Five African cities of opportunity

17 March 2015

Johannesburg, South Africa’s economic capital, is in the top five cities when it comes to opportunity, according to PricewaterhouseCoopers (PwC), the multinational professional services network.

Joburg is named in PwC’s report, Into Africa – the Continent’s Cities of Opportunity. It details the potential of 20 African cities believed to be among the most dynamic and future-focused on the continent. The report is part of PwC’s global Cities of Opportunity series, and was released on 17 March at the African CEO Forum of 2015 in Geneva, Switzerland.

The report’s analysis is structured around the critical issues of the business community as well as those of the office holders and other public authorities who are responsible for improving the collective life of each city examined, according to PwC.

The continent is crossed by five trends: demographic change, urbanisation, technological changes, the transfer of economic power, and climate change. Urbanisation is of particular importance, as by 2030, half of Africa’s population will live in cities where economic activity and growth will be focused and which will become communication centres and hubs for social trends.

The global megatrends are colliding across Africa, says PwC. “The growing middle class, strong demographic growth with an improving age mix, technological innovation that we have already seen in mobile payments and a growing choice of investment partners from the global south, as well as fast-paced urbanisation are all shaping what the future of Africa will look like.”

Stanley Subramoney, PwC’s head of strategy for Southern Africa, says: “We have sought to answer ‘What makes an African city one of opportunity’ by developing a set of questions that investors should ask themselves and themes which city politicians and officials can work on to improve their competitiveness.

“This report assesses how the cities are performing not only on a regional level but also on an international one, which is hugely important in terms of these cities being able to compete and prosper on both of these stages.”

PwC studied four indicators: the economy, infrastructure, human capital and population/society (which itself contains 29 variables). From this analysis, two rankings emerged: general and opportunities for cities.

“We believe that these cities demonstrate the relative strengths and weaknesses of Africa’s urban future. Our evaluation and re-evaluation of that future is, of course, a continual work in progress,” adds Kalane Rampai, the company’s leader for local government for Southern Africa.

North African cities lead the way

Four of the top five cities in the report are in North Africa: Cairo, Tunis, Algiers and Casablanca; the fifth is Johannesburg. The preponderance of North African cities at the top is mainly due to how long they have been established. This has given them time to develop infrastructure and a regulatory and legal framework, and to establish a socio-cultural ecosystem.

Johannesburg is the only exception to this pattern since it was established more recently, in 1886, compared to the other cities with which it is ranked highly, and was developed rapidly for political reasons. Therefore, its infrastructure and services are comparable to those of the more established African cities.

African cities with promise

Another major criterion of a city’s potential is the vision it has for its future. Accra, the capital of Ghana, for example, has a good reputation throughout Africa and beyond for the quality of its communications infrastructure, low crime rates and steady democracy. Economically, it ranks second for both its attractiveness as a destination for foreign direct investment (FDI) and the diversity of its gross domestic product (GDP).

Most of the African cities with promise can (and will), with a little effort and organisation, climb to join those cities at the top of PwC’s overall ranking, says the company. Moreover, many of them have already become key regional platforms, such as Dar es Salaam and Douala as centres for telecommunications, Accra and Lagos for culture, and Nairobi for financial services.

“Outside our top five cities, Kigali finishes at the very top for both ease of doing business and health spending; Abidjan ranks number one in both middle-class growth and diversity; Dar es Salaam is first in GDP growth; and Nairobi outscores all African cities in FDI.”

With 5% growth, dynamic demographics and a growing middle class, Africa is extremely appealing to investors. After undergoing a period of pessimism about the future of Africa with some exaggerated optimism, leaders today share a more realistic view of the economic climate of the continent. This is what PwC calls Afro- realism.

Source: APO