South African cities lag behind

by Kentse Radebe

January 30th 2013



Accra, Lusaka and Luanda top Africa’s growth potential list – MasterCard index.

JOHANNESBURG - Accra, Lusaka and Luanda were identified in the MasterCard Cities Growth Index as the cities in Africa with the highest levels growth potential. Johannesburg, Durban and Cape Town however, took positions eight, ten and eleven respectively.
One of the reasons that the three South African cities missed out was because they were already considered mature in other areas such as (Johannesburg’s) strong financial institutions and their growing middle class populations. They also didn’t perform well on the indices that were considered for the index.
The index considered 19 cities in Sub-Saharan Africa according to their growth potential between 2012 and 2017 using lagging and leading indices. Lagging indicators focussed on historical data such as GDP per capita, household consumption, and population numbers as well as a focus on government and its institutions i.e. political stability, regulatory quality and corruption control.
Leading indicators focussed on the projected growth of the cities, including infrastructure development, human development index (health and education), and mobile telephone subscriptions.
Accra took pole position because of GDP per capita growth over the last three years, increased populations growth, higher household consumption, and ease of doing business as well as a strong regulatory environment.
Johannesburg undermines growth
One of the themes prevalent in all the presentations was the notion of inclusive growth. Dr Yuwa Hendrick-Wong, an economic advisor for MasterCard, explained that while exclusive growth focussed only on a few sectors and certain parts of a country, inclusive growth is sustainable and not dependant on finite sectors focusses on commodities but is driven by ensuring that more people benefit from the growth of cities.
Johannesburg was highlighted as being a city that undermines growth in the rest of the country. The Absa SME Index showed that most small business growth as concentrated in Johannesburg, lagging behind was Cape Town and Durban, mirroring the positions that the cities occupy on the index. Inclusive growth would mean ensuring that cities in South Africa were all growing, and importantly had access to internet, water and electricity - some leading indicators for a city’s growth potential.
Africa’s growth decisions
In a statement, Unisa Professor George Angelopulo said that  “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.”
A potential growth promoter on the continent s increased urbanisation: the United Nations Human Settlements Programme projects that by 2050 60% of African would be living in urban areas. Other factors include financial inclusion on the continent as only 12% of Africans have a bank account, the importance of public-private partnership and the growing African middle class.
Hendrick-Wong said Africa governments had two choices to develop their cities. Governments could either take the short road by selecting exclusive growth which is concentrated on very few industries or opt for the long road where inclusive growth ensures that more sectors and cities grow.  Dr Martyn Davies, CEO of Frontier Advisory, identified that manufacturing, the formalisation of the informal economy and the growth of businesses would be more sustainable for development benefiting more sectors and are sustainable. 
However, whether or not African cities capitalise on their growth is dependent on the decisions made by African governments today, Hendrick-Wong points out. 

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