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Unleashing Africa's potential as a global economic powerhouse in the decades to come (report)

Thursday, 19 October 2023 19:15
Unleashing Africa's potential as a global economic powerhouse in the decades to come (report)

(Ecofin Agency) - Africa has the potential to become the main driver of economic growth in the world in the coming decades. Aware of this, the American think tank Atlantic Council issued a report on October 5 presenting the key steps to be taken to unleash this potential to its fullest.

The Atlantic Council believes that the young African population, the abundant natural resources, and the continent's strategic geographical location are all assets that can be leveraged to achieve the goal. “Africa’s Economic Renaissance - Reimagining the Continent’s Role in Revitalizing the Global Economy”, the report mentioned earlier, noted that the global economy has entered a long slowdown period over the last two decades. Between 2017 and 2021, the average global growth stood at 2.4%, compared with 3.7% between 1996 and 2000.

Almost all the levers that had sustained growth and prosperity in the early 90s have now weakened. Even before the coronavirus pandemic, global growth was already slowing due to an aging population, slowing productivity, rising levels of public debt, more frequent and severe natural disasters, and increasing barriers to trade and the free movement of people.

The situation was further exacerbated by consecutive shocks linked to the coronavirus pandemic, the war in Ukraine, and rapid rate hikes to combat inflation. Combined with pre-existing structural factors, these shocks have created strong headwinds for the global economy and its growth outlook over the next few years.

If nothing is done to revitalize the economy, the world could be facing a "lost decade". According to World Bank forecasts, global GDP growth is set to fall to a three-decade low of 2.2% a year between now and 2030.

A huge consumer market and an abundant workforce

The Atlantic Council document indicates that targeted and internationally-coordinated policies can, however, help the global economy to recover. These policies include increasing the participation of females and youths in the labor force, facilitating the movement of labor, reducing costs and barriers to trade, and significantly reducing greenhouse gas emissions to limit global warming.

In this context, Africa has a crucial role to play, thanks to its many assets and comparative advantages. While all regions of the world are affected by demographic aging, the share of the population aged 65 or over on the continent has remained at barely 3% over the last four decades. With almost two-thirds of its population under the age of 30 and 40% under the age of 14, Africa is the world's youngest continent- which is an enormous labor pool.

The continent's population is also set to double by 2050, from 1.4 billion to 2.8 billion, offering an enormous consumer market that will be the main driver of global demand for goods and services.

Another good point is that Africa has abundant and highly diversified natural resources. In particular, it is home to almost 30% of the world's mineral reserves, 12% of its oil reserves, and 8% of its natural gas reserves. The continent also has the world's largest reserves of cobalt, diamonds, uranium, platinum, and rare earths. The importance of most of these elements to the global economy is growing rapidly, particularly in strategic high-tech industries such as semiconductors, electric batteries, and clean energies.

The continent is also home to 65% of the world's uncultivated arable land, making it essential to long-term global food security, as well as huge renewable energy resources. For example, the installation of solar panels on just 1% of the Sahara's surface area would be more than enough to meet the electricity demand of Europe, the Middle East, and Africa combined.

Last but not least, Africa's strategic geographical position facilitates trade with all other regions of the world. The continent is surrounded by seas and oceans on all sides. Of the continent's 54 countries, 38 are coastal states. In conclusion, Africa has huge potential to achieve remarkable growth rates under certain conditions.

Substantial investment in infrastructure

By way of comparison, despite its limited natural and energy resources, a country like Vietnam has managed to multiply its GDP sevenfold over the last 30 years (from $45 billion in 1990 to $332 billion in 2021). If Africa can achieve similar growth rates over the next three decades, it will have the potential to contribute $20,000 billion to the global economy by 2050. The continent has already succeeded in tripling its GDP from $900 billion to $2,700 billion between 1990 and 2021. Over the same period, Ethiopia's GDP increased by 7.6, more than the rate recorded in Vietnam. Ghana and Tanzania multiplied their GDP by 5 and 4.6 respectively.  Robust, inclusive, and green growth in Africa will not only lift hundreds of millions of people living on the continent out of poverty but also accelerate the global economic revival.

To make that possible, the report suggests that substantial investment should be made in the continent's failing and inadequate physical and social infrastructure. This, in particular, requires a stronger and more coherent commitment to the continent from multilateral financial institutions, more balanced and transparent cooperation agreements between African countries and the rest of the world, and long-term partnerships with the private sector.

Translated from French by Firmine AIZAN

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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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