Top 10 African cities of the future

By 2040, Africa will experience faster economic growth than any other region and is expected to have the biggest labour force in the world, according to PwC’s latest Global Economy Watch, which puts the spotlight on the largest cities in sub-Saharan Africa.

As companies around the world look to exploit the widely reported untapped potential on the continent, the question now is, where can one focus if they want to expand their activities in sub-Saharan Africa (SSA)?

Most major corporations are already active in at least one of the four largest cities in SSA – Lagos, Kinshasa, Nairobi and Johannesburg. But, according to PwC economists, it is the ‘Next 10’ biggest cities in the region that should be exciting foreign investors. The population of these cities is projected to almost double by 2030, growing by around 32 million people.

Next 10 biggest cities

1. Dar es Salaam (Tanzania)
2. Luanda (Angola)
3. Khartoum (Sudan)
4. Abidjan (Cote d'Ivoire)
5. Nairobi (Kenya)
6. Kano (Nigeria)
7. Dakar (Senegal)
8. Ouagadougou (Burkina Faso)
9. Addis Ababa (Ethiopia)
10. Ibadan (Nigeria)

Top 3 cities

1. Lagos (Nigeria)
2. Kinshasa (DRC)
3. Johannesburg (South Africa)

The latest UN projections show that by 2030 two of the ‘Next 10’ – Dar es Salaam and Luanda – could have bigger populations than London has now.

Cities are the typical entry points for businesses trying to expand into new overseas markets, because they enable closer interaction with customers in a relatively small geographic space, which in turn helps contain distribution costs.

One of the key factors that drive economic growth is the number of people of working age. PwC expects a bigger and younger urban population to be associated with strong GDP growth. The firm’s analysis shows that economic activity in the ‘Next 10’ cities could grow to about $140-billion by 2030. “This is roughly equivalent to the current annual output of Hungary,’ says Stanley Subramoney, Strategy leader of PwC’s South Market Region

This is a comparatively conservative estimate by PwC that assumes no real exchange rate appreciation despite relatively strong projected growth in these SSA economies.

More people, bigger business opportunities

One of the key factors that drive economic growth is the number of people of working age. PwC expects a bigger and younger urban population to be associated with strong GDP growth. Several trends are responsible for the increasing appeal of the region to international investors. These include high GDP growth rates, rapid urbanisation and the “demographic edge”. Other economic factors are the big new discoveries of natural reasons, substantial investment in infrastructure, sustained growth in per capital incomes and the growing ability of countries to raise project financing on international capital markets.

The three big hurdles 

There are however three problems that could slow the pace at which the ‘Next 10’ biggest cities in sub-Saharan Africa grow, says the report. These are issues that African countries have been trying to tackle for many decades with limited success:

Low quality of 'hard' infrastructure like highways, airports and trains, which increases the cost of doing business, eats away at business profits and discourages investment.

Inadequate 'soft' infrastructure like schools and universities, which could lead to a persistent skills gap that hampers long-term business growth.

Growing pains stemming from the inability of regulators and policymakers to manage effectively a larger and more complex economic system as growth proceeds. These problems could, for example, lead to credit or property bubbles as a result of rapid economic growth, or a failure to tackle issues relating to corruption and excessive bureaucracy that deter international investment.

Looking ahead

The challenges that policy makers face is to convert Africa’s demographic dividend into economic reality by overcoming these hurdles. “History suggests this will not be a quick or easy process. Investors should form their own plans to mitigate these problems by supporting infrastructure skills and development programmes,” says Stanley.

Source: APO

Prospects for cement companies in Africa

Free download report: Outlook for the cement industry in Africa

Cement companies are expanding their footprints and investing in more capacity to meet the rising demand for cement in Africa.

In East Africa, old and new players are jostling for a share of the booming market, with Kenya and Tanzania attracting the most interest from investors.

In Southern Africa, cement companies are expanding to take capture growth opportunities in the region's massive pipeline of infrastructure and housing projects.

In West Africa, companies in Nigeria are taking advantage of government incentives to increase cement production.

Imara Securities looked at the sector recently and compiled the cement outlook report that we are now sharing with you.

Download the report  to get comprehensive information on:

• Regional consumption and production trends
• Drivers of consumption
• Opportunities for investment
• Risks for investors
• Top industry players and other Pan African companies to watch

To access this report you must be a Frontier member. Click on this link to sign up and get immediate access.

Visit www.frontiermarketnetwork.com to read some country-specific articles on cement production.

Top six risks in Africa in 2014

Download a free report on the risks to watch in sub-Saharan Africa this year.

By @EcobankResearch

The global economy appears to have turned the corner and is strengthening. However, US and eurozone problems are deep seated and will take years to resolve particularly in the latter, which will remain an area of concern for sub-Saharan Africa (excluding South Africa) economies that hope to export greater levels of produce to help fund domestic development. 

Nonetheless, strong real growth is likely to remain the norm in key economies in sub-Saharan Africa in 2014 and beyond. Although nearly all countries expanded in 2013 (only Central Africa Republic (CAR) and Equatorial Guinea contracted while Swaziland recorded no growth), some were adversely affected by weakness in the Eurozone and key emerging markets.

Economic policies are likely to continue improving, which will help underpin growth, as will increased political stability, which will create a more attractive business operating environment.

There are six main risks facing the region. In isolation, each poses a serious threat to growth if realised. The risks highlight some of the potential challenges that could derail growth and compound the day-to-day challenges of managing key economies.

1. Spillover from eurozone crisis

There are six major eurozone problems that could spillover and affect sub-Saharan Africa. Euro is at risk of resembling Japanese Yen in 2000s – a strong currency but weak economy. From a Middle Africa perspective this is worrisome because ongoing eurozone problems will continue to reduce trade and weaken capital inflows. Moreover, the artificial appreciation of the EUR against the USD increases exchange rate volatility, which could impact UEOMOA and CEMAC international trade transacted in USD.

2. Slowing growth in China

Recently, real GDP growth has been slowing steadily, due to domestic and external factors: domestic factors have seen a tightening of credit policies; and external factors have seen weaker OECD demand for Chinese manufactures.

Slower growth in China is having a significant impact in sub-Saharan Africa, with the risk that US$150bn of bilateral trade in 2013 is likely to grow more slowly in 2014. This highlights the risk of relying too heavily on one trade partner. Moreover, slower Chinese growth and credit tightening could mean the end of a bullish global commodity market, which is likely to contribute to lower commodity prices.

This would have negative implications for export receipts and fiscal revenues for commodity exporters that trade heavily with China (such as most oil and mineral producers).

To learn more about the other four risks to watch in SSA this year, Download the Top Six Risks Report.

This report is brought to you in partnership with Ecobank Research. 

Ecobank Research is the research team of pan-African Ecobank Group, and has been the recipient of the Best African Research Team award for three consecutive years – 2011, 2012 & 2013 – under the Africa Investor Index Series Awards. Ecobank Research is dedicated to providing the highest quality research for our clients to help them navigate the complex African marketplace. Our research team is probably the largest in any private financial institution that is dedicated purely to research on ‘Middle Africa’ and comprises a dozen analysts based in Ecobank’s affiliates in London, Paris, Abidjan, Accra, Lagos, Nairobi and Harare. We are passionate about Africa, and our team of seasoned analysts based across Ecobank’s 34-country footprint draws on its extensive local knowledge to provide insights for clients and identify investment opportunities and strategies. Our focus is on Middle Africa – the region between North Africa and the Rand Zone, which has the richest potential for growth but is poorly understood. We produce regular market updates, briefing notes and detailed studies on the region’s macroeconomics, currencies, fixed income, equities, commodities and trade. We also have a research hub co-ordinating LocalKnowledgeAfrica™ the research team’s bespoke advisory and research initiative serving corporate clients in Africa and world-wide.