Could South Africa miss out on the potential of the demographic dividend for economic prosperity?

GEN AFRICA | JUNE 11, 2018

The youth population grew from 18.5 million to 19.6 million and according to Stats SA 2017 young people constituted 36.5 per cent of the total South African population.   This is often described as a demographic dividend that could potentially propel the economy and the country onto a new growth trajectory.

The concept of a demographic dividend is based on the link between a country’s demographic profile and its potential for an increase in economic growth. Typically, starting from a position of a high fertility rate and a relatively large young population, if there is a decline in the country’s fertility rate over time, there follows an increase in its working-age ratio, which is the population of working age (15–64 years) as a percentage of the total population.

An increase in the working-age ratio does not lead to a demographic dividend automatically. Rather, it presents an opportunity for higher economic growth which may be achieved in full or in part or not at all. For the demographic dividend to reach its full potential, favourable socioeconomic conditions are required. If socio-economic conditions are unfavourable, a demographic dividend could remain elusive.

South Africa is at a relatively advanced point within the demographic transition. The youngest cohorts within the working-age population are expected to stabilise in size and begin to contract. At the same time the number of older working-age people – who would comprise a large proportion of effective consumers – is expected to grow rapidly. The magnitude of South Africa’s demographic dividend is in line with that of other middle-income countries. But estimates of the first demographic dividend show that South Africa has passed through at least half of the period in which it is expected to be positive. It is now in the stage during which the magnitude of the dividend is falling.

To realise the benefit of the final phase of the demographic dividend, the South African economy needs to grow employment and improve the labour market prospects for younger working-age people. Greater employment will raise mean incomes, allowing South Africans to invest in education and save. These actions are crucial for achieving the second demographic dividend.  President Nelson Mandela reminds us that ‘significant progress is always possible if we ourselves plan every detail and allow intervention of fate only on our own terms.  Preparing a master plan and applying it are totally different things.’ The NDP is a master plan and applying it requires a planning system and above all a detailed integrated plan underpinned by crucial statistical evidence.

The evidence confirms that inequality in consumption across age in South Africa is limiting the size of the demographic dividend. This suggests that weak sharing mechanisms in the country may have a negative impact on per capita income growth over time. In some sense, this provides support for the argument that inequality can act as a brake on economic growth.

The Significance of June 16, Youth Month

June is celebrated as Youth Month in South Africa, paying tribute to the school pupils and ordinary citizens who lost their lives during the 16 June 1976 uprisings in Soweto.  As we remember the bold actions taken by the youth of Soweto, against an oppressive education regime in a now 39-year old uprising, one wonders whether a similar protest is not warranted in the context of youth entrepreneurship.

It is critical for our youth to begin to understand that even at a young age they are key to the economy. They influence the buying habits of their parents, they are a target market for many companies, they do have the ability to earn income through entrepreneurship, they already understand negotiation skills, they can save for their future with the right knowledge and strategy, and they can develop a habit of giving back and practicing social responsibility.

We at 22 ON SLOANE continue to see that instilling positive values in the youth around finances, business and social responsibility builds strong character, confidence, furthers interest in the economy, and reinforces state testing requirements that are now demanding students to apply critical thinking and greater analytical skills.

We know that entrepreneurial skills are academically complimentary and beneficial for the youth, whether they wish to start a business venture or not. Having an entrepreneurial mindset has increasingly become valuable for individuals working in the competitive corporate world. It requires critical thinking skills and the ability to determine when to take necessary risks, as well as, it is grounded in creativity and innovation. Entrepreneurship is also a natural fit to enhance and compliment business education in advanced education because it integrates the core areas of business—accounting, finance, marketing, and management, as well as, the legal and economic environments in which any new venture operates.

GEN 22 ON SLOANE to celebrate Youth Day with 35 school pupils. We continue to empower young people and encourage their participation in the country’s socio-economic activities.

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