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Chapter 1: What is the main topic discussed in this episode?
We don't just invest in cutting edge companies. We look at companies with a history of steady growth. And companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions. Monk's Investment Trust.
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The biggest unknown in Africa is the extent to which governance will respond to thicker populations, greater growth, greater capacity to raise taxes and therefore expand the capabilities of government. To what extent will African governments respond to this more benign, positive environment and up their game?
Welcome to Merrin Talks Money, the podcast in which people who know the markets explain the markets. I'm Merrin Somset-Webb. This week, we are focusing on one of the most misunderstood and often oversimplified dimensions of economic development, population. Jo Stadwell, journalist and author of How Africa Works, Success and Failure on the World's Last Developmental Frontier, joins me today.
And we talk about how population dynamics shape Africa's economic trajectory. not just in terms of size, but also structure. And we talk about how demographics can influence industrialisation, urbanisation and political stability. Joe, welcome to Merion Talks Money.
Thank you for having me.
The first thing to say, I guess, is that a book that is just about Africa is a little all-encompassing. Africa is full of so many different countries, different cultures, different languages, endless different things going on. So I suppose the first thing we should talk about is to what extent is it really possible to generalize about a continent that is so huge and so diverse?
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Chapter 2: How does population density impact Africa's economic growth?
I mean, it's hard to believe, but if you cut the countries out of an atlas and try, you'll find that that's correct. That's how vast Africa is, and yet it had only 220 million people at the end of the Second World War. The constraint that that produces is that you get population density averaged over Africa of less than 10 people per square kilometre.
You think of the size of a square kilometre and only 10 people in it, it's very few. And the impact that this has economically is, well, you don't have markets, you don't have meaningful concentrated markets. So if you think 1900, for Africa, the two biggest cities were Lagos and Dar es Salaam, and they had populations of 20,000 people.
And this is a time when cities like Singapore or Shanghai in East Asia had a quarter of a million or half a million in the case of Africa. of Singapore. So it's just a different order of magnitude. So you haven't got concentrated centres of population that demand goods and will reliably pay for goods and services.
And also cities have always been very, very important historically as places to raise tax. It's always been much easier to get tax off urbanites than it is off people living in a dispersed condition in the countryside. So you have that problem. And then you have the problem that you've got to have infrastructure to have a modern economy.
And you look at infrastructure cost per capita, and Africa in 1960 can't afford anything. Can't afford roads, can't afford power networks, can't afford irrigation systems, any of the things. There are things that get built usually with sort of foreign aid, but nothing is affordable within the internal capability of African governments. So you're just totally constrained. And if you want the...
the historical comparison for the population density, that of Africa in 1960 was equivalent to Europe in 1500. And so then we ask how much growth was there in Europe in 1500? Well, there wasn't any. So why did we think that there was going to be lots of growth in Africa? Yes, I think it was.
You know, some of the things that were said in the 60s and the 70s about what Africa could do were frankly crazy and were really just based around some mineral investments. And people thought that these mineral enclaves were going to translate into broad economic development, which they don't anywhere else.
in the world because mineral economies employ very few people and they are genuine enclaves cut off from the rest of the economy. And I'm not saying that you shouldn't dig up your minerals, you should dig up your minerals, but they do not lead to broad-based economic development.
OK, so the argument is that now much of Africa has reached the level of population density that Southeast Asia had already hit in the 60s. And that should be the thing that suddenly pushes economic growth higher. And one of the things you talk about in the book is that this tends to start with fast rises in agricultural growth and particularly agricultural productivity.
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Chapter 3: How do demographics influence industrialization and urbanization in Africa?
So we don't necessarily want fertility rates to fall in Africa, though. I mean, based on this idea of population density, you would want populations to increase for some time to come to produce that population dividend. Right.
No, I mean, I think that this is not a perfect science, but to my mind, once you get beyond sort of 50, 60, 70 people per square kilometre on average, obviously your urban densities are massively higher than that, then reducing population growth abruptly in order to maximise the demographic dividend makes sense.
It's not the case that there's a direct correlation that the more people you get, the better it is for forever and forever. It's about having a minimum... a minimum density of people that means that you can afford the infrastructure, that you have the markets, that you've got the division of labour that's required to do complex things efficiently.
Okay, so 50-60 is around ideal. I mean, I know it's not a precise science.
Yeah, it's not a perfect science. And I'm just making historical analogies with what the case was in Asia. But I'm saying that clearly, you know, 9, 10 was way too low. You know, 50, 60 worked for Asia. But having been 50, 60 in Asia, it then tripled over the next 70 years. In East Asia, it's now around 150. But Africa will go to 150 on its current population trajectory. Okay.
I mean, there's going to be 4 billion people at the end of the century in Africa and there'll be 4 billion people in Asia. And there will be only 2 billion people in the rest of the world if the UN's projections are to be believed.
They usually aren't. I mean, they're mostly out by quite a lot, aren't they?
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Chapter 4: What are the challenges of generalizing about Africa's diverse economies?
General guidelines and anything remotely precise. And they keep changing their idea of a peak global population for starters.
We don't just invest in cutting-edge companies. We look at companies with a history of steady growth. And companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions. Monks Investment Trust.
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Let's go back actually to education, because I know that one of the things that you also say is that people underestimate how well educated Africa's population is and therefore how ready it is for economic growth. And obviously, efficient education is also a function of population density to a degree. But it's underappreciated, isn't it?
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