Business & Finance

Performance of Pension Funds for to 30 April 2023

Note: The figures used to present the performances are unaudited. A detailed report using 2021 audited accounts and is available to download here.

Pension funds’ performance charts YTD (30-04-2023):

To analyse and compare pension and mutual funds please visit moneycounsellors.com

Fund I (Aggressive fund)

Fund II (Default fund)

Fund III (Pre-retirement)

Fund VI (Retiree)

Fund VI – Non-Interest (Active)

Fund V (Micro Pensions)

Fund VI – Non-Interest (Active)

April 2023 Performance Table

YTD 2023 Performance Table

Other industry statistics:

Total Assets under management

Pension Fund RSA Holders 28-02-2023

Review your individual pension fund at moneycounsellors.com

Dear RSA Holder,

I understand you have a busy lifestyle and planning for your future, which is paramount. You’ve worked hard to earn a comfortable living, and you want to ensure that your family is financially secure for years to come. With 19 PFA’s and 115 pension funds available in Nigeria, how can you be sure that you’re getting the best deal?

MoneyCounsellors.com is here to help. Our platform provides an easy-to-use tools that allows you to analyse, compare and review the performance of all pension funds managed by pension fund administrators (PFA’s) in Nigeria. We believe that making informed decisions about your pension is key to achieving your financial goals.

With our platform, you can compare your current PFA’s fund with all other funds in the group managed by other PFA’s and ensure you fund is performing as expected.

The MoneyCounsellors.com platform is: 

Clear: Our platform easy to use, with a simple interface that makes comparing different pension funds a breeze (just add funds to the basket and compare). We provide all the information you need to make an informed decision, without any clutter or confusion.

Concise: Our platform cuts through the noise and provides you with the key information you need to know. We don’t overload you with irrelevant details, but instead give you the facts that matter.

Compelling: Our platform provides a compelling reason to act – by analysing and comparing different pension funds, you could potentially save yourself thousands of naira in the long run. Plus, you’ll have the peace of mind that comes from knowing that you’ve made an informed decision.

Credible: We provide information on ALL PFA funds in Nigeria, and provide unbiased information, data and analysis about each of their pension funds. We believe in transparency and honesty, and our platform reflects this.

So, what are you waiting for? Take control of your financial future, review the performance of your pension fund today. 

Get started with a few clicks. Visit MoneyCounsellors.com.

You can also download our guide “What to look out for when evaluating a PFA”.

Best regards,

Michael Oyebola

MoneyCounsellors.com

Note: The figures used to present the performances are unaudited. A detailed report using 2021 audited accounts and is available to download here.

NPF Pensions is the runaway performer when it comes to investment returns on their portfolios for Q1 2023. The PFA manages pensions on behalf of the Nigerian Police Force. The PFA offers Funds I, II, III and IV and all 4 funds took top spot outperforming all 18 others to 31-03-2023.

Fund I returned 8.86%, Fund II 5.97%, Fund III 7.78% and Fund IV 3.88%. Following close behind NPF Pensions for Funds I, II and III were Fidelity Pensions and CrusaderSterling Pensions, whilst for Fund IV they had Stanbic IBTC Pension Managers (3.062%) and PAL Pensions (3.058%) on their tail.

For Fund V (Micro Pension) YTD, performance was led by Stanbic IBTC Pension Managers (4.96%), followed by CrusaderSterling Pensions (3.93%) and Oak Pensions (3.54%).

The top 3 performers for Fund VI – Non-Interest (Active) were Tangerine APT Pensions (4.61%), followed by Nupemco (3.93%) and Stanbic IBTC Pension Managers (3.37%) and for Fund VI – Non-Interest (Retiree), performance was led by ARM Pensions (3.31%), Stanbic IBTC Pension Managers (3.28%) and Access Pensions (3.21%).

Pension funds’ performance charts YTD (31-03-2023):

Fund II (Default fund)

Fund III (Pre-retirement)

Fund VI (Retiree)

Fund V (Micro Pensions)

Fund VI – Non-Interest (Active)

Fund VI – Non-Interest (Retiree)

March 2023 Performance Table

YTD 2023 Performance Table

Other industry information:

Allocation of Pension assets as at 28-02-2023

Total Assets under management

Pension Fund RSA Holders 28-02-2023

Review your individual pension fund at moneycounsellors.com

Download the Money Counsellors Annual Report on Pensions (MCARP 2022) for a full analysis of all Pension Fund Administrators (PFA) in one single document. The report presents a holistic review of the last five years of activities of all PFAs, and the funds managed, including 5-year summary company and fund accounts, ratios, fund performances, fund performance rankings vs. peers, asset allocation, AUM ranking, RSA ranking and much more. The Report is a must read for all 9.9m RSA holders and those thinking of signing up to a PFA or switching a PFA.

Our data and information provided is based on public data, our regulatory intelligence effort, from our archives, and other public sources such as from Fund Managers, FMAN, Pension Fund Administrators (PFAs), PenOp, etc. We have taken care to ensure that the information is correct, but MoneyCounsellors neither warrants, represents, nor guarantees the information’s contents, nor does it accept responsibility for any errors, inaccuracies, omissions, or inconsistencies contained herein. Because past performance does not predict future performance, it should not be used to make an investment decision. We make no product recommendations. No news or research item on our website or in this document should be interpreted as a personal recommendation to buy, sell, or switch any investment. Investments and the income generated by them rise and fall in value, so you may receive more or less than you invested.

© MoneyCounsellors.com

Fund I (Aggressive Funds)

 Fund VI – Non-interest (Retiree) returns since inception available here

Asset Allocation of Pension Funds as at 28-02-2023

Review your individual pension fund at moneycounsellors.com

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This is a continuation of my previous post.

Prior to independence, when Cote d’Ivoire was under French rule, cocoa production was stifled because the French authorities were more interested in growing rice and cotton. So the forests of the sparsely populated Southern and Western parts of country, which had huge potential for cocoa production just lay fallow. Perhaps it is useful for me to point out that cocoa is not native to Africa. It was introduced from Latin America in the course of the 19th century by European colonialists [1]. After independence in 1960, the government of Houphouet-Boigny, whose reign lasted 33 years, the longest of any African leader [2], encouraged a free for all migration to the southwest part of the country in a bid to encourage cocoa and coffee production. Migrants from the northern part of the country as well as from Burkina Faso and Mali, flooded the southwest. There was harmony so long as cocoa prices remained high and there was ample farmland, but when cocoa prices crashed in the 1980s and the economy went into a tailspin, ethnic tensions began to simmer as the issue of land ownership was brought to the fore. From the highs of the mid to late 70s, the monetary income cocoa farmers reduced by 60%-80% in the 80s and early 90s. The following graph attests to the fact:

Looking at the graph, you do not need to be a genius to realize that cocoa prices are volatile. This is true about just about any other commodity (e.g. oil). Commodity prices are generally volatile because they are lot more sensitive to the fluctuations in supply and demand than manufactured goods. This makes economies based on commodity production (i.e. almost all of Sub-Saharan Africa) inherently unstable.

The ethnic tensions inflamed by the crash of cocoa prices no doubt played a part in the two recent civil wars experienced by Cote d’Ivoire, the first between 2002 and 2007 and then again in 2011 [3].

In a previous article on the demographic transition, I pointed out that much of Sub-Saharan Africa is at stage 2. Countries at this stage are experiencing a population explosion as a result of a combination of high birth rates and low death rates. Now that the farmlands for cocoa in Cote d’Ivoire have been exhausted, to increase yields they are going to have to resort to scientific and technological methods. In other words, they are going to have to industrialize cocoa farming. Once they do that they are not going to need the vast majority of people who currently earn a living from cocoa farming. This is means that they are going to have to tackle the difficult task of creating labour intensive manufacturing industries to absorb the farmers that have become surplus to requirements. They will need to do this to prevent the social conditions from becoming any more explosive than they have been in the recent past. 

In closing, I would like to point out that there are lessons for the rest of Sub-Saharan Africa from the Ivorian cocoa experience. I had pointed out earlier and in a previous article that diminishing returns sets in much faster in agriculture than it does in manufacturing or services. It is all agricultural practices that I am referring to, not just cocoa farming. This applies to other commodity driven activities like mining and oil exploration.  So what has happened to cocoa farming in Cote d’Ivoire, if it has not already happened, will sometime in the future happen to other farming practices that use similar small scale techniques, and since we are talking Sub-Saharan Africa, that essentially virtually all farming practices. I am hoping this incident will make clear that industrialization is an inevitable step in economic development needed to secure a decent livelihood for the masses.

BEFORE YOU GO: Please share this with as many people as possible and check out my book Why Africa is not rich like America and Europe. Thank you

References:

1. Tooze, Adam Feb 19 2023 ‘The closing of the Cocoa Frontier’ Chartbook #196 https://adamtooze.substack.com/p/chartbook-196-the-closing-of-the
2. Wikipedia article on Houphouet-Boigny
3. Tooze, Adam Feb 19 2023 Chartbook ‘The closing of the Cocoa Frontier’ #196 https://adamtooze.substack.com/p/chartbook-196-the-closing-of-the

Background: The reporting season for PFA’s has begun. On 28 March Premium Pension Limited published summary accounts for the company and the pension funds it manages. The company closed the year with 772,885 RSA holders and total RSA assets under management of N860.43bn.

Observations: Whilst the company complies with PenCom regulations and publishes corporate and fund accounts in the national dailies, it only uploads corporate accounts unto its website, which is puzzling as to why. Despite enquiries to the company in the last 3 years that action has not changed. It is also worth noting that not one single PFA releases the FULL (not summary as all do) set of audited accounts, even when a direct enquiry is made to obtain such, which is also puzzling. Also, there are currently no benchmarks to compare the performance of pension fund returns to other than between one PFA and the others and existing metrices like inflation, the NGX All-share index, interest rates, bond yields and treasury bill rates.

The Analysis:

Company accounts:

Premium Pension Limited was incorporated in March 2005 and was licensed by PenCom as a Pension Fund Administrator (PFA) in November 2005. Total income for the year ended 31 December 2022 grew 18.34% to N10.04bn from N8.48bn the year before. Having climbed over the previous 4 years, the company’s cost to income ratio went down to 60.27% from 64.65% the year before. This ratio has now averaged 60.65% over the last 5 years. Profit After Tax grew 35.51% to N2.65bn. This stemmed the falling tide as PAT had been falling over the prior 3 years. This growth in PAT boosted the companies Return on Equity which closed the year at 37.33% stemming the declines which started in 2018 when the company had an ROE of 62.94%. Shareholders funds grew 10.64% to N7.11bn from N6.43bn in 2021.

Fund accounts:

Premium Pension offers all 7 PenCom approved funds to the public.

Premium Pension Fund I

Income earned in the Premium Pension Fund I grew triple digits, 211% to N60.84mn from N19.56mn in 2021, with net gains from investing activities rising to N49.73mn from N14.46mn. The funds expense ratio (this is the figure that captures the annual cost of managing the fund), rose to 1.80% from 1.37%. Over the last 5 years the ratio has averaged 1.70%. The fund managers generated a return of 10.71% in 2022 compared to 5.70% in 2021. The fund underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 11 out of 19 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Premium Pension Fund II

Income earned in the Premium Pension Fund II grew 65.17% to N44.01bn from N26.64bn in 2021, with net gains from investing activities rising to N37.57bn from N21.06bn. The funds expense ratio rose slightly to 1.68% from 1.63%. Over the last 5 years the ratio has averaged 1.95%, hence some improvements taking place. The fund managers generated a return of 10.87% in 2022 compared to 6.73% in 2021. The fund also underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 10 out of 19 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Premium Pension Fund III

Income earned in the Premium Pension Fund III grew 38.24% to N38.68bn from N27.98bn in 2021, with net gains from investing activities rising to N33.18bn from N23.12bn. The funds expense ratio rose marginally to 1.53% from 1.52%. 5-year average has been 1.42%. The fund managers generated a return of 10.13% in 2022 compared to 7.62% in 2021. The fund also underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 13 out of 19 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Premium Pension Fund IV

Income earned in the Premium Pension Fund IV grew 35.40% to N11.42bn from N8.44bn in 2021, with net gains from investing activities rising to N10.50bn from N7.74bn. The funds expense ratio was 0.83% compared to 0.71% in 2021. The 5-year average has been 0.84%. The fund managers generated a return of 10.59% in 2022 compared to 8.82% in 2021. The fund also underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 7 out of 19 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Premium Pension Fund V

Income earned in the Premium Pension Fund V grew 194.82% to N1.71mn from N0.58mn in 2021, with net gains from investing activities rising to N1.47mn from N0.39mn. The funds expense ratio fell to 1.21% compared to 1.61% in 2021. The fund managers generated a return of 10.29% in 2022 compared to 7.22% in 2021. The fund also underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 9 out of 14 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Premium Pension Fund VI (Active)

Income earned in the Premium Pension Fund VI (Active) grew to N386.07mn from N36.91mn in 2021, with net gains from investing activities rising to N327.59mn from N30.75mn. The funds expense ratio had a big leap to 1.37% from 0.33%. The fund managers generated a return of 10.22% in 2022 compared to 2.88% in 2021 (2021 was a partial year). The fund also underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 4 out of 11 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Premium Pension Fund VI (Retiree)

Income earned in the Premium Pension Fund VI (Retiree) grew to N84.43mn from N3.5mn in 2021, with net gains from investing activities rising to N77.46mn from N3.02mn. The funds expense ratio was 0.81%, up from 0.25%. The fund managers generated a return of 11.67% in 2022 compared to 1.89% in 2021 (2021 was also a partial year). The fund also underperformed the stock market (19.98%), it’s returns were lower than inflation (21.47%) and even lower than MPR (16.50%). In 2021 the fund ranked 2^nd out of 5 in terms of performance. The ranking for 2022 will be revealed in our 2023 report later in the year.

Overall, it’s too early to form an opinion as to the overall performance trend of these funds and in comparison, to its peers, but generally the company custodians are generating better returns for the company’s shareholders with a 2022 ROE of 37.33%.

For mor information and analysis, visit moneycounsellors.com

Coming soon our 2023 Annual Report on ALL PFA’s. See our 2022 report here:

the Money Counsellors Annual Report on Pensions (MCARP 2022) for a full analysis of all Pension Fund Administrators (PFA) in one single document. The report presents a holistic review of the last five years of activities of all PFAs, and the funds managed, including 5-year summary company and fund accounts, ratios, fund performances, fund performance rankings vs. peers, asset allocation, AUM ranking, RSA ranking and much more.

Our data and information provided is based on public data, our regulatory intelligence effort, from our archives, and other public sources such as from Fund Managers, FMAN, Pension Fund Administrators (PFAs), PenOp, etc. We have taken care to ensure that the information is correct, but MoneyCounsellors neither warrants, represents, nor guarantees the information’s contents, nor does it accept responsibility for any errors, inaccuracies, omissions, or inconsistencies contained herein. Because past performance does not predict future performance, it should not be used to make an investment decision. We make no product recommendations. No news or research item on our website or in this document should be interpreted as a personal recommendation to buy, sell, or switch any investment. Investments and the income generated by them rise and fall in value, so you may receive more or less than you invested.

© MoneyCounsellors.com

In a previous post, I had explained the concept of diminishing returns, and how diminishing returns sets in much quicker for agriculture, than for either manufacturing or services. I am aware of the fact that this is the kind of thing that is often dismissed as academic theory or which comes to the same thing, as being abstract. It is unfortunate that our education system is in such a state, such that it has imparted to us such a scornful view of such a powerful tool as theory but that is the story of a post for another day, though I will point out that theory, when done properly, provides powerful explanations for how the world works. Without it, world events can easily appear to us as being random in character, without any underlying order. Good theory or abstraction, exposes this underlying order so that the world can begin to make sense to us.  

Today, what I want to point out is that the “theory” of diminishing returns recently became reality as regards cocoa farming in Cote d’Ivoire but before we get into that, perhaps a few facts and numbers are in order to give a picture of the cocoa industry. I will mostly be referencing a brilliant piece very recently written by Adam Tooze, a Professor of economics and geopolitics at Columbia University in New York.

Cote d’Ivoire, together with Ghana, have historically been responsible for about 60% of world cocoa output [1]. West Africa in general, is responsible for about 70% of world output. There are some relatively new producers like Indonesia that have emerged as major growers. If you look at the graph above, you would notice that in 2010, that last year in the period covered, Indonesia’s output exceeded that of Ghana. My guess as to why this happened is that Indonesia, being a Newly Industrialized Country (NIC), is making use of industrial techniques to produce its cocoa, as opposed to the small-scale techniques used by the farmers of Ghana and Cote d’Ivoire. Based on that, I would expect Indonesia to eventually surpass Cote d’Ivoire in the not too distant future, particularly as cocoa farmlands in Cote d’Ivoire have reached their limit. Cote d’Ivoire is currently responsible for about 40% of global production [2]. About 5 million tons of cocoa beans were processed into chocolate confectionary in 2020, generating around 130 billion dollars in revenue. Out of this, the farmers of West Africa only captured about 5-6% of the final price of a chocolate bar sold to consumers [3]. The result of this in personal wealth terms is that more than half of Ivorian cocoa farmers and their families subsist on less than $1.20 a day [4]. So for African governments looking to grow the wealth of the populace through farming, you now have an idea of the results. It should go without saying that for West Africa to capture the lion’s share it would need to move up the value chain and get involved in agro-allied processing activities on an industrial scale the way the global chocolate companies like Mars do. 

Throughout the 20^th century, there was a relentless drive to expand cocoa production in West Africa particularly in Cote d’Ivoire. Cote d’Ivoire today delivers at 40 more times the cocoa beans to the global market than were harvested worldwide in 1900 [5]. As a result of this, together with the population pressure and the availability of land, farmland available for cocoa farming has reached its limits. It has gotten to this point because the gigantic increases in production of the last century were not achieved by using increasingly sophisticated technology and scientific techniques, which would have helped to increase the yields from a given piece of land, they were achieved by making ever more use of resources like land and labour, as diminishing returns set in on previous plots being farmed using small-scale methods. Now there is little or no land left to be put into play. To make matters worse, the situation has exacerbated the ethnic tensions in Cote d’Ivoire in recent years. I shall elaborate on this in my next post.

BEFORE YOU GO: Please share this with as many people as as possible and check out my book Why Africa is not rich like America and Europe. Thank you

References:

1. Tooze, Adam Feb 19 2023 ‘The closing of the Cocoa Frontier’ Chartbook #196 https://adamtooze.substack.com/p/chartbook-196-the-closing-of-the
2. Ibid.
3. Ibid.
4. Ibid
5. Ibid

Lagos, March 11, 2023 (NAN) Hamilton and George, a boutique financial advisory firm based in Lagos, has announced the commencement of Private Placement exercise for Quantum Partners, the parent entity, for an emerging innovative fintech platform for African entrepreneurs.

The company is building Africa’s first green and sustainable fintech, deploying its expertise in digital technology and green finance to transform Africa’s business and startup ecosystem.

The Private Placement is part of Quantum Partners’ efforts to raise additional capital to support its growth and expansion plans.

The funds raised will be used to accelerate the development of the company’s technology platform, expand its product offerings and deepen its reach in key markets across Africa.

“We are thrilled to be working with Quantum Partners on this exciting Private Placement exercise,” Mr Joseph Edgar, the Chief Executive Officer of Hamilton and George, said in a statement on Saturday in Lagos.

“As a specialised financial advisory firm, we are committed to providing our clients with the highest level of service and support.

“With our expertise in the Nigerian market and our deep network of partners and investors, we are confident that we will be able to help Quantum Partners achieve its fundraising goals,” he added.

In a joint statement issued to mark the commencement of the exercise, Adedipe Oluwafemi and Samuel Ndubuisi-Brown, co-founders of Quantum Partners said, “we are excited to launch this Private Placement exercise.which represents a significant milestone in our journey to empower African entrepreneurs and startups through innovative digital finance solutions.

“With the support of Hamilton and George, we are confident that we will be able to attract the right investors, who share our vision and are committed to driving positive change in Africa’s business ecosystem.”

The Private Placement exercise is open to accredited investors who are interested in participating in the growth and success of Quantum Partners, as it seeks to build a category defining fintech firm in Africa.

The statement advised interested investors to contact Hamilton and George for more details, adding that Cordros Trustees Ltd, a trustee firm, would lend credibility to the capital raise exercise.

The News Agency of Nigeria (NAN) reports that Hamilton and George Advisers is a boutique financial advisory firm based in Lagos, Nigeria.

The firm is a specialised financial advisory firm that focuses on providing personalised services to a specific niche, and provides a range of services to its clients, including corporate finance, advisory and proprietary investment.

It is focused on deploying a team of professionals and a deep network of partners and investors toward helping Nigerian and African businesses to achieve their full potential.

Cordros Trustees, on its part, offers a wide range of trustee services, including corporate, public, and private trust services.

The firm has an experienced team of professionals with expertise in various areas of trust management such as estate planning, fund management and corporate restructuring.

They provide customised solutions that align with the unique needs of each client, ensuring the best possible outcomes.

The firm adheres to regulatory standards set by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to ensure the safety and security of its clients’ assets.

The statement said that
Quantum Partners Investment Service Ltd focuses on building Africa’s next-generation fintech platform with special attention to empowering African entrepreneurs and the businesses they run.

“The company recognises that the traditional financial system may not be equipped to address the changing trend and unique needs of today’s African businesses and startups, especially since most financial systems were designed for a different time and age.

“The company believes the world is changing and so must the financial services engine that powers it,” the statement added.

ETS

Source: Max Roser http://ourworldindata.org/data/population-growth-vital-statistics/world-population-growth

I had ended my last post by stating that I was going to explain Africa’s population explosion and the west’s lack of it. I ended by saying the west (and increasingly, Asia) are the beneficiaries of what is known as the demographic transition.  

The demographic transition refers to a phenomenon where there is a shift from high birth rates and high death rates in societies with minimal technology, education (especially of women) and economic development, to low birth rates and low death rates in societies with advanced technology, education and economic development, as well as the stages between these two scenarios [1]. As can be seen from the graph above, the transition is divided into 5 stages. Stage 1 is characterized by high birth rates and high death rates. During this stage, the society evolves in accordance with the Malthusian paradigm, with population essentially determined by the food supply. Any fluctuations in food supply tend to translate directly into population fluctuations. In stage 2, the death rates drop quickly due to improvements in food supply and sanitation, which increase life expectancy and reduce disease. This is the stage that characterizes developing nations. The resulting fall in death rates tends to lead to a population explosion. In stage 3, birth rates begin to fall rapidly as a result marked economic progress, an expansion in women’s status and education, and access to and use of contraception. In stage 4, both birth rates and death rates are low. At this stage it is possible for birth rates to dip below death rates and thus have a shrinking population as is the case in Japan.   

The advanced countries of the West, and of East Asia (Japan being the most prominent here) are at stage 4. Most of Sub-Saharan Africa is at stage 2 but a handful of them namely, South Africa, Zimbabwe, Botswana, Eswatini (formerly Swaziland), Lesotho, Namibia, Kenya, Gabon and Ghana have begun to move to stage 3 [2].  Some observers believe that many Sub-Saharan African nations are stuck in stage 2 as a result of stagnant development [3]. It should be of concern to us that countries are vulnerable to becoming failed states in the absence of progressive governments at this stage. No country is yet to experience stage 5. Of course, it is important to remember that that the demographic transition is just a general picture and not a specific description of the path each individual country goes through.

There are competing explanations as to why the demographic transition happens. A leading explanation is that people undergo a change in values as their country industrializes. Some of the value changes include greater emphasis on female education, and delayed marriage age. Also important is that successful industrialization arguably provides the greatest opportunities for people to be gainfully in the formal economy. This crucially gives people access to steady employment and retirement benefits like pension plans. Pension plans reduce the incentive to have large families. Prior to the establishment of the formal economy, adult children were the primary form of insurance for adults in old age [4]. To the extent that we do not industrialize, is the extent to which we keep people dependent on adult children as their pension, and hence, the incentive to have large families remain, with the attendant risks of serious social unrest, stemming from the inadequate resources required for a burgeoning population. This is what drives many of Africa’s poor to have large families. They are not stupid. Their actions are entirely rational. We ‘educated’ Africans need to understand that illiteracy isn’t the same thing as stupidity. You can be illiterate and smart. You can also be educated and stupid. Furthermore, preparing children to be members of the formal economy is expensive and this further reduces the incentive to have large families. Contrast that with raising children to help you work your small plot for your subsistence farming. The cost of raising children in this case is barely more than the cost of feeding.

You shouldn’t think the attitudes of Africa’s poor towards child-bearing is unique to Africans. Europe’s poor behaved exactly the same way 200-300 years ago before the Industrial Revolution, because they were trapped in the exact same socioeconomic conditions that Africa’s poor today, finds itself in. I am highlighting this because I want to make two general points; Values, and hence culture is not static; Some values, hence, some aspects of culture are universal. I would like to elaborate further on these two points.

The above discussion on the democratic transition should make it clear that each stage of socioeconomic development imposes its own values on a given society. So inasmuch that the culture of a people is derived from its values, culture is by nature, meant to be an inherently fluid concept. In simple words, culture is not set in stone but is meant to change as the prevailing realities in the environment demand it. On the second point, as a result of a lack of exposure to history, and to other groups of people and their respective cultures, people of a certain group often think their outlook and values are unique to them and that such outlooks and values have not been held by other people at any point in history, hence they are led to the mistake that there is nothing to be gained from the experience of other people. Some values have shown themselves to be universal in the sense that they have the potential to be held by all people. They just haven’t been held by all people at the same time.

There is a very big danger that awaits countries that don’t make it out of stage 2 (which I previously mentioned is the stage which most of Sub-Saharan Africa is in) known as the demographic trap. The demographic trap refers to a situation where countries in stage 2 remain stuck because they are not creating enough economic development to match their explosive population growth, resulting in increasing poverty, which in a very pernicious way, encourages even more population growth because even more people find themselves trapped outside the formal economy and therefore look to adult children as their pension plans in their old age [5], which of course, increases poverty. It is a vicious cycle. If things get really bad a stage 2 country might find itself experiencing a reversal and find itself headed back to stage 1 [6]. According to Population Action International (PAI), a global think-tank and advocacy group, this reversal has already started in Nigeria [7].  PAI claimed this had happened as far back as 2006. It is needless to say that such a scenario seriously increases the potential for civil conflict. Two globally renowned scholars, have gone on record to claim that the Rwandan genocide was ultimately the result of population pressure. One of them, Edward O. Wilson [8], famous for developing the field of sociobiology and for discovering the first colony of fire ants in the United States as a secondary school student, pointed out in his remarkable book Consilience, that between 1950 and 1994, the population of Rwanda more than tripled from about 2.5 million to 8.5 million; that it had the highest growth rate in the world in 1992 with 8 children per woman. He claims that the overpopulation and the dwindling resources were the inflammable material that were finally lit by the match of ethnic tension between the Hutus and the Tutsis [9].

 I had started this post by explaining the demographic transition. I had also mentioned that industrialization has been recognized as being key to bringing this transition about. Sub-Saharan Africa’s relatively feeble attempts at industrialization put much of it at risk of being caught in the demographic trap or worse, the Malthusian trap. The stakes are just too high not for us not to take this issue seriously.  

References:

1. Wikipedia article on the demographic transition https://en.wikipedia.org/wiki/Demographic_transition
2. Ibid
3. Ibid
4. Ibid
5. Wikipedia article on the demographic trap https://en.wikipedia.org/wiki/Demographic_trap
6. Ibid
7. Leahy, Elizabeth Nov 2006 ‘Demographic Development: Reversing Course?’ http://www.populationaction.org/resources/researchCommentaries/Nov06_AgeStructure.htm
8. Wikipedia article on Edward Wilson https://en.wikipedia.org/wiki/E._O._Wilson
9. Wilson, Edward. 1998 Consilience: The Unity of Knowledge. UK: Abacus