“North Africa, which is well supplied with electricity, is the first region likely to industrialize, led by Morocco and Egypt,” Charles Robertson, chief economist at Renaissance Capital told FLA.

According to economist Charles Robertson, low population growth leads to higher economic growth. However, the economist disputes the conventional wisdom that having a young workforce is a good thing. The most important thing, he says, is how many children those young people will have.

Fertility reduction and economic growth, a close correlation

When a family has five children, all of the family’s income is used to meet immediate needs. This makes it impossible to create a large pool of savings, which means that banks are unable to provide cheap financing to the private sector or the government.
“Asia’s rapid economic growth in the second half of the 20th century was made possible by small family size,” says Robertson. Indeed, with families of less than three people, the ratio of bank deposits to GDP takes off.
Today, he says, Morocco already has families small enough to support economic growth. Fertility rates in Egypt, Ethiopia, Ghana and Kenya could fall below three children in five to 15 years, reducing the cost of borrowing.
“By the 2040s, most of the continent will have experienced sufficient demographic change to be consistent with higher per capita GDP growth,” according to a study by Charles Robertson.
“We believe that Africa will be a $29 trillion economy by 2050-2060, more than the combined GDP of the United States and the eurozone in 2012,” the economist continues.

Infrastructure deficit

Nevertheless, the challenge is to close the infrastructure gap on the continent and ensure that countries with high family sizes do not remain in extreme poverty for decades until the necessary demographic changes take place.
Businesses need basic infrastructure to operate, and per capita incomes of $2,500 to $3,000 are essential for the private sector to help countries achieve middle-income status, the economist said.
Robertson said the IMF’s Special Drawing Rights (SDRs) could help finance infrastructure, digitization and the transition to renewable energy sources.

SDRs, a miracle cure for the crisis?

Last August, the IMF decided to make available about $650 million in special drawing rights. The British economist sees this allocation as a “very late” response to the Covid-19 crisis, taking about as long as the response to the great financial crisis that began in 2008 – the allocation took place in 2009.
Of the $650 million, $34 million will be made available to Africa in the first round, and $65 million may follow later.
The SDR decision has “changed the tenor of the African debt debate,” away from concerns about where the next default might occur, and has “put to rest most of the concerns about a debt crisis in Africa,” the economist says. “Sub-Saharan borrowers now look safer from a 12-month perspective.

Thus, “demographic change is the game-changer for Africa’s growth prospects,” concludes Charles Robertson.