[Standard Bank] 10 years on – reviewing the trends driving Africa’s allure

By Simon Freemantle, senior political economist, Standard Bank

A decade ago, amidst growing talk of Africa’s ‘rise’, Standard Bank Research published a series of reports detailing the five trends that we believed captured the continent’s structural allure. These trends looked at demographic (and income) changes, urbanisation, technological leapfrogging, the broadening of financial access, and the abundance of the continent’s untapped (and primarily agricultural) resources.

Over the past six months we have revisited, and updated, this series. Our aim in doing so has been twofold: (1) To test the robustness of our original thesis; and (2) to assess which economies have best harnessed these underlying structural opportunities over the past decade and are, as such, better placed to continue to progress in the decade ahead. We held to the original trends, except for the final trend, which we altered from a focus on resources and agriculture, to a consideration of the path of political and institutional progress in Africa since 2000. Reforms in this area (related to peace and stability, democracy and the rule of law) will determine the continent’s future trajectory.

In this updated series, three primary conclusions have emerged through the review process.

First, the progress and potential that animated the original series a decade ago remains intact and has, in some instances, exceeded expectations at an aggregate level.

Regarding demographics and income: Since 2010, Africa’s collective GDP has grown by 55%; its population has swelled by 300m people (meaning it now accounts for 17% of the world’s population, up from 15% in 2010); and its middle class has meaningfully matured (today there are around 180m middle class households in Africa that collectively account for half of the continent’s total consumer spending). There have been important gains in life expectancy (from 57 in 2010 to 63 in 2020), infant mortality rates (with deaths down from 68/1,000 live births in 2010 to 47/1,000 today). And as socio-economic support deepens, fertility rates continue to fall – the continent’s overall fertility rate stands at 4.44 today, and is expected to reach 3.0 by 2050.

Regarding urbanisation: Today, 44% of Africa’s population is urbanised, up from 39% in 2010. This implies that since 2010, Africa’s total urban population has grown from 408m to 588m – a quite staggering 44% increase (and a rise of 180m people).

Regarding technological leapfrogging: Today, there are over 840m mobile subscribers in Africa, up from 400m in 2010. Meanwhile, around 90% of Africa’s population is covered by a mobile cellular network, and 80% is covered by at least a 3G mobile network, up from 50% five years ago. And the number of total internet users has lifted by 260% since 2010.

Regarding financial inclusion: Between 2011 and 2017, the share of adults in sub-Saharan Africa (SSA) with a bank account almost doubled, from 23% in 2011 to 43% in 2017 (a nominal increase of 160m people). These gains were broadly shared, too – the share of accounts held by the poorest 40% of the SSA adult population grew from 13% to 32%, while the wealthiest 60% of the SSA adult population saw growth from 29% to 50%.

Regarding political and institutional reform: Since 2000, 21 countries in Africa have seen improvements in their World Bank World Governance Indicator (WGI) ‘peace and stability’ scores, while over half of the continent has achieved either modest or meaningful gains in the WGI ‘voice and accountability’ (democracy) measure since 2000. Separately, according to the Centre for Systemic Peace, the number of African democracies has doubled since 2000.

Second, the past decade of change on the continent has emphasised just how deep and pervasive the continent’s divergences are. Indeed, the polarities in Africa’s economic and institutional experiences are in some instances so vast that generalised references to the continent’s progress are almost irrelevant. For instance, at the extreme ends:

Fertility rates range from 6.95 in Niger to 1.39 in Mauritius; the average Tunisian will live until 76, while the average Chadian will live to 53; and less than 10% of adults in South Sudan and Burundi had a bank account in 2017, compared to 90% in Mauritius and 82% in Kenya. And, while around 50% of households in Tunisia have direct access to a computer, the same can be said of just 6% of households in Tanzania, Malawi and Niger.

In addition to this, there has been a definitive shift in the economies that broadly drove Africa’s 2000-2010 growth story (mostly large, commodity-rich countries such as South Africa, Nigeria and Angola) to those that have inspired much of the continent’s post-2010 ascent (here countries such as Kenya, Tanzania, Ethiopia, Rwanda, Cote d’Ivoire, Ghana, and Senegal have registered the most prominent gains).

Third, technology presents arguably the most compelling opportunity for African economies to overcome powerful and resilient obstacles to greater progress. Throughout the series, we emphasise the pervasive challenges that continue to stifle more prolific growth and progress. These are perhaps most pronounced regarding the limitations to political reform, and the threats posed by unmanaged urban and population growth rates in institutionally weak African markets. To be sure, the risks inherent in Africa’s urbanisation trajectory are enormous, including: (1) Chronic infrastructure weaknesses; (2) poor urban planning; (3) the mushrooming of urban slums; (4) climate risks; and (5) political instability. Yet, at least, the area that appears to present not only the most prolific current opportunities, but also the ability for Africa’s systemic challenges to be more nimbly overcome, is in its capacity for technological leapfrogging.

Evidence of Africa’s enormous potential is captured in estimates of its iGDP (which currently stands at around USD100bn and could reach USD180bn by 2025, and USD700bn by 2050).

And in rising interest in Africa’s tech ‘revolution’ – it has been estimated that USD2.02bn was raised in 2019 in venture capital (VC) equity funding for African tech start-ups. This represented a profound y-o-y increase of 74% from total funding of USD1.16bn in 2018. Meanwhile, last year, there were believed to be 618 active tech hubs in Africa, up from 442 in 2018 and 314 in 2016.

In all, the series points to a continent that has registered remarkable progress in deepening the quality of its post-2000 ‘rise’. However, the series equally points to the enormous challenges that face Africa in ensuring that such progress is more evenly shared across the continent; and that underlying political and institutional shifts enable nascent gains to become more durable. It is likely that the recovery from the COVID-19 crisis will be patchy, with the economies identified across this series as having made sustained and meaningful post-2010 gains better positioned to limit the degree to which the crisis disrupts their medium-term trajectories.