With a population of 1.307 billion and a gdp per capita of only $1,667, it is easy to justify why we are bullish on Africa. Africa is one of the fastest growing parts of the world and the need for developing infrastructure and services like railways, energy, potable water, and roads is immense. Growth has been present throughout the continent, with over one-third of African countries posting 6% or higher growth rates, and another 40% growing between 4% to 6% per year. The recent establishment of the African Continental Free Trade Agreement, amidst the current global trade wars, is a sign that Africa is getting its political act together and it is now the torchbearer of multilateralism and open economies.
Another inevitable self fulfilling prophecy is the fact that all the easy money emanating from quantitative easing and near zero interest rates, will have to find hard commodities and projects, in order to prevent another economic crisis. Africa is strategically poised to absorb these capital flows, as the mineral industry of Africa is the largest in the world. This fact, coupled with the high demand for infrastructure and services renders Africa as the future economic growth engine of the world.
The balance of evidence suggests that the next half century in Africa offers good prospects for realizing the African vision of a dynamic, diversified and competitive economic zone in which extreme poverty is eliminated within peaceful, stable and vibrant societies. This vision involves the transformation of fragile and vulnerable African economies into more robust and developed market, creating opportunities for the poor and leading to peaceful, stable and vibrant societies.
Recent evidence shows that economic growth in Africa is generally strong, fueled in large measure by business-enabling policy reforms, more favorable commodity prices and a marked improvement in peace and security, notably in the west and south-central sub-regions. Robust growth in the first decade of this century helped to diminish the depth of poverty. The recent global economic and financial crisis that beset world markets throughout 2009 sparked sharp price drops for exports and commodities and reduced trade and investment, slowing Africa’s growth. Nevertheless, global recovery starting in 2010 began to curb the slide in economic activity, and the momentum of economic growth is now enough to ensure steady progress in the coming years.
The performance of most African economies during the global economic crisis of 2008/9 was testimony to their underlying resilience and robust fundamentals. This made it possible to preserve macroeconomic balances and to implement economic policies that alleviated the impact of the crisis.
Given the extremely dynamic social and economic conditions in Africa and around the world, making accurate projections for Africa in 50 years’ time is very difficult. Extrapolations of current economic performance suggest a positive future, but one that is by no means assured. African Development Bank estimates suggest that both Gross Domestic Product (GDP) and GDP per capita will increase steadily throughout the period 2010 to 2060 (Figure 1). By that time, most African countries will attain upper middle income status, and the extreme forms of poverty will have been eliminated.
In this most positive of scenarios, the African Development Bank estimates suggest that Africa’s GDP could increase to over US$15 trillion in 2060, from a base of US$1.7 trillion in 2010. Consequently, income per capita expressed in current US dollar terms should grow from US$1,667 in 2010 to over US$5,600 by 2060. While this would represent a major leap forward in standard of living, it is still less than the current South Korean per capita GDP of US$17,000. However, a less optimistic scenario sees real GDP growth accelerating up to 2020, before decelerating to around 5% per annum (Figure 2). This would leave GDP per capita in 2060 at only US$5617.
The projected breakdown of GDP by sub-region indicates that North Africa will continue to post the highest income per capita. However, East Africa is likely to show the strongest growth performance, reaching 9.3% in 2030. By 2060, the sub-region will have a per capita income ten times higher than in 2010.
Available data suggest that these growth rates may still be lower than the group of developing Asian countries. While in recent years African growth rates have exceeded those of the world as a whole, they remain lower than in Asia’s developing countries, and this is unlikely to change in the coming decades.
A dramatic decline in Africa’s poverty would require the continent to grow at an average of 7%. These projections fall short of that level. And there are still serious risks ahead to Africa’s growth path. Global developments, particularly the escalating price of commodities like food and oil, could yet pose serious threats to governance, peace and security. In the decades ahead, Africa’s growth prospects will be heavily influenced by trends in labour availability. Economic performance relies primarily on human resources, which strongly impact on overall factor productivity. Continued rapid growth in the size of the economically active population (men and women 15- 64 years of age), at an average of around 3.5% per annum, will lead to an absolute increase in Africa’s working age population of around 1.87 billion. Around 74% of Africans will be of working age.
As both a cause and a consequence, economic and population growth will be associated with rapid migration and urbanisation. The movement of working age people from rural areas to urban centers will be instrumental in accelerating economic growth. At the same time, this population migration will lead to more diversified economies, away from a reliance on subsistence agriculture toward more productive sectors such as manufacturing and service activities. The growth of urban sectors will act as a driver for strengthening the continent’s economic advancement. The process will be very important for the continent and the rates of urbanization in Africa will advance quickly: the proportion of urban dwellers in 2010 was nearly 40 percent, and this will rise to 50% by 2030, and will reach 65% by 2060. (See Figure 3).
One of the results of strong economic growth in the past two decades has been a significant increase in the size of the African middle class (defined as earnings of between US$4 and US$20 per day). The middle class will continue to grow, from 355 million (34% of Africa’s population) in 2010 to 1.1 billion (42%) in 2060. Conversely, poverty levels are expected to fall, with the proportion of the population living on less than US$1.25 a day declining from 44% in 2010 to 33.3% in 2060.