Africa’s rising population, abundant resources and youthful workforce hold immense potential for growth, but neglecting to put the right policies in place and investing in future leaders may have far-reaching consequences for stability worldwide and economy prosperity.
This was the sentiment of World Bank Group president Ajay Banga during the third G20 Finance Ministers and Central Banks Governors Meeting in Zimbali, Durban, on Thursday.
He was speaking at the Compact with Africa (CwA) side event, an initiative established during the Germany G20 presidency in 2017 to promote private investment in Africa. This year, the initiative is co-chaired by South Africa and Germany at the ongoing G20 meetings.
Banga said a quarter of the world’s population will be African by the middle of this century and its workforce will be the largest in the world and its cities will be the fastest growing.
“Africa has abundant land and water that could help feed a rapidly growing planet. Its critical minerals can power everything — from electrical vehicles to solar panels and it has the resources to meet its own energy needs and potentially the world’s energy needs,” he said.
But Banga also noted projections indicate there will be 1.2-billion young people entering the workforce competing for about 400-million jobs in that period, 800-million “without hope, opportunity and work”.
Without strategic investment in Africa, the continent risks being left behind. That scenario will transform the energy and optimism of half of the generation into despair, he cautioned.
“It could fuel instability and migration, with far-reaching implications for everyone in every region and the global economy,” he said.
“So Africa, I believe, will help to define this century, but it needs the right investments, focused on opportunity, not on need.”
He said creating the conditions that allow business to thrive is the best chance of addressing this challenge, noting that the private sector — mostly through small businesses — was the engine for job creation that accounts for 90% of all employment.
Supporting private sector-led growth in Africa is what the World Bank Group and its partners, including the CwA initiative, have been focusing on.
They are doing this by helping governments finance infrastructure, supporting efforts to improve regulatory environment, strengthening governance to support private sector development and providing financing and risk management tools to support private sector growth.
“We combine public finance with expertise and private sector support to help countries move from planning to implementation and from implementation to actual growth.”
The World Bank has identified five focus areas they believe have the strongest potential to create jobs: infrastructure, agribusiness, healthcare, tourism and value-added manufacturing.
“These are growth industries that are capable of building middle classes and expanding markets. They don’t outsource jobs from the developed world, they grow opportunities that are locally relevant where people live,” he said.
“But capital has to flow for that and private investors don’t fund good intentions, they fund opportunity. They have to see a risk-reward relationship — risk being managed, returns being possible and the rules being clear and understandable, so our private sector investment lab is focused on that challenge.”
“I think this will take a little time, but I believe it has the biggest payoff possible over time. Creating jobs and skills require an orchestra and that’s where the CwA comes in: what Germany and South Africa are doing is critical because we need to create the momentum of like-minded partners.”
This highlights the necessity for continued political and financial commitment to unlock the compact’s full potential sustainable and inclusive growth across Africa
— Lars Klingbeil, German vice-chancellor and finance minister
He said the initiative has helped 13 countries implement reforms to improve the business environment and attract private sector investment and that it will continue supporting these countries, while focusing new efforts on those with strong reform momentum.
South African finance minister Enoch Godongwana said further achievements of the initiative include galvanising over $191m (about R3.4bn) in private capital and improved access to services for over 13.5-million people.
“It has also fostered a strong peer learning network among participating countries, supported by institutions like the African Centre for Economic Research and provided structured framework for reform through regular monitoring and technical assistance.”
He said this dialogue comes at a pivotal moment in Africa’s development trajectory.
“While the continent is rich in opportunities, it continues to face significant challenges ranging from infrastructure deficit and climate vulnerability to constrained fiscal space and limited access to long-term private capital.”
German vice-chancellor and finance minister Lars Klingbeil said the initiative embodied a broader principle of multilateralism. This, he said, is the answer to global challenges and evidence has shown, over the years, that members of the compact have higher chances of foreign direct investments.
He conceded that it has yet to reach its full potential partly due to unexpected challenges such as the Covid-19 pandemic and global uncertainties.
“This highlights the necessity for continued political and financial commitment to unlock the compact’s full potential sustainable and inclusive growth across Africa.”
As part of deepening its partnership with South Africa and its continued strong support for the compact, Klingbeil said the German government plans to establish a new commission, an international forum where experts from politics, civil society, business and research can collaborate to find innovative solutions.
He also encouraged international partners, including the World Bank and IMF, to also deepen their contributions to the initiative which will help promote growth, business opportunities and reduce pressure on the public budget. He pledged that Germany would lead the way.
“Germany will provide an initial contribution of €10m (R207m) to the World Bank trust fund this year. We are convinced this is a worthwhile investment and we will be very pleased to see other G20 members joining us,” he said.
“Therefore we call on all G20 members to consider making contributions to the World Bank trust fund to help ensure the compact’s long term success. Only through our joint efforts can we truly unlock the full potential with the G20 CwA and make a lasting impact for the benefit of our African partners and the global community.”
Godongwana said the success of this initiative depends on collective commitment from all stakeholders.
“We must ensure that this initiative remains country owned, reform driven and results orientated and we must work together as governments, multilateral institutions and the private sector to create enabling conditions for sustainable investment and inclusive growth.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.