Earlier today, the asset management firm Bridgewater released a new research report about the growing population in Sub-Saharan Africa and what that could mean for the world’s economic growth.
In the following decades, the working-age population of Sub-Saharan Africa is expected to grow significantly, going from around 10% to 25% of the world’s total working-age population.
This could mean one of two things for this region, the report argues. With increased productivity, the region could be transformed into a driver of global economic growth. But it could also result in lackluster economic development if the region remains on the track it’s on—one of “anemic” economic development, negatively impacting both the region and the globe.
“To change this trajectory, developed economies need to dramatically increase financial support for the region and the private sector needs to increase allocations, which will require action by policy makers in the region and in developed economies,” Bridgewater CEO Nir Bar Dea wrote in the report’s introduction.
Barriers to growth and the need for “quality investments”
The report, authored by Devon Long and Eka Zhao, estimates that if the region can increase productivity growth by 3% to 4% for the next 25 years, it would be able to go from a 3% global output to a 10% global output.
In order to achieve this goal, however, investors would need to “address the infrastructure and human-capital gaps,” the authors write. This can be achieved by doing two things: closing the investment gap and increasing the quality of investments.
In other words, investments need to generate profits and social benefits that outweigh the cost of servicing them. This would allow the region to advance necessary resources including healthcare and education without the fear of going into debt.
International private capital is potentially the key to closing the investment gap, the report says, but there are barriers, including “high perceived risk,” underdeveloped infrastructure, “immature capital markets,” and fragmentation across the region.
The full report, done with the help of South Africa-based Harith General Partners, is available on the Bridgewater website.