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The Baby Boom Effect

According to The Economist, the global suicide rate has fallen by 38% from its peak in 1994. As a result, over 4.0 million lives have been saved. The decline has happened at different rates and times in different parts of the world. One of the major reasons for the decline is greater social freedom, female independence and urbanisation. However, in Africa, the number that is of more significance has been the birth rate. We note that almost 2.0 billion babies are expected to be born in Africa between 2015 and 2050 (UNICEF) and the two main driving forces behind this surge in births and children are continued high fertility rates and rising numbers of women able to have children of their own.  The implication is that Africa will emerge as one of the largest markets for consumer goods.

According to Countrymeters, the 2019 population in Zimbabwe is projected to increase by 370,927 people and reach 17,200,656 in the beginning of 2020.  These numbers mean that the population of Zimbabwe will have to increase by 1,016 persons daily. The natural increase is expected to be positive, as the number of births will exceed the number of deaths by 420,912. As of 1 January 2019, the population of Zimbabwe was estimated to be 16,829,729 people. This is an increase of 2.2 % compared to population of 16,466,801 in 2017.

Population Growth in Zimbabwe (1952-2019)

Source: countrymeters

A high population rate has a large effect on the economy, especially on the composition of goods and services produced by the marketplace and the government. Large changes in the population growth affect also aggregate consumption and savings. For example, during the baby boom the United States of America (USA) experienced after World War II, the dramatic rise in births led to a higher dependency ratio, which means that there was a large portion of the population under the age of 15 and over the age of 65 that relied on those in the work force (ages 15–64).

Overall, a baby boom may in the long term create significant pressures on the economy especially if it is not accompanied by sustainable economic growth. We opine that GDP growth should at least be 1.5 -2.0 times the population growth for an economy like Zimbabwe to benefit from a baby boom.  We have witnessed a number of bull runs on the ZSE and the usual question of course has been, “Which are the stocks to BUY for the long term?”. In a developing country such as Zimbabwe, the usual suspects will be the consumer stocks such as BAT Zimbabwe, Delta, Simbisa Brands, Dairibord and OK Zimbabwe given that these tend to be supported by demographics (population growth rate of c2.0% and a young population). 

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