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Shifting global demographics: An African opportunity? (7)

africa (1)

Africa has the time needed to fulfil its potential in today’s age of labour and position itself for the coming age of machines in tandem with humans. The choices are not mutually exclusive. Global businesses and investors have opportunities to invest in either or both ages. The real choice global firms face is time-dependent. Would it be optimal to invest in managing automation for the next three decades or so?

Or would a firm be better off getting in on the ground floor of 4IR on the continent? The optimal decision would depend on the company, the sector and the country. China is already investing in both futures via the BRI and its bilateral 4IR partnerships with African countries through its many technology-based firms.

But there is no one-size-fits-all solution. Some African countries have little choice but to remain in the age of labour longer than others. In other cases, the sector might evolve too quickly into the high technology age to leave firms with a real choice. Ultimately Africans may make up nearly half of the world’s population by the end of the 21st century. Thus, the consumption story is irrefutable. But the story may also have a broader spectrum.

“We have a hunch that the really exciting music and theatre, the truly ground-breaking innovations, the revolutionary new thinking in the last decades of this century will more likely come from Lagos or Mumbai than from Paris or Tokyo (Bricker & Ibbitson, 2019).” As our exposition shows, this view is not farfetched. A decline in human capital growth is seen as the cause of the perennially dull economic growth of the developed world since the late nineteenth century.

While investments by global firms in African secondary school education may not yield immediate returns, they would strengthen inputs to the continent’s emerging manufacturing and services sectors

 

Vollrath (2020) finds ageing and smaller family sizes as the principal culprits for America’s growth slowdown. Almost paradoxically, decline in fertility is a consequence of wealth and thus a symptom of success. As suggested by the title of Vollrath’s book “Fully Grown: Why a stagnant economy is a sign of success,” birth rate decline also signals potentially irreversible economic stagnation. That seems inevitable unless human capital decline is mitigated by immigration. This is because an organic replenishment, even by very determined government policies, of the lost human capital due to these demographic changes would take decades (Vollrath, 2020).

History tells us that, with few exceptions, a sizable working-age population is one prerequisite for economic success. As early as the 1960s, fears emerged in the United States that automation would take jobs away. But people were needed to fill the new and more interesting jobs brought on by automation. Besides, even in the anticipated age of artificial intelligence, a conservative time estimate for the ubiquity of desirables such as driverless cars are at least another twenty years.

So, the key issue is not whether there will be demand for human labour. It is far more likely to be about finding adequate numbers of right-skilled people for the jobs ushered in by successive waves of high technology. If about half the world’s people at the end of the 21st century are likely to be African, then the currently rich world would be wise to ensure that the continent’s human resources would be more than capable of filling the inevitable gaps in their own economies by that time.

Even so, many will make their own way at home. This would in part be due to better conditions and opportunities over time. True, many would likely migrate to Europe and The Americas, with a likely relative few making their way to Asia. However, the majority of the expectedly dominant African population would likely make their contributions to global progress from within their continent. Digital technologies already demonstrate the feasibility of this scenario.

Our instinct is to veer towards the positive. Credible forecasts (Vollset et al., 2020) of demography-induced economic development predict that Nigeria, Africa’s currently most populous and largest economy, is likely to be the ninth largest economy in the world by the end of the 21st century. Imported goods (or their substitutes produced locally by multinationals) are sold at relatively attractive margins. And firms are the ultimate beneficiaries of investments in education, especially in secondary school education for girls.

True, the inevitable rise in the opportunity costs of industrial capacity redundancy, high labour costs, and peak (and eventually slowing) demand owing to the shifts in demography may plague some currently developed economies. But other factors will pay a less immediate dividend for the African continent.

Each of the three basic demographic transitions — child survival, fertility decline and educational attainment — provides opportunities for global firms to contribute to the achievement of key milestones. Cincotta (2018) notes that service-driven achievements in any of these basic transitions “tend to drive demand for other services, spurring progress across several development transitions.”

Child survival and fertility decline are already observable milestones on the continent (Vollset et al., 2020). Educational attainment at scale that positions Africa for the high technology age should lead to increased income, and is likely to be the right path.

What type of educational attainment would be an optimal starting point? Goldstone (2019) argues for secondary school education as the most pertinent to achieving both fertility decline and creating the solid foundations for greater wealth for the many. While investments by global firms in African secondary school education may not yield immediate returns, they would strengthen inputs to the continent’s emerging manufacturing and services sectors. This would benefit global firms on the continent in the long run, as boosting the value of the human resource supply generates demand for more advanced goods and services, forming a virtuous cycle.

Edited & published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References, figures, tables, etc. in original article viz. https://nbs.ntu.edu.sg/Research/ResearchCentres/CAS/Publications/Documents/NTU-SBF%20CAS%20ACI%20Vol.%202020-32.pdf