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AfricaMoney | October 20, 2017

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Opportunity for Mauritius as gateway to Africa as PwC points next 10 biggest cities

Opportunity for Mauritius as gateway to Africa as PwC points next 10 biggest cities

According to the Global Economy Watch report, most Western companies already have some presence in at least one of SSA’s ‘Top 3’ populous cities – Nigeria’s Lagos, Democratic Republic of Congo’s Kinshasa and South Africa’s Johannesburg – but it is the ‘Next 10’ biggest cities in sub-Saharan Africa that investors must watch out for. (Image: IDO Productions)

As labor costs in Asia start to increase amid mounting pressure to keep prices competitive, global CEOs are increasingly recognizing the unexploited potential of the Sub-Saharan African (SSA) countries.

This is mainly driven by Africa’s unparalleled demographic edge compared to other parts of the world. Africa is the world’s youngest continent, and is expected to have the biggest labour force in the world by 2040.

Having seen the bounties that Africa has to offer, the question that now arises is: Where should investors focus their attention within SSA?

According to PwC’s latest Global Economy Watch report, released on Thursday, most Western companies already have some presence in at least one of SSA’s ‘Top 3’ populous cities: Nigeria’s Lagos, Democratic Republic of Congo’s Kinshasa and South Africa’s Johannesburg.

However, it is the ‘Next 10’ biggest cities in sub-Saharan Africa which we should certainly watch out for.

The report then goes on to list the next 10 biggest cities in SSA according to PwC’s estimates, which are: Dar es Salaam (Tanzania), Luanda (Angola), Khartoum (Sudan), Abidjan (Côte d’Ivoire), Nairobi (Kenya), Kano and Ibadan (Nigeria), Dakar (Senegal), Ougadougou (Burkina Faso), and Addis Ababa (Ethiopia).

Based on the report the population of these cities is projected to almost double by 2030, growing by around 32 million people, which will triple their economic output by around USD 140 billion (approximately Rs 4.3 billion) that is roughly equivalent to the current annual output of Bangladesh.

These estimates are based on three key assumptions: that national GDP growth rates follow those projected by the IMF in its latest World Economic Outlook report, that the city GDP per capita grows in line with the rest of the country and that real exchange rates remain constant.

Furthermore, according to the latest projections by the United Nations, two of the ‘Next 10’ cities, namely Dar es Salaam and Luanda, could have a bigger population than London’s actual count now.

However, in order to make this projection a reality, three key obstacles that should be overcome to realize the growth potential are low quality of ‘hard’ infrastructure (like highways, airports and trains) which increases the cost of doing business, inadequate ‘soft’ infrastructure (like schools and universities) which could lead to a continual skills gap that hampers long-term business growth, and finally, growing pains which stem from the inability of regulators and policymakers to manage effectively a larger and more complex economic system as growth proceeds.

The report concludes on the note that the journey to a brighter economic future for the region is likely to be long and tortuous, but enjoins investors to be ready to form their own plans to mitigate these problems by supporting infrastructure skills and development programmes in the African continent.

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