African Cities and Opportunity

Credit: PwC

It’s about 10 years since the turn of the global financial of 2008 in which economies were cajoled into the arm twisting allure of the West’s subprime mortgages, the aftermath of which saw economies grapple with recovery. Africa has over the past decade not only recovered but significant improvements have been made which have intensified economic activity across the continent. Real estate, the culprit of the crisis, has in particular attracted a lot of investment in many countries especially in sub-Saharan Africa in recent years. The Africa Business Agenda report by audit firm PwC, released in 2017 identifies some of the opportunities going forward.

Many positive trends have merged together on the African scene, multiplying the potential for economic development and change in the real estate sector as well as in other spheres of business. Factors such as population growth, rapid urbanization, technological breakthroughs and shifts in global power dynamics are increasingly playing out in favour of Africa. The real estate sector stands to benefit enormously from each of these ongoing and looming transformations identified by the data from the report:

By 2035, Africa’s labour force is expected to be larger than that of China. Providing for the basic needs of this workforce will demand a lot of resources from governments and private investors to keep the workforce serviced.

Africa has the fastest growing middle class on the globe with 350m people belonging in this category and yet this represents less than 50% of the workforce.

Thanks to rapid urbanisation, there will be 12 megacities (over 10m people) in Africa by 2025, which is less than a decade away. The result is that by 2025, Africa will house some of the largest cities in the world. Of the 37 megacities expected, 12 will be from Africa. Cities such as Lagos, Kinshasa and Abidjan are projected to join the ranks of some of the world’s most densely populated urban areas. The kind of growth expected can be compared to the transformation of Asian cities such as Shanghai and Dubai which in a span of 10 to 20 years have grown into the urban bulwarks we know, creating opportunities and driving growth.

On population growth, Africa is expected to contribute 50% of the world’s population growth between now and 2050. With this increase in the number of consumers many of which will flock into cities, the demand for food, infrastructure, technology, financial services, housing and health services will rise.

Mobile broadband growth in Africa has since surpassed 50%, which is Africa catching up with the rest of the world. This has and will continue to affect the flow of information between Africa and the rest of the world.

The resulting concentration of economic activity in urban areas will be key to propelling Africa into greater economic heights. Urban areas are everywhere known to have the greatest influence on economic opportunities because they drive growth though innovation and technology, information exchange, infrastructure demand, social transformation and others.

The Cities of Opportunities report by PwC also ranks the African cities by regional index, opportunity index and overall index in evaluating the growth potential of those cities using a total of 29 variables for the overall index and 5 variables for the opportunities index. The variables included infrastructure, human capital, economics, society and demographics, rate of real GDP growth among others. Cities like Accra, Lagos, Nairobi, Cairo, Addis Ababa and Kampala rank in the top ten of both indices and already attract the highest Foreign Direct Investment in the continent.