AFRICA – Rapid economic growth, coupled with discovery of large deposits of oil and gas, are likely to see both Nairobi and Dar es Salaam join the top 10 “super cities” of Africa by 2030, according to a new report.
The report by United Kingdom-based international firm PricewaterhouseCoopers (PWC) also predicts that Dar es Salaam will become a bigger city than London by 2030.
The London-based professional services network says that CEOs around the world are increasingly recognising the untapped potential of sub-Saharan Africa.
This, it says, “is driven by Africa’s unparalleled demographic edge or demographic dividend. By 2040, Africa is expected to have the biggest labour force in the world and experiencing faster economic growth than any other region”.
Currently, the three biggest cities on the continent are Lagos, Kinshasa and Johannesburg. But PWC predicts that another 10 cities are set to join them in importance by 2030, including Nairobi, Dar es Salaam, Addis Ababa, and Khartoum.
PWC says the “Next 10” cities are expected to almost double their population and triple their economic output by 2030, growing by around 32 million people.
The report estimates that economic activity in the “Next 10” cities could grow by around $140 billion dollars by 2030.
“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,” the report says.
However, like a recent Unicef report, it also warns of problems ahead. “We see three key hurdles which could derail the pace at which the ‘Next 10’ grow,” the report says.
These include “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.
Also of importance are “inadequate soft” infrastructure like schools and universities, which could lead to a persistent skills gap that hampers long-term business growth.
Finally, PWC expresses concern at the “growing pains stemming from the inability of regulators and policymakers to manage effectively a larger and more complex economic system as growth proceeds.
CORRUPTION AND BUREAUCRACY
“These problems could, for example, manifest themselves in the form of 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 investment.”
However, Mr Stanley Subramoney, strategy leader of PwC’s South Market Region, says: “The report projects that economic activity in the ‘Next 10’ cities could grow around $140 billion by 2030. This is roughly equivalent to the current annual output of Hungary.”
This is a conservative estimate as no premise has been made for real exchange rate appreciation despite relatively strong projected growth in these economies.
“In addition to the trends with regard to high rates of GDP growth, rapid urbanisation and the so-called demographic edge that sub-Saharan Africa possesses, a number of other economic phenomena are starting to appeal to the global investment community,” says Dr Roelof Botha, economic adviser to PwC.
These include significant new discoveries of mining and energy resources, in particular, gold and gas; substantial investment in infrastructure and capital formation by the private sector, which has witnessed an increase in the ratio of total fixed investment to GDP from 17.7 per cent in 2000 to 23 per cent in 2013.