How Africa can achieve 8 to 10 per cent economic growth per year for the next four decades

– Professor Jeffrey Sachs (Keynote address at the Ọbafẹmi Awolọwọ Memorial Webinar, ‘Our 21st Century World: Reflections and Projections’ on March 6, 2025. According to the Executive Director, Obafemi Awolowo Foundation, Ambassador Dr. Olatokunbo Awolowo Dosumu, the webinar was planned to focus on four critical sub-themes: The Economy, Technology (with special emphasis on Artificial Intelligence), the North-South Dynamics, and Africa’s Options for Development.)

By Tribune Online

March 16, 2025

Thank you for the opportunity to meet together and open, I hope, some long-term strategic contacts on the topic of Africa’s economic and geopolitical development in the coming decades. Everybody knows that we are in a period of tremendous disruption and flux right now. Donald Trump is a part of that, but only a part of that. In addition, we’re in a period of massive geopolitical change. The rise of China is certainly the most significant geopolitical reality of our age. Beyond China, many other parts of the world are experiencing a massive advance in technology and in their geopolitical weight. India is another crucial case. Russia obviously is yet another great power in the world today. I count on Africa becoming one of the world’s great poles of growth and geopolitics in the coming decades.

Of course, the technological revolution is also changing our economies dramatically, faster than we can keep up. The advances in artificial intelligence are very real. The advances in robotics are astounding. The advances in space-based technologies surveillance and the ability for satellite imagery and other geospatial data to change how governments functions are dramatic. Militaries are obviously changing rapidly in the face of this technological revolution. These technological advances are deep and even accelerating.

At the same time, we have the global environmental crisis that has also accelerated dramatically in recent years. In just the past four years, Earth has warmed by astounding 0.3 degrees Celsius. This is absolutely remarkable. We have actually exceeded the 1.5 degrees centigrade limit that was agreed in the Paris Climate Agreement of 2015.

And we also have a massive demographic change underway as well. In some parts of the world, populations have peaked and are beginning to decline. China is a case in point. China’s population has peaked at 1.4 billion, and if current assessments of future fertility are borne out, China’s population will be under 1 billion by the end of this century, even around 700 million, according to the United Nations forecast.

At the same time, Africa’s population continues to soar. It’s at about 1.5 billion today and by mid-century, perhaps, about 2.4 billion. And according to the UN, estimates could be as much as 3.8 billion by the end of the century, roughly 37% of the projected world population.

So, yes, we are in the midst of massive change. I think, from Africa’s point of view, the main question is how should Africa — as a continent, as the African Union – position itself for success in the coming years? How should Africa as a continental union move forward rapidly: economically, technologically, socially, culturally, and in terms of 21st century infrastructure? How should Africa, as a union, face the challenges of the climate change, the threats to biodiversity, the current degradation of the Congo Basin rainforests, and many other environmental challenges? And how should Africa most effectively participate in a very tough geopolitical world that is now multipolar, where great powers — the United States, Russia, China, India — are in quite intense, and I would say, often dangerous competition, and where those major powers have their eyes on Africa’s natural resources.

I started my morning today in a Zoom meeting in India. The main topic of that session was strategic minerals. All the talk at that international meeting in Delhi was about how the major powers would each secure their strategic minerals – copper, cobalt, rare earths, and other strategic minerals. Frankly, they were talking about you, but not quite with you. The discussion was mainly about the competition amongst Russia, India, China, the United States. Africa was the object of the discussion (in part), but not the subject. Ukraine too is being basically pulled to pieces right now, in part because of the competition for Ukraine’s strategic minerals.

So, what, broadly speaking, do I recommend for today’s 1.5 billion people of Africa, and who will soon be two, three and more billion people? First, quite obviously, I believe that the next 40 years can be, and absolutely need to be, a period of extremely rapid economic growth and I would like Africa to follow the path that China and India have been on. China, during the period from 1980 to 2020, achieved roughly 10% per year economic growth, amounting to more than a 30X increase of the size of the Chinese economy. India today is growing at around 6% per year and I think it will increase to around 7% per year. That too is a very rapid rate that is transforming India’s economy, ending its extreme poverty and putting India also into the front ranks of advanced technologies.

As for Africa, I believe that Africa should aim for and achieve economic growth on the order of 8 to 10% per year for the upcoming four decades, up to let me say 2063, the 100th anniversary of African unity. So, I would like Africa both to design and implement a high growth strategy in the coming 40 years. I think that the historic success that China achieved and that India is achieving helps to chart the path for Africa as well.

Africa currently is growing at 3 or 4% per year aggregate. Because of rapid population growth of around 2.3%, that means just 1-2% per annum in per capita terms, which is woefully insufficient. So, Africa’s growth rate needs to be increased rapidly and the key question is how to achieve that.

Now, the key point is that high growth results from a high investment rate, and the crucial investments are of five kinds: human capital, infrastructure, intellectual capital (R&D), business capital, and natural capital.

The most important investment is in human capital, especially the health, nutrition, education and skills of Africa’s young people. In this regard, Africa is the youngest continent in the world. If we define “school age” to be ages 3 – 21 (spanning from early childhood development through some form of tertiary education), a remarkable 45% of Africa’s population is of school age. Think of it, roughly half of Africa’s population is of school age! (In the high-income countries, the share is around 21%).

Africa’s young people need a quality education, and there’s no time to lose! If a child is forced to drop out of school in lower secondary, or before finishing upper secondary, that boy or girl is likely to suffer a massive loss of income and wellbeing for their whole lifetime, and a massive loss for society.

So, the first order of business in achieving next 40 years of rapid growth is achieving a very high level of educational attainment. That is expensive and it takes a long time to realise the returns — twenty years to educate a child – yet the returns are the highest that a society can achieve. I estimate that the returns to educating a child through upper-secondary are around 20% internal rate of return (IRR).

The second kind of investment is investment in infrastructure, including transport, the power grid, the digital networks, water and sanitation, and climate resilience.

The third kind of investment is in technology and innovation. Innovation is not just a by-product of the market forces. Governments need to invest in research and development (R&D) for their societies to reap the benefits of technological advance. Yes, many technologies come from abroad, but even these technologies need to be adapted locally and reconfigured locally. The localization requires domestic R&D. Africa spends a small fraction of one per cent of GDP on research and development, whereas China and the US now spend around 3% of GDP, while Korea currently spends around 5% of GDP. Africa’s innovation economy needs investment by governments across Africa.

The fourth area of investment, of course, is business investment. Business investment is boosted especially when there are skilled workers and high-quality infrastructure and the ability to adopt or adapt advanced technologies. Then, the businesses will come to Africa far beyond the traditional investments in mining and agriculture. They will come in on a large scale, including in the manufacturing and service sectors of the economy.

The fifth area of investment is natural capital. Africa, obviously, is not only the cradle of humanity, but it is the home of much of the world’s biodiversity. That biodiversity, and Africa’s ecosystems, are under threat, and must be protected. The protection of ecosystems and biodiversity is itself an investment in natural capital, to prevent its degradation.

Now, my view is that Africa can accomplish a high rate of investments of at least 40% of GDP, and even higher, just like China has done, but requires a strategy and the strategy needs to be at the African Union level in my view. The African Continental Free Trade Area is an extremely important part of that, but as we all know, it’s only at the beginning. There are still massive barriers to trade within Africa, barriers that are regulatory, at border crossing, and infrastructural because the railways and highways simply aren’t there yet, and the fibre and power grids aren’t either. This continental-scale infrastructure is critical because Africa will not achieve rapid growth one country at a time but will if Africa is unified on the continental scale.

Africa is the third region of the world, together with China and India, with 1.5 billion people. Africa can achieve the kind of rapid growth achieved by China and India based on a well-trained population of more than 1.5 billion people, a large and growing internal market, and with the right investments, the realistic prospect of the fastest economic growth of any major region in the world.

This, for me, is the agenda. Of course, success will require making the African Union far more consequential and effective than it has been in the past. The AU has in the past been, of course, a place for many important agreements and much progress, but it has not yet played its potential role in the African-wide economy that it needs to play. The projects of NEPAD (New Partnership for Africa’s Development) that are the trans-border projects now need to be implemented rapidly and effectively, and the implementation needs to be in line with the Africa Continental Free Trade Area that has been established.

This also requires a financing strategy to achieve this rapid rate of growth based on high investment rates. My own view is that Africa’s debt is not too high, but actually too low. Africa should be borrowing a lot more on International capital markets, but not the kind of borrowing it’s been doing.

When Africa has borrowed on the international capital markets, it has typically been borrowing at maturities as short as 5-7 years, yet the growth and development will take place on horizons of 25-30 years. Africa is borrowing at short-term maturities to fund investments that pay off only on the scale of a generation or more. When the short-term debts come due, the governments can’t repay the debts and then often get in a refinancing crisis (or a “rollover” crisis). When this happens, the governments default and the national economy enters a downward financial spiral, an IMF programme, and a lost decade of development, or even longer.

The IMF then says, “Don’t you dare try to have those high investments rate again. That’s too destabilising and things come crashing down.” But in my view the mistake is not the debt per se, but rather the short-term maturity of the debt. There is a fundamental maturity mismatch, trying to fund long-term development with a sequence of short-term loans. If the government borrows a seven-year bond to keep a child in school, seven years gets you from first grade to the eighth grade, but it can’t get you the economic growth and government revenues to repay the loan. And so, in my view, the biggest problem that Africa is facing is the underuse and so far, the under-availability, of long-term financing at reasonable interest rates that reflect Africa’s long-term high-growth potential.

My view is that if the capital markets behave properly, they would come to realize that Africa has the highest growth potential of any region of the whole world. Starting poor and accumulating capital, Africa can grow at astoundingly high rates for decades to come. For this reason, with the right fiscal, financial, and investment implementation, it would not be risky to lend long-term to Africa but it is risky to lend for just seven years!

The lending should be 25, 30, or 40 years and this requires a financial strategy for Africa. One basic part of the strategy should be to increase the scale of the African Development Bank. The African Development Bank borrows on the international capital markets and then on-lends to the member states of the African Union on favorable terms, but the scale of the African Development Bank is far too small. AfDB lending is only around $5-10 billion per year but can and should be perhaps $100 billion of lending per year in the coming decade. There’ll be, I think, the opportunity for a major scale-up of the capital and lending flows of the African Development Bank in the coming years.

Here’s my advice to the AfDB: Don’t wait for the United States and Europe to agree, do it yourself! The US and Europe are not going to scale up the African Development Bank to the extent needed. Perhaps the United States isn’t going to put much official financing into African development more generally. The US may try to grab some strategic minerals, but it’s not going to fund much of African development, through the AfDB or otherwise. Africa is going to have to do this by itself and with partners that are really committed to Africa’s long-term development. You will have partners in the Gulf region, you will have partners in the Government of India, and you have partners in the Government of the People’s Republic of China. And I could mention other parts of Asia as well. That’s where Africa’s long-term financing is going to come. Not from the United States, alas, and not from Europe.

The African Development Bank is not the only multilateral bank of Africa. There are many African multilateral development banks. They should be scaled up significantly. And maybe some new ones should be invented, a West African Development Bank, an East African Development Bank, a Southern African Development Bank, and so forth. If well designed and managed, these multilateral banks tend to attract capital on better terms than their individual sovereign owners.

I like the example in Latin America of what’s called the Latin American Development Fund, with the acronym CAF. Its owners, mainly governments in South America, are generally rated at sub-investment grade, yet these sub-investment grade sovereigns got together, pooled their capital, developed the CAF, and thereby gained access to low-cost bonds on the international markets on far better terms than their individual member states could attract.

So, actually, there is leverage through unity. There is leverage through multilateralism.

I had the great pleasure and honor to work with the African Development Bank on a study that was just released on rapid growth for Africa to 2063. The study was led by the superb AfDB Chief Economist Kevin Urama. The study shows, on rigorous analytical basis, how the African Union can move forward on a high-growth agenda.

Nigeria, obviously, has a major leadership role to play in all of this, as the most populous nation in Africa, with so many leaders in finance and in business. So, I really want Nigeria to help lead, not only for Nigeria itself, but for all of Africa. If Africa succeeds on a continental scale, Nigeria will boom as part of this overall continent-wide success.

We will have a noisy global political scene for years to come. Donald Trump will pull the US out of the Paris Agreement. Yesterday, the United States vetoed a very standard UN General Assembly resolution because the resolution endorsed the Sustainable Development Goals that the US (wrongly) claims are not in the best interests of the United States. Nonetheless, don’t be perturbed, don’t be put off. This is Africa’s time for rapid development. Act in unison, and believe me, Africa’s success in the next 40 years will be the biggest success on the whole planet.

Thank you for letting me share these brief remarks with you. I hope that something has resonated with you. If so, I would greatly look forward to continuing to brainstorm with you on Africa’s rapid and sustainable development.

Thank you very much.

– Sachs, world-renowned economist and best-selling author is the Director, Centre for Sustainable Development & University Professor at Columbia University, United States of America

Source: Nigerian Tribune