Speech by Millennium Challenge Corporation CEO Daniel W. Yohannes — By 2020, Africa’s collective GDP could be 2.6 trillion dollars. Foreign direct investment surged from 9 billion dollars in 2000 to 62 billion dollars in 2008—which is almost as large as the flow into China, when measured relative to GDP.
Africa’s long-term growth will increasingly reflect interrelated social and demographic changes creating new domestic engines of growth. Key among these will be urbanization, an expanding labor force, and the rise of the middle-class African consumer.
In 1980, just 28 percent of Africans lived in cities. Today, 40 percent of the continent’s one billion people do—a proportion roughly comparable to China’s and larger than India’s. By 2030, that share is projected to rise to 50 percent, and Africa’s top 18 cities will have a combined spending power of $1.3 trillion.
Africa’s labor force is expanding, in contrast to what’s happening in much of the rest of the world. The continent has more than 500 million people of working age. By 2040, their number is projected to exceed 1.1 billion—more than in China or India—lifting GDP growth. Over the last 20 years, three-quarters of the continent’s increase in GDP per capita came from an expanding workforce, the rest from higher labor productivity. If Africa can provide its young people with the education and skills they need, this large workforce could become a significant source of rising global consumption and production. Education is a major challenge, so educating Africa’s young has to be one of the highest priorities for public policy across the continent.
Finally, many Africans are joining the ranks of the world’s consumers. In 2000, roughly 59 million households on the continent had $5,000 or more in income—above which they start spending roughly half of it on nonfood items. By 2014, the number of such households could reach 106 million. Africa already has more middle-class households (defined as those with incomes of $20,000 or above) than India. Africa’s rising consumption will create more demand for local products, sparking a cycle of increasing domestic growth.