Eliya Msiyaphazi Zulu (PhD.) The Demographic Dividend - Conceptual framework and Global/ Regional Experiences Eliya Msiyaphazi Zulu (PhD.) Presented at the Regional Public Dialogue on the Demographic Dividend Serena Hotel, Kampala, Uganda 4th July, 2014 1 HIV Project Consultative Meeting Draft Presentation 1

Outline of Presentation Linkages between population change and development Meaning and pathways for achieving the demographic dividend Global Experiences African Experiences Implications for policy and action

Population dynamics and the “African Century” Africa is undergoing phenomenal population changes and has immense economic opportunities Population projected to grow from 1.2 to 2.4 billion by 2050 Majority of African to live in Urban areas by 2050 Migration likely to increase, with increasing regional integration and globalization High child dependency burden a key barrier to development BUT if mortality and fertility decline rapidly child dependency burden will decline and having more people of working age a can provide a valuable impetus for rapid economic growth

Africa on the rise – growing economic opportunities and unprecedented growth Economies expected to continue growing at a steady rate, despite global recession In 2014, Sub-Saharan Africa economies to grow by 6.1% (global average of 4%) – IMF, April 2013 Foreign Direct investment projected to increase from $37 in 2012 to $54 billion in 2015 Infrastructure development is improving across the continent, especially in East and Southern Africa "It is expected that by 2020, only four or five countries in the region will not be involved in mineral exploitation of some kind” (World Bank) Diaspora remittances playing a key role in development Most countries have long-term development strategies to guide socioeconomic transformation But World Bank economists cautioned that high inequality and a dependence on mining and mineral exports in many countries had actually dampened the poverty-reducing effect of income growth. Countries rich in natural resources, such as Gabon, Equatorial Guinea and Nigeria, performed less well than those lacking this apparent head start. The World Bank said better administration of mineral wealth, development of agriculture and a careful managing of rapid urbanisation would help governments to lift more people out of poverty. "Better governance will need to underpin efforts to make growth more poverty reducing," the report said.

Population sizes will at least double in all EAC Member States by 2050 Past and Projected population size (Millions)   1960 2010 2050 2100 Burundi 2.8 9.2 26.7 56.3 Kenya 8.1 40.9 97.2 160.4 Rwanda 2.9 10.8 25.4 36.2 Tanzania 20.1 45.0 129.4 275.6 Uganda 6.8 34.0 104.1 204.6 TOTAL 40.7 139.9 382.8 733.1 If we look at the specific countries in the region, we see the gravity of the population growth factor that we are facing. Population of all countries will at least double between now and 2050, almost tripling in Burkina Faso and more than tripling in Niger. While some experts and political leaders feel uncomfortable to talk about population growth and the need to slow it down, I submit to all of you here that it would totally irresponsible for us to close our eyes and fail to recognize the implications that these numbers have and will continue to have on sustainable development in Africa. We need to ask ourselves and answer the tough questions such as – how will these countries feed its populations, educate their people, provide health care for them, create jobs for them, and preserve their natural resources? Furthermore, we need to understand how the escalating climate change will compound these challenges Source: United Nations Population Division – Medium Variant UN Projections 2012 Edition

Population Momentum The population of Uganda will continue growing for 6-8 decades even after reaching replacement level fertility of 2.1   300  250  population  (millions)  2080  2060  2040  2020  UN Newest  Projection 2010 Current  population  200  150  100  50  0  Total fertility rate:  6.2  (2010)  

The year in which a country reaches replacement level fertility has a major impact on its ultimate population size. Total fertility rate: 4.5 (2010)

The year in which a country reaches replacement level fertility has a major impact on its ultimate population size. Total fertility rate: 5.4 (2010)

The year in which Kenya reaches replacement level fertility will have a major impact on its ultimate population size  200  180  population  (millions)  160  140  120  100  80  60  40  20  0  Total fertility rate:  4.6  Population Size (2010):  40 million  2080  2060  2040  2020  UN Medium  Projection 2010 Current  population 

Past & projected % of population living in urban areas Urbanization is on the rise – what will this mean for socioeconomic development for East Africa? Past & projected % of population living in urban areas   1960 2010 2050 Burundi 2 11 28 Kenya 7 24 46 Rwanda 19 39 Tanzania 5 26 50 Uganda 4 15 34 If we look at the specific countries in the region, we see the gravity of the population growth factor that we are facing. Population of all countries will at least double between now and 2050, almost tripling in Burkina Faso and more than tripling in Niger. While some experts and political leaders feel uncomfortable to talk about population growth and the need to slow it down, I submit to all of you here that it would totally irresponsible for us to close our eyes and fail to recognize the implications that these numbers have and will continue to have on sustainable development in Africa. We need to ask ourselves and answer the tough questions such as – how will these countries feed its populations, educate their people, provide health care for them, create jobs for them, and preserve their natural resources? Furthermore, we need to understand how the escalating climate change will compound these challenges Source: United Nations Population Division – Medium Variant UN Projections 2012 Edition

Past and projected trends in Child dependency ratios As fertility declines, child dependency ratios will decline and working age population will increase, creating a window of opportunity for accelerated economic growth Past and projected trends in Child dependency ratios   1960 2010 2050 2100 Burundi 81 82 62 36 Kenya 93 78 50 31 Rwanda 97 84 45 27 Tanzania 88 86 60 30 Uganda 89 100 33 If we look at the specific countries in the region, we see the gravity of the population growth factor that we are facing. Population of all countries will at least double between now and 2050, almost tripling in Burkina Faso and more than tripling in Niger. While some experts and political leaders feel uncomfortable to talk about population growth and the need to slow it down, I submit to all of you here that it would totally irresponsible for us to close our eyes and fail to recognize the implications that these numbers have and will continue to have on sustainable development in Africa. We need to ask ourselves and answer the tough questions such as – how will these countries feed its populations, educate their people, provide health care for them, create jobs for them, and preserve their natural resources? Furthermore, we need to understand how the escalating climate change will compound these challenges Source: United Nations Population Division – Medium Variant UN Projections 2012 Edition

Defining the Demographic Dividend The Demographic Dividend is the economic benefit arising from a significant increase in the ratio of working-aged adults relative to young dependents.   When birth rates decline significantly, the age structure shifts in favor of more working-aged adults, accelerating economic growth through increased productivity, greater household savings, and lower costs for basic social services provided to a young population. 

Kenya and Thailand’s age structure differ remarkably due to differences in birth rates TFR: 7.5 TFR: 6.1 TFR: 4.6 TFR: 1.6 TFR: 2.7 TFR: 1.7 Source: UN Population Division (MEDIUM VARIANT), 2011

Asian Tigers: Success Story Between ¼ to 1/3 of economic growth since 1970 in East and South East Asia can be attributed to the Demographic Dividend” (Bloom and Williamson, 1998; Mason, 2001) The economic success was made possible by sustained investments in education, health, family planning, and economic reforms How does the demographic dividend work? There are two

Ratio of working age to dependent population Sub-Saharan Africa Source: UN Population Division (MEDIUM VARIANT), 2011

Pathways for Accelerated Economic Growth through the Demographic Dividend The first Demographic Dividend: Increased productivity from “surplus” labor supply generated through: Rapid fertility (and mortality) decline Greater involvement of women in the labour force Productive employment of the extra workers The Second Demographic Dividend: Increased savings and investment due to higher incomes and reduced child dependency burden: Increased savings and investment capital stock Improved human capital due to higher investments in health and education and reduced childbearing burdens for women Growth in domestic demand and purchasing power due to higher incomes Increase in labor supply and overall economic productivity resulting from age structure changes due to declines in fertility To accelerate fertility decline, countries should invest in family planning, education, general empowerment of women as well as in child survival To harness the DD the economy MUST have the capacity to absorb and productively employ the extra workers Increase in savings resulting from reduced number of dependents, which can improve productivity when the accumulated capital stock from the savings in effectively invested To Harness the DD, countries should create a favorable environment for domestic savings and foreign investments Improvement in quality of human capital resulting from greater investments in children’s health and education by parents and governments and healthier and more productive women with less childbearing burdens This will probably be Africa’s biggest benefit given the very low levels of human capital (low education, low social capital for women) – talk about education levels in West and East Africa But for Africa, women are already involved in economic activities – In Asia, it was getting women out of the home, in Africa it will have to be mostly about getting women from the informal to the formal sector Use Nigeria and South Korea example Growth is the increasing domestic demand brought about by the increasing GDP per capita and the decreasing dependency ratio

Consumption and Labor Income by Age, Nigeria 2004 Labor income (500 trillion Naira) Consumption (500 trillion Naira) Labor surplus is less than 20% . Shortfall is met by relying on: Natural resources Remittances Other asset income. Little remains for saving and investment. Economic needs of children are enormous: about 80% of total labor income. Source: National Transfer Accounts estimates (www.ntaccounts.org) - Mason 2012

Consumption and Labor Income by Age, S Korea 2000 Labor income (3000 trillion won) Consumption (3000 trillion won) Working age surplus is about 30% of total labor income. S Korea is investing asset income. Child deficit is very small in S Korea: about 35% of labor income. Each box represents one-tenth of total labor income in Nigeria and South Korea, respectively.  They are just summarizing the values in the graphs for three broad age groups:  0-24, 25-59, and 60+.  In Nigeria, prime age adults have a surplus of about 20% of their labor income (two boxes) after they fund their own consumption.  The needs of children are about 80% of total labor income.  Nigeria is relying on income from assets including natural resources and remittances to fund the consumption of children with little left over for pro-growth efforts, e.g., investing in human capital or funding entrepreneurial activities.  In South Korea, however, the surplus of 30% during the working ages is almost sufficient to fund all of the needs of S Korean children.  So S Korea can use almost all of the income from non-labor sources to fund pro-growth efforts.   The key point of the two slides is that high fertility requires that an enormous share of a country's resources must be devoted to the basic needs of children.  As a consequence, too little is available for growth objectives, e.g., investing in human and physical capital.  I don't know much about Tunisia so I cannot really comment on whether or not they have realized a demographic dividend.  I did look briefly at the population and I see that the support ratio will soon reach its peak.  So I would say that its current demographic structure is quite favorable.  The important thing is to use the favorable conditions to establish a strong foundation for continued growth, what I call a second demographic dividend, by investing in children, improving the physical infrastructure, creating entrepreneurial opportunities, and so forth.  We have NTA estimates for only five African countries (Nigeria, Senegal, Kenya, South Africa, and Mozambique).  A team in Egypt is working on estimates there.  If other countries are interested in constructing NTA, we would need to field a strong research team to carry out the work and we would need to mobilize the resources needed to support the substantial work that is required.  Source: National Transfer Accounts estimates (www.ntaccounts.org) - - Mason 2012

Demographic Dividends: contribution to growth in GDP/N1 The demographic dividend contributed significantly to GDP growth in East & South East Asia Region Demographic Dividends: contribution to growth in GDP/N1 Actual growth in GDP/N1 First Second Total Industrial economies 0.34 0.69 1.03 2.25 East and Southeast Asia 0.59 1.31 1.90 4.32 South Asia 0.10 0.79 1.88 Latin America 0.62 1.08 1.70 0.94 Sub-Saharan Africa -0.09 0.17 0.08 0.06 Middle East and North Africa 0.51 0.70 1.21 1.10 Transition economies2 0.24 0.57 0.81 0.61 Pacific Islands 0.58 1.15 1.73 0.93 Define what first and second dividends are Source: Mason, 2005

Africa’s labour force surplus will peak later & at a lower level if fertility continues to decline slowly Source: UN Population Division (Medium Variant)

Speeding the Demographic Transition Reduce child mortality – replacement effect Enhance education, particularly female school enrollment and general female empowerment Expand access to family planning, focusing on underserved sub-groups such as youth

Fertility rates have declined considerably in some African countries over the past 4-4 decades

The demographic transition is not sufficient to harness the demographic dividend as the case in Tanzania and Tunisia has show

Addressing demand and supply barriers of access and use of contraception will help accelerate fertility decline % of married women using family planning and with unmet need for family planning

African countries still need to do more to reduce child mortality

There is urgent need to address relatively early entry into marriage in West, Middle, and East Africa % of women aged 20-24 who got married by age 18

Many young people’s lives are wasted through early childbearing

The reality is that young people are or will soon be sexually active Our findings show that it is critical for sex education to begin in primary school, both because many young adolescents are already sexually aware, because at least some adolescents do begin sexual activity before age 15 and it is important to reach them before their sexual debut, and because many adolescents (especially girls) will have left school by age 15. It is also the case that many adolescents do not finish primary school before age 15.

Adolescence is a time when changes in sexual activity happen fast % of 20-24 year olds who had sex by certain ages Adolescence is a time when changes in sexual activity happen fast. Within a five-year period, the change is tremendous. By age 15, nearly 1 in 5 young women has had sex (top 2 bars) By age 18, between 40 and 60% are sexually active For males, the pace of change is also rapid, but levels are a little lower Source: National Academies, "Growing Up Global", pp.508-509

Earning the Demographic Dividend Macro-economic policies – the demand Public health Education Youth and Female Employment Unemployment and underemployment Export orientation for labor demand Channeling savings into investment Address huge inequities in demographic transition and opportunities between the rich and the poor

In order to EARN the demographic dividend, African countries should simultaneously prioritize investment in all the five pillars or wheels of the demographic dividend

Governments and development partners must pledge universal secondary education, especially in West, Central and East Africa % of secondary school age boys and girls who are enrolled in school

Reality Check: Africa’s economic boom is not reducing poverty & creating enough jobs High levels of underemployment and reliance on the informal sector, especially among women and youth Heavy reliance on mining and mineral resources, which are often mismanaged and are not labour intensive Agricultural sector, which provides livelihood to most people, is still largely underdeveloped and vulnerable to climate change Rapid but poorly managed urbanization not effectively used as an engine for socioeconomic development "Better governance will need to underpin efforts to make growth more poverty reducing," (World Bank) High child dependency burden one of the key factors undermining development if quality human capital and poverty reduction But World Bank economists cautioned that high inequality and a dependence on mining and mineral exports in many countries had actually dampened the poverty-reducing effect of income growth. Countries rich in natural resources, such as Gabon, Equatorial Guinea and Nigeria, performed less well than those lacking this apparent head start. The World Bank said better administration of mineral wealth, development of agriculture and a careful managing of rapid urbanisation would help governments to lift more people out of poverty. "Better governance will need to underpin efforts to make growth more poverty reducing," the report said.

African countries can harness the demographic dividend, but much more needs to be done… Enhance political will and investments for strong family planning programs, education, and general empowerment of women Enhance investments in public health for greater child survival and healthy workforce Adopt economic policies and reforms that help develop industries of comparative advantage to ensure mass job creation and enhance savings and investments Improve governance and accountable use of pubic resources – invest in people!

Thank You Eliya.zulu@afidep.org www.afidep.org