Panel, Conference Presentation
The World in Transition | Africa and the Middle East: The Cradle of Civilization Once Again?
Milken InstituteStaci Warden, Mohammed Alardhi, Madalitso Mandiwa, Michael Milken, Patrice Motsepe, Stephanie von Friedeburg
- Africa's population is projected to account for all net global population growth this century, potentially reaching 2.8 billion by 2040 or 2060, with Nigeria's population expected to surpass that of the United States by 2040; the continent's population share is forecast to double from 14% to 30% by 2030, while the total population share of the world is expected to rise significantly.
- Sub-Saharan Africa, comprising 49 countries, faces a $170 billion annual infrastructure funding gap and a $365 billion gap in the telecommunications sector, though trillions of dollars in global assets are seeking returns slightly above the 10-year US Treasury rate, creating potential investment opportunities if legal frameworks and market scales improve.
- Economic and demographic shifts predict urbanization rates rising from 40% to over 50%, a transition from 2% to over 80% mobile phone penetration driving cashless societies and mobile medical care, and increased intra-regional financial integration, while political stability is expected to depend on harnessing a demographic dividend to avoid a "demographic curse."
- Trade relationships are evolving with China projected as Africa's largest trading partner by 2030 and shifting focus from resources to the middle class and manufacturing, while the EU remains the largest trading block at $400 billion annually, though intra-African trade remains challenged by fragmentation and low cargo transport shares of 2% to 3%.
- Capital markets are expected to mature with increased issuance of long-term local currency bonds for affordable housing, efforts to convert 7.5-year mortgages to 15-year terms to reduce payments by 46%, and initiatives to train 1,000 financial experts, while private equity from the Middle East currently represents only 5% of the total market and risk capital is expected to flow primarily from Asia, the US, and Europe.
- Sector-specific challenges include power generation concentration with only eight countries generating over 50% of base load independently outside of South Africa, significant data connectivity cost disparities between East and West Africa, and Islamic finance growing at double the rate of commercial banking despite brand acceptance hurdles.
- Future risks include potential mass migration of hundreds of millions if local opportunities are not created, cultural disruptions, and the persistence of a higher perceived risk environment that remains an "investment nirvana" only for those able to navigate legal and regulatory uncertainties, with successful investing predicated on capable administrators and confident regulators.
- Regional differentiation is anticipated with East Africa expected to show higher entrepreneurialism due to superior digital infrastructure compared to West Africa, while investment strategies are expected to evolve from high-risk avoidance to targeted engagement once rule of law and functioning court systems are confirmed, with sovereign wealth funds and pension assets under management projected to increase.