MasterCard Study Reveals African Cities Economic Growth Potential

MasterCard Study Reveals African Cities Economic Growth Potential

Out of 19 Cities, Accra, Lusaka and Luanda offer Highest Growth Potential in Sub-Saharan Africa

To tweet this news, copy and paste: New #MasterCard Index reveals African cities with greatest potential for growth http://bit.ly/14lmoWI


JOHANNESBURG--(BUSINESS WIRE)-- 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.

Methodology

The MasterCard African Cities Growth Index is compiled from a range of verified data on variables of city economic growth. The Index uses historical data from the period 2009 to 2011 for:

  • GDP Per Capita Growth (Canback Danglar)
  • Household Consumption Expenditure Growth (Canback Danglar)
  • Governance Factors (World Bank, World Governance Indicators) - included are Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Voice and Accountability, Rule of Law, Control of Corruption
  • Doing Business (World Bank)
  • City Population Growth (Canback Danglar)
  • National Urbanisation (World Bank, World Development Indicators)
  • Middle Class Household Growth (Canback Danglar).

Additionally, the Index uses projected data for the five years 2012 to 2017 for:

  • GDP Per Capita Growth (Canback Danglar)
  • Household Consumption Expenditure Growth (Canback Danglar)
  • Human Development Index Factors (UN) - included are Health and Education
  • Infrastructure Development Factors (World Bank, World Development Indicators) - included are Gross Fixed Capital Formation as Percentage of GDP, Access to Water, Access to Electricity, Access to Sanitation
  • Mobile Telephone Subscriptions (ITU)
  • Inbound Travel Factors (MasterCard Global Cities Project) - included are International Non-Resident Arrivals and International Non-Resident Arrivals Expenditure.

Cities were selected to include a range from all regions of Sub-Saharan Africa. The range is not exhaustive and additional cities are expected to be added in further research updates. The cities and their ranking are

             

1.

Accra

Ghana

11.

Cape Town

South Africa

2.

Lusaka

Zambia

12.

Mombasa

Kenya

3.

Luanda

Angola

13.

Lagos

Nigeria

4.

Dar es Salaam

Tanzania

14.

Abuja

Nigeria

5.

Addis Ababa

Ethiopia

15.

Dakar

Senegal

6.

Nairobi

Kenya

16.

Harare

Zimbabwe

7.

Kampala

Uganda

17.

Kano

Nigeria

8.

Johannesburg

South Africa

18.

Abidjan

Côte d'Ivoire

9.

Kinshasa

DRC

19.

Khartoum

Sudan

10.

Durban

South Africa

 

The assessment was undertaken in a five-step process:

1.   The variables of city economic growth were converted to a common 100 point scale.
2. The variables were weighted to reflect their contribution to growth.
3.

The variables were aggregated using the geometric average method of the Potgieter-Angelopulo Index - http://www.potgieter.org/doku.php?id=mv_index

4. The results were presented in two dimensions - lagging (historical) indicators on the one and leading (projected) indicators on the other.
5. The dimensional scores were consolidated and this data was used for the final city rankings.

Professor George Angelopulo, University of South Africa

Professor George Angelopulo is affiliated to the University of South Africa and CENTRUM Católica, the business centre of the Pontificia Universidad Católica del Perú. He develops and applies diagnostics in the corporate field, has published in peer reviewed journals, produced standard academic works used throughout Southern Africa, and authored a number of books.

MasterCard and its Suite of Research Properties

The MasterCard Worldwide Index suite in Asia/Pacific, Middle East and Africa includes the long-running MasterCard Worldwide Index of Consumer Confidence, as well as the MasterCard Worldwide Index of Women's Advancement, Online Shopping and Ethical Spending, Index of Financial Literacy, and the Index of Global Destination Cities. In addition to the Indices, MasterCard's research properties also include a range of consumer surveys including a series on Consumer Purchasing Priorities (covering Travel, Dining & Entertainment, Education, Money Management, Luxury and General Shopping).

MasterCard also regularly releases Insights reports providing analysis of business dynamics, financial policies and regulatory activities in the Asia/Pacific, Middle East and Africa region. Over 80 Insights reports have been produced since 2004.

About MasterCard

MasterCard (NYS: MA) , www.mastercard.com, is a global payments and technology company. It operates the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's products and solutions make everyday commerce activities - such as shopping, traveling, running a business and managing finances - easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.



For media inquiries:
Tribeca Public Relations
Geraldine Trennery / Cian Mac Eochaidh
mastercard@tribecapr.co.za
+27 11 208 5500
or
MasterCard Middle East & Africa
Sami Lahoud
sami_lahoud@mastercard.com
+971 56 216 9273

KEYWORDS:   South Africa  Africa

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