By CEOs around the world are increasingly recognizing the untapped potential of sub-Saharan Africa.
This is driven by Africa’s unparalleled demographic edge or demographic dividend.
By 2040, Africa is expected to have the biggest labor force in the world and experiencing faster economic growth than any other region, according to a report issued by internationally renown auditing agency, PricewaterhouseCoopers (PwC).
The projections are contained in the latest PwC Global Economy Watch, which puts the spotlight on the largest cities in sub-Saharan Africa.
Most major corporations are already active in at least one of the four largest cities in sub-Saharan Africa which include Lagos, Kinshasa, Nairobi and Johannesburg.
But PwC economists believe it’s the ‘Next 10’ biggest cities in sub-Saharan Africa that should also be exciting foreign investors. The population of these cities is projected to almost double by 2030, growing by around 32 million people. In fact, latest UN projections show that by 2030 two of the ‘Next 10’, Dar es Salaam and Luanda could have bigger populations than London has now.
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 ontain distribution costs.
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 urbanization and the so-called demographic edge that sub-Saharan Africa possesses, a number of other economic phenomena in the region are starting to appeal to the global investment community,” says Dr. Roelof Botha, economic advisor to PwC.
These included, 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% in 2000 to an estimated 23% in 2013 and also sustained growth in per capital incomes, which has led to demand shifts that are benefitting household consumption expenditure on durables, semi-durables, and services.