Here Are The Next Ten Most Attractive African Cities For Investment

August 26, 2014 Niyi Aderibigbe Intelligent Investing, International, Investing, Investors

inShare44

VENTURES AFRICA – Ten sub-Saharan African countries have been identified by international professional services firm, PwC, as the go-to cities for international investors looking to expand to the sub-region.
The world is turning focus to sub-Saharan Africa (SSA), with its potentials now recognized by several international conglomerates holding a deeper presence on the continent. But the key to succeeding in this region is identifying the right cities for investments, according to the August 2014 edition of PwC’s Global Economy Watch.
Half the projected 2.2 billion rise in the world population in 2015-2050 is expected to emerge from Africa, UN says. But the good news is that Africa will have the largest youth population in Africa by 2030. The continent’s fledging youth workforce is also
expected to further drive economic growth and investors would be eager to position themselves within the cities that hold the greatest potentials.

Next 10 cities
Large cities are typically entry points for companies trying to expand to new markets. This explains why most large multinationals have presence in at least one of sub-Saharan Africa’s three largest cities: Lagos (Nigeria), Johannesburg (South Africa) and Kinshasa (Democratic Republic of the Congo).
The report identified five cities in West Africa (Ibadan, Kano, Abidjan, Ouagadougou and Dakar); four in East Africa (Dar es Salaam, Nairobi, Addis Ababa and Khartoum) and one Southern African city, Luanda.
PwC believes investors should look further than these three cities as the Next 10 largest cities of sub-Saharan Africa also hold abundant opportunities investors should exploit.

population trends in sub-Saharan Africa
Source: UN Urbanisation Prospects 2014 revision

An interesting fact notes that two out of the ‘Next 10’ cities (Dar es Salaam and Luanda) could have bigger populations than London has now by 2030, according to the latest United Nations projections.

Potentials overshadow challenges
The ‘Africa Rising’ narrative paints a picture many Africans love to see; making case for a bright future for the continent. While growth is real, Africa’s challenges remain vivid and require a sustainable solution to fully exploit the potentials of held by cities.
“The challenge that policymakers are faced with is to convert Africa’s demographic dividend into economic reality by overcoming these hurdles,” PwC noted in the report.
Although there are myriad of challenges faced by the sub-region, PwC identified the top three.

• Infrastructure: poor transportation network shoots up the cost of doing business. Sadly, most countries in SSA have still not gotten it right. Most cities in sub-Saharan Africa lag behind cities in the Middle East and North Africa (MENA) region in terms of infrastructural development. Dearth of basic infrastructure discourages investments. The ‘Next 10 cities’ should take note.

Percentage of total roads paved compared with the MENA region
Source: World Bank

• Education: Poor education infrastructure may hamper long-term business growth as skills gap occasioned by the inadequacies in the educational system would flourish.

• Leadership: The inability of regulators and policymakers to effectively manage the windfall from the economic growth could be a great undoing. Failure to tackle issues relating to corruption and excessive bureaucracy that deter international investment could also hamper the growth of the ‘Next 10 Cities’.

While it will be in the best interests of the ‘Next 10 Cities’ to ensure these challenges are addressed, PwC however advised potential investors to form independent plans to mitigate these problems, suggesting support for the cities in developing infrastructure and organizing skills development programmes.
Insecurity is also fast becoming a barrier to investment in several sub-Saharan African countries; governments of the countries therefore need to address the growing scourge to ensure investors are not discouraged despite all the promises these ‘Next 10 cities’ hold.