The working population of sub-Saharan Africa is expected to increase more than two-folds by 2050, becoming the largest in the world, and wielding enormous potential for economic growth, S&P Global highlights.

According to the international ratings agency, the increase will add up to 3 percentage points to average annual GDP growth in the next 10 years among key economies in the sub-region.

Noting the demographic transition regional economies are undergoing, S&P Global’s Senior Economist Satyam Panday indicated that this shift appears the most significant in history.

“Unprecedented declines in fertility rates, lower child mortality, and increases in life expectancy will have crucial effects on the region’s demographic dynamics for decades to come.”
Satyam Panday, S&P Global’s Senior Economist

Fertility rates declining in sub-Saharan Africa but still high

It is with no doubt that the age composition of a country’s population is foundational to the nation’s economic progress.

“For the sub-Saharan African region, which has experienced subdued economic performance over the past decade, demographic transition may be a chance for stronger growth, but it could also be a major source of instability and fragility.”

Statistics reveal that fertility rates have been declining rapidly in the sub-Saharan Africa since 1990 to 4.6 in 2020 from 6.3. The UN recently projected that fertility rates in the region will continue to fall, and by 2050, this rate will decline to the levels close to natural replacement rate of 2.1 births per woman for some regional economies, the report indicates.

Relative to advanced and emerging economies, the fertility rates are still significantly higher. Fertility rates in Southeast Asia and Latin America are expected to be around 1.85 by 2050 from 2.2 in 2020.

Meanwhile, the only region in the world that is expected to have fertility rates above the natural replacement rate is the Middle East and North Africa (MENA), projected at 2.5 in 2050. Also, the average fertility rate across high-income economies is currently around 1.6 and is expected to stay around this value.

Furthermore, the situation among SSA countries is not even. While fertility rates are in ongoing steep decline in South Africa, Kenya, and Ethiopia, some countries including Nigeria are still experiencing rates above 5.

According to UN projections, Nigeria is expected to reach a population of 400 million by 2050 (up from 206 million in 2020), a rate expected to be the fourth-highest in the world.

At the current rate, SSA countries could be set for a “demographic dividend,” the S&P report notes. The demographic dividend refers to the increased share of working-age people compared to non-working (i.e. children or older people). With fewer people to support, a country is presented with a window of opportunity for rapid GDP growth.

However, governments’ economic policies will be critical to the ability of SSA countries to capitalize on the workforce boom, and Panday suggested that at present the region risks being ill-prepared to reap the benefits of the demographic transition.

Policies to implement in order to avert the impending danger

“If jobs are not created in tandem, the demographic dividend could become a source of instability, since the relative share of young unemployed people would increase. If governments do not invest in education, access to high-quality education is not improved,” the report notes.

“In this case, families will not be able to invest in better education for their children, so the increase in savings won’t increase human capital. If banking services are not widely available and capital markets are not developed, an increase in savings won’t necessarily correspond to an increase in investments.

“At present, sub-Saharan Africa risks being insufficiently prepared to reap the benefits of this demographic transition and, without correct and timely policy responses, the region’s catch-up with developed economies may take a lot of time.”

For sub-Saharan Africa to reap the benefits of this demographic transition, the report highlights that investments in human capital are necessary to reap the benefits of the increase in savings. Also, investments in fixed assets are regarded as critical, as capital-deepening raises labour raises labour productivity and creates more possibilities for higher added value production.

For example, in Singapore, capital stock per capita has increased 11x over the past 50 years, while it grew only by around 50% in Nigeria and South Africa. In Ghana, capital stock per capita has been almost unchanged.

Moreover, sustainability of policies are also crucial, as population growth puts intense pressure on the natural environment, the report notes.

Sub-Saharan African cannot afford to lose out on the growth potential that this demographic transition could accelerate should timely policies be implemented to ensure a catch-up.