16 Combined Agenda 2063

Introduction: Africa’s development potential

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The first theme on this website presented Africa’s recent history and its Current Path forecast of development — how the continent and its individual member states have done in recent years and how matters are likely to develop by 2043. The Current Path forecast is a dynamic scenario in the International Futures (IFs)  forecasting platform that imitates current policies and environmental conditions. It indicates that, on Africa’s Current Path, the African economy in 2043 will have grown by 172% compared to 2019, but because Africa’s population will have increased by 71%, gross domestic product (GDP) per capita will have increased by only 37%. Meanwhile, GDP per capita in the rest of the world, which comes off a much higher level, will have increased by a similar percentage, meaning that the gap between the average GDP per capita for Africa and that of the rest of the world remains constant. Although average economic growth in the rest of the world will be lower than in Africa, the large population increases outweigh the associated improvements.

Things continue to improve in Africa on the Current Path, but continental averages continue to trail behind global averages on many development indicators.

There are many reasons for this rather uninspiring forecast. The African economy grows at an average of about 4.6% from 2024 to 2043 while Africa’s population increases at an average rate of 2.2%, translating into slow per capita income growth (an average of 1.5% from 2024 to 2043).

We then ask the question, what needs to be done to improve the development prospects for Africa? To answer this question, we model eight sectoral scenarios and simulate their impacts. Our forecast horizon is 2043, the end of the Second Ten Year Implementation Plan of the African Union’s Agenda 2063 long-term development plan. Each scenario is explained in various themes on the website, and the impact of each is compared with the Current Path forecast. The eight scenarios are:

• A more rapid demographic transition and investments in better health and WaSH infrastructure
• Better and more education (looking at quantity, quality and relevance)
• Large infrastructure and leapfrogging (the impact of renewables, ICT and the more rapid formalisation of the informal sector)
• Improved food security reflected in an agriculture revolution scenario
• A low-end manufacturing transition
• The full implementation of the African Continental Free Trade Area (AfCFTA)
• More inward financial flows (consisting of aid, foreign direct investment, remittances and reduction in illicit financial flows), and
• Better governance (consisting of stability, capacity and inclusion).

In some instances, a single scenario is discussed and examined in two explanatory themes, such as the Demographics and Health scenario, which is examined in a separate demographic and health/WaSH theme, given the complexities associated with each.

These sectors are not isolated but deeply interlinked. For instance, infrastructure and education(human capital) are crucial for industrialisation and economic diversification. Similarly, providing rural roads is vital for food self-sufficiency and agriculture commercialisation. Agriculture can also pave the way to manufacturing through agro-processing while improving governance and security cuts across all sectors. Thus, a holistic approach or a coordinated policy push across sectors is the best option to propel Africa to prosperity.

It is equally true that some interventions also compete with each other. For example, although social grant programmes reduce poverty at high levels, it could detract from economic growth prospects, such as in South Africa (but the relationship is complex).[1On the other hand, over longer time horizons reductions in poverty would improve human capital and eventually have a positive impact on economic growth.] It's all about balance. Too much expenditure on infrastructure will inevitably come at the cost of reduced health and education expenditures. We term the additional economic productivity from combining the different scenarios a synergistic effect. The scenario that brings all eight sectoral scenarios together in a single integrated, positive scenario is termed the Combined Agenda 2063 scenario (or simply the Comprehensive scenario), after the comprehensive blueprint that aims to transform Africa into an integrated, prosperous and peaceful continent, ‘driven by its citizens, representing a dynamic force in the international arena.’[2The Agenda 2063 Solemn Declaration was signed by African heads of state and government in Addis Ababa in May 2013, 50 years after the establishment of the Organization for African Unity towards the attainment of ‘an integrated, prosperous and peaceful Africa, driven by its own citizens, representing a dynamic force in the international arena.’ Agenda 2063 consists of 20 goals encapsulated in the broader seven aspirations and 15 flagship projects. See: African Union, Agenda 2063: The Africa we want]

The interventions are mostly done at an individual country level, and carefully benchmarked to ensure that they are ambitious but realistic, comparable to what has been historically achieved by countries at similar levels of development. All the interventions commence in 2024 and last to 2033, coinciding with the second ten-year implementation plan of the African Union’s Agenda 2063. We then measure the impact of the scenario to 2043, the end of the third ten-year implementation plan of Agenda 2063.

In addition, we discuss the likely implications of the various scenarios on the future of work  and the threat of climate change and Africa’s energy transition  associated with each scenario.

Development is a messy affair that seldom follows the smooth forecasts set out on this website. Instead, it is characterised by ‘persistent failure, wastage, exploitation and misery.’[3C Cramer, J Sender and A Oqubay, African Economic Development: Evidence, Theory, Policy, Oxford: Oxford University Press, 2020, 22.] Africa is hugely diverse and the future, as in the past, will reflect large variations in the development trajectories of its constituent countries. It is also highly unlikely that all of Africa will simultaneously advance on all the transitions modelled in the various scenarios. Some countries may progress in some areas, while others may stagnate or regress.

We model governance and reflect the contribution of determined visionary leadership as captured in the ambitious outcomes of each scenario. Although recurrent natural disasters such as droughts and floods are ‘baked into’ forecasts (i.e. they are reflected in forecasts that initialise from historical data that already reflects such disasters), the Current Path and scenarios do not forecast global catastrophes such as the effect of a future global pandemic or an extreme climate tipping point.

Evidence suggests that Africa’s small island countries — Mauritius, Cape Verde and Seychelles — have done particularly well because they had high trade or tourist income relative to their population size and experienced early demographic transitions. It could also be that governance in a small country is simply easier. As a result, these countries typically reached health, education and income milestones before more populous states; are more likely, with a youthful population, to progress to liberal democracy and maintain it; are less vulnerable to revolutions; and very rarely engage in interstate conflicts.[4In 2020, the African countries with populations below five million were: Seychelles, São Tomé and Príncipe, Cape Verde, Comoros, Djibouti, Eswatini, Mauritius, Equatorial Guinea, Guinea Bissau, Lesotho, Gabon, Botswana, The Gambia, Namibia and Eritrea.]

Africa is diverse, young, and rapidly urbanising, and its population and economy will grow quite quickly. But will it be sufficient to improve well-being? At first glance, the energy levels on the continent are reminiscent of China some decades ago, but with significant differences. Emulating China in Africa may not be possible in all respects, but there is much to learn and take from China. The most important example to take from China is moving from handouts to empowerment and the dedicated effort to understand, document and help each poverty-stricken household. Thus, ‘the key to getting out of poverty lies in people’s mindsets.

China has adopted measures that combine poverty alleviation with efforts to improve people’s ‘will and wisdom’ to stimulate the internal motivation of the disadvantaged so that they can take actions more spontaneously,’ forming the overall anti-poverty pattern underpinned by ‘social mobilisation + individual progress’.[5Xinhua, Chinese Poverty Alleviation Studies: A Political Economy Perspective, New China Research, Xinhua News Agency, 28 February 2021, 16.] In this manner, China has prevented many of its poor people from falling into a welfare trap where individuals remain economically inactive and dependent upon assistance from the government. However, it did so at a significant cost to individual liberties and choice. Eventually, the miracle of authoritarian development in the Asian Tigers and China is likely not available to Africa for reasons we explain in the theme on Governance .

Africa’s future will inevitably unfold quite differently from the remarkable development experience of China.

Development is about countries empowering their citizens and learning how to help themselves through small businesses and small-holder farming activities. It is generally about communities growing and flourishing, steadily weaning themselves off the state's helping hand on their pathway to greater prosperity.

It is perhaps best to view societies like living organisms.[6This analogy was offered by Prof Jack Goldstone during one of our expert discussion sessions, 18 May 2021.] To grow, an organism does not need only a single nutrient; it needs a combination of different nutrients in a proper balance. Increasing any one of them provides rapidly diminishing or even negative returns. Societies become productive by linking different inputs and eventually being able to do more with them, although not necessarily in equal amounts. That is why this site has taken a comprehensive approach to development, examining all aspects and sectors.

The first section below presents the impact of the Combined Agenda 2063 scenario, which includes the integrated impact of all eight scenarios and the synergistic effect, comparing Africa with other regions and countries within Africa. We use economic size or gross domestic product (GDP), GDP per capita and poverty rates as key impact indicators. While these indicators are imperfect and incomplete development measures, they remain helpful in gauging Africa’s general direction and correlate with numerous other welfare indices. Subsequent sections use other variables as appropriate. For example, infant mortality and life expectancy rates are more appropriate measures of general development progress.

After assessing the combined impact, we consider the impact that individual scenarios (representing different priorities) could have. However, much more detailed additional work is necessarily required at the national level.

Impact of the Combined Agenda 2063 scenario on economic size

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The Combined Agenda 2063 scenario represents a massive boost to Africa’s economic heft. In 2019, the size of Africa’s economy was US$3.1 trillion. On the Current Path, Africa’s GDP will likely be approximately US$8.5 trillion in 2043. The Combined scenario forecasts an economy that is US$15.1 trillion in size. Instead of 5% of the global economy by 2043, Africa’s economy would account for more than 8% (Chart 2 - The drop-down menu allows the user to view the impact of the combined scenario on each country, REC or income group).

At the regional level, the reader should bear in mind that the populations of West and East Africa are each almost double the size of the populations of North, Southern and Central Africa. With much higher rates of urbanisation and education than East Africa, West Africa shows particularly positive momentum.

Central Africa starts off, in 2019, as the region with the smallest economy. It remains thus in the 2043 Combined scenario forecast. Central Africa also differs from other regions in that it does not have a locomotive state (such as Nigeria in West Africa and South Africa in Southern Africa), where the size of a single national economy provides a sufficiently large market that could boost the region as a whole. However, the full implementation of the AfCFTA is intended to address this.

In 2019, North Africa had the largest regional economy, given its relatively high levels of development compared with other regions. However:

• In the Current Path forecast, the size of the economy of West Africa overtakes North Africa in 2036. In the Combined scenario, it does so in 2032. After that, West Africa has the largest regional economy, followed by North, Southern, East and Central Africa.
• East Africa (the most rural amongst the five regions) steadily narrows the gap with Southern Africa. Still, it remains the third-largest economic region in 2043 - even as its population is roughly comparable to West Africa.

Central Africa has a relatively small economy (and the smallest population amongst the five regions), and the economy experiences only a modest increase on the Current Path forecast. It grows rapidly in the Combined scenario but remains the smallest among the five regions.

Countries coming off a lower base, often with rapid population growth, see the largest proportional economic increases. In 2043, Africa’s 23 low-income countries will have a combined GDP that is 75% larger than the forecast on the Current Path. The increase for Africa’s 23 low-middle-income countries is 71% and 49% for Africa’s seven upper-middle-income countries and for the single high-income island state, Seychelles.

In the Combined scenario, the economies of Somalia and Liberia have compared to the 2043 Current Path forecast. Others, such as the DR Congo, CAR and Uganda, experience an increase of about 90%. The size of the economies of Madagascar, Sierra Leone, Egypt, Burundi, Nigeria, São Tomé and Príncipe and Chad will increase by -nearly  80% compared with the Current Path forecast. However, since these countries come from a low base and generally have very high population growth (except for Egypt), the increase in GDP per capita is much lower (see next section).

Comparative impact of scenarios on per capita income

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For all its deficits, GDP per capita reflects not just the economic productivity of an economy but also the number of people among whom that product must be divided. Chart 2 presents GDP per capita for the World except Africa, Africa and each African grouping and country on the Current Path and in the Combined Agenda 2063 scenario. It shows in a single graph the dramatic change in fortunes that could follow from the combined effect of the various scenarios modelled on this website. Whereas, in 2019, Africa’s GDP per capita was 26% of the rest of the world (i.e. the World except Africa) average, staying at that portion to 2043, it could increase to 41% in the Combined scenario, a difference of US$4 157 compared to the 2043 Current Path forecast. 

In the Current Path forecast, GDP per capita increases at a miserly 1.5% from 2024 to 2043. It more than doubles to 3.9% in the Combined scenario and illustrates that Africa could actually start turning the widening gap around towards the end of the forecast period. Because of technology, climate change and future shocks, that catch-up will occur in a different world than the one we currently know, occur slowly but gather momentum over time.

This site often uses the four standard World Bank income classifications as a kind of shorthand to present general trends among countries at roughly similar levels of development. In the Combined Agenda 2063 scenario, the average GDP per capita in 2043 would be:

• US$5 757 instead of US$3 486 in low-income Africa.
• US$14 159 instead of US$8 910 in low-middle-income Africa.
• US$29 049 instead of US$21 092 in upper-middle-income countries.
• US$41 355 instead of US$31 348 in Africa’s high-income country (Seychelles).

Although from a lower base, the relative increase is again more pronounced in low-income countries (58%) than in upper-middle-income countries (35%).

The ten countries that would gain the most in absolute increases in average income levels when comparing the Current Path forecast with the Combined Agenda 2063 scenario by 2043 are Libya, Eswatini, Botswana, Namibia, Egypt, Mauritius, Seychelles, Gabon, Equatorial Guinea and South Africa.

The ten countries that show the least improvement in absolute US$ terms are Mali, Madagascar, South Sudan, Chad, Malawi, Sierre Leone, Guinea Bissau, Mozambique, Sudan, Central African Republic and Burundi. All are currently classified as low-income countries and have high total fertility rates.

The impact of the various scenarios also changes over time. For example, what contributes most to income growth in the first decade (to 2033) for low-income countries may change during the second and third decades.

Chart 4 ranks the four scenarios that provide the largest change in GDP per capita in purchasing power parity in 2033 and 2043. The default display compares low-, low-middle- and upper-middle country income groups, but the user can select any three African countries or groups. The analysis does not imply that policymakers should choose one set of interventions above another. Development is organic and context-specific: eventually, a simultaneous and coordinated effort across dimensions produces much better progress than pushing on any single sector to the exclusion of another.

From 2024 to 2033, the Large Infrastructure and Leapfrogging scenario produces the most increase in GDP per capita for Africa, followed by the full implementation of the AfCFTA, Governance and Manufacturing. By 2043 the AfCFTA will do best, followed by Governance and Manufacturing. For this reason, the African Development Bank, the UN Economic Commission for Africa (UNECA), the World Bank and development economists are so excited about the potential of the AfCFTA.

The impact changes when considering different income groups.

• For low-income countries, the Large Infrastructure and Leapfrogging scenario is followed by Agriculture and the AfCFTA in 2033, and, in 2043, it is the AfCFTA, Governance and Manufacturing
• For low-middle income countries, the Large Infrastructure and Leapfrogging scenario does best in 2033, followed by Agriculture and the AfCFTA. In 2043 it is the AfCFTA, followed by Governance and Manufacturing
• For upper-middle-income countries, the AfCFTA does best in 2033 and 2043, followed by Governance and Manufacturing.

Chart 5 allows the user to compare the impact of the eight sectoral scenarios and the synergistic effect on any African country or group on improvements in GDP per capita.

Because of the fertility characteristics of the different income groupings, the contribution of the Demographic and Health scenario declines with increasing income status. Even then, its impact is underplayed. Like the Governance scenario, the Demographic and Health scenario acts as a force multiplier on all other scenarios, particularly for low- and low-middle-income Africa. For example, it reduces the number of children that need to be educated (and increases the money available for those already in school) and reduces the demand for basic infrastructure such as water and sanitation. When parents have fewer dependents to care for, it frees up resources to invest in human and physical capital.

A critical dynamic to consider here is how the Demographic and Health scenario combines with the Education scenario to reduce total fertility rates rapidly. Whereas on the Current Path forecast, the average fertility rate in sub-Saharan Africa will decline from 4.7 children per fertile woman in 2019 to 3.3 by 2043, the Combined scenario is a decline to 2.3. As a result, in 2043 sub-Saharan Africa will have 117 million fewer people. Recent data would suggest that even more rapid changes are likely.

The impact of the Education scenario increases with higher income status since a more sophisticated economy requires a more skilled workforce, and its impact steadily increases over time. But it takes a very long time, reflecting the inertia in improving education systems and that the payoffs typically take up to a generation.

As with education, improvements in general health indices and the provision of WaSH facilities are more important (and impactful) for upper-middle-income countries, where the older labour force is better nourished, healthier, and, therefore, more productive.

The IMF finds that investment in human capital is more effective in the long run (15 years or more) than investment in infrastructure.[7African Development Bank, African Economic Outlook 2021, and EF Buffie, LF Zanna, C Adam, L Balma, D Tessema and K Kpodar, Debt, investment, and growth in developing countries with segmented labor markets, International Monetary Fund, 19 June 2020]

Impact on extreme poverty

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The Combined Agenda 2063 scenario has an even more impressive impact on poverty than on economic size and GDP per capita. The forecast of the number of extremely poor people in Africa presented in Chart 6 (using the US$1.90 threshold), shows that 34% of Africa’s total population (or 446 million people) was considered to be extremely poor in 2019, a ratio that will decline to 28% by 2030, 26% in 2033 and 18% by 2043 in the Current Path forecast. Owing to rapid population growth, relatively slow economic growth and often high levels of inequality, 407 million Africans would therefore still live in extreme poverty in the Current Path forecast by 2043, meaning that the absolute number of extremely poor Africans will have declined only modestly since 2019.

The impact of the Combined Agenda 2063 scenario is for extreme poverty to drop to 26% in 2030, 21% in 2033 and 7% in 2043, equivalent to 468, 369 and 146 million poor people, respectively.

The Combined Agenda 2063 scenario represents a potentially seismic shift in Africa’s fortunes, as poverty reduction is perhaps the most critical measure of improved well-being. Although extreme poverty will remain a feature of Africa for generations to come, the portion of extremely poor people in Africa will have dropped dramatically.

It is clear that even in the Combined scenario, Africa will miss the SDG target of eliminating extreme poverty by 2030 by a very large margin. Although the COVID-19 pandemic has contributed to these depressing forecasts, the key reason is that Africa’s economies are not growing rapidly enough, given population growth. Although Africa (and Southern Africa in particular) has relatively high levels of inequality, the continent simply has to find ways of growing its economies much more rapidly if it intends to increase incomes, provide jobs and dramatically reduce poverty.

Effect of sectoral scenarios on extreme poverty

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In addition to interpreting extreme poverty rates in the Combined Agenda 2063 scenario, it is also helpful to compare the impact of the sectoral scenarios on extreme poverty.

Chart 7 compares the impact on extreme poverty rates for each scenario with the forecast in the Current Path for each African country or group in 2033 or 2043, using the threshold of US$1.90. These would reflect the end of the second and third ten-year implementation plans of Agenda 2063.

At the continental level, the Agriculture and Manufacturing scenarios are particularly powerful in reducing extreme poverty, followed by the Education and Demographics and Health scenario.

In low- and low-middle-income countries, the Manufacturing and Leapfrogging and the Agriculture scenarios generally have the largest impact in part because agriculture constitutes almost a quarter of GDP by value in low-income countries, about 15% in low-middle-income countries and only about 3% in upper-middle-income countries. Also, agriculture employs more than 50% of the labour force in low-income countries.

Here it is important to point out that the scenario on Manufacturing  includes interventions that emulate cash transfers or social grants, which have proven a particularly effective short- to medium-term strategy for reducing poverty and inequality. Large increases in inequality and poverty often accompany the early stages of industrialisation because limited resources are diverted into capital-intensive projects and away from consumption.

However, providing social grants is a more impactful strategy for upper-middle-income countries, which generally cannot leverage a large agriculture sector to reduce poverty. The general tendency in many North African countries has been to subsidise fuel and foodstuffs, often linked to foreign exchange payments. Still, these tend to lock governments into expensive programmes they find impossible to retreat from.

For this reason, and also because of the market distortions such subsidies can create, the World Bank and the IMF generally target the reduction of fuel and food subsidies as a key component in their assistance strategies and have grudgingly come around to support cash grant systems. Poor countries generally have limited financial means to effect substantive transfers to the poor through social grant programmes. Still, it remains a strategy that is particularly well suited to countries that discover new mineral resources, such as the gas potential of Tanzania and Mozambique. In these countries, the idea of ring-fencing natural resource income for distribution as cash grants rather than through subsidies on fuel and food that are more prone to wastage and cause inefficient distortions in the market would have a beneficial impact on levels of extreme poverty.

The standard sequencing of development?

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Chart 7 reinforces the traditional sequencing of development also discussed in the theme on governance , namely that a governing elite strongly committed to economic growth is needed to start the developmental transformation process from subsistence agriculture to manufacturing.  

Underlying much of this is the need for Africa to progress more swiftly through its demographic transition by empowering women, rolling out modern contraceptives, investing in female education and managing deliberate urbanisation. Although Africa is urbanising, it is generally not planned or maximised.

As most African governments do not have the means to invest in the dense network of transport systems required for such sprawling cities, poorly constructed and poorly maintained roads are crowded with cars and other means of private transport. The result is that cities sprawl out further and further, lowering urban density and increasing the potential cost of providing the required additional infrastructure. Consequently, instead of increasing productivity and access to services, one of the main advantages of urbanisation, these measures start to decrease.[8P Collier, African Urbanisation: An Analytic Policy Guide, London: International Growth Centre, 2016, 23.]

Without economic growth and rising incomes, cities become poverty traps. Some African countries (e.g. Tunisia) are already largely urban, but East Africa is the most rural region in the world. Here, the growth of a city such as Addis Ababa has become a major source of tension as urban sprawl encroaches on surrounding Oromo farmland, eventually contributing to violent riots.[9For example, see: Y Tsegaye, Pushing boundaries in Ethiopia’s contested capital, Ethiopia Insight, 21 June 2021]

Digital solutions can contribute to providing basic services in poor urban communities through pay-as-you-go models that allow low-income customers to make small, incremental payments towards otherwise unaffordable goods and services, including water, clean cooking gas and sanitation. The result is a sustainable business model able to respond to the challenges of the urban poor and urban poverty traps.[10For example, see: Groupe Speciale Mobile Association, Digital solutions for the urban poor, Mobile for Development, 10 March 2020] Managed correctly, urbanisation represents immense opportunity.

The solutions to Africa’s urbanisation challenges are well-known:

• Without clear legal rights and a formal property market that allows for the secure transfer of property rights, land cannot serve as a tradeable asset, and investments are limited to those done by the state. Digitisation and modern technology allow Africa to do much of this more rapidly than is the case historically anywhere else. It also applies to the agriculture sector.
• Early infrastructure installation must happen at low-density levels, such as roads, water, sewage, and electricity connections. Where this is not possible, modern technology can help overcome the deficits in crowded settlements. Urbanisation is an opportunity to build climate resilience and manage the spread of infectious diseases such as COVID-19.
• Cities develop if they can crowd larger numbers of inhabitants into formal systems, hence increasing the tax base and improving efficiencies and productivity. Cities that are overcrowded or characterised by low-rise informal housing and urban sprawl have higher production costs and generally struggle to produce internationally traded goods.

Ideally, basic infrastructure must be in place before people arrive. Once an informal settlement has reached the size of Khayelitsha in Cape Town or Kibera in Nairobi, it is challenging to uproot populations to install plumbing or build proper roads. Providing water and sewer connections for half a million people is a challenging enough task. However, if all these people must be relocated to provide that infrastructure, it is significantly more expensive and more difficult. Modern technology can help by combining smart metering, pay-as-you-go services, big data, geolocation and the Internet of Things to establish smart grids, solar home systems, mapping sanitation facilities, monitoring decentralised water points, operating water ATMs in informal settlements, mitigating peak traffic flow and managing waste flows. That is because, as an enabler, the ICT sector has strong backward and forward linkages with almost every sector of the African economy needing rapid development ranging from increasing yield in agriculture to electricity and water demand management and e-learning in the educational sector.

Urbanisation, digital transformation and electrification using pay-as-you-go services should therefore be adopted as deliberate strategies towards providing basic services, better education, improved healthcare and educational opportunities. The digital transformation of Africa will require huge investment to make the Internet accessible, but there is real potential in initiatives such as those from SpaceX that promise global satellite Internet coverage within the next few years.[11A Moya, How Africa can tap into SpaceX’s Starlink satellites, itWeb, 28 May 2019]

In addition to managing urbanisation, successful governments typically pursue low-end manufacturing, even as the educational focus now shifts to secondary, vocational and tertiary education. Entry into manufacturing requires participation in regional value chains and the need to attract foreign direct investment and foreign companies, with clear incentives for them to build local capacity and ensure technology transfer.

Because of the dire impact of climate change but also because of the enabling dynamic of digital and other technologies, Africa needs to look at modern manufacturing and seek competitive advantages in areas such as ICT, food processing and so-called “industries without smokestacks” (see below) that can play a role analogous to that of manufacturing in East Asia.[12The notion of ‘industries without smokestacks’, advanced by the Brookings Institution, argues in favour of sectors that are tradable, employing low- and moderately skilled labour, having higher-than-average value added per worker, exhibiting capacity for technological change and productivity growth, and displaying evidence of agglomeration economies. See: R Newfarmer, J Page and F Tarp, Industries without Smokestacks: Industrialisation in Africa Reconsidered, WIDER Studies in Development Economics, Oxford University Press, 2018] As countries go up the manufacturing value chain, the spillovers from manufacturing facilitate and incentivise a more productive agriculture sector and the development of higher-end services such as finance until, in some instances, services start to serve as the main engine of growth or agriculture (such as in the Netherlands). Typically, large-scale commercial agricultural development and exports depend upon industrialisation progress. Thus, according to Erik Reinert, ‘no country without an industrial sector … has ever managed to raise the wage level of its farmers.’[13ES Reinert, How Rich Countries Got Rich … and Why Poor Countries Stay Poor, London: Constable, 2007, 63]

It is likely that the economic impact of COVID-19 has significantly advanced the point at which services play a larger role in economic development. COVID-19 may have unlocked productivity improvements in mid- to high-end services to an extent similar to the communications and IT revolution that created complex global value chains in the manufacturing sector some decades ago. The service sector will dominate Africa’s future too.

The broad outlines presented here serve to frame a kind of standard approach to development. It requires leadership committed to evidence-based policies on development but cannot, beyond general observations, be considered as a template. The World Bank’s Commission on Growth and Development, in its 2008 Report, came to exactly this conclusion when it found that there is no single recipe beyond some common flavours, namely strategic integration with the world economy; the mobility of resources, particularly labour; high savings and investment rates; and a capable government committed to growth. Instead, the Commission argued in favour of patience, pragmatism and experimentation in mixing the growth ingredients for each country.[14Commission on Growth and Development. The Growth Report : Strategies for Sustained Growth and Inclusive Development. Washington, DC, World Bank, 2008 ]

The role of leadership and government is important throughout but is particularly crucial at low and middle levels of development. Then, as countries go up the income ladder, economic growth in the 21st century becomes increasingly dependent on the role of the private sector. The government’s role remains crucial, although it should shift to a predominantly regulatory and compliance function while ensuring inclusive growth by progressive tax policies, support to rapid growth efforts (particularly manufacturing) and other redistribution measures.

A recent, widely acclaimed study identifies investment as crucial, indicating that it should proactively be directed towards activities with high potential for increasing returns of scale and scope, raising demand for labour, and earning foreign exchange.[15C Cramer, J Sender and A Oqubay, African Economic Development: Evidence, Theory, Policy, Oxford: Oxford University Press, 2020, 9.] Elsewhere, the authors argue in favour of rapid export growth, a modestly undervalued exchange rate and an ambitious global trade strategy. They argue that a country’s prospects ‘are not determined by what that country has and is … instead, a country’s prospects are determined by what a country does.’[16C Cramer, J Sender and A Oqubay, African Economic Development: Evidence, Theory, Policy, Oxford: Oxford University Press, 2020, 10] For these authors, as in our analysis, leadership, capable government and expanding wage employment (more and better jobs in the formal economy) lie at the heart of improved prospects.

Structural change of economies in the Combined Agenda 2063 scenario

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The transitions modelled on this website emulate a developmental path where Africa can reverse its growing commodities dependency and proceed to inclusive and rapid development by building human capital and economic diversification. In this vein, the African Growth Initiative at the Brookings Institution popularised the potential of “industries without smokestacks”, pointing to the potential of tourism, agro-processing and other tradeable services as having productivity improvement effects in a modernising economy comparable to traditional industrialisation.[17R Newfarmer, J Page and F Tarp, Industries without Smokestacks: Industrialisation in Africa Reconsidered, WIDER Studies in Development Economics, Oxford University Press, 2018] Others are more sceptical and argue that services such as tourism are 'quick wins', but cannot serve as a pathway for long-term growth. Although it generates export earnings, growth and employment, specialisation in tourism tends to yield limited growth benefits. To generate growth through tourism, a country has to attract more tourists yearly, placing a higher strain on public services such as security and utilities. Also, tourism comprises low-productivity activities such as hotels and restaurants. Thus a study by the IMF[18R Arezki, R Cherif, and J Piotrowski, Tourism Specialization and Economic Development: Evidence from the UNESCO World Heritage List, IMF Working paper, WP/09/176, July 2009] shows that to reach growth of 6% per year, it would need to increase tourism receipts as a share of exports by more than 70%, which is unlikely to happen in most African countries.

To this end, Chart 8 presents the size and changes in the growth of the six economic sectors modelled in IFs: agriculture, energy, materials, manufacturing, services and ICT for African countries and groups.

It is evident from Chart 8 that all sectors in Africa’s 2043 economy will be bigger in the Combined Agenda 2063 scenario than in the Current Path forecast for that year.

The sectoral shift in economic composition from 2024 (the start of the interventions) to 2043 for low-income Africa is in Chart 9. The scale on the y-axis indicates that the shifts are at a maximum amplitude of five percentage points in either direction. Still, the impact of compound interest is such that these changes have a significant impact over time, evident from the area graph reflecting economic size in Chart 9. The general growth in manufacturing (almost five percentage points larger in 2043 in the Combined scenario compared to the Current Path) reflects the structural change in African economies, yet, even in the Combined scenario, the services sector constitutes 57% of GDP. The ICT sector also shows modest growth. All other sectors decline in their contribution to GDP although all increase in size.

However, two caveats must be considered when considering these results. The first is that there are large country-to-country differences, with some, such as Gabon and Equatorial Guinea , having very skewed economic structures, discussed in the geographic country forecasts for those countries. The results of these two out of seven upper-middle-income countries invariably skew the results for the group. The reader should also remember that our interventions are from 2024 to 2033 and then maintained at the 2033 level to 2043.

At a continental level (i.e. the average for Africa), the Combined Agenda 2063 scenario modestly constrains the growth of the service sector in favour of growth in the size of the agriculture sector. From 2027 the service sector grow more rapidly than any other. The Combined Agenda 2063 suggests an end to the premature deindustrialisation of Africa, with an increase in the manufacturing sector's contribution to Africa’s GDP by more than one percentage point by 2043. Overall, Africa will have a growth trajectory dominated by services, which traditionally has lower transformative productivity potential than a manufacturing growth trajectory, although, as discussed, there is some potential for modern services such as transport and communication, financial intermediation and business services to exhibit the same labour productivity as manufacturing/

Whereas the service sector currently constitutes about half of the African economy, it will be 60% by 2043, closer to the average forecast for the rest of the world (about 58%). The agriculture sector's contribution to GDP in the rest of the world slowly declines (from 4% to 3%). 2019 it was just below 16% in Africa, dropping to 7% on the Current Path and 6% in the Combined Agenda 2063 scenario.

The impact of the scenarios is that African economies become more productive, with considerable growth in the service sector, in line with global trends. But none of this will happen by itself. It requires appropriate policies that support local industry or at least the transfer of knowledge to local industry, determined implementation and productive investment.

Governance and unlocking Africa’s human capital

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Africa needs strong, developmentally minded governments and associated leadership that regulate, empower and support small and medium-sized businesses, the primary wealth and employment creator in the 21st century.[19The private sector in Africa is showing steady growth and doing so from the smallest informal trader to large multinationals. A 2017 study by McKinsey reveals that some 400 companies in Africa earn revenues of US$1 billion or more and that nearly 700 companies have revenues greater than US$500 million. Most have grown faster than their peers in the rest of the world in local currency terms, and most are more profitable than their global peers. Just over half are owned by Africa-based private shareholders, 27% are foreign-based multinationals and 17% are state-owned enterprises. K Jayaram, O Kassiri and IY Sun, The closest look yet at Chinese economic engagement in Africa, McKinsey & Company, June 2017] In poverty alleviation, governments need to offer an enabling hand that shapes the market in a pro-poor manner while alleviating extreme poverty through grants, work schemes, education, housing and other measures for those who cannot adequately provide for themselves. It requires the precise allocation of poverty alleviation resources, such as done in China, seeking to help families and communities in ways that address their immediate needs and enable them to wean themselves out of poverty eventually. Experience from around the world highlights the need for growth policy not only to emphasise institutions and policies that promote strategic collaboration between the government and the private sector but also on the clear understanding that the market will not resolve poverty. That requires a capable government committed to harnessing and regulating all resources to that end and that monitors and helps directly to the need.[20United Nations Economic Commission for Africa, Making the most of Africa’s commodities: Industrializing for growth, jobs and economic transformation, Addis Ababa: UNECA, 2013.] In many senses, development is about eventual independence from the helping hand of others.

The continent needs governments that consistently invest in knowledge creation. The Norwegian scholar and economic philosopher Erik Reinert concur with others such as Joseph Stiglitz and Bruce Greenwald in describing what lies at the heart of development: ‘The global economy,’ Reinert writes, ‘can in many ways be seen as a pyramid scheme of sorts — a hierarchy of knowledge — where those who continually invest in innovation remain at the apex of welfare.’[21ES Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor, London: Constable, 2007, 148 and J Stiglitz and B Greenwald, Creating a Learning Society: A New Approach to Growth, Development, and Social Progress, 2014.] Reinert points to the importance of ‘going up the productivity and technology curve’, generally a function of investments in research - development and expanding the manufacturing sector more than others.

In a different context, the McKinsey Global Institute argues that ‘all global value chains are becoming more knowledge intensive’.[22S Lund, J Manyika, J Woetzel, J Bughin, M Krishnan, J Seong and M Muir, Globalization in transition: The future of trade and value chains, New York: McKinsey Global Institute, 2019, 1.] The associated response could take many forms, but only deliberate efforts to unlock the promise of digitisation and the Fourth Industrial Revolution will achieve this in the 21st century.

In the aftermath of the great global recession of 2008/09, globalisation briefly deepened until the COVID-19 pandemic. Then, competition between the US and China changed things even before the disruptive effect of Russia’s invasion of Ukraine on global food markets. Today, growth and trade within regional trading blocs (as opposed to between these blocs) have become particularly important.[23McKinsey Global Institute, Digital globalization: The new era of global flows, New York: McKinsey & Company, 2016, 3.] Global value chains are shortened as production moves closer to consumers - partly due to efforts to improve the speed of getting goods to market. It is also a reaction to global tensions caused by a growing sense of nationalism, like the obvious efforts by Europe and the US to constrain technology transfer and competition from China, as well as the reactions to Russia's war on Ukraine. Previously, labour costs were a deciding factor in manufacturing location. But in the last two to three decades, non-labour costs — including the costs of managing complex global value chains — have increased in importance.

Regional value chains and localised production closer to the end market have become more attractive in advanced and emerging economies alike, with some even talking about manufacturing on-demand based on technologies such as 3D printing.[24K de Backer and D Flaig, The future of global value chains: Business as usual or “a new normal"?, Organisation for Economic Co-operation and Development, 2017] This is the emergence of a decentralised, cottage-industry model of industrialisation, referred to in the theme on manufacturing. 

Africa must integrate regionally and into global supply chains to facilitate knowledge transfer. To that end, Africans must actively encourage foreign companies to invest and locate on the continent and attract skilled foreigners. Part of that process is to manage debt levels, eradicate financial leakages, mobilise domestic resources, efficiently allocate funds, and curb capital flight.[25R Arezki and A Erce, How to reignite Africa’s growth and avoid the need for future debt jubilee, Brookings Institution, 8 December 2020] Some refer to instituting ‘radical transparency’, such as to ensure that all debt — not only sovereign debt but also debt directly or indirectly guaranteed by African governments such as that held by special financial vehicles — is recorded on the World Bank’s Debtor Reporting System.

Technological knowledge transfer and steadily expanding local content requirements are crucial to ensure these companies are embedded in local value chains. Over time, local value chains will allow African companies to become part of international value chains. Whatever the exact point, Africa must subscribe to an approach that enhances the mantra of ‘designed in Africa, grown in Africa, made in Africa’.

In this regard, there is much that Africa can learn from China and South Korea, which have perfected the art of setting up a subtler ambush by requiring foreign companies to partner and transfer technology to local partners. In the process, China emerged as the global manufacturing hub. It achieved these goals by making technology transfer and skills requirements of the law, including them in every agreement and then negotiating hard. China intends to rival the US as the technology leader in several key areas, including artificial intelligence. It has been so successful that the West now scrambles to constrain its growth.

Instead, many African countries such as Kenya and Nigeria specialise in so-called ‘foreign ambush’. Their primary orientation is not to attract and nurture foreign businesses but to entice and trap them. Once a foreign company has been attracted by a liberal legal framework and fiscal incentives to invest, the rules are changed to extract greater profits and benefit particular nationals or families. Nothing scares private investment more than uncertainty, and the threat of changes to their legal or tax status is often a substantial disincentive. The result is that the companies that do invest eventually capitulate and leave, as many South African (and other) companies have done in these three countries. In another example, South Africa has made it particularly difficult for skilled foreign nationals to obtain work permits or for companies to invest while adding one compliance burden on top of another. The result is disinvestment and slow growth.

Many of Africa’s post-independence efforts at industrialisation failed because of efforts to effectively create islands of technological sophistication and prestige projects in a sea of informal, low-technology economies. Without forward and backward linkages to the domestic economy, these projects depended on government subsidies and handouts in terms of access to foreign markets, for instance, through the US African Growth and Opportunity Act. Some recent investments in heavy-duty infrastructure (as opposed to basic infrastructure) threaten to replicate these mistakes. When these agreements ended, the investments proved unsustainable, and the company inevitably folded or left. For the same reason, highly capital-intensive projects such as gas and petroleum extraction in northern Mozambique, Angola, Nigeria, Equatorial Guinea and Gabon provide little spillover effect to the wider economy. All provide a money stream to elites fighting to control that money. But oil or gas income does not develop a country, and its importance will decline given the threat of climate change. Above all, Africa needs appropriate government policy, ethical leadership and oversight that unlocks the one thing we have in abundance, our human resources.

Eventually, the transformation of Africa is less about grand schemes and ambitions (of which there have been many) and more about the mundane functions of improving food security through land reform and support of small-scale farming, ensuring a hassle-free and facilitative investment environment, holding one another to account; and facilitating foreign investment in clear terms. It requires a technical and bureaucratic process, where governments must meticulously go through every impediment that deters or inhibits innovation, entrepreneurship and doing business. It is about governments that get behind success, offering support and helping to facilitate growth in a sector already showing potential rather than merely shovelling money in that direction.

Long-term planning requires policy certainty and many challenges as civil resistance campaigns against dictators and lifetime presidents mount. For investment, as opposed to war profiteering, policy predictability is a prerequisite.

Conclusion: Africa has significant untapped development potential

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The introductory section in this theme indicated that, on Africa’s Current Path, the African economy in 2043 will have increased by 173% compared to 2019, but because Africa’s population will have increased by 71%, gross domestic product (GDP) per capita will have improved by only 37%.

In the Combined Agenda 2063, things will change. In that scenario African economy in 2043 will have increased by 385% compared to 2019,  Africa’s population will have increased by only 62%, and as a result, GDP PC will have improved by 117%. The difference is a remarkable US$3 429.

In 2019, Africa’s GDP PC was 26% of the average of the rest of the world, and on the Current Path forecast, that would still be 26% in 2043. In the Combined scenario, it would be 41%.

Instead of an African economy that is 3.2% of the global economy (in 2019), it could be 9.2% in 2043 instead of 5.2%.

On a structural level, many of Africa’s challenges can be traced back to the process of imposed state formation, which started with imperialism and lasted through the colonial period. Decades later, the end of the Cold War released Africa into an international state-based system when its constituent states had not yet been able to consolidate. 

Subsequently much of Africa and its amalgamation of unconsolidated ‘states in name’ struggled. Some have been poorly served by elites who often appear to place their family, tribe or ethnic group ahead of their country’s development rather than a commitment to advance equal development for all its citizens. The challenge to deliver is complicated by the fact that in many African states, governing consists of a continuous process of bargaining and patronage among numerous traditional, ethnic, family and other groupings to retain power. That is changing, but slowly.

Eventually, neither Western donors, nor trade with China or India, will develop Africa; only Africans can, but cannot, in isolation. Leaders must accept responsibility for shaping the future, manage debt levels and carefully allocate resources to maximise development progress. More capital is key. Even developed countries cannot finance their capital needs from domestic revenues alone and need to borrow. 

As a percent of GDP, Africa’s finance requirements are high, although eminently achievable when looking at the amounts of capital available globally. There is no silver bullet to this dilemma. It requires a host of responses, starting with the quality of domestic governance and extending all the way to restructuring the voting rights of IFIs. Africans must afford much higher debt levels (at least 50% to 60% of GDP) which is only possible at very low concessional rates. This means someone somewhere needs to offset the additional risk premium as Africans work to reduce their risk premium through better governance.

Sustained and rapid growth is difficult to achieve. Each African country needs to develop organic practices tailored to that country's domestic conditions. ‘Countries become successful,’ argues Lant Pritchett, ‘by means of an ugly, messy, contested hard slog that takes decades. And then, after they become successful, they create myths about how wonderful it was and the reasons why they did it, when the reality was just that it was a hard slog.’[26Prof Lant Pritchett in conversation with Ann Bernstein, Centre for Development and Enterprise, June 2021.]

This website presents a host of policy recommendations that seek to explain and explore the development of Africa. The general result that emerges from the analysis is to recognise the interrelationships between various sectors. In many senses, governments need to fix the basics. For example, they need to invest in core infrastructure such as electricity, sanitation, water and roads, in literacy and primary education, then in lower-secondary and upper-secondary education, and in empowering and helping small-scale farmers and businesses to improve productivity to ensure sufficient nutrition and food security.

Leapfrogging should be seen in this context to allow Africa to benefit from new technologies so that things can progress more rapidly and cheaply, such as by using digital identification systems and electronic payments systems to improve the capacity of governments to deliver more effective programmes or provide electricity to their citizens through decentralised mini-grids using renewables. Access to electricity and the global village (through access to the Internet) offers huge potential to embark on a rapid digitisation process. It has significant potential as a key enabler of more rapid growth.[27United Nations Economic Commission for Africa, Fiscal policy for financing sustainable development in Africa, Addis Ababa: UNECA, 2019, xiii.] Large infrastructure projects are important, but governments must carefully analyse that their investments respond to actual demand before investing in hugely expensive railway lines, for example.

Current forecasts indicate that the rise of India could lead to a global resources boom starting within the next decade, even as the transition to renewables means that a new scramble for Africa’s minerals, such as nickel is imminent. As much as African economies need to diversify, it is unlikely that this will be possible by then. Nor is it a given that Africa will be the region to benefit most from this boom, for, according to the Fraser Institute, much of Africa ranks near the bottom in their annual survey of mining and exploration attractiveness.[28Investment decisions are not based only on mineral potential but also on policy certainty and confidence in a policy regime that will remain stable. Policy factors account for approximately 40% of investment decisions. Regionally, only Latin America and the Caribbean fares worse than Africa. See: A Stedman KP Green, Annual Survey of Mining Companies: 2017, Fraser Institute, 2018]

Resource extraction can provide an opportunity to invest in the efforts required to transform Africa’s economies and education systems for greater productivity. However, this is only possible if Africa uses that income and opportunity as a foundation and opportunity for structural economic transformation — going up the productivity value chain using renewables to power that pathway. Africa must embark on a direct pathway to a distributed, renewables-based energy solution that provides a sufficient base load to drive its burgeoning manufacturing industry and unlock productivity from its services sector.

Africa has a large and growing working-age population. By 2037 its increasing labour force will be larger, as a proportion of its population, than that of the EU27 and larger, by the middle of the century, than North America. This growing working-age population has the potential to accelerate economic growth, provided the continent can improve on the associated skills base and create the demand to translate that skills base into a knowledge economy. The reverse applies in Europe, where the contribution from labour to growth is declining.

However, the potential contribution from Africa’s growing labour pool is insufficient to guarantee productive economic growth without adequate investment in appropriate education for the Fourth Industrial Revolution, sufficient nutrition and access to healthcare, and industrial policies that incentivise and absorb graduates. Africa trails significantly in all three areas compared to global averages. Since investments in human capital provide the most enduring contribution to sustainable economic growth over long time horizons, the continent needs to invest in the associated enablers.

Even with the best will and good fortune, it is unlikely that all African countries would be able to achieve similar success in advancing across all dimensions. In addition, the type of reforms required to move from low levels of development are quite different from those needed at a middle-income level. Eventually, only individual country studies can indicate the potential growth that is possible.

Apart from everything else, African countries need modern, capable leadership that can connect with the aspirations of their youthful populations. Leaders must move on after a set term, look to the future rather than fixate on the past, and rely on evidence-based policymaking, not ideology. Africa does not need excellent governance, superb education, or top hospitals; what transforms a country is typically governance that is ‘good enough’, strong local low-tech health programmes, and decent education and jobs for women. That is the essence of the call by Nelson Mandela that we should not ‘seek to place blame for our condition elsewhere or to look to others to take responsibility for our development’, but to become the masters of our own fate.[29NR Mandela, Address by Nelson Mandela at gala banquet celebrating Africa’s 100 best books of the 20th century, 23 July 2002]