Recently, while reviewing a document, I came across a statistic about age dependency* in the Republic of Mauritius. Mauritius already had an age dependency ratio of 10.9 in 2010 and this is projected to rise to 25 by 2030 and 37 by 2050, which is at par with many East Asian economies. Aging issues in Europe and parts of Asia have already become an economic and fiscal policy concern over the last few years and will remain so for the foreseeable future, could it also become a problem for Sub-Saharan Africa (SSA) sooner than realized?
With 43 percent of the population below the age of 15 and only three percent above the age of 65, Sub-Saharan Africa is a predominantly young continent. The problems emanating from an ageing population, such as rising age dependency ratios and increasing health care costs, are far over the horizon as far as the continent is concerned. However, this may not remain so for long and definitely not for all the countries. Let me explain why.
The table below shows UN demographic projections for sub-Saharan Africa for 2010, 2030 and 2050. The population above working age (65) was 26 million in 2010 but will quadruple to 102 million by 2050. The age dependency ratio in SSA is very low and will remain so until 2050, rising only to 8 (per 100 people of working age) from 5.8 percent in 2010. In comparison, East Asia has already had an age dependency ratio of 13.3 in 2010 which will rise to 41.8 in 2050. Even by 2075, the age dependency ratio will only have reached 13 in SSA, the same as the current level in East Asia. The very low share of the population above working age in the total population of SSA reflects the fact that SSA has only just entered its demographic transition, unlike East Asia which began its demographic transition several decades ago.
Demographic projections for Sub-Saharan Africa
Source: World Population Prospects 2012 Revision, Vol II, United Nations Department of Social and Economic Affairs/Population Division
The projections above imply that SSA does not face any significant challenges from population aging for at least 4-5 decades, however, some individual countries are ahead in terms of their demographic transition than the average for SSA and will face rapidly rising age dependency ratios. Mauritius is not the only economy in in SSA to display such trends. A few smaller Africa countries, notably Cape Verde, Seychelles, Reunion etc, display similar trend.
On an average, the projected age dependency ratios remain low in SSA, which implies that elderly people will not become a burden on the economy; important social challenges pertaining to ageing could still arise in SSA over the coming decades. The absolute numbers of elderly people in SSA will rise sharply (reflecting rapid population growth over the last few decades). As shown in the table, the total number of people aged over 65 in SSA will be more than 100 million by 2050, four times the number in 2010. Given the rise in absolute numbers of elderly people, their welfare will become an increasingly important policy issue.
SSA currently lacks formal institutions to provide for elderly people; only a small share of the workforce (mainly public servants and those employed in formal sector businesses) is entitled to a retirement pension. Most elderly people rely on informal kinship based social security mechanisms for support but the efficacy of these informal systems may be eroded over time by changes in life style patterns, such as urbanization. Hence governments in SSA may face increasing pressure over the next few decades to put in place more comprehensive formal systems of financial support for elderly people, funded from government budgets. Because the number of elderly people will remain relatively small as a share of the total population, this should be fiscally affordable if a more comprehensive pension provision were accorded priority in budget planning. However, given the severe strain which public finances face in most SSA countries, whether governments will actually find room in their budgets for pension payments is far from certain. However, what is clear is that it is never too early to start addressing the aging problem; this is also the case for Africa.
*Age dependency ratio is the ratio of dependents--people younger than 15 or older than 64--to the working-age population--those ages 15-64.
I am thankful to my summer intern Ms. Sona Nahapetyan who helped gather useful data and my friend Martin Brownbridge who reviewed an earlier draft and provided helpful comments. All remaining errors are mine.
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