Compared to 10 years ago, prosperity levels around the world are now relatively at a record high. Not only is this positive news for countries that have seen an increase in their standard of living, but it also means there is a deeper insight into what can be replicated in other regions that require more attention and assistance.
To learn more, read on for five things to know about the climate of prosperity in Sub-Saharan Africa.
1. Prosperity is generally improving in Sub-Saharan Africa.
In order to understand the business climate of an area, it is crucial to consider the overall picture of prosperity.
Last year, world prosperity significantly improved due in large part to developments in the world business environment. One good measure of world prosperity is the 2018 Legatum Prosperity Index, an annual review that looks at nine pillars: Economic Quality, Business Environment, Governance, Personal Freedom, Social Capital, Safety and Security, Education, Health, and the Natural Environment.
According to this report, for the past decade, 35 countries in the region have increased their prosperity with Malawi and Cameroon being the biggest risers in the pillar overall. As a region, Sub-Saharan Africa is strong in the Governance pillar, ranking third out of all regions, which is an important thing to know when considering the potential for future business expansion in the area.
2. Entrepreneurship is key.
One of the key findings in the report is that the Business Environment pillar of Sub-Saharan Africa has undergone robust growth in the past decade. Looking further into this finding shows that it is the entrepreneurial environment sub-pillar which has been boosted to the point where it is now the third highest scoring region. Additionally, there has been a significant improvement in the ability of business owners and entrepreneurs to access credit.
Generally, around the world, entrepreneurship is considered one of the key ways to reduce poverty and increase prosperity. That being said, entrepreneurship can’t accomplish this on its own. Instead, a strong entrepreneurial environment needs to be combined with a fair and transparent system of law and order, effective judicial systems, property rights, low taxation, and comprehensive education.
Research from The Legatum Center at MIT confirms that entrepreneurship is a fundamental player in the battle to eliminate global poverty by replacing dependency tendencies with a system of self-sufficiency and trade.
The more the centre fulfils its mission to examine and illustrate the impacts that entrepreneurs can have on the global economy and local society, the more the world will know about the relationship between entrepreneurship and global prosperity.
3. There remains a significant global and national gap.
In Sub-Saharan Africa, while the review reported that the overall picture was one of prosperity and growth, it is clear that far more development is required. Over the past decade, the region has seen a gradual improvement in prosperity despite the fact that the gap between it and the rest of the world is more significant than it was in 2007.
Last year, the region saw 20 countries improving their prosperity scores, while another 20 states saw theirs decrease. Unfortunately, it is in the Safety and Security pillar in which Sub-Saharan Africa continues to fall downwards, making it the least safe region in the world – a designation it has had since 2007. For this reason, the area of Sub-Saharan Africa remains the weakest performer in the world.
4. There are clear regional leaders.
The purpose of the Legatum Institute’s report is to help recognize what factors lead a country from poverty to prosperity. Therefore, it is essential to look at what is working for other countries in Sub-Saharan Africa and which countries are improving drastically.
When it comes to the Business Environment, Rwanda has improved the most as a result of their business reforms which enable entrepreneurs to start a business quicker and access credit easier, as well as increasing investor protections.
Furthermore, Ghana takes second place for Economic Quality in the region due to the advances in its export quality index, a decrease in trade barriers and a decline in absolute poverty. When you include the fact that the country also has a 77% labour force participation rate, it is understandable why Ghana rose 18 places in the ranking.
Other regional leaders include Kenya, which is high in Social Capital, South Africa which scores well for Personal Freedom, Namibia which does admirably in the Natural Environment pillar thanks (in part) to it being one of the first African countries to include environmental protection clauses into its constitution.
5. The future looks bright.
According to current estimates, the region of Sub-Saharan Africa will be home to an additional one billion Africans by 2050, making it the fastest growing population in the world.
This can potentially be very stimulating for the region as it can lead to tremendous economic gains. In fact, having a young and growing population can lead to a boost in economic growth that transpires when there is an increasing number of employees in the workforce when compared with their dependents (the children and elderly).
However, the biggest challenge for the region is ensuring that the growing population has access to high-quality education, an area where it is currently lagging in. For example, now, the adult literacy rate is only 60%, contrasted to 80% in MENA and 83% in Asia.
There is no denying that education is directly related to prosperity, as it increases the productive potential of citizens who, in turn, make up the nation. Additionally, it also enables individuals to make more educated decisions and pursue a more fulfilling life – something that the Prosperity Index also takes into account.
Therefore, the most significant focus for Sub-Saharan Africa needs to be the educational structure. Access to education needs to be increased, as should the overall quality of lessons and materials improve. If the world can come together and help in this regard, then this vital region will be in a better equipped to deal with what challenges in the future.
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