Last August The Economist published an interesting piece on Africa’s population transition; while still an outlier compared with the developing world, the continent’s total fertility rate, which was over six in 1990 compared with two in East Asia, is expected by the U.N. to halve in sub-Saharan Africa by 2030 and then fall below 2.5 by 2050.  The article poses the question whether or not Africa will be able to capitalize on what it labels the “demographic dividend”:

As societies grow richer, and start to move from high fertility to low, the size of their working-age population increases. The effect is a mechanical one: they have fewer children; the grandparents’ generation has already died off; so they have disproportionately large numbers of working-age adults. According to a study by the Harvard Initiative for Global Health, the share of the working-age population will rise in 27 of 32 African countries between 2005 and 2015.

The result is a “demographic dividend”, which can be cashed in to produce a virtuous cycle of growth. A fast-growing, economically active population provides the initial impetus to industrial production; then a supply of new workers coming from villages can, if handled properly, enable a country to become more productive. China and East Asia are the models. On some calculations, demography accounted for about a third of East Asia’s phenomenal growth over the past 30 years.

One nation explicitly predicted to benefit from said dividend is Mozambique, a country still suffering the effects of a brutal civil war following its independence from Portugal in 1975.  Yet per last week’s Economist, much has changed since the peace deal officially ending the carnage:

At the end of the civil war in 1992, Mozambique was arguably the world’s poorest country. Its transport, education and health systems were in ruins. Many Mozambicans with marketable skills had fled. But now its economy is one of the fastest-growing in the world. In the past 15 years it has swelled by an average of 8% a year, dipping slightly to 6% during last year’s global meltdown, with nearly 7% expected this year, well above the 4% the World Bank forecast for southern Africa as a whole.

After South Africa, which imports electricity from the continent’s most powerful hydroelectric plant, China and India continue to be the country’s biggest foreign investors, keen to feed their voracious resource appetites and specifically their supplies of quality, coking coal (although India is one of the world’s biggest producers of coal, it produces only limited quantities of the coking coal needed by its steel plants).  In late June, China announced that it had agreed to invest $1bn in a coal project in Mozambique’s Tete province, and India sent yet another trade delegation two weeks ago to “consolidate friendly relations between the two countries.”

Coking coal could indeed be a feather in Mozambique’s macro cap, though the extent to which the country can profit from an expected continual surge in demand will be dependent on improved infrastructure, noted a recent research piece from MF Global which concluded that the coking coal market had better long-term fundamentals than the iron ore market, and furthermore that Mozambique and Mongolia have the potential to be “potential game changers” on the supply side – but only from 2015 and “conditional on infrastructure”.  At present however, it noted, Mozambique suffered “severe limitations on its rail and port infrastructure.”  While critics of the BRICs’ resource romp in Africa contend that the rents gained from commodity-rich governments are often inadequate and/or squandered by opaque political elite decision making, one byproduct of foreign investment is generally an immediate upgrade in infrastructure.  And if coking coal can be the impetus for the above-related demographic dividend to take shape, then the commodity loss can indeed be seen as pie-expanding instead of zero-sum.