THE BRENTHURST FOUNDATION

TOWARDS A THIRD LIBERATION? The New Search for Prosperity and Jobs

Greg Mills & Jeffrey Herbst

Point of Departure
Six Drivers. Three Scenarios for Africa

Six Drivers
People. Growth and Differentiation. Democracy and Conflict. Resources. Food. Competitiveness and Technology.

DRIVER ONE: People

SSA Population: 1950-2050

2 1.5 (Billions) 1 1.4 Billion in 2025

0.5
0 1950 1975 2000 2025 2050
6

Source: United Nations

Population by Age Group

100+ 90-94 80-84 70-74 60-64 50-54 40-44 30-34 20-24 10-14 0-4 1.0

1980 2020

Male

Female

0.5
Source: United Nations

0.0 (in Billions)

0.5
7

1.0

But its also where they will be living

The Urbanization Phenomenon

2 70 60 50 40 30 20

1.5
Billiions 1 0.5 0 1950 1975 2000 2025 % Urban 2050 Total Population
Source: United Nations

10
0

12

400

200

700

600

500

300

100 0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

African Per Capita Income, Constant (2000) US$

Where It Went Wrong

1200
1000 800 600 400 200 0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 Indonesia Nigeria

Constant Per Capita 2000 USD

Start of Indonesia's sustained growth 1967

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION

DOWNSIDE RISING INEQUALITY SMALL MIDDLE-CLASS LOW SAVINGS POOR INFRASTRUCTURE

15

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION

DOWNSIDE RISING INEQUALITY SMALL MIDDLE-CLASS LOW SAVINGS POOR INFRASTRUCTURE

16

UPSIDE PEACE DIVIDEND BETTER GOVERNANCE POVERTY DOWN DIFFERENTIATION

DOWNSIDE RISING INEQUALITY SMALL MIDDLE-CLASS LOW SAVINGS POOR INFRASTRUCTURE

- At 68 GW, entire electricity production of SSA = Spain; without SA = 28GW = Argentina. - P/million capacity = one-third of South Asias, one-tenth of Latin Americas.

17

Over the past two decades, Africas coastal cities have been growing by 4+% a year. Lagos, Mombasa, Dar es Salaam, Accra, Abidjan and Dakar have seen populations explode from in-migration.
SS Africas littoral population should double to 250m by 2030, with faster growth expected. (Two-thirds of world already within 400kms.)

 Expand administration, governance and rule of law Investment in basic services and infrastructure fuel, water and (electrical) power Increased threats of environmental instability, overfishing, piracy, threat networks, and ungoverned urban spaces

In 1990 there were only 24 cities in Africa with more than one million inhabitants. Today this number is 48 cities, of which Cairo and Lagos have more than ten million inhabitants each.

By 2025 there will be 300 million people younger than 24 years in African cities a most potent political and cultural force on the continent.

What does this mean for Africa? Stress on urban infrastructure Risk of appeal of populism Need to manage expectations Need to ensure rural growth

Yet her generation has the best chance of breaking out of poverty

The demographic dividend

Working Age Population (% of total population)

70 65 60

55
50 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 World Sub-saharan Africa

The demographic dividend

Working Age Population (% of total population)

70 65 60

55
50

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 World Sub-saharan Africa

By 2050 Africas population of 2bn > India (1.6bn then) and China (1.4bn). One in 5 people and 1 in 4 workers globally will be African; and its population younger than all other regions. Already 19.7 African median age (29.2 Asia, 36.8 US, 40.1 Europe).

DRIVER TWO: Growth & Differentiation

Much has been achieved - 40+ democracies - Range of donors and allies - Governance improved - Growth over 5% - More honest inward scrutiny - Commodities revival

Much has been achieved - 40+important democracies Differentiation phenomenon - Range of donors and allies - Governance improved - Growth over 5% - More honest inward scrutiny - Commodities revival

Much has been achieved - 40+ democracies - Range of donors and allies - Governance improved - Growth over 5% - More honest inward scrutiny - Commodities revival

Much has been achieved - 40+ democracies - Range of donors and allies - Governance improved - Growth over matters 5% Growth - More honest inward scrutiny - Commodities revival

DRIVER THREE: Democracy & Conflict

Sub-Saharan African Conflicts

25 20

15
10 5 0

Conflicts

The potential for social destabilisation exists

GDP Growth and Employment Trends

Despite the best growth decade on record, labour

participation rates remained largely flat

7 6 70 5 75 Labor Force Participation Rate
41

Growth (%)

65

3
2 1 60

55
0 2000 -1
GDP Growth GDP Per Capita Growth Labor Participation Rate (ALL) Labor Participation Rate (YOUTH) Source: World Bank and International Labour Organisation

2001

2002

2003

2004

2005

2006

2007

2008

2009 50

GDP Growth and Employment Trends

Vulnerable Employment by Region
90 80 70 60 50

% Vulnerable Employment Both Sexes

Developed Economies inc EU Europe Non-EU and CIS

East Asia
South-East Asia & Pacific South Asia

40
30 20 10 0 1998 1999 2000 2005 2006 2007 2008 2009

Latin America & caribbean Middle East

North Africa
Sub-Saharan Africa World

42

GLOBAL PER CAPITA INCOME (PPP) & INCOME INEQUALITY

GLOBAL PER CAPITA INCOME (PPP) & INCOME INEQUALITY

The inherent vice of capitalism is the unequal sharing of blessings, the inherent virtue of socialism is the equal sharing of miseries. WINSTON CHURCHILL

Stressing fragile peace

More than 50% of post-conflict countries slide back to conflict within ten years

DRIVER FOUR: Resources

Africas Globalisation Link

Western consumer demand

Asian production & savings

Commodity demand

AFRICAN COMMODITIES BOOM

African Exports Track Commodity Prices

50000 45000 600 40000 35000 30000 25000 500 700

400

20000
15000 10000

300

200

100 5000

0
Nov-05 Oct-03 Jul-02 Apr-06 Aug-09 Dec-02 Jun-05 Jan-10 Jul-07 Aug-04

0 Sep-06
Dec-07 Oct-08 Nov-10 Feb-07 Feb-02 Jun-10 Apr-11 May-08 May-03 Mar-09

Mar-04

Jan-05

Sep-11

Africa total exports (USD milion)

Commodity prices (CRB, 1967=100, Right scale))

Feb-12

African Exports Track Commodity Prices

50000 45000 600 40000 35000 30000 25000 500 700

400

20000
15000 10000 5000

300

200

0
Nov-05 Oct-03 Jul-02 Apr-06 Dec-02 Jun-05 Aug-04

70+% African exports still oil & other minerals

100

Aug-09

Jan-10

Jul-07

Sep-06

Dec-07

Oct-08

Nov-10

Feb-07

Feb-02

Jun-10

Apr-11

May-08

May-03

Mar-09

Mar-04

Jan-05

Sep-11

Africa total exports (USD milion)

Commodity prices (CRB, 1967=100, Right scale))

Feb-12

African Exports Track Commodity Prices

50000 45000 600 40000 35000 30000 25000 500 700

400

20000
15000 10000 5000

300

200

0
Nov-05 Oct-03 Jul-02 Apr-06 Dec-02 Jun-05 Aug-04

Aug-09

Jan-10

Sep-06

Dec-07

Oct-08

Nov-10

Feb-07

Feb-02

Jun-10

Apr-11

May-08

May-03

Mar-09

Mar-04

Jan-05

Africa total exports (USD milion)

Commodity prices (CRB, 1967=100, Right scale))

Feb-12

70+% African exports still oil & other minerals; 90+% Nigerian exports
100

Jul-07

Sep-11

DRIVER FIVE: Food

This is how she has to cope

A hungry man is an angry man. Raila Odinga

Africas net food importers

Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo, Dem Republic of Congo, Republic of Cte dIvoire Djibouti Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Namibia Niger Nigeria Sao Tome and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania, United Rep of Togo Uganda Zambia Zimbabwe

Africas net food importers: 39 of 49

Angola Benin Botswana Burkina Faso Burundi Cameroon Cape Verde Central African Republic Chad Comoros Congo, Dem Republic of Congo, Republic of Cte dIvoire Djibouti Equatorial Guinea Eritrea Ethiopia Gabon Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mauritius Mozambique Namibia Niger Nigeria Sao Tome and Principe Senegal Seychelles Sierra Leone Somalia South Africa Sudan Swaziland Tanzania, United Rep of Togo Uganda Zambia Zimbabwe

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

Cereal Yields (Kg/Ha) in Developing Countries

East Asia & Pacific

Latin America & Caribbean South Asia Middle East & North Africa

1961

2005

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

Cereal Yields (Kg/Ha) in Developing Countries

East Asia & Pacific

Latin America & Caribbean South Asia Middle East & North Africa

Sub-Saharan Africa

1961

2005

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

Cereal Yields (Kg/Ha) in Developing Countries

East Asia & Pacific

Latin America & Caribbean South Asia Middle East & North Africa

Just 20% of Sub Africas -Saharan Africa 400m ha arable land currently cultivated
1961 2005

DRIVER SIX: Competitiveness, Skills & Technology

2000-2011: African internet usage in Africa grew 2,500%; global growth rate ten times less. In Nigeria, internet users went from 200,000 to 44 million during this time.

2000-2011: African internet usage in Africa grew 2,500%; global growth rate ten times less. In Nigeria, internet users went from 200,000 to 44 million during this time. Kenyas M-Pesa service 14 million users in 5 years, moving 20% of value of GDP.

Result: Africans, natural connectors, will increasingly have their lives shaped by global and regional information and financial exchange

What does this mean for Africa? Impact on expectations A linked diaspora Avenue to globalisation, good and bad Premium on skills

The uneducated fall behind

[picture of skills premium point]

Skills Premium

Gross primary enrollment

140

120

100 East Asia & Pacific

80
%

Latin America and Caribbean 60

Middle East and North Africa

South Asia
Sub-Saharan Africa

40

20

0 1970 1975 1980 1985 1990 1995 2000 2005

120 100

80 60 40
20 0 Net Enrollment Rate Minimum Mastery

So, whats the future look like?

77

Three Scenarios for Africa

78

Boom Times Continue High Commodity Prices Here to Stay

79

Boom Times Continue

- China only $4000 pc income; domestic
demand e.g. cars 1/10th of US levels. - Chinese increased demand for copper 700,000t annually: same as Zambia. - China raw material investments $340bn last five years, only $88bn mining.

80

The Cycle Turns Commodity Prices Cool

81

The Cycle Turns: Commodity Prices Cool

82

The Pattern of Cycles

Selected Commodity Prices
(1998 US$)
80.00 10,000 70.00
9,000

8,000
60.00

7,000 50.00

6,000

40.00

5,000

Iron ore Oil

30.00

4,000

Copper

3,000 20.00
2,000

10.00

1,000

0.00

1904

1908

1912

1916

1940

1944

1948

1952

1976

1980

1984

1900

1920

1924

1928

1932

1936

1956

1960

1964

1968

1972

1988

1992

1996

2000

2004

84

Boom Times Continue: High Commodity Prices are here to Stay

85

Double-whammy ? US energy demands fall through increased domestic supply and efficiencies, while Chinas growth falls

86

Double-whammy ? US energy demands fall through increased domestic supply and efficiencies, while Chinas growth falls and/or other new technologies appear altering demand for traditional resources.

87

At nearly 8mb/d, the US is the Doublewhammy ? of oil, world's largest importer US energy demands through ahead of China fall (6mb/d) and increased domestic supply and Japan (4.5mb/d). efficiencies, while Chinas growth But down from nearly 13mb/d in falls and/or 2006 due to other new technologies appear altering demand for traditional resources.
88

Lower demand (40% of Double-plus whammy ? reduction) increased US energy demands fall through domestic production: 1.5mb/d increased domestic supply and to 6.5mb/d since 2006. efficiencies, while Chinas growth falls and/or other new technologies appear altering demand for traditional resources.
89

Boom Times Continue: High Commodity Prices are here to Stay

Doublewhammy ? Lower demand (40% of US energy demands fall through reduction) plus increased increased domestic supply 1.5mb/d and domestic production: efficiencies, while Chinas growth to 6.5mb/d since 2006. falls and/or other new technologies appear altering demand for traditional resources.

90

Africas Third Liberation? The Politics of Job Creation

91