Versions of this article have also been published in Capital, The Daily Telegraph, Dienas Bizness, Nikkei Asian Review, Nikkei Veritas, Süddeutsche Zeitung.
The G20 has recently turned its eyes on Africa. Its finance ministers have launched a “Compact with Africa”, aiming to support economic development and strengthen relations with the continent. For Europe, Africa is particularly relevant because of its geographical proximity.
The G20 and the European policy establishment have become more interested in Africa because of a fear that ever increasing migration inflows are unpopular with the public. And indeed, irregular migration into the EU, mostly by boat, has increased substantially since 2008. But this irregular migration is still only a fraction of total immigration, which is actually fairly stable at around 500 000 per year.
At the moment, annual migration from Africa to the EU only represents 0.1% of the EU population. But the numbers will likely increase in the future. The population of Africa is expected to more than double by 2050, reaching 2.5 billion. The demographic pressures are the strongest in Sub-Saharan Africa, where fertility rates are exceptionally high at 5 children per woman and where the average income per person is below $3500 in purchasing power parity (PPP) terms. For these reasons, emigration will continue, and Europe will remain an attractive destination.
Many explain this migration through the large difference in income between Africa and Europe. This leads many to believe that economic development is the best way to reduce migration. But unfortunately this conclusion is too simple, as development and migration interact in complex ways. In fact, in very poor countries emigration often increases with rising GDP per capita. This makes sense, because at first development simply provides the money and means to travel out of a still-poor country. Empirically, studies find that emigration only starts to fall once levels of income are above $7000-9000 PPP per year.
Out of 47 sub-Saharan countries, only seven are currently above the $9000 GDP-per-capita level and 39 have a GDP below $7000 per capita. And even with 2% annual per capita growth, 35 countries would still be below that level in 2030. Meanwhile, the population of these countries will have reached 1.05 billion. Not all who can leave will do so, but that is a large number of potential emigrants.
The figures are sobering, but three key conclusions jump out. First and foremost, economic development in sub-Saharan Africa is a critical objective in the fight against poverty. The G20 is right to emphasise the need for private investment, as development aid alone is not suitable or enough to meet the funding challenge. But the key precursor to private investment will be political stability and well-functioning institutions. Without these, private investors will stay away and the continent’s potential will be squandered. Multilateral institutions such as the World Bank and the EIB can play a role in promoting good governance, but ultimate responsibility lies with the governing class of the concerned countries. Nevertheless, Europe has also a commercial interest. A growing continent of some two billion people would be a significant nearby market for European producers.
Secondly, while development is critical, it will not be a panacea for migration worries. In fact, it will take several decades until countries reach income levels where emigration numbers will start to fall. This will create major societal tensions and challenges all across Europe. That means that Europe needs a coherent strategy for at least the next two decades, to deal with immigration pressures from Africa. We need the right policy mix of legal and direct immigration routes into Europe, coupled with socioeconomic integration policies and firm border control. Much must be coordinated at EU level, and this will doubtless be difficult and contentious.
Last but not least, we need to focus our attention on women. We were surprised to see that that the “Compact with Africa” made virtually no reference to female empowerment in Africa. But there is convincing evidence that better education and women’s rights reduce fertility rates, and thereby soothe demographic pressures. There is also evidence that empowering women promotes a more equitable distribution of income as economies grow. G20 finance ministers should make promoting women’s rights and education a central tenet of their set of development policies for Africa. A plan for Africa without this is missing the obvious.