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What will Sub-Saharan Africa Look Like in 2030?

and 03.12.15

What will Sub-Saharan Africa Look Like in 2030?

and 03.12.15
Africa

According to the U.S National Security Council, Sub-Saharan Africa’s role within the global community will change dramatically in the mid-term future. A number of opportunities need to be fully embraced by Sub-Saharan societies and their political classes to sustainably profit from this process of change.

Africa’s latest resurgence as a global hub for investment

Sub-Saharan Africa’s recent resurgence as a financial hub for global investment gives some important indication of the continent’s pivotal future role in an era of globalization and insatiable demand for economic growth.

Large-scale funding and private and state investment initiatives such as the record fund-raising by London-based wealth fund Helios, Angola’s launch of a $1.6bn Africa infrastructure fund or a Swiss private bank’s first buyout fund set up early this year constitute encouraging signs amidst a sluggish world economy.

Despite the surge of geopolitical and security-related crises taking a heavy toll on countries like Nigeria, Kenya and Mali, the overall business outlook for Sub-Saharan Africa clearly seems more sanguine these days.

This view also precedes the assumption, as set out in the report ‘Global Trends 2030: Alternative Worlds’ by the U.S. National Security Council (NSC), that Africa’s role in world politics will dramatically change through the year 2030 and beyond due to an unprecedented shift in the global balance of power.

Despite the country-specific regulatory and economic framework conditions, the way Sub-Saharan Africa will deal with global phenomena focusing on technological change, individual empowerment, the growth of the middle class, urbanization and its demographic advantage vis-à-vis the West and countries including China or Japan will heavily impinge on its future status as a powerful global player.

Which global trends will decide whether Africa will be able to take on its new role?

Sub-Saharan Africa’s key sociopolitical long-term trajectories

In the coming years, Sub-Saharan governments, civil societies, entrepreneurs and investors alike will have to meet the following challenges.

Technological change & spill-over effects: From a macroeconomic point of view, economic growth can best be achieved by means of technological change. Without technological change, economies suffer from capital income and wage stagnation. The report by the NSC ascribes technological change a game-changing role within the global economy. Already by mid-2013, the Economist labeled the information technology sector in Sub-Saharan Africa “the next frontier” whereas Bloomberg called Africa “the tech industry’s next China.”

Despite such optimism, the high-tech and information technology sectors in all Sub-Saharan African countries remain in their early stages, as pointed out by the Boston Consulting Group.

Sub-Saharan African economies are still highly dependent on technology transfer from non-African partners. Know-how constitutes the pivotal key for the materialization of entrepreneurship and a strong private sector.

Moreover, to develop competitive high-tech industries of their own, which will eventually lead to the introduction of new technologies, African states have to ramp up their education systems, which still suffer from a significant flow of brain-drain and a comparative lack of competitive higher education.

Individual empowerment: Identified as a global mega-trend, individual empowerment strongly depends on high-quality education and a flourishing private and start-up sector development, in the framework of laws and regulations.

Therefore, individual empowerment will aid poverty alleviation and create spill-over effects into other parts of society. Accordingly, individual empowerment is inextricably linked with a growing middle class, greater educational attainment and the widespread use of new communications and manufacturing technologies.

In comparison to other parts of the world, the growth of the middle class in African societies has still been limited. However, some countries such as Nigeria, Rwanda and South Africa and the so-called African Lion states have set the stage for a small but fast-growing middle class.

This evolution constitutes an encouraging sign amidst rising global income disparities and provides the key to fighting poverty.

Urbanization: In the decades to come, the vast majority of the world’s population (an estimated 6.3 billion people) will live in big cities, primarily because of better job prospects. In this respect, Sub-Saharan Africa is leading the world.

Apart from growing environmental concerns, surging urbanization is widely linked to higher school completion rates, a better provision of new technologies and modern infrastructure and a higher probability of attaining middle class income status.

By 2030, Africa will have surpassed Asia as the region with the highest urbanization growth rate.

Demographics: According to the NSC, demographics pose another global mega-trend. Ageing populations in the Western hemisphere, China, Taiwan, South Korea and Japan will put Sub-Saharan Africa in a unique position as the demand for cheap labour will persist and, thus, in the long run, only Africa will be capable of satisfying the global need for a young and cheap labour force.

Consequently, global migration will increase, not decrease, since industrialized nations will experience severe workforce shortages and a significant drop in global income share due to reaching post-mature demographics by 2030. The median age of Sub-Saharan Africa is the only one that will not have increased by then.

It’s a rocky road ahead

Most of the Sub-Saharan economies are moving in the right direction. Intra-African trade is surging, Kenya and Nigeria are amongst the world’s top 10 fastest-growing countries in 2015, and despite massive fluctuations in 2014, countries including Angola, Rwanda, Zambia, Namibia, Gabon and South Africa belong to Africa’s current top economic performers.

However, there might be indicators that point in the opposite direction, substantiating severe potential risks if the impending challenges are not met with determination, deliberation and sustainability.

Geopolitics and the deterioration of political stability of parts of the region are taking a heavy toll on countries such as Nigeria, Mali, Kenya, Central African Republic, Sudan, South Sudan, the DR Congo or Somalia.

In the light of changing patterns of violence accounting for a decrease in large-scale organized political violence vis-à-vis an increase in electoral and religious violence, the widespread incapacity of Sub-Saharan governments to deal with sub-state terrorism, the stagnation of regional governance building processes and the increasing danger of intra-state conflict in the region pose serious non-economic threats to a rising Africa until 2030 and beyond (see also Fragile States Index).

Moreover, if Sub-Saharan Africa does not succeed in diversifying its economies amid tumbling global commodity prices by reducing its dependence on natural resource extraction as its primary industry; in challenging the Chinese state-led model of economic development which hampers the building-up of national industries, secondary resource processing within African economies and the emergence of more democratic political regimes; and in increasing sustainability in terms of the provision of healthcare services, the use of FDI and raw materials, Sub-Saharan Africa will fall way short of expectations.

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