MasterCard Study Reveals African Cities Economic Growth Potential

Accra, Lusaka and Luanda, the capital cities of Ghana, Zambia and Angola respectively, have been identified as the Sub-Saharan African cities that have the highest potential for growth over the next five years, according to the  MasterCard African Cities Growth Index. As the entire African continent with its population of over 1 billion people is going through a fundamental transformation, this new Index puts a spotlight on the economic and human factors driving urban growth over the next five years.

The Index, produced on behalf of MasterCard by Professor George Angelopulo of the University of South Africa (UNISA), was launched today at the second Africa Knowledge Forum hosted by MasterCard in Johannesburg, convening thought leaders from academic, business and government sectors. The Forum explores how cities across Africa are playing an increasingly important role in driving national and regional growth, how they need to compete on the global stage in order to attract inward investment, and how these cities urgently need to manage their natural and human resources more effectively as they grow.

The MasterCard African Cities Growth Index was developed in the final quarter of 2012 and analysed 19 cities across Sub-Saharan Africa ranking them according to their growth potential between 2012 and 2017. The Index rankings were developed from published historical and projected data on typical factors that impact cities’ growth rates, including: economic data, governance levels, ease of doing business, infrastructure and human development factors, and population growth levels.

Of the 19 researched cities, Accra, the capital city of Ghana, was ranked as having the highest growth potential, followed by Lusaka and Luanda, that were both identified as having medium-high growth potential.

“Some of the key reasons for Accra emerging as a high growth city include: its gross domestic product per capita growth over the past three years, its projected population and household consumption growth, its strong regulatory environment, and the relative ease of doing business in this city, compared to other African cities,” said Professor Angelopulo.While many of these larger and more established cities offer the expected potential for growth, other less prominent ones are quietly establishing themselves as those with even higher growth potential. This is primarily due to high scores on accelerated growth factors that include health, education, governance, infrastructure development, and the ease of doing business in those cities.

Johannesburg, although already a strong economic powerhouse city in Africa, achieved lower scores in certain categories as a result of lower growth expectations due to its relative maturity when compared to other African cities. For example, the expected growth of the middle class population is higher from cities such as Accra and Luanda than it is for Johannesburg, which has seen a growing middle class since the change of government in 1994.

Explaining why MasterCard chose to develop this new Index specifically for Africa, Michael Miebach, president, MasterCard Middle East and Africa says, “Africa is a region where the lines between the developed and developing worlds are dissipating owing to various economic, demographic and technological factors. Most of these factors have been associated with the increased urbanization of the continent. Therefore, understanding the long-term growth potential of Africa’s cities, and the resultant increase in African urban consumers, has never been as important.”

“We are committed to understanding the needs and challenges that consumers, businesses and financial institutions face as we partner with local stakeholders to enable economic growth through the increased adoption of electronic payments. African nations have taken the lead in moving toward a world beyond cash that is also a world of greater financial inclusion and economic empowerment,” said Miebach.

He noted that, according to the United Nations Human Settlements Programme, the urban population of Africa is expected to triple by 2050 to 1.23 billion (from 395 million in 2009), by which time 60% of all Africans will be living in cities or urban areas.

“This growth in urbanization, combined with the fact that the center of global economic gravity is shifting to dynamic emerging markets such as those found in Africa, means that the continent’s cities will play a much bigger role in driving the economic growth of their respective countries,” Miebach continued.

Harare (Zimbabwe), Kano (Nigeria), Abidjan (Côte d’Ivoire), and Khartoum (Sudan) were deemed to have the lowest growth potential of the 19 cities examined in the study.

Although these cities scored well in some categories, such as the overall health index and the levels of foreign direct investment, their potential for growth was negatively impacted by low scores in areas such as their political and regulatory environments, lower historical economic growth and the challenges of doing business.

“One of Africa’s key economic and social challenges is how its cities attract significant inward investment by being  globally competitive, serving as magnets for investment and growth, hot-spots of innovation and, most importantly, developing attractive and thriving business environments,” concludes Professor Angelopulo.