Is Africa the next China?

One of the questions that arose as we looked at this year’s trend updates was “is Africa the next China?” While researching the trends, we continually saw that Africa exemplifies each of the Megatrends: Rapid Urbanization, Changing Demographics, Hyper Globalization, and Accelerated Innovation.

The media has largely colored our perception on Africa. We typically hear about government corruption, war-torn landscapes, arid deserts and medical crises.

However, Africa is so much more than that. Their financial markets are becoming digitized, countries are experiencing high sustained growth rates, there’s a growing middle class, a burgeoning tech sector, and stabilizing democracies.

Rapid Urbanization

In our first Megatrends report, we shared that Africa’s population is expected to surpass China and India in 2022. In fact, it is expected to double to 2.4 billion by 2050, and by 2100, the African population will represent 40% of the global population.

This population growth is driving the Rapid Urbanization of African cities. Sub-Saharan Africa is urbanizing faster than any other place on the planet. By 2025, Africa will have three megacities comprised of more than 10 million people each, with Lagos, Nigeria projected to be the largest city on Earth by 2075.

By 2100, the African population will represent 40% of the global population.

Productivity in those large cities is three times as high as in rural areas, resulting in a growing middle class consisting of 1 billion Africans by 2060.

Urbanization has been a leading indicator of productivity and prosperity. When we look at the ratio of urban dwellers to rural dwellers, Africa is nearly as urbanized as China. In the next 15 years, several African cities will experience an over 50% increase in their population.

Given these changing dynamics in Africa, it is safe to say that Rapid Urbanization will be with us for decades to come, creating new opportunities and growth.

Changing Demographics

Presently, Africa has the largest population of people under 20 years of age. Combined with high birth rates and decreasing infant mortality rates, this youth bubble will lead to Africa having the world’s largest workforce population by 2035, exceeding China & India.

The world’s eyes are turned toward Africa’s growing workforce and market of one billion people, including a growing middle class. Investors also see significant opportunities to invest in Africa’s non-commodities sectors: financial services, construction, and manufacturing.

However, Africa must deal with their current challenges first. The Africa region bears more than 24% of the global burden of disease but has access to only 3% of the world’s health workers and less than 1% of the world’s financial resources. 29 of the 46 countries in the Africa region have fewer than 12 healthcare providers per 10,000 inhabitants, in some countries going as high as 1 to 50,000. In the US, active physicians (not counting nurses, technicians, etc.) are approximately 300 per 10,000 inhabitants.

Each day, New York City consumes the same amount of electricity as all of Sub Saharan Africa combined.

Africa has the lowest per capita energy use of any continent. Each day, New York City consumes the same amount of electricity as all of Sub-Saharan Africa combined (excluding South Africa). In 11 African countries, more than 90% of people go without electricity.

There are 127 million children of primary school age in Africa. Roughly 50% of these children — 61 million in total — will reach adolescence without basic learning skills (numeracy and literacy), and only 6% receive tertiary education.

Despite all of these challenges, conceptions of Africa are also giving way to opportunity. With a wealth of natural resources, countries are experiencing high-sustained growth rates, but underemployment could become a huge social disaster.

Hyper Globalization

Increased globalization and connectivity are giving rise to the Silicon Savannah. With over 340 million Africans on the Internet and 99% of those via handheld devices, this is more than all of North America.

Many multinational companies are recognizing this trend and the opportunities that Africa represents. Technology companies like Microsoft, Google, IBM, and most recently Facebook are making investments to address the growing market, but also tap into the growing talent. Recently, GE announced it will invest $2 billion to developing facilities and infrastructure, improving supply chain and training workers.

With incubators, accelerators, co-working spaces and other technology hubs, Africa currently has over 300 active hubs in 93 cities across 42 countries. The top five countries — South Africa, Kenya, Nigeria, Egypt, and Morocco — account for 50% of the tech hubs. Awareness of these tech hubs is increasing as indicated by 1.5 million followers on Facebook and more than 600,000 Twitter followers.

Hyper Globalization is causing the world to become smaller. Successful business models, innovation practices, and technologies are finding fertile soil in Africa.

Accelerated Innovation

Necessity is the mother of invention, and that is the case when considering the infrastructure deficiencies in Africa.

For example, most of Africa’s rural populations do not live within reach of all-season roads. As a result, they are not capable of participating in any meaningful entrepreneurial activities. In middle-income countries, about 60% of rural people live within two kilometers of an all-season road.

Technology disruption in Africa is addressing this lack of fundamental infrastructure. The absence of these fundamental infrastructures is leading to “leapfrogging” where new technologies are being adopted without being burdened by old legacy systems. And that leapfrogging has the potential to flip the common narrative, allowing emerging economies not to play “catch up” but to be leaders in development.

Economists project that Africa’s GDP growth is about 30 years behind China and 20 years behind India.

If we look at global economies over the last 150 years we will see that every economy grows, some are just delayed. And Africa is simply catching up. Economists project that Africa’s GDP growth is about 30 years behind China and 20 years behind India. Based upon the wealth of natural resources, many sub Saharan African countries have seen world-leading growth.

African leadership is not standing still. Diversification of industries has enabled several African countries to move beyond resource market dependencies. Commitments to a unified Africa have increased the stability of African economies and the prevalence of democracies. If there is any continent that can do what China has done over the last 30 years, it will be Africa in the next 30 years.

African nations have a compelling opportunity to seize a share of the roughly 80 million jobs that China will export as its manufacturers lose competitiveness. In an industrial zone outside Addis Ababa, the Chinese-owned Huajian factory — which opened in 2012 and became profitable in its first year of operation — reportedly plans to expand its workforce to 30,000 as part of a $2-billion investment. One more indication that “made in Ethiopia” could become the next “made in China.”

While we must keep in mind that Africa is a divided continent of 54 countries, unification is occurring. Africa has a 50-year vision of establishing a continent-wide economic and monetary union. In addition to becoming a strong and influential global player and partner, valuing good governance, democracy, human rights, justice and a rule of law, Africa also maintains a strong cultural identity, values and ethic.

And so the question remains, will Africa be the next China?