Powering Africa's Growth: From Demographics to Development.

Almost a quarter century into the millennium, Africa stands out relative to every other continent and region in terms of demographics. While the rest of the world’s population is projected to stagnate or even shrink, Africa’s population is set to grow significantly. Africa is expected to add approximately 950 million people between now and 2050, taking its share of the global population from 17% to 25% in 2050, and potentially as high as 40% by 2100 if birthrate trends remain consistent. In fact, the countries of Egypt, the Democratic Republic of Congo, Ethiopia, Nigeria, and Tanzania alone will likely account for half of the global population growth over the next 25 years.

This demographic explosion creates challenges, which overcome, could yield massive boosts to productivity. During the latter part of the 20th Century, China navigated a similar set of circumstances to massively boost its economy. They utilized their large labor force to create manufacturing activity, boosted by workers encouraged to relocate from rural settings to urban centers. This allowed China to invest in human capital development through education efforts, which in turn boosted their consumption further helping the economy. 

While this process is easier said than done, this type of transition is dependent on a large population. India has achieved some of the same success and is still in the transition phase. While those two Asian nations had certain economic and geopolitical advantages for their evolution, Africa’s abundance of natural and mineral resources could pair exceptionally well with a manufacturing capability if the logistics of raw commodities are removed to other manufacturing and refining centers.

To even begin this process, one thing is needed to spur all other efforts: energy. While the modernization process described above requires education, urbanization, logistical infrastructure, and startup ecosystems just to name a few, none of those are possible without more readily available energy. To this point, roughly 55% of Africa’s population has regular access to electricity, while every other major region is at or above 95% for that category.

Studies have shown a strong correlation between the rise of energy consumption per capita and GDP. This is especially true for countries still considered developing or outside the Organization of Economic Cooperation and Development (“OECD”). Rapidly increasing energy production is more difficult now than it was decades ago due to increased costs of fossil fuel derived energy stemming from increased costs and global scrutiny on carbon-based energy.

Fortunately, Africa has immense promise for renewable energy. It is estimated that roughly 39% of the world’s renewable energy potential is in Africa. Furthermore, it is more highly concentrated, meaning the yield (or capacity factor) from sources such as wind and solar are higher relative to places like Europe for example, creating a lower price per kWh at the generation point. 

This set of factors will lead to a rush of energy development in Africa. There are many constraints, such as the cost of capital and access, electrical infrastructure development, long-term economics for state-owned utilities, and predictable off-take matching the generation. Still, the transition must start with energy, and building generation is the sole first step of that process.