Youthful and innovative potential holds key to region’s robust economic growth

With a fast-growing population and vibrant cities, Africa is poised to harness its resources and human potential to drive inclusive prosperity at home and globally, says a new report read by Jon Offei-Ansah

AFRICA is undergoing a transformative shift, driven by its youngest and fastestgrowing population, burgeoning cities, and bold innovations in various sectors, including fintech and clean energy, says a new report by global management consulting firm McKinsey & Company.

According to the report, Reimagining economic growth in Africa: Turning diversity into opportunity, the continent, projected to reach a population of 2.5 billion by 2050, presents a multitude of opportunities for robust and inclusive growth, utilising its abundant natural resources and human capital. It says, “By capitalising on these strengths, Africa can reverse the economic deceleration experienced in the past and pave the way for a prosperous future not only within the continent but also worldwide.”

Amidst the challenges faced by Africa, including a 35 percent decline in GDP growth between 2010 and 2019, as well as the disruptive impact of the Covid-19 pandemic and global geopolitical shifts, the report says there are success stories that provide valuable lessons. “Certain countries, cities, sectors, and companies within Africa have emerged as beacons of innovation, productivity, and growth, demonstrating that a one-size-fits-all approach does not apply to the continent. These models can serve as inspiration to invigorate the African economy and drive widespread development.”

While Africa's overall GDP growth outpaced its population growth, the number of Africans living in poverty still increased. This discrepancy highlights the need for a concentrated effort to boost per capita income growth and address the poverty gap. Nearly half of Africa's population resides in countries that have exceeded the continent's average growth rate, indicating the existence of viable models for inclusive growth. These countries, referred to as "consistent growers" and "recent accelerators," experienced higher-thanaverage increases in investment, exports, and urbanization, leading to increased productivity.

On the other hand, slower growth was observed in the remaining African countries, including Egypt, Nigeria, and South Africa. Additionally, ten of the smallest countries on the continent faced challenges in driving economic expansion. To overcome these obstacles, Africa must focus on improving productivity across sectors. The continent has the necessary human capital and resources to propel growth, particularly within the services sector, which has become the major driver of economic output. However, Africa's services sector productivity is the lowest globally, emphasizing the urgent need for improvement. Enhancing productivity in agriculture, where half of Africa's workforce is employed, is also crucial.

Looking ahead, the report believes that Africa's vast working-age population presents a unique opportunity for economic growth. By strategically deploying this labour force in highly productive jobs, the services sector alone could create at least 85 million net new jobs by 2030. “However, realising this potential requires Africa to match the productivity levels of Asia's strongest services hub, which could add a staggering $1.4 trillion to the continent's economy. Additionally, the agricultural sector, accounting for 49 percent of total employment, must continue to increase yields and add value to agricultural output to meet global standards,” it says.

To further drive economic progress, African leaders in the public and private sectors must explore opportunities within the continent. Currently, only a small percentage of Africa's trade is intraregional, indicating significant room for growth. The African Continental

Free Trade Agreement offers a pathway to reduce border constraints, enhance competitiveness, and encourage technology and talent flows. Sectors such as agroprocessing, pharmaceuticals, automotive, and logistics have the potential to deliver substantial value but require bold interventions and investments in infrastructure and productivity.

Africa's future lies in its vibrant cities, which are urbanising at a remarkable pace. With more than 500 million people projected to migrate to cities over the next two decades, the continent will witness the largest number of urban dwellers globally. However, investment in infrastructure is crucial to support businesses and workers, ensuring high productivity and sustained economic growth.

Large private-sector firms play a vital role in reigniting economic progress in Africa. These firms contribute significantly to growth, innovation, employment, exports, productivity, and taxes. While the number of large corporations on the continent may have decreased compared to other regions, Africa still boasts highperforming companies across various sectors. With the potential to increase collective revenues by over $550 billion by 2030, large companies can create substantial value by adopting ambitious strategies to access new markets, enhance productivity, and contribute to society.

Africa's journey toward inclusive growth requires leveraging successful examples within the continent and addressing the challenges that impede progress. By moving one billion Africans across the empowerment line and unlocking the potential of its consuming class, Africa can generate $3 trillion in consumer spending. This offers immense opportunities for businesses to provide affordable prices, target growth hot spots, and innovate within local value chains. Rising incomes, coupled with population growth, can further enhance Africa's consumption potential.

Africa's youthful population, vibrant cities, and innovative spirit provide a strong foundation for robust economic growth. By harnessing its resources, developing essential skills, and increasing the adoption of digital tools and technologies, Africa has the potential to become a driving force of productivity-led growth, improving the lives of its people and contributing to global prosperity.