Making the most of demographic change in southern Africa
The countries of the Southern African Customs Union have relatively diverse demographic and economic starting points. These economies have the potential to realize demographic dividends and experience an acceleration in their income per capita growth and poverty reduction progress through forthcoming shifts in their age structures.
Between 35 and 75 percent of poverty reduction in 2015-50 in Southern African Customs Union economies could be attributed to demographic shifts in a business-as-usual scenario of economic development, if employment rates are at least maintained. The magnitude of the demographic dividends could be greater if countries are able to achieve policy outcomes in parallel in the areas of education, savings-investment, and employment.
Scenario analyses of these different policy outcomes interacting with the shifting age structures in different ways suggest quantitatively different economic impacts despite qualitatively similar policies. Improving educational attainment is found to be most important in Lesotho and Swaziland; mobilizing savings for higher investment can be most useful for Botswana; and improving employment rates, especially by closing gender gaps, can be most useful for South Africa and Namibia.
Sub-Saharan Africa will be undergoing substantial demographic changes in the coming decades with the rising working age share of its population. Recent analyses suggest that demographic dividends in the region could account for 11 to 15 percent of GDP volume growth by 2030, while accounting for 40 million to 60 million fewer poor in 2030. However, the realization and magnitude of demographic dividends for a given African country would depend on their current demographic profile and their trends in their demographic changes, as well as their ability to create an appropriate enabling environment. An appropriate enabling environment would include improvements in educational attainment and quality, labor productivity, savings and investment, and job creation.
This paper examines how demographic dividends may play out in the economically linked but otherwise diverse Southern African Customs Union (SACU) economies, when presented with similar economic policy outcomes. SACU economies – Botswana, Lesotho, Namibia, South Africa, and Swaziland – have relatively diverse demographic and economic starting points. This diversity is present in terms of their demographic profile, as evidenced by South Africa being further along in the demographic transition process than the other countries. The diversity is also present in terms of their development indicators, as illustrated by the relatively lower educational attainment rates in Lesotho and Swaziland, or the extremely high unemployment rates in South Africa.
Three broad questions are addressed:
What is the potential contribution of demographic change to growth in the different SACU economies?
What is the potential effect of demographic change on poverty reduction for SACU economies?
What policy intervention might have the largest impact on the size of a SACU economy’s demographic dividend?
Several different possible scenarios for demographic change and development in the SACU economies are considered following the approach of Ahmed et al. (2016) where a global dynamic simulation model is applied in tandem with a microsimulation model based on harmonized household and labor force survey data. Demographic changes in the different economies are considered against the backdrops of different policy outcomes in the areas of educational improvement, mobilizing savings, and improving employment rates. When considering the scenarios of individual interventions, Lesotho and Swaziland benefited the most from improvements in educational attainment rates by achieving higher economic growth and lower poverty rates. For other economies, interventions that had greater impacts were those that focused on improving employment ratios, through higher labor force participation, reducing unemployment, or eliminating gender gaps in the labor market.
The paper thus provides a comparative analysis across several policies highlighted by the literature as key interventions to realize demographic dividends. As such, this paper augments the substantial literature on demographic change and development by focusing on the policy outcomes necessary to realize (or maximize) the demographic dividend.