Jhb third-best city to do business in Africa

Johannesburg has been ranked the third-best city in Africa in terms of economic opportunity, according to PwC’s inaugural lnto Africa report released this week.

Johannesburg ranked the best in terms of airports, literacy and numeracy, GDP per capita, strength in financial services and its political environment.

However, it ranked the worst with regards to diversity, population growth and its Gini co-efficient level and second to worst in terms of crime and road safety.

The report measured the potential of 20 African cities that PwC believed to be among the most dynamic and future focused on the continent.

Poor society and demographics

Johannesburg had the second best human capital and third best infrastructure and economics, but ranked fairly low on society and demographics.

The city of Kaizer Chiefs and Orlando Pirates had a pretty low rate of real GDP growth, ranking third to last, but ranked second in terms of ease of doing business. In terms of attracting direct foreign investment, it ranked third.

Cost of housing in Johannesburg was seen as expensive, pushing its ranking low in this sector. Ironically, given the issues with load shedding, Johannesburg had the highest rank in terms of power. 

Trends in Africa

The African continent was crossed by five trends, according to PwC: demographic change, urbanisation, technological changes, the transfer of economic power and climate change.  

“Urbanisation is of particular importance, as by 2030, half of Africa’s population will live in cities where economic activity and growth will be focused and which will become communication centres and hubs for social trends,” PwC said at the launch at the African CEO Forum in Geneva.

Stanley Subramoney, PwC head of strategy for southern Africa, said: “We have sought to answer what makes an African city one of opportunity by developing a set of questions that investors should ask themselves and themes, which city politicians and officials can work on to improve their competitiveness.”

“This report assesses how the cities are performing not only on a regional level but also on an international one, which is hugely important in terms of these cities being able to compete and prosper on both of these stages.”

Where the countries rank per region:

Source: lnto Africa report

From economy to human capital

PwC studied four indicators: the economy, infrastructure, human capital and population/society (which itself contains 29 variables).

From this analysis, two rankings emerged: ‘general’ and ‘opportunities for cities’.

“We believe that these cities demonstrate the relative strengths and weaknesses of Africa’s urban future. Our evaluation and re-evaluation of that future is, of course, a continual work in progress,” said Kalane Rampai, PwC leader for local government for southern Africa.

North African cities lead the way

Four of the top five cities in the report are located in North Africa: Cairo, Tunis, Algiers and Casablanca, with the fifth being Johannesburg.

The preponderance of North African cities at the top is mainly due to how long they have been established. This has given them time to develop infrastructure and a regulatory and legal framework, and to establish a socio-cultural ecosystem, according to the report.

“Johannesburg is the only exception to this pattern, since it was only formed more recently, in 1886 (compared to the other cities it’s ranked highly with), and was developed rapidly for political reasons. Therefore, its infrastructure and services are comparable to those of the more established African cities.”

A global perspective on Africa’s rapid urbanisation and middle-class growth:

– Entertainment and media: Top 10 spending and top 10 spending-growth cities
– 2013 advertising and consumer spending and 2013 – 2018 growth rate

Source: Into Africa report

African cities with promise

Another major criterion of a city’s potential is the vision they have for their future, according to the report.

“Accra, the capital of Ghana, is a good example of a city that has a good reputation throughout Africa and beyond for the quality of its communications infrastructure, low crime rates and steady democracy. Economically, it ranks second for both its attractiveness as a destination for foreign direct investment and the diversity of its GDP.

“Most of the African cities with promise can (and will), with a little effort and organisation, climb to join those cities at the top of our overall ranking. Moreover, many of them have already become key regional platforms, such as Dar es Salaam and Douala as centres for telecommunications, Accra and Lagos for culture, and Nairobi for financial services.”

Afro-realism

Outside the top five cities, Kigali finishes at the very top for both ease of doing business and health spending; Abidjan ranks number one in both middle-class growth and diversity; Dar es Salaam is first in GDP growth; and Nairobi outscores all African cities in FDI, the report showed.

“With 5% growth, dynamic demographics and a growing middle class, Africa is extremely appealing to investors. After undergoing a period of pessimism about the future of Africa with some exaggerated optimism, leaders today share a more realistic view of the economic climate of the continent. This is what PwC calls ‘Afro-realism’.

“The trends identified in the report, with the generally accepted economic data supporting the notion that cities are the world’s ‘engines of growth’, make ‘Into Africa – the continent’s cities of opportunity’ report not only necessary but extremely timely.”

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