Business Day Opinion by Abu Addae
Possibilists allow data and possibilities to emerge and enlighten us — and the data and possibilities we possess on this continent are potentially quite astounding in
Few topics better divide people into two warring camps of optimists and pessimists than the state of Africa’s development. The optimists argue for the “Africa Rising” narrative, citing some well-publicised feat of technological entrepreneurship or some bold new initiative, while the pessimists point to the poverty, rampant corruption and poor infrastructure the continent is so well known for.
But beyond the drama of this debate far quieter and more profound forces are at work. Understanding these forces allows us to see the possibilities and the potential outcomes.
Hans Rosling, that late great student and illustrator of human progress, described himself as being neither a pessimist or an optimist but a possibilist — someone who stares straight into the facts, tries to block out the noise from the flaws in thinking we all have as people, and allows the data and the possibilities to emerge and enlighten us.
Africa’s population is expected to be 2.5-billion by 2050, reaching 4-billion by the end of the century, according to the UN. Worryingly, the number of people living in extreme poverty actually increased in Africa between 2000 and 2010, according to the World Bank. This state of affairs seems to make the case for pessimism and it is tempting to either extrapolate this dismal trend into the future or to deny it as a blip and stick with optimism.
Perhaps the more useful question is to focus on the possibilities and ask what has to happen for Africa to develop? Framing it this way makes the development question much more tractable and concrete, avoiding the futility of comparing crystal balls.
For the discussion to be meaningful we have to define what exactly would represent progress in Africa. The framework introduced in the book Factfulness (Rosling et al) is particularly useful because rather than the usual dichotomies of “developed” and “developing” countries, they focus on how people live, dividing this into livelihoods at four levels of income. Level 1 represents extreme poverty — life on less than $2 a day. At the other end of the spectrum is level 4 — where you can afford to save, take risks like starting a business or change careers, buy a car or a home, experience travelling for leisure and save for your children’s university.
These categories and research at LifeCheq puts a level 4 middle-income lifestyle at about $1,000 a month, something only about 16-million Africans will enjoy in 2020, about 1.25% of the population. The size of this segment globally is around 14% of the population. If current trends continue we will, even optimistically, have a level 4 segment of just 3% of the population by 2050. Hence the line of expectation that is built into mindsets about the continent and its future.
The coming demographic boom on the continent can indeed be a major problem, but seen through the eyes of a possibilist could also be the very catalyst for the inclusive economic development needed to shift the projected 3% level 4 middle class to something closer to 14% by 2050.
The 2.5-billion Africans on the continent translate into 800-million children under 14 by 2050. What is the potential market for healthcare, food, education and retail products for these children? The coming demographic boom also means a working-age population of 1.6-billion people, the largest in the world — so consider the financial services, transport and logistics, manufacturing, consumer goods, fashion and beauty, entertainment and energy needs of these people.
New, high-growth markets create the possibility of high-income growth as the new jobs require higher productivity from workers, and rewards them with higher wages. Possibly the most well-known example of this phenomenon is Ford’s $5 a day wage for assembly line workers in 1914, turning them from low-level labourers earning $2.34 a day to core target customers for the very Model T cars they were manufacturing.
The sheer size and growth of the markets in Africa will demand innovation: we cannot expect level 4 healthcare, education and financial services models to work within levels 2 and 3 budgets. Professionals, executives and entrepreneurs who are reading this article are presented with the opportunity of the century to apply their skills to solve these problems and enjoy significant success from doing so.
It can be truly surprising the kind of catalyst required to shift the trajectory. If the net effect of solving these problems means that 3% of the total population (or just 40-million of the roughly 600-million people at level 2 and 3) move up one level every eight years (15% per annum income growth), and spend their new disposable incomes locally (generating an additional 1% of broad-based GDP growth), then the picture starts to shift.
The size of the population enjoying a level 4 lifestyle could reach 4% by 2050 (30% higher than the current projection), numbering about 100-million Africans. By 2080 we see 330-million Africans at this level (10% of the population), and one of the largest such groups in the world at that time.
But that is not the truly surprising part. In The Prosperity Paradox (Christensen et al), the authors illustrate the power of new market innovations to drive down the cost of goods by targeting non-consumers — those who currently don’t have access to the service at all because the price is too high. Citing examples from healthcare in India to microwaves in China, they show how aiming for lower costs makes a middle-income lifestyle more affordable.
If we allow for the potential impact of such innovations on the continent the numbers look even more remarkable. Let’s be conservative: say goods such as a car with the same quality and functionality as a 2018 entry level model get 40% cheaper every decade until 2050. By then, the number of Africans that enjoy a 2018 level 4 lifestyle will be over 280-million (11% of the population — and much closer to the current global average), reaching a staggering 715-million (23% of the population) by 2080. In the process, this would create a $14-trillion market by 2050, reaching $80-trillion by 2080. Surely, that would be enough to warm the heart of even the most incurable pessimist?
At a conference with members of the AU, Hans Rosling thought he was being optimistic when he said to Nkosazana Dlamini-Zuma that he hoped his grandchildren would come to Africa as tourists and travel on the new high-speed railways that were being planned to be built. She reproached him for having no real vision — it would be her grandchildren that would travel to Europe as welcome tourists rather than unwanted refugees, and travel on his country’s high-speed trains. Rosling had to admit that even for someone who had spent his whole life trying to cultivate the ability to see possibilities, his imagination was still lacking. It was still too hard to see beyond his own frame of reference, that even he would likely still be surprised. Africa will likely surprise us all.
• Abu Addae, an actuary, is CEO and co-founder of tech-based financial consultancy LifeCheq.
Source Business Day