivity growth is linked to impacts on savings, investment, labour efficiency and innovation.

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In principle, productivity growth in young populations should increase in each of these areas. As birth rates decline, both families and the government will have more resources available per child to provide better education and health care, which boosts productivity over time. With relatively more people at working age, the savings rate could increase and also raise productivity through more investment. Migration of workers to areas with higher levels of income and productivity, notably in cities, could also increase Africa’s productivity. By the mid 2030s, about half of Africans are expected to live in cities.

However, a number of downside risks could impact productivity growth. In particular, the growing labour force may lack the necessary skills (human capital), and firms and public infrastructure may not provide adequate physical capital. Africa’s demographics also raise a number of questions: Will current low levels of productivity in agriculture and the effects of global climate change compromise Africa’s ability to provide food security for a growing population? How can Africa attain environmental sustainability in the face of rising populations and increasing economic activity?

Africa’s future demographics thus offer opportunities but also create challenges. Africa’s “economic renaissance” of the past two decades gives reason to hope that the continent will reap the demographic dividend in coming decades. But as much depends on how policy makers respond to these challenges, it is difficult to judge which view will finally prevail. These considerations suggest that countries in East, West and Central Africa have the potential to reap a significant demographic dividend, while the dividend will be much smaller in Southern Africa and North Africa.

To exploit this potential, countries must make managing demographic transition a key policy priority. It is of the utmost importance to:

• reduce bottlenecks that still constrain demand for labour by promoting entrepreneurship and private-sector activity in general, while simultaneously helping young people to obtain the skills needed to obtain a decent job.
• ensure food security and environmental sustainability
• speed up the demographic transition towards lower birth rates by improving health care, education and family planning.