By: Nghiinomenwa Erastus
Every month countries in Sub-Saharan Africa, including Namibia, receive more than 1,5 million people willing to work and participate in the economy – seeking employment.
The International Monetary Fund (IMF) highlighted its Regional Economic Outlook: Sub-Saharan Africa report released two weeks ago.
However, the fund has highlighted that population growth presents an opportunity for the region to utilise, providing a valuable opportunity for accelerated growth.
The international lender highlighted in the report that more than 1,5 million people enter the labour force every month.
“Within 10–15 years, more than half of the world’s new job market entrants will come from sub-Saharan Africa,” the report read.
Making the region potentially one of the world’s most dynamic economies and one of its most important markets, wrote the IMF.
Over the next three decades, the global population is set to grow by about 2 billion people, with half of that increase in sub-Saharan Africa alone.
“This represents the region’s single greatest challenge, but it also presents perhaps its greatest opportunity,” the outlook indicated.
The IMF assessment found that the region embodies a growing pool of human talent and ingenuity, with a billion more individuals interacting and seeking new ways to better themselves and their communities.
In contrast to many other regions, sub-Saharan Africa’s working-age population (25 to 64 years) grows faster than any other age group.
The IMF cautioned that capitalising on this potential will require bold, transformative reforms.
But the threat of climate change and the process of global energy transition also means that sub-Saharan Africa may need to adopt a significantly different growth model.
The first step in realising any potential demographic dividend, according to the IMF, is to ensure that the population is sufficiently healthy and well-educated to participate in the global economy.
In addition to a healthy and skilled workforce, sustained growth requires new job entrants to be matched with new job opportunities.
This, in turn, will require reforms to ensure a growth-friendly business climate and greater private investment.
These reforms have long been understood to be needed. They include enhancing the contestability of markets, removing key bottlenecks (such as unreliable electricity), levelling the playing field between public and private firms.
Moreover, the IMF wrote, aligning the treatment of firms in the formal and informal sectors, reducing red tape, improving governance, and broadening financial inclusion.
Portfolio inflows to emerging and frontier markets in sub-Saharan Africa totalled $4,4 billion between January and August 2021.
Although foreign direct investment declined by 12% to $30 billion in 2020 (faring better than in other regions), it is expected to grow only modestly in 2021 and gain greater momentum beyond 2022.
In line with an expected rise in commodity demand, the approval of key projects, and the finalisation of the African Continental Free Trade Area’s Sustainable Investment Protocol.
Sub-Saharan Africa is set to grow by 3,7% in 2021 and 3,8% in 2022.
This rebound largely depends on a sharp improvement in global trade and commodity prices.
While favourable harvests have also helped agricultural lift production.
However, the recovery is expected to be slower than in advanced economies, leading to a widening rift in incomes.
The IMF said this divergence is expected to persist through the medium term, partly reflecting different access to vaccines and stark differences in the availability of policy support.
Countries like Namibia, Zambia, and Angola are among more than 40 countries that have low growth prospects for this year and next year.
According to the IMF projection, the regional economic outlook remains extremely uncertain, and risks are tilted to the downside.
The recovery depends on the path of the global pandemic and the regional vaccination effort and is also vulnerable to disruptions in global activity and financial markets.
Aside from different levels of policy support, the crisis has also highlighted key differences in resilience across countries.
Again, comparing resource-intensive countries (like Namibia) with non-resource-intensive countries, the latter tend to have a significantly more diversified economic structure.
The IMF wrote that the degree of diversification helped mute the initial impact of the crisis and allowed these countries to adapt quickly and bounce back swiftly.
However, resource-intensive economies such as Namibia were hit the hardest by the crisis and are expected to recover relatively slowly.
The underlying mechanism is most likely multifaceted, as a country’s quality of institutions, governance, fiscal credibility, administrative capacity, business climate, degree of diversification, and resilience are all interrelated.
Moreover, the fund indicated that those countries that had been performing relatively well before the crisis are generally the countries that are expected to recover quickly.
Before 2020, the domestic/Namibian economy contracted by 0,1% on average since 2016 and further declined by 8% in 2020 as the Covid-19 pandemic set in.
In essence, the crisis has underscored and amplified preexisting differences in country-level vulnerability, worsening the extent of divergence across the region. Email: firstname.lastname@example.org