Millions of Africans live in poverty. File photo.
Image: ALAN EASON
You don’t need us to tell you about this continent’s potential. About 70 years ago, Africans comprised 8% of the world’s population. By 2050, just a century later, an estimated one-quarter of humanity will be African. But whether this beautifully rich and diverse continent can achieve its full potential will depend on critical investment decisions made in the coming years.
It’s well known that the world’s youth shape cultural, food and music trends. That is why major global brands often target youth cultures to stay relevant. Given this fact, it’s clear that world culture, purely in terms of numbers, will soon be distinctly African. According to UN projections, by 2050 at least one-third of all young people aged 15 to 24 will be African.
This demographic shift is already driving important investment decisions. Take Global Citizen’s Move Afrika, a pioneering international music tour across Africa. The first event, Move Afrika: Rwanda, occurred in Kigali last December and was headlined by Grammy Award- and Pulitzer Prize-winning artist Kendrick Lamar, the co-founder of pgLang. This event employed more than 1,000 Rwandans and provided the crew and production staff, 75% of whom were locals, with skills development and international event training. The initiative’s underlying premise is that the creative industry will contribute much more to Africa’s GDP than it does now.
Gone are the days when Western business leaders could afford to think about Africa maybe 1% of the time
Harnessing this potential across all African industries will require decisive shifts, particularly in productivity growth. According to new research from Bridgewater Associates, the world’s largest hedge fund, with the right level of productivity growth, Africa could join the ranks of the larger emerging economies in Asia today in terms of its importance to the global economy and relevance to international investors. This would also lead to many people being lifted out of extreme poverty, in much the same way that millions throughout Asia escaped its clutches in recent decades.
However, the same research from Bridgewater indicates that, based on current levels of investment in institutions and infrastructure, alongside high levels of indebtedness, a more likely scenario is that productivity growth will remain “mediocre”. This would consign millions to continued poverty and deter global investors from pouring capital into the continent, diminishing the prospects of Africa realising its full potential and benefiting from a “demographic dividend”.
The capital needed to jump-start investment in Africa’s transport, electricity and logistics infrastructure is unlikely to come from global private investors. In a world where they can simply invest in US Treasury bonds, with a guaranteed 5.5% minimum return, few US and European investors will want to risk investing in Africa. African institutional investors, including local pension funds, can and should invest in the continent before looking to the US and Europe. However, even with their involvement, more funds will be needed.
The World Bank’s International Development Association (IDA) comes in here. The IDA has long been one of the continent’s biggest sources of concessional financing. This year marks its 21st replenishment, and with wealthy nations in the G7 (which includes the US, the EU, the UK and Japan) increasing their investment in the IDA by at least 25%, World Bank president Ajay Banga has outlined how the institution could support efforts to provide 300-million people with electricity, 1.5-billion with health care, and 40-million with nutritious food annually — all by 2030.
Of course, G7 leaders have their own priorities. Still, they should view investing in the IDA both as aid to distant lands and an opportunity to benefit their own societies. There has been much commentary in recent years on the negative consequences of Africa failing to realise the potential of its demographic dividend, such as increased migration to wealthier countries, especially considering the continent’s vulnerability to climate-induced events such as droughts and floods, as witnessed in recent months from Kenya to Zambia. However, there is also reason to be optimistic. Just as China’s economic miracle lifted hundreds of millions of its citizens out of poverty, Africa’s growth can do the same for the world.
Gone are the days when Western business leaders could afford to think about Africa maybe 1% of the time. Known for taking a long-term view of potential areas of interest to global investors, this last point perhaps explains why Bridgewater will join Global Citizen, Harith General Partners and the government of the Ivory Coast on October 9-10 2024 to host an economic summit in Abidjan. The summit will bring private investors, corporate entities and finance leaders to one of Africa’s fastest-growing economies just days before the World Bank’s annual meetings in Washington, DC. Those in attendance are expected to issue a clarion call to business leaders in both the global north and south to invest in Africa’s future by boosting support for the IDA. Indeed, it would be a missed opportunity for the world if they failed to do this.
Originally published on Sunday Times with co-author Tshepo Mahloele.