With a rapidly rising population, Africa needs to ensure its demographic boom is translated into a dividend rather than a curse. In this exclusive op-ed Sebastiaan Tan, CEO of Caspar Coding, argues that the continent needs to invest in human capital and embrace a technological revolution in order to meet its development goals.
“Forming your worldview by relying on the media would be like forming your view about me by looking only at a picture of my foot.” This is Hans Rosling’s takeaway from his book ‘Factfulness’, in which he describes ten misconceptions about the world and how everyone seems to get the world (and in this context Sub-Saharan Africa) devastatingly wrong.
Public audiences all over the world consistently overestimate poverty in the world, underestimate life expectancy and generally think Africa is quantitatively worse than the data indicates. This misconception may lead to the biggest oversight of opportunity in their lifetime.
The current population of Sub-Saharan Africa is estimated to be almost 860m strong. In terms of future projections, the World Bank estimates that by 2060, the population of Africa could be as large as 2.7bn people. Nigeria, Ethiopia, Tanzania, DRC, Niger, Zambia, and Uganda will contribute the most, with Nigeria projected to overtake the USA’s population by 2050. Currently, over 60% of Africa’s population is under the age of 25, meaning that it has one of the largest, if not the largest youth populations in the world.
This translates into the biggest demographic dividend on earth where economic prosperity is the result of rapid falling birth rates, improved health and the subsequent shift in population age structure. Currently 60% of the African population is under the age of 25 and fertility rates are falling. With fewer births each year, a country’s working-age population grows larger relative to the young dependent population.
So, with more people in the labour force and fewer children to support, a country has a window of opportunity for economic growth. Africa’s working age population is expected to grow by 450m people by 2035. There is an enormous potential so to speak, but what is the key to unlocking this potential and catapult Africa into prosperity? What is needed to put Africa in the driver’s seat and complete the shift from poverty to power? The answer: human capital investment.
Human capital theory
In the late 18th century Adam Smith was the first to define human resources as a type of fixed capital next to machines, land and property. The acquisition of skills and knowledge should be viewed as a form of capital stock and a means of production. Following in his footsteps, Becker argued that human capability can be viewed as a product of talent on one hand and investment in knowledge and skills on the other, which is referred to as human capital investment.
With relation to Africa, we identify that there is no lack of talent. I believe that talent is distributed evenly among everyone ever born; yet, in contrast, opportunities to put this talent to work are not evenly distributed. This is the slogan of talent hub Andela who specialise in training African software developers from offices across the continent. Companies like Andela foresee this shift in demographic structure, and act on it by bringing the brightest minds into tech jobs.
For Africa to be prosperous and become competitive, it has to put its talent to work. In the recent past, mankind has seen such economic miracles in the form of the Asian Tigers including Korea, Hong-Kong, Taiwan and Singapore, which have found a way to transform themselves from poverty to prosperity. This transformation can be directly attributed to the accumulation of human capital instead of traditional features of production like capital and labour. Further analysis of the eastern success story found that transformation was achieved by: investing in education, improving infrastructure, employing R&D to enhance innovation, and improving institutional regimes.
Indeed, human capital works in two distinct ways. On the one hand by educating people, it enhances a comparative advantage to other countries, which results in economic development. On the other hand, better educated people within the market increases competition and motivates private enterprises to engage in the development of technology, which in terms drives innovation.
In conclusion, you could say that the economic miracle of the Asian Tigers substantially relied on human capability. This can offer valuable lessons for African economies in their current pursuit of prosperity.
So how should African countries provide the platform for developing skills and knowledge sharing? Simply following in the footsteps of the Asian Tigers won’t do the trick. This is because the Asian Tigers started their transformation from poverty to power almost four decades ago. The world has evolved since then as new technologies have been introduced and adopted. Therefore, a different approach should be taken into account.
So where should they start? African economies are still the world’s poorest and least developed economies in the world. One could view this as a bad thing, however there is a huge benefit. It actually provides a big opportunity. An opportunity every other high-income economy lacks: the collective choice to embrace emerging technologies.
The introduction of M-pesa already illustrates this phenomenon. M-Pesa is a money transfer service launched by Safaricom, the largest mobile network operator in Kenya and Tanzania. The service allows users to deposit money into a debit account operating from their phones. Users are able of to redeem deposits, transfer money and pay bills.
In 2012, 17m M-Pesa users had been registered in Kenya alone. The service has been lauded for including millions of people into the financial system and for reducing crime rates in otherwise largely cash-concentrated countries.
Why is this an opportunity every high-income economy lacks? Indeed, this seems odd as high-income economies are already ahead of the technological curve and possess more knowledge and resources to embrace emerging technologies. The answer lies in the notion that high-income countries resist systemic change due to their size and the potential of destabilization or disruption.
African systems haven’t yet been established for very long and are thus in their formative period. Today they stand on the cross section of defining how the continent will develop. Africa therefore has the opportunity to lead the world in emerging technologies. The continent should take the leap and integrate and embrace a culture of working with AI.
AI became a buzzword over the past couple of years and the word is used in many contexts. African leaders, entrepreneurs and investors facilitating the integration of AI must understand the benefits and risks in order to respond accordingly and to ensure that their people reap the benefits of this digital revolution. Society should find a balance between fostering adoption and simultaneously keeping control.
Education systems in Africa also need adapt to the future and focus on the fields of science, technology, engineering, and mathematics (STEM) from an early age. Along with proactive governments, investors, corporations and entrepreneurs can also help. They ensure that the African people reap the benefits on this digital revolution by investing in them. They must support the long-term growth of people (and profits) through providing the most relevant tool: capital. They can do this through investing in companies that use AI for social and developmental good or by investing in tech hubs.
‘Fear the robots’
What determines vulnerability to automation? It is not necessarily a distinction between blue or white colour jobs; it’s about whether jobs are perceived as routine. Machines already perform routine manual labour, but are now also able to perform some routine cognitive tasks. In a widely noted study published in 2013, Carl Benedikt Frey and Michael Osborne examined the probability of computerization for 702 occupations and found that 47% of workers in America had jobs at high risk of potential automation. They concluded “recent developments in machine learning will put a substantial share of employment, across a wide range of occupations, at risk in the near future.”
For African countries this would mean that aiming to become the next manufacturing hub, might be a dangerous focus as it is vulnerable to automation. Therefore “working hard with your hands” in order to become rich could backfire massively. Africa does not need to follow the route of the Asian Tigers. By investing in factories and low-skilled employment, Africa would sign its own death sentence as machines will increase worker productivity, and put downward pressure on factory wages. Africa should embrace AI and facilitate people’s acquisition of knowledge and skills to use artificial intelligence to their advantage.
Africa’s enviable tech talent
Africa contains the largest untapped workforce potential on earth. In order to quantify the workforce potential one can calculate the old-age-dependency ratio and put this into perspective with Europe. The dependency ratio says a lot about a country’s potential, by revealing what percentage of the population is entering its workforce, saving money, and contributing to the pool of capital available to invest rather than drawing down pension funds.
The total population of Europe is declining in the period between 2020 – 2050, whereas Africa’s population will nearly double. Similarly, we see that Africa’s “pyramid base’’ is getting smaller in 2050 compared to 2020. This illustrates that birth rates are declining, indicating a growing workforce as there are less people who need to be taken care of.
In order to put this enormous potential to work, talented Africans in the tech scene should be deployed into a competitive business environment. The African tech industry is still in its premature state and infrastructure for integrating emerging technologies is lacking. This results in a mismatch between a large talented workforce, representing supply, and limited tech opportunities, representing demand.
Considering Europe, one can observe the opposite mismatch between a declining and aging workforce and increasing opportunities in tech. By 2020 the expected mismatch between supply and demand in Europe represents 500,000 jobs. Even if Europe would consider to re-educate their own workforce, this mismatch will still exist. In our viewpoint, the solution for Europe’s problem lies in Africa’s untapped potential. Ultimately, one should expect the demand for African tech talent to happen sooner rather than later.
Undoubtedly, from an African viewpoint, this will benefit the continent. When Africa delivers on its talented tech workforce, more and more African techies will land a job in a competitive business environment like Europe. They can put their acquired skills and talent to work, earning a competitive salary. Eventually and preferably, they will return to Africa fully equipped with knowledge and guidance, leading the way to prosperity.
Caspar Coding are a talent hub based in Kenya who link up African software developers with European markets.
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The views are that of the author and do not necessarily reflect the group or magazine.