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The biggest unknown in Africa is the extent to which governance will respond to thicker populations, greater growth, greater capacity to raise taxes and therefore expand the capabilities of government. To What extent will African governments respond to this more benign, positive environment and up their game.
Welcome to Marrion Dogs Money, the podcast in which people who know the markets explain the markets.
I'm Marry in Sunset Web.
This week we are focusing on one of the most misunderstood and often oversimplified dimensions of economic development population. Just add Wealth, journalist and author of How Africa Works, Success and Failure on the World's Last Development Frontier, joins me today and we talk about how population dynamics shape Africa's economic trajectory, not just in terms of size, but also structure. And we talk about how demographics can influence industrialization, urbanization,
and political stability. Joe, Welcome to Marin Talks Money.
Thank you for having me.
The first thing to say, I guess is that a book that is just about Africa is a little all encompassing. Africa is full of, you know, so many different countries, different cultures, different languages, endless, different things going on. So I suppose the first thing we should talk about is to what extent is it really possible to generalize about a continent that is so huge and so diverse.
You're right, but we generalize about Asia and talking about Asia at the same time, and there's almost as much diversity in Asia. So I think we have to recognize that that fifty five countries are very different in Africa, but nonetheless there they are on this vast land mass together and their economies are going to evolve with close
relations with each other as we go forward. So there is to my mind still a value in talking economically about Africa, and you can sort of see that in terms of what's happening within the continent, because there was a trend to put the Arab states in with the Middle East over the last sort of thirty forty years, so and not count North Africa really as part of Africa, but the North African countries themselves, now that there is some economic traction in Sub Saharan Africa, are starting to
talk about themselves as being fundamentally African states.
Okay, So when you went into this, because your last very well known book was How Asia Works into How Africa Works. It's a bit of a shift. Did you go into this with an expectation of what you would find?
I didn't go with an expectation of what I would find. I thought that there might be something different about what was required in Africa in policy terms. I think that's about as much of a predisposition as I had. I mean, I started out by reading through the academic literature, and so I went through all the literature on governance, failure of which has a huge amount in Africa, corruption, kleptocracy,
civil strife, ethnic strife. But I got to the end of reading all that feeling that I hadn't really got an argument about what the fundamental reason was why Africa's development had lagged as much as it as it has. And that's what took me on to the demographic stuff that I got to eventually.
Okay, so you felt that all these things that're sort of relentless debt, the conflict, ethnic conflict in particular, the corruption and cryptocracy, etcetera, and none of these things were in themselves enough to explain why Africa has not been able to develop in the same way as other areas.
Yeah, often symptomatic rather than fundamental reasons for development failure, if you like. It was when I got to the demographics that I felt that I found something that had much more powerful explanatory potential.
When you looked at Asia. Was that something that stood out to you at the time, or did that come later? Was it only when you started looking at Africa that you looked back at Asia and thought, well, that already had this population density or did it not really come up? Then?
One always discuss demographics in Asia because it was it was always relevant, but you didn't discuss it that much because it was never a problem. Asia in nineteen sixty always had a sufficient demographic density to be able to pay for its infrastructure, to have deep concentrated urban markets, to raise taxism, in all of the stuff that you need to do developmentally. So I had never thought, in two three decades working in Asia of demographics as something
that could fundamental constrain economic development. It was just a sort of marginal variable.
Let's talk about how it can constrain them. What is it about population density that makes it different?
Well, when you have super low population density, is you did in Africa? If you go back to the end of the Second World War, Africa is this vast land mass into which you can fit China, India, Europe and the US. And it's hard to believe, but if you cut the countries out of an atless and try, you'll find that that's correct. That's how vast Africa is. And yet it had only two hundred and twenty million people
at the end of the Second World War. The constraint that produces is that you get population density averaged over Africa of less than ten people per square kilometer. You think of the size of a square kilometer and only ten people in it. It's very few. And the impact that this has economically is well, you don't have markets.
You don't have meaningful concentrated markets. So if you think nineteen hundred for Africa, the two biggest cities were Legos and DRIs Salam, and they had populations of twenty thousand people. And this is a time when cities like Singapore or Shanghai and East Asia had a quarter a million or half a million in the case of Singapore. So it's just a different order of magnitude. So you haven't got concentrated centers of population to demand goods and will reliably
pay for goods and services. And also cities have always been very, very important historically as places to raise tax. It's always been much easier to get tax off urbanites than it is off people living in a dispersed condition
in the countryside. So that problem, and then you've the problem that you've got to have infrastructure to have a modern economy, and you can look you look at infrastructure costs per capita, and Africa in nineteen sixty can't afford anything, can't afford rows, can't afford power networks, kind of bored irrigation systems, any of the things. You know, there are things that get built, usually with sort of foreign foreign aid, but there's nothing is affordable within the internal capability of
African governments. So you're just totally constrained. And you know, if you want the cross the historical comparison for the population density, that of Africa in nineteen sixty was equivalent to Europe in fifteen hundred, and so then we ask how much growth was there in Europe in fifteen hundred, Well, there wasn't only so why did we think that there was going to be lots of growth in Africa? Yes,
I think it was. You know, some of the things that were said in the sixties and the seventies about what Africa could do were frankly crazy and were really just based around some mineral investments, and people thought that these mineral enclaves were going to translate into broad economic development, which they don't anywhere in the world because mineral economies employ very few people and they are genuine enclaves cut off from the rest of the economy. And I'm not
saying that you shouldn't dig up your minerals. You should dig up your minerals, but they do not lead to broad based economic developments.
Okay. So the argument is that now much of Africa has reached the level of population deentity that Southeast Asia had already hit in the sixties, and that should be the thing that suddenly pushes economic growth higher. And one of the things you talk about in the book is that this tends to start with fast rises in agricultural growth, particularly agricultural productivity, and we're already seeing that.
Yeah. So that's I think the biggest sort of or the hardest evidence for optimism, if you like, in the book would be what's been going on in agriculture since the mid nineties. But to make things more straightforward, I provide data from two thousand onwards, since when agricultural growth in Africa as a whole has been an over four percent a year, highest rate in the world, and in you know, many countries a lot higher than that. Nigeria has been doing six percent a year. And it's not
because the government has got great agriculture policy. It's because of the density of the population. And what's happened in Africa is that as population has doubled approximately in twenty five years, because there's been a bit of economic growth as well, demand for food by value has tripled. That drives the production of crops that's good for ordinary people,
small holder farmers, but particularly in peri urban areas. So African agriculture is becoming very bifurcated now between people who are farming around cities, of which there are over seven thousands designated cities in Africa now people who are farming in those areas because the urban demand is so relentless, so reliable, that you can grow relatively value added crops things like tomatoes instead of what you would have grown in the deep countryside, and you can sell it, and
you can make thousands of dollars per hector, and you can afford to buy little pumps and irrigate your soil, and that will allow you to increase yields. At the same time as that is going on in a lot of places in deep rural Africa where nothing has changed yet.
And across Africa, is agricultural production keeping up with population growth because these are really fast growing populations.
Now, yes, it is so. By value, agricultural output is, as I said, going up over four percent a year. Population is going up less than three. So population growth is slowing more slowly than it did in East Asia, but it is nonetheless slowing. And in some African countries there's a lot of variation.
So fertility rates are falling in Africa in the same way as there every wh else, not to the e same extent, obviously, but they are still falling.
They're falling, but they're coming down from a high level. And so this means that it will be some time before Africa gets its demographic dividend, in other words, where it gets a very large share of working people relative to kids and older people. To my mind, one of the most useful things that the what remains that the aid industry can do in Africa is to put money into female education because that is very closely correlated with
lifetime fertility. I even girls who just do primary school have a massively reduced propensity to have lots of kids during their lifetime. And it's economically very important because the bigger and longer the demographic dividend, the better it is obviously for African development.
Okay, but interesting, So we don't necessarily want fertility where's to fall in Africa though, I mean it based on this idea of population density, you would want populations to increase for some time to come to produce that population dividend.
No, I mean, I think that this is not a perfect science. But to my mind, once you get beyond sort of fifty sixty seventy people per square kilometer on average, obviously your your urban densities are massively higher than that, then reducing population growth abruptly in order to maximize the demographic dividend makes sense. It's not the case that there's a direct correlation that the more people you get, the better it is for forever and forever. It's about having
a minimum, a minimum density of people. That means that you can afford the infrastructure that you have, the markets that you've got, the division of labor that's required to do complex things efficiently.
Okay, so fifty sixty is around ideal. I mean, I know it's not a precise science.
But it's not a perfect science. And I'm just making historical analogies with what the case was in Asia. But I'm saying that clearly, you know, nine to ten was way too low. You know, fifty sixty work for Asia. But having been fifty sixty in Asia, it then tripled over the next seventy years. In any STAGEA, it's now around one hundred and fifty. But Africa will go to
one hundred and fifty on its current population trajectory. I mean, there's going to be four billion people at the end of the century in Africa, and there'll be four billion people in Asia, and there will be only two billion people in the rest of the world, if the UN's projections are to be believed.
Aren't I mean, they're mostly out by quite a lot, aren't They generally get precise? I mean, they keep changing. The idea of a peak global populations that started. Let's go back actually to education, because I know that one of the things that you also say is that people underestimate how well educated Africa's population is and therefore how
ready it is for economic growth. And obviously efficient education is also a function of population identity to a degree, but it's underappreciated, isn't it.
Yeah, I think that what African government's managed to do post nineteen sixty in education is really underreported and was very important. So I mean again, it was this very low population density that meant that colonial governments couldn't raise tax either. So their response to not being able to
raise any significant tax was to not run schools. And there were no schools bar missionary schools in Africa until the nineteen fifties, I mean one or two tiny exceptions, so that obviously South Africa was an exception, Mauritius was an exception, but elsewhere there are no schools until the fifties. And so in nineteen sixty Africa comes into the independence era with a literacy rate of sixteen one six percent
and a female literacy rate of five percent. And this makes, you know, modern economic activity really close to impossible, and African governments put huge resources into opening schools after nineteen sixty and the World Bank in the seventies did a review of what had been done and said, nowhere in the world has built education systems as fast as Africa. I mean this genuinely extraordinary what has been achieved here,
you know. And if you take a single country example, I mean someone like Julius Nareerri running Tanzania after independence. He inherited a country with a literacy rate of fifteen percent and by the mid eighties literacy was up to over eighty percent. So all that has been very important. And without that educational progress, I don't think that the thickening of populations would be producing the pick up in growth that we've been seeing since the turn of the century.
Okay, so outside agriculture, where is the growth coming from? The big drivers?
Well, I think you've got to sort of add that there's the other bit of agriculture, the manufacturing end of agriculture, which we always forget about because we always think agriculture is about farmers. But of course once you've produced the crops, then the crops have got to be milled, they've got to be turned into processed foods. There has been a colossal boom in process foods in Africa all across Africa
in the last twenty five years. Most Africans now eat African produced processed foods and they're very local to local taste. I mean, what Nigerians eat even in one body of Nigeria is not what Nigerians buy in another part, and there's certainly not they what they buy in different areas of Africa. And that has meant a fantastic boom in the manufacturing end of agriculture. And it's reckoned that around half of all the capital expenditure and manufacturing in Africa
at the moment is going on agricultural processing. So there's that, and then you have it's very variable by country. You have the beginnings of some greater amount of other manufacturing in Africa. But this is a return if you look at it as a share of GDP, it's sort of bottoming out and going up and hopefully heading back towards
where we were in the seventies. At the end of the seventies, and that is because after independence, when economies were much smaller, African governments put a lot of money into manufacturing projects and they almost all failed again largely would fail because for demographic reasons. In nineteen sixty labor rates, factory labor rates in Africa were twice what they were in Asia. It seems extraordinary. That's the supply and demand
of human labor. But now wage rates if you compare with China, so China's at about six hundred dollars per month for factory labor now and if you compare with that, different African countries are between half and one tenth, so that the cheapest will be places like Muddy Gasca or Ethiopia sixty bucks a month for a factory worker. Of course, that's bringing in some some investment. And the leaders in the manufacturing investment if you think of FDI are the Chinese.
There was a piece in The Economist last week or the week before talking about this. It's reckoned based on the fts on the Financial Times FDI database, which is micro level firm by firm. It's reckoned that the Chinese put twelve over twelve billion into manufacturing investment in China last year. And most of it is because profit rates
are pretty low in China. Now, you know, things are so competitive, and they come and they look at Africa and you know often people are seeing products that are priced three, four, five times what they cost in China, and so Chinese investment is coming chasing better returns, and
it's a sort of a slow a slow build. It's not held by the fact that African go moments don't recognize that manufacturing is something that you just cannot develop quickly without because it's massively the most efficient way to take your rural population into the modern economy. There's just no kind of there's no sort of political commitment really to manufacturing in Africa, although the African Union has tried
to ferment one, but nonetheless manufacturing is going on. And when you go and visit manufacturing, harbs, manufacturing enclaves in Africa, each of the one so you know, I went to Lasutu, to Madagascar, to Morocco, and in each of these places you just think, well, there's no real reason why there can't be a lot more of this here because the labor is it starts off massively less productive than in China, but it goes up a fairly steep curve and you know,
in one to two years, people running factories generally are happy with with the productivity that they're getting.
And what other similarities would there be. We're talking about this transfer of manufacturing from China and parts of Southeast Asia into Africa now, but if you look at the way that the Southeast Asian economies developed during that period of sixties, seventies, eighties, what the similarities do you expect there to be with the African economies in if you remember those Southeast Asian economies in the beginning, where we're very closed, you know, lots of tariffs and regulations and
lots of capital controls even to keep growth internalized. Is that the way you expect to see the African economies go as well.
I mean, if we're talking in a very geographically specific way about Southeast Asia and we're thinking about countries like Indonesia and the Philippines, then I think that Africa will be more like that than it will like the Northeast Asian countries with the sort of super competent governments in Japan and Korea and China and day Vietnam. So I think it will be more like traditional Southeast Asia. And
you can already see certain things. So going back to the businesses that I was talking about that have come out of agriculture, the agricultural manufacturers and processors. You can already see them evolving in the way that a company like CP Group did in Thailand or Salim Group did in Indonesia, that they get these cash flows, very good
cash flows out of agricultural processing. I mean Salem was making noodles, CP was doing seeds, and then they take that money and they build these kind of Christmas tree conglomerates. And you can see this happening already in Africa. So in Tanzania you have Buckrazer as the biggest agribusiness enterprise and they operate across ten countries now and they're doing
all our agri business and they're basically millers. But on top of that, they've also now got hydrofoil businessiness is going out a Zanzibar, They've got real estate, they've got a TV station, they've got a football club, and you know, with a kind of oligarch at the top, it all feels to me quite Southeast Asian, and I think that I think that much of Africa will go in that kind of direction. It's way less efficient developmentally than what you get in in a Vietnam or a China or
a Japan but it's not bad. Still progress, It's still progress.
Yeah. Should we worry about a commodity supercycle? And that much conversation these days about sharply rising prices of commodities across the board copper, silver, or pladium, that rare earth metals, et cetera. And you know, there is the resource curse, isn't there? If there is another commodity supercycle and we see all these prices going up massively, is that good for long term growths Africa or is it a problem?
How good it is depends on how well the money is used, and in previous cycles that the money hasn't been well used, which is why I'm so happy to see this demographically driven growth in agriculture producing more stable developments. I mean, you can look at you know, if you look at African growth since twenty fourteen, the end of the China boom, Africa didn't collapse into acute negative growth
as it did after previous cycles. And my feeling is that a lot of that is down to the fact that now, you know, you've just got this more diverse economy. So I think with the minerals, I mean, I hope that that governments are learning some of the lessons from previous commodity cycles. I don't say for a moment that Africa shouldn't think about its commodities. If you can sell it,
you should. One of the big questions going forward will be whether governments managed to exercise bargaining power to have minerals used for manufacturing. Within their efforts to do this around the seven main minerals that are used in battery production. It isn't yet clear what that's going to lead to,
but it can obviously make a big difference. I mean, Jakoi and Indonesia was pretty successful in negotiating with Chinese companies in particular for local manufacturing production if they wanted access to nickel and other minerals that the Indonesians produce.
So we just have to wait and see if African governments can replicate that, and I think that for me is going forward is the biggest unknown in Africa is the extent to which governance will respond to thicker populations, greater growth, greater capacity to raise taxes and therefore expand the capabilities of government. To what extent will African governments respond to this more benign positive environment and up their game?
And I just don't know. The only thing that I would say with some confidence is there's going to be phenomenal variation between countries.
Let's take you back a little bit to China we were talking about earlier and the rise of Chinese investment into manufacturing in Africa, and obviously there's been lots of Chinese involvement in the mining sector as well. But one of the things that people worry about now pretty much across the continent is the amount of money that the
Chinese have one way or another lent into Africa. And there's a high level of debt that lots of African countries now have for infrastructure projects in particular, and that might sort of slightly imprison them in the future.
I tried to stand back from this, and I feel that the Chinese influence in Africa overall has been significantly positive because Chinese banks have lent over one hundred and fifty billion dollars. Now. It was not done in a terribly clever way. I mean, the Chinese themselves will say privately at least that yes, we were bloody stupid with some of the things that we did. I don't think that they went in with a sort of agenda to
get people into debt bondage. What they wanted to do was lend the money to support the purchase of Chinese goods and services, because China is in Africa fundamentally for the same reasons that the Japanese were in Southeast Asia in the seventies and the eighties, and the Koreans were in the Middle East in the eighties and the nineties building infrastructure and selling capital goods and selling consumer goods that are there because they've run this economic development policy
where you massively overemphasize the role of manufacturing, massively over you subsidize heavily manufacturing your economy, and you end up with surplus, and that surplus has to go somewhere. So what the Chinese are doing with a surplus in Africa is entirely the same as what the Japanese were doing with it in the seventies and the and the Koreans
in the in the eighties. The thing to recognize is that where the Chinese have got to now is that at a political level, Belton Road has been very heavily wound down, not with any formal announcement of it's over, but I mean they've just pulled back, and various agencies that have been set up by the Chinese banks to do private equity in Africa and things like this have just been shot at. I mean, there are some projects that are funded by state banks, but they've got to
jump over much higher hurdles to get done. But what we're what we're seeing when we talk about investment in manufacturing is private sector stuff from Chinese corporates that are not getting the backing of the state banking system.
Should we talk about some individual countries, which where are you most optimistic? Where do you look and think, well, that's the new Singapore.
Well, the one that claims to be the new Singapore is Rwanda, of course, and you think this is insane when you hear it, but actually there's a certain logic to it, you know, because cogum is people say, well, look, it costs you a couple of thousand dollars to ship a container from China to Daris alarm, and it costs you five thousand dollars to truck it to Kigali. So that means that you can produce stuff here in Rwanda and not even be particularly efficient, put it together here
and sell the stuff. They haven't really done it with manufacturing yet, but they have done it with services, and of course a lot of Singapore is services. In the book that says, you know, brutal but developmental, and I think that's what it is. So yeah, And it is a very real question when you have acutely poor, malnourish people about what is what is the right priority? And Kagama will tell you that the right priority is to increase GDP and reduce polity, keep.
Ahead as quickly as possible. And where would you go back to in a hurry?
I was really upset to see the civil war that broke out in twenty twenty in Ethiopia because they were, you know, the second most populous nation in Africa, and they really have been getting the tracks set down in the right way. I will certainly go back to ETHOPI I'd probably go back soon because I want to see
where they are at now under RB. I think my guess is that they will continue to do relatively well because I just think they've got the basics in place and the commitment to the small holder agriculture that they have the commitment of manufacturing, that they have the willingness to engage in a bit of financial repression to support those two things. I feel that all of that is still the and they have a really excellent civil service that has been doing this for thirty years now. So
I remained somewhat somewhat optimistic about about Ethiopia. I'm also strangely optimistic about Nigeria. I mean, I think everybody should go to Lagos just to see the mayhem. They said that ninety percent of the population wakes up every morning and doesn't know how it will eat, but everybody does
eat by the end of the day. Yeah. I mean, if ever you wanted an exercise in understanding just how a great density of people can produce a lot of creativity and a lot of value, then I think Lagos is a very good place to go and you get you know, other places that are of interest. In Benin,
also in West Africa, a very small country. But Patrice Talon, who around the country for two terms, you know, semi autocratically, but got very focused on on development, and his deputy has now taken over, won an election and taken over from him, So I think there's something to be positive
about that. But I think it's probably a mugs game to try and pick winners in Africa and I and I you know, I prefer just to stand back and say I'm optimistic about the well, I'm more optimistic about the thing overall than I would have been by a big margin than I would have been twenty years ago.
Okay, brilliant, Thank you so much for joining us today. Thanks for listening to this week's Maren Talks Money. If you like, I'll show, rate, review, and subscribe whereever you listen to podcasts and keep sending questions or comments to Merrin Money at Bloomberg dot net. Even also follow me and John on x or Twitter. I'm at Mary leurs
w and John is John Underscore STEPIC. This episode was hosted by Me Marry zumsep Web was produced by Samasadi and Moses and sound designed by Blake Mabel's and Aaron Casper no
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