2014 MasterCard African Cities Growth Index...4 2014 MasterCard African Cities Growth Index This is...

2014MasterCardAfrican Cities Growth IndexUnderstanding Inclusive Urbanization

By Dr Yuwa Hendrick-Wong & Professor George Angelopulo

Knowledge Leadership

Acknowledgements

The authors thank Rodger George (Deloitte Consulting (PTY) LTD.) for his advice when designing theMasterCard African Cities Growth Index and Desmond Choong (The Quiet Analyst LTD.) for technical

support during data gathering and analysis.

Copyright MasterCard 2014

2014 MasterCard African Cities Growth Index 3

Table of Contents

Foreword

Introduction

ONE | ABOUT THE 2014 MASTERCARD AFRICAN CITIES GROWTH INDEX

TWO | THE CITIES OF THE 2014 INDEXIllustration 2.1: The six international comparison cities of the 2014 MasterCard African Cities Growth Index

Illustration 2.2: The 74 African cities reviewed by the 2014 MasterCard African Cities Growth Index

THREE | DATA AND RANKINGLagging Indicators

Illustration 3.1: Lagging indicators

Figure 3.1: Lagging indicator ranking by city

Leading IndicatorsIllustration 3.2: Leading indicators

Figure 3.2: Leading indicator ranking by city

FOUR | CITY RANKINGInternational Comparison CitiesTable 4.1: International comparison cities

Figure 4.1: Inclusive growth potential - comparison city array

Large CitiesTable 4.2: Large cities of more than 1 000 000 inhabitants

Figure 4.2: Inclusive growth potential - large city array

Figure 4.3: 2014 MasterCard African Cities Growth Index - large cities by rank

Medium CitiesTable 4.3: Medium cities of 500 000 to 1 000 000 inhabitants

Figure 4.4: Inclusive growth potential - medium city array

Figure 4.5: 2014 MasterCard African Cities Growth Index – medium cities by rank

Small CitiesTable 4.4: Small cities having fewer than 500 000 inhabitants

Figure 4.6: Inclusive growth potential - small city array

Figure 4.7: 2014 MasterCard African Cities Growth Index - small cities by rank

FIVE | FINDINGSConclusion

Biography | Dr Yuwa Hedrick-Wong

Biography | Professor George Angelopulo

Appendix One | Lagging Indicators

Appendix Two | Leading Indicators

Appendix Three | City Scores

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4 2014 MasterCard African Cities Growth Index

This is the second African Cities Growth Index released by MasterCard as part of a portfolio of insight reports that examine the economic landscape and potential for growth in Africa. This Index, which analyzes 74 African cities and ranks them according to their inclusive growth potential, serves as a valuable resource for governments, investors, academics and the business community to map the continent’s future success from the perspective of inclusive urbanization.

In this edition, authors Dr Yuwa Hedrick-Wong and Prof George Angelopulo place particular emphasis on inclusive urbanization, where the physical, economic and social development of a city benefits all its inhabitants. Inclusive urbanization leads to inclusive growth, which occurs when citizens from all levels of society have equal opportunity to participate in and benefit from expanding economies. Financial inclusion, in turn, is an integral part of inclusive growth, particularly in the urban context.

At MasterCard, we believe that the only way to ensure sustained, inclusive economic development is through the financial inclusion of all individuals, communities and countries. This drives our business strategy in Africa, where less than a quarter of adults have an account with a formal financial institution, and where more than 90% of all transactions take place using cash.

MasterCard understands that solving for financial inclusion is not a one-size-fits-all proposition, nor is it achieved overnight. Complicating the provision of financial services are barriers such as the lack of formal identity documentation, the challenges facing banks serving poor and often remote populations, and the need for improved financial literacy. Public-private partnerships are best placed to address many of these barriers, and we are seeing increased interest in such partnerships as governments, non-profits and the private sector embrace the concept of shared value.

A great example of this is our collaboration with public and private stakeholders across the continent to enable economic growth through the increased adoption of electronic payments. The citizens of Nigeria, South Africa, Kenya and other countries already experience the benefits of these collaborations, particularly as related to financial inclusion.

There is much credible and relevant investigation into financial inclusion and inclusive economic development. However, there is a lack of research into the link between inclusive urbanization and inclusive growth. It is for this reason that MasterCard supports academic research such as the African Cities Growth Index.

By increasing the scope of the Index from 19 African cities in 2013 to 74 this year, we have produced a volume of credible, relevant industry and market intelligence. It is relevant to MasterCard’s customers, industry associates, and merchants as they grow their businesses, adopt alternative payment solutions and migrate from cash to electronic payments.

The findings of the Index highlight the importance of the development of inclusive cities as a means to deliver sustainable and equitable economic growth and inclusion for more people around the world.

We hope that the 2014 MasterCard Africa Cities Growth Index brings greater perspective to your assessment of Africa’s economic prospects.

Michael MiebachPresident, Middle East and Africa, MasterCard

Foreword


The current economic recovery is turning into one of the most complicated, protracted, and difficult in history. Persistent uncertainty is compounding risks to doing business.

A common analysis is that the global economy suffers from inadequate aggregate demand. Debts over-burden both individual consumers and the public sector, which means decreased fiscal expenditure and growth in household income, the latter leading to reduced consumer spending. As a result, the business sector is reluctant to invest, even though in many markets it has the financial capability. Weak investment slows employment and income growth, which further aggravates weak aggregate demand.

For emerging markets, this is a reversal of fortunes. The first decade of the 21st century was very good to emerging markets. Cheap finance, boundless risk appetite, and a commodity windfall boosted growth everywhere, including Africa. A ‘rising tide lifts all boats’ phenomenon characterized the 2000s, making it virtually impossible for economies not to grow. By 2007, only three countries in the world failed to record economic growth: Fiji, Zimbabwe, and the Democratic Republic of Congo1.

In contrast, the current decade has unfolded very differently.

The BRIC countries - Brazil, Russia, India and China – supposedly the most promising of emerging markets, have been struggling in recent years. Brazil and Russia are recording economic growth that is particularly sluggish. Weighing on many analysts’ minds now is whether the potential of emerging markets was just a ‘fairy tale’.

Concern about the economic future of emerging markets is not just a matter of usual market mood swing. It is simply a fact that, globally, achieving sustained economic growth today is decidedly more challenging than in the past.

Consider the shift in world trade growth, which illustrates this point well.

In the previous four decades, world trade growth averaged some 1.4 times that of world Gross Domestic Product

(GDP) growth. In other words, for every one percent of world GDP growth, world trade grew by 1.4%. Between 2008 and 2013 however, the pace of growth in world trade slowed to half that of world GDP. This sudden reversal hit emerging markets hard, especially those dependent on exports. In 1990, emerging markets collectively accounted for only about 19% of total world trade, but that figure has since increased to 42% of total world trade2. As emerging markets have become far more export-driven in the last several decades, few markets were unaffected.

In sub-Saharan Africa, much of the growth in the previous decade came from two related sources. The first was the commodity windfall, which hugely improved the region’s terms of trade. The second was increasing investment from China, related to China’s demand for resources and its need to secure future supplies. China’s increasing demand for resources was behind the so-called ‘commodity super-cycle’ that generated the windfall for sub-Saharan Africa. The current slowdown of China’s growth, on the heels of the weak and problematic global economic recovery, is a double whammy for sub-Saharan Africa.

Countries in Africa need to implement many political and socio-economic reforms successfully to sustain strong economic growth. Of these, we believe that urbanization is particularly critical and inclusive urbanization the ideal. Cities today are vital gateways that connect countries to the global economy. They are powerful hubs for business innovation, income and employment generation.

Sub-Saharan African is urbanizing quickly. According to United Nations (UN) estimates, 60% of sub-Saharan Africa’s population will be living in cities by 2050, almost doubling today’s 36%3. The economic future of this vast continent will be determined in its cities.

Where there is inclusive urbanization, a city’s critical mass and economies of scale support the flow of knowledge and capital. This generates ever-expanding opportunities for large business conglomerates as well as for small businesses and entrepreneurs. This environment stimulates indigenous innovations, driving wealth creation that is widely shared.

Introduction

1 International Monetary Fund, World Economic Outlook database.

2 International Monetary Fund, World Economic Outlook database.

3

United Nations Population Fund, World Urbanization Prospects.


This in turn empowers a growing middle class that promotes a dynamic and resilient urban consumer market.

In contrast, where there is exclusive urbanization, most of the wealth generated in cities benefits the elite, very often straddling government and the business sector. Left behind in the informal economy, the majority of the population is stuck in sprawling slums and excluded from most urban services and facilities. In this scenario, the city becomes an agglomeration of poverty, over-crowding, and eventually a bottleneck to growth.

Excluding a majority of urban residents from meaningful participation in affairs that have direct and immediate impacts on their homes, families, and well-being, inevitably breeds discontent. Discontent leads to social and political instability - a more serious consequence of exclusive urbanization.

Typically, developing economies suffer from having most of their workers stuck in low-productivity employment in the non-tradable sector. They have relatively small clusters of high-productivity industries operating in the tradable sector. These economies must move workers from low- to high-productivity sectors, therefore closing the productivity gap between the two.

Inclusive urbanization is one of the most effective ways to achieve these two objectives simultaneously.

Inclusive urbanization supports strong household consumption and therefore strong domestic demand. Consequently, inclusive urbanization benefits local entrepreneurs and small businesses closer to local consumer needs that are swift to meet that demand. This is particularly positive where there is inadequate aggregate demand in the external sector.

Cities committed to inclusive urbanization recognize the need for urban services and facilities that serve the vast majority of the city’s residents. This requires sustained investment in physical and social infrastructure, which ultimately benefits all inhabitants.

For developing countries attempting to thrive within a still-weak and under-performing global economy, inclusive urbanization is a prerequisite for sustainable growth and development.

Dr Yuwa Hedrick-Wong

Professor George Angelopulo


The MasterCard African Cities Growth Index (ACGI) maps the future success of Africa from the perspective of inclusive versus exclusive urbanization, and by implication the economic outlook of the continent.

First launched in 2013, the ACGI initially assessed 19 of the most important cities in sub-Saharan Africa. That report established the framework for this expanded 2014 edition that examines 74 cities from across the continent and its island states. In 2014, the ACGI is a truly pan-African Index.

An additional six cities from other developing regions outside Africa have been included to provide benchmarking against cities of similar size and potential. These cities are Chennai (India), Chongqing (China), Jakarta (Indonesia), Lima (Peru), Manila (the Philippines) and São Paulo (Brazil).

The ACGI organizes the complete list of 80 cities, illustrated in Chapter Two, into three categories by population size:

(i) Large cities – population over one million

(ii) Medium cities – population between 500,000 and

one million

(iii) Small cities – population under 500,000

To assess inclusive urbanization potential, the ACGI deploys 24 indicators - organized into lagging and leading indicators - detailed in Chapter Three.

In Chapter Four, the ACGI applies both sets of indicators to each of the 80 cities in the three categories. This quantifies and ranks the cities’ inclusive urbanization potential, projected forward for five years. In so doing, the ACGI suggests the trajectory of the African cities’ inclusive growth potential in the coming years, with comparison to the international cities.

Four arcs categorize inclusive growth potential:

(i) High inclusive growth potential - 50 and above ACGI score

(ii) Medium-high inclusive growth potential - 40-49.99 ACGI score

(iii) Medium-low inclusive growth potential - 30-39.99 ACGI score

(iv) Low inclusive growth potential - 0-29.99 ACGI score

In the concluding Chapter Five, the ACGI discusses these arcs.

One |

About the 2014 MasterCard African Cities Growth Index


The maps below provide the geographic locations of the six international and 74 African cities analyzed by the ACGI in 2014.

To maintain consistency throughout the report, the United Nations geoscheme4 divides the continent into its macro

geographic sub-regions of East, West, North, Southern and Central Africa.

These sub-regions are color-coded consistently throughout the ACGI for easy reference.

Two |

The Cities of the 2014 Index

Illustration 2.1: The six international comparison cities of the 2014 MasterCard African Cities Growth Index

4

http://millenniumindicators.un.org/unsd/methods/m49/m49regin.htm


Illustration 2.2: The 74 African cities reviewed by the 2014 MasterCard African Cities Growth Index


The ACGI analyzes inclusive urbanization and inclusive growth potential using composite sets of lagging and leading indicators.

In addition to common economic indicators such as growth of GDP per capita, the ACGI includes social inclusion indicators, inextricably linked to economic performance. For example, if urban residents have a strong voice regarding how their city is run, and are able to hold government officials accountable, then it can be expected that urban infrastructure is more established and in better condition. This in turn creates better conditions for domestic and foreign investment.

Indicators related to the business environment are an important dimension to consider because it is impossible to have a dynamic city without a dynamic business sector. Inclusive urbanization requires that the business sector is open to the widest possible participation, with ease of entry and exit being critically important conditions.

The ACGI also examines the extent to which these basic services benefit the majority as opposed to the elite.

Lagging Indicators

The twelve lagging indicators describe conditions that have contributed to the status of the examined cities. They are reflective and make use of the latest annual data, available at end-2013, on the set of measures illustrated below.

Six of the 12 lagging indicators cover governance issues, while the balance measure specific dimensions of economic and population growth:

• GDP Per Capita Growth and Household Consumption Expenditure Growth identify real growth at the city level;

• Urbanization refers to the percentage of urban, compared to national, population;

Three |

Data and Ranking

Illustration 3.1: Lagging indicators

GDP Per Capita Growth Household ConsumptionExpenditure Growth Urbanization

Political Stability and Absenceof Violence Government Effectiveness Regulatory Quality

Voice and Accountability Rule of Law Control of Corruption

Doing Business Population Growth Middle ClassHousehold Growth

Gov

erna

nce


• Political Stability and Absence of Violence identifies the perceived likelihood of social instability;

• Government Effectiveness refers to the provision of public services and civil servants’ susceptibility to political pressures;

• Regulatory Quality relates to governments’ ability to generate private sector development;

• Voice and Accountability reflects citizens’ perception of their freedom to select their governments and enjoy rights such as freedom of expression and association;

• Rule of Law reflects views on the quality of society’s rules, including contract enforcement, independence of the courts and property rights;

• Control of Corruption reflects perception of the extent to which public power is free from corruption and control by private interests;

• Doing Business is drawn from World Bank data5 on the ‘ease of conducting business’ but excludes the electricity acquisition component addressed separately in this study;

• Population Growth has long been associated with economic growth – the so-called ‘demographic dividend’; and

• Middle Class Household Growth considers growth in this particular population segment, one of the strongest drivers of private consumption.

These indicators, when moving in a positive direction, are both causes and consequences of inclusive urbanization. Collectively, they assess the level of inclusive growth achieved by the cities under review.

The ACGI gives each indicator a fixed, geometrically averaged weighting6. The outcome is an overall lagging indicator score for each city, arranged to generate a lagging indicator city ranking. Appendix One provides detailed data and transformation information for the lagging indicators.

5

The World Bank, Ease of Doing Business Index. 6

See http://www.potgieter.org/doku.php?id=mv index


Figure 3.1: Lagging indicator ranking by city


The following twelve leading indicators point to the emerging potential of cities. These are forward-looking and are determined by conditions, practice, policy and investment already in place or expected to be in place soon. The set of measures, illustrated below, make use of the latest annual data available at end-2013, or projections for the period 2013 to 2018.

Infrastructure is central to the criteria used in the set of leading indicators:

• Gross Fixed Capital Formation points to investment, the prime mover of growth that generates momentum for future economic expansion;

• The availability of Electricity is an essential support of economic growth in urban areas;

• Water and Sanitation are representative of development indicators and are prerequisites for the well-being of urban residents;

• Health and Education are important investments in human resources and are used as pillars in the UN’s Human Development Index7;

• Air travel, examined by two indicators – Air Connectivity and Air Capacity – points to how well each city is connected to other cities, and hence its significance as an economic hub;

• Projection of GDP Per Capita Growth is a fundamental measure of future economic performance;

• Foreign Direct Investment (FDI) is an external driver

of economic growth and a measure of a city’s appeal as an investment destination with far-reaching ramifications for its future;

• Household Consumption Expenditure Growth is an internal economic driver and a measure of domestic demand as a source of economic growth; and

• Mobile Subscriptions measures the proliferation of mobile telephony, which is indicative of the economic growth of developing economies.

The leading indicators form an assessment of the cities’ potential for inclusive urbanization and growth. The variables’ measurements are weighted and geometrically averaged in the same way as the lagging indicators. The results derive a leading indicator score for each city, and corresponding ranking.

Appendix Two provides detailed data and transformation information on the leading indicators.

7

United Nations Development Programme, Human Development Index

Leading Indicators

Illustration 3.2: Leading indicators

Gross Fixed Capital Formation GDP Per Capita Growth Household Consumption Expenditure Growth

Water Foreign Direct Investment Health

Electricity Mobile Subscriptions Education

Sanitation Air Connectivity Air Capacity

Infr

astr

uctu

re

Hea

lth

&Ed

ucat

ion

Air Travel


Figure 3.2: Leading indicatorranking by city


With an overall score of 56.5, Lima ranks ahead of the other comparison cities by some way. Jakarta is second in this group, scoring 53.2, and Chongqing is third, scoring 51.1. Manila and São Paulo are ranked fairly equally behind these cities, far ahead of Chennai. The disparity between the cities’ GDP per capita growth and their inclusive growth potential is notable.

Chongqing’s actual growth is strongest but Lima has the greatest potential for inclusive growth, given its human development indices, strong FDI, fixed capital formation, regulatory quality and ease of doing business. São Paulo enjoys good infrastructure, political stability, political accountability and comparative control of corruption, but falls short on economic performance measures.

The low ranking of Chennai may be surprising, given its position as a growing economic hub, but it does speak to the difficulties the city has experienced in bringing its broader population into the economic mainstream.

The comparison cities, with their relatively wide range at the upper end of the developing city scale, offer good comparisons of inclusive economic growth for Africa’s cities.

By consolidating the lagging and leading indicators, the ACGI provides a complete picture of the current state of inclusive urbanization in each African city under review, as well as the trajectory of each city’s relative potential for inclusive growth.

Appendix Three provides the underlying data for the composite scores.

The ACGI examines the international comparison cities, Table 4.1, separately before analyzing the large, medium and small cities listed in Tables 4.2., 4.3 and 4.4 respectively.

Four |

City Ranking

International Comparison Cities

Table 4.1: International comparison cities

CITY COUNTRY

Chennai India

Chongqing China

Jakarta Indonesia

Lima Peru

Manila Philippines

São Paulo Brazil


Figure 4.1: Inclusive growth potential - comparison city array


Large Cities

For the second year running, the capital city of Ghana - Accra - ranks highest of all African cities included in this study, with an overall score of 50.9. It falls somewhat short of Lima, but it is the only city in Africa with inclusive growth potential comparing favorably to cities like Jakarta or Chongqing. Accra also ranks higher than Manila, São Paulo and Chennai.

Accra has a population of approximately 2.3 million inhabitants, and is the nucleus of a broader urban zone of about four million inhabitants. The city is a growing industrial and services center.

With some exceptions, Accra consistently ranks well across the ACGI’s assessment criteria and is among the highest in governance rankings.

However, Accra does face challenges. With Kumasi, it shares Ghana’s macroeconomic difficulties of high fiscal and current account deficits, high wage bills, energy subsidization, increased interest costs, an under-recovery of revenue and a slight reduction in economic growth.

Ghana’s presidential elections in 2012 tested the country’s political stability, and perceptions of corruption and crime do not appear to be declining. Accra has not yet achieved satisfactory delivery of sanitation services, or electricity and water supply, and it has large slum settlements. Local government has made efforts to reduce the size of the slums, but progress is slow as the city attracts immigrants from the rest of Ghana and other African countries.

On balance, however, Accra is the African city with the greatest promise of inclusive growth and a better material life for its population in the years ahead.

Looking at the geographic locations of the top six large cities with greatest inclusive growth potential, it is notable that they are all located in West or North Africa. Accra and Kumasi (Ghana), Freetown (Sierra Leone) and Lagos (Nigeria) are in West Africa, Casablanca and Tripoli (Morocco and Libya respectively) are located in North Africa.

At the low and medium-low levels, there is a concentration of large West African cities (Lomé in Togo, Cotonou in Benin, Conakry in Guinea, Bamako in Mali and Ouagadougou in Burkina Faso). Most large East African cities appear in the medium-low category.

At the very lowest levels of inclusive growth potential, regional bias is evident when considering Yaoundé (Cameroon), Luanda and Huambo (Angola), and N’Djamena (Chad) are in Central Africa; and Harare (Zimbabwe) and Antananarivo (Madagascar) are in East Africa.

Regional clustering is not the sole determinant of inclusive growth potential or lack thereof, although there is a significant regional spillover with geographic penalties and benefits accruing from factors such as neighboring stability, natural resources or proximity to markets.

The potential for inclusive growth is primarily the result of the implementation of political, economic and social policies.


Table 4.2: Large cities of more than 1 000 000 inhabitants

CITY COUNTRY

Abidjan Ivory Coast

Abuja Nigeria

Accra Ghana

Addis Ababa Ethiopia

Alexandria Egypt

Algiers Algeria

Antananarivo Madagascar

Bamako Mali

Brazzaville Republic of the Congo

Cairo Egypt

Cape Town South Africa

Casablanca Morocco

Conakry Guinea

Cotonou Benin

Dakar Senegal

Dar es Salaam Tanzania

Douala Cameroon

Durban South Africa

Fes Morocco

Freetown Sierra Leone

Harare Zimbabwe

Huambo Angola

Ibadan Nigeria

Johannesburg South Africa

Kaduna Nigeria

Kampala Uganda

Kano Nigeria

Khartoum Sudan

Kigali Rwanda

Kinshasa Democratic Republic of Congo

Kumasi Ghana

Lagos Nigeria

Lomé Togo

Luanda Angola

Lubumbashi Democratic Republic of Congo

Lusaka Zambia

Maputo Mozambique

Mombasa Kenya

Nairobi Kenya

N'Djamena Chad

Niamey Niger

Ouagadougou Burkina Faso

Port Elizabeth South Africa

Port Harcourt Nigeria

Pretoria South Africa

Rabat Morocco

Tripoli Libya

Yamoussoukro Ivory Coast

Yaoundé Cameroon


Figure 4.2: Inclusive growth potential - large city array


Figure 4.3: 2014 MasterCard African Cities Growth Index - large cities by rank


The regional pattern of the higher- and lower-ranking cities in the medium city group is similar to the large city group. North and West African cities rank highest; Central and East African cities rank lowest.

Tunis (Tunisia), the top-ranked city in this category, lies slightly ahead of Libreville (Gabon) and Nouakchott (Mauritania). Matola (Mozambique) is the exception to the north/west bias of the leading cities, ranking at the lower end of the medium-high growth potential category. It has a swiftly increasing population, high rates of FDI and industrial concentration. Matola’s growth links to that of Maputo, the Mozambican capital that it adjoins.

Following 2011’s Arab Spring and the political turmoil that ensued, Tunis, and indeed Tunisia as a whole, now shows political and security improvements expected to result in greater future economic growth. In terms of pure economic growth, Tunis does not perform as well as the other three high-ranking cities in this group, but it does compare favorably in terms of infrastructure, middle class as a percentage of households, connectivity, governance and ease of doing business.

Off a relatively low base, the economic growth projections for Nouakchott, Libreville and Matola are high. However, all face governance challenges and difficulties incorporating all inhabitants in their expanding economic sectors. This tends to result in insufficient employment opportunities and concentrated wealth at the top end of society within narrow sections of their city populations.

Medium Cities

Table 4.3: Medium cities of 500 000 to1 000 000 inhabitants

CITY COUNTRY

Asmara Eritrea

Bangui Central AfricanRepublic

Banjul The Gambia

Bujumbura Burundi

Kisangani Democratic Republicof Congo

Libreville Gabon

Lilongwe Malawi

Matola Mozambique

Monrovia Liberia

Nouakchott Mauritania

Oran Algeria

Pointe-Noire Republic ofthe Congo

Tunis Tunisia


Figure 4.4: Inclusive growth potential - medium city array


Figure 4.5: 2014 MasterCard African Cities Growth Index – medium cities by rank


Interestingly, the small cities with highest inclusive growth potential are all from Africa’s island states.

São Tomé, the capital of São Tomé and Príncipe, lies in the Atlantic Ocean off the West coast of Africa while Victoria (Seychelles) and Port Louis (Mauritius) are in the Indian Ocean off the East coast of Africa. These three cities fall into the medium-high inclusive growth potential category, offering significantly greater promise of inclusive growth than the three Southern African cities that follow – Gaborone (Botswana), Windhoek (Namibia) and Maseru (Lesotho). The latter three fall into the medium-low category. Mbabane (Swaziland) and Malabo (Equatorial Guinea) are the small cities offering the lowest prospects of inclusive growth.

The three cities that lead the small group rank similarly, yet they derive their positions from significantly different conditions.

São Tomé and Príncipe is resource-rich. The recent discovery of oil in the Gulf of Guinea is a predictor of high and continuing GDP growth, but its government has not eradicated the income inequality and political instability of previous decades. This could undermine the inclusivity of the city’s economic growth. Its capital, São Tomé, shares many of the benefits and problems of cities in other resource-rich countries. The city’s lagging indicators score is lower than those of Victoria and Port Louis for example, but its leading indicator score is significantly higher because of steep projections of GDP growth on oil revenues.

Victoria and Port Louis can anticipate far lower GDP growth but they have significantly higher levels of governance and mobile connectivity, more diversified economies and established middle classes. While they are all in the higher category of this group, São Tomé will ultimately determine its long-term position by the quality of the investments that it makes from its expanding revenues.

The three cities ranked at the lowest end of this group demonstrate low scores on most criteria, including economic growth, FDI, governance, human development indicators, infrastructure, travel and connectivity.

Small Cities

Table 4.4: Small cities having fewer than500 000 inhabitants

CITY COUNTRY

Bissau Guinea-Bissau

Djibouti Djibouti

Gaborone Botswana

Malabo Equatorial Guinea

Maseru Lesotho

Mbabane Swaziland

Moroni Comoros

Port Louis Mauritius

Praia Cape Verde

São Tomé São Tomé and Príncipe

Victoria Seychelles

Windhoek Namibia


Figure 4.6: Inclusive growth potential - small city array


Figure 4.7: 2014 MasterCard African Cities Growth Index - small cities by rank


After examining the 74 cities of the 2014 ACGI in separate groups according to their population size, it is interesting to consider parallels offered by similar inclusive growth potential that exist whatever the size of the city.

In the High category of inclusive growth potential are cities with legislation, policy and resources in place to increase economic inclusivity among their citizens. These cities, despite some persistent barriers to inclusive growth, have sufficient forward momentum to ensure that more of their residents participate in the mainstream economy, and share the benefits of growth over the next five years.

Accra stands out as the only African city in this category, and therefore as the city in Africa with the greatest promise of inclusive economic growth.

Accra is not Africa’s most populous city, nor is it the richest in terms of per capita GDP. Ghana is not the country with the best resource endowment. Accra is the top-ranked city in Africa because of the progress it has made in creating conditions that are most conducive to inclusive urbanization.

At the country level, it is worth noting that Ghana has had four successful elections following a peaceful transition of power in 2000. The findings of the ACGI therefore affirm the importance of advancing and protecting individual freedom and rights to ensure ongoing economic development.

Following some distance behind and so falling in the Medium-High category are Tunis (Tunisia), Casablanca (Morocco), Lagos (Nigeria), Kumasi (Ghana), Victoria (Seychelles) and Port Louis (Mauritius). In this category are cities with inadequate structural foundations or governance for higher inclusivity.

However, they have the necessary resources to address these issues. These are cities with the greatest unrealized potential for improving inclusivity.

If infrastructure, education, and improved governance and regulation follow the economic expansion that results from their resources, economic inclusivity in these cities will increase.

Somewhere between the first and second categories lies Tripoli (Libya). The city has a high overall score, reasonably good infrastructure and, following the contraction of its economy during the civil war, a steep increase in GDP. However, political instability and degrees of poor governance still beset the city.

If Tripoli’s conditions stabilize and it addressed its governance and business issues, it is highly likely that the city will rank a lot higher in inclusive growth in future.

The Medium-Low category comprises cities categorized by stasis and drift, arrayed across the middle to lower inclusivity spectrum. Reasons for this drift may be lack of resources, low growth and reduced growth prospects, but more significantly their opaque or ambiguous strategic direction.

Notable among these are the cities of Johannesburg, Pretoria, Durban, Port Elizabeth and Cape Town (South Africa); Abuja, Ibadan, Kano and Port Harcourt (Nigeria); Cairo (Egypt); Lusaka (Zambia) and Algiers (Algeria).

The goal of inclusivity may well exist in such cities, but attaining it is undermined where economic development and foreign investment policies are uncertain, infrastructure is neglected and resources are not allocated to long-term structural improvement.

Finally, the Low inclusive growth potential category includes cities with reigning conditions that undermine or preclude economic inclusivity. A significant difference between many of these cities and those in the second category is the absence of FDI or extractive industries on a scale that makes economic expansion and inclusivity a viable proposition despite structural impediments.

Five |

Findings


Harare (Zimbabwe), Huambo (Angola), Antananarivo (Madagascar), Bangui (Central African Republic), Asmara (Eritrea), Malabo (Equatorial Guinea) and Mbabane (Swaziland) are examples of cities where conditions make economic investment comparatively unattractive for a range of political and economic reasons, some evident in the criteria of assessment used for this study.

Conclusion

The ACGI assesses the inclusive growth potential of Africa’s most important cities, and is therefore of interest to local and national governments and civic organizations as it provides an internal perspective of current and future growth.

It also offers an external perspective - an indicator of potential profitable investment in one of the fastest growing and most challenging regions of the world.

Some African cities are growing demonstrably, but many are not. Some are offering investment and business opportunities, but some are not. In each city, however, economic growth potential as well as the sustainability of growth in each city remains closely intertwined with the extent to which the city is achieving inclusive urbanization.

From this perspective, the ACGI is a lens through which the business community at large can assess the future of African cities as investment destinations, and as gateways into and across Africa.


Dr Yuwa Hedrick-Wong is Chief Economist of the MasterCard Center for Inclusive Growth. He is also HSBC Professor of International Business at the University of British Columbia, Canada, and Global Economic Advisorat MasterCard. Dr Hedrick-Wong is an economist and business strategist with 25 years of experience gained in over thirty countries. He is Canadian and grew up in Vancouver (British Columbia), but has spent the last 20 years working in Europe, sub-Saharan Africa, the Indian sub-continent,and Asia Pacific. He has served as strategy advisor to over 30 leading multinational companies. In addition to his role at MasterCard, he also serves as advisor to Southern Capital Group, a private equity fund; and as a member of the Investment Council at ICICIin India. Dr Hedrick-Wong wrote a regular column in Forbes Asia called “Asian Angles” in 2005 and 2006 and was a guest lecturer at the Graduate School of Business, University of Chicago from 2004 - 06. In 2006, the Asia Pacific Association of Public Relations Professionals voted him “Communicator of the Year” in Asia.

A student of philosophy, political science, and economics, Dr Hedrick-Wong studied at Trent University and pursued post-graduate training at the University of British Columbia and Simon Fraser University in Canada. He also received post-doctoral training in energy and resource economics and scenario forecast and planning. He lives with his wife and their cat on Salt Spring Island, off the west coast of Canada, and is an eager apprentice in the fine art of gardening.

Biography |

Dr Yuwa Hedrick-Wong


Professor George Angelopulo’s area of interest is the relationship between corporate integration, communication and sustainable competitive advantage. He has published in peer-reviewed journals, presented academic papers, produced standard academic works, edited and authored a number of books, always retaining a focus on the corporate world. Professor Angelopulo has worked with organizations that include listed and unlisted companies, multinationals, NGOs, most of South Africa’s government departments and a number of parastatals. He has a particular interest in research methodology and has developed diagnostics for stakeholder perception analysis in marketing and communication that include the iBrand Barometer® and the Communication Prioritization Index®. He has undertaken research around the world, most recently with Columbia University’s Institute for Tele-Information in a study on global media concentration trends, and with leading international researchers in a comparative study of corporate social responsibility in Africa, Latin and North America.

Professor Angelopulo holds a DLitt et Phil (University of Johannesburg) and academic positions at the Department of Communication Science at the University of South Africa (Unisa), and CENTRUM Católica, the business school of the Pontificia Universidad Católica del Perú. Prior to his academic career, Professor Angelopulo worked in media and advertising in Africa.

Biography |

Professor George Angelopulo


Appendices


Indicator -Name & Weighting Level Period

Raw Unit Type

Transfor-mation

TypeTransformation

ExplanationData

Source Additional Description Source Links

GDP Per Capita Growth14.3% City 2013 %

Max Coun-try Full List

Divisor

Divisor is coun-try with largest

raw score. Negative scores

set at 0.

Canback Danglar

GDP per Capita real growth at city level. In the absence of data for Gaborone, Praia, Moroni, Djibouti, Malabo, Bissau, Maseru, Port Louis,

Windhoek, Sao Tome, Victoria, Mbabane, Banjul, use urban area figures adjusted to city population.

www.cgidd.com

Household Consumption Expenditure Growth

14.3% City 2013 %Max Coun-try Full List

Divisor



set at 0.

Canback Danglar

Household Consumption real growth at city level. In the absence of data for Gaborone, Praia, Moroni,

Djibouti, Malabo, Bissau, Maseru, Port Louis, Windhoek, Sao Tome, Victoria, Mbabane, Banjul, use

urban area figures adjusted to city population.

www.cgidd.com

Political Stability and Absence of Violence

2.4%City 2013 %

Max Coun-try Full List

Divisor



set at 0.

Canback Danglar

Household Consumption real growth at city level. In the absence of data for Gaborone, Praia, Moroni,

Djibouti, Malabo, Bissau, Maseru, Port Louis, Windhoek, Sao Tome, Victoria, Mbabane, Banjul, use

urban area figures adjusted to city population.

http://info.worldbank.org/

governance/wgi/sc_country.asp

Government Effectiveness2.4% Country Latest 2012 Index As is

Raw index range is from

-3.5 to 3.5, transformed to a 0 -100 range using a linear

transformation.

World Bank, World

Governance Indicators

Reflects perceptions of likelihood that government will be destabilized or overthrown by

unconstitutional or violent means.



Regulatory Quality2.4% Country Latest 2012 Index As is



transformation.

World Bank, World


Reflects perceptions of government ability to formulate and implement policies and regulations

that permit and promote privatesector development.



Voice and Accountability2.4% Country Latest 2012 Index As is



transformation.

World Bank, World


Reflects perceptions of citizens’ ability to participate in selecting government, freedom of expression,

freedom of association, and free media.



Rule of Law2.4% Country Latest 2012 Index As is



transformation.

World Bank, World


Reflects perceptions of agents’ confidence in and willingness to abide by the rules of society, quality

of contract enforcement, property rights, police, courts, and the likelihood of crime and violence.



Control of Corruption

2.4% Country Latest 2012 Index As is



transformation.

World Bank, World


Reflects perceptions of public power exercised for private gain, including petty and grand forms of corruption, and the ‘capture’ of the state by elites

and private interests.



Appendix One |

Lagging Indicators


Appendix One |

Lagging Indicators continued


Raw Unit Type

Transfor-mation

TypeTransformation

ExplanationData


Country 2013 Index As is As is. World Bank

Doing Business score excluding Getting Electricity component. Ease of Doing Business Index measures

regulations divided into 10 components that directly affect businesses. Libya (2011) uses older

data as 2012 data not available.

www.doingbusi-ness.org

Population Growth

14.3% Country 2013 %Max Coun-try Full List

Divisor



set at 0.

Canback Danglar www.cgidd.com

Urbanization

14.3% Country 2013 % As is x 100 (data already a %).

World Bank, World De-velopment Indicators

Percentage of urban population compared to total population.

http://data.worldbank.org/

data-catalog/world-develop-ment-indicators

Middle Class Household Growth

14.3%

City 2013 % As is x 100 (data already a %).

Canback Danglar

City households classified by AMAI (Mexican Association of Marketing and Public Opinion Research Agencies) socio-economic status. High – highest life standards. Family head’s

education level is Bachelor’s degree or higher.Live in luxury dwellings with all services

and amenities.

Medium High – income/lifestyle slightly superior to middle class. Family head’s education level is

Bachelor’s degree. Live in own dwellings,all amenities.

Medium – ‘typical’ middle class. Family head’s educational level is high school. Dwelling owned

or rented, some amenities.

Medium Low – income/lifestyle slightly inferior to middle class. Possess best standards among lower class. Family head’s educational level is junior high

or elementary school. Dwellings mostly owned, but also rented; some social interest homes.

Low – mid segment of lower class. Familyhead’s educational level is elementary

school. Dwellings owned or rented, tenement houses and social interest units, or under

frozen rents.

Lowest – not usually in market segmentations. Family head’s educational level is unfinished

elementary school. Usually don’t own dwellings. Many generations may live under same roof;

total frugality.

We define ‘middle class’ here as the range between Medium High and Medium Low

. In the absence of data for Gaborone, Praia, Moroni,

Djibouti, Malabo, Bissau, Maseru, Port Louis, Windhoek, Sao Tome, Victoria, Mbabane, Banjul,

use urban area figures adjusted to the population of the city.

Data source changed from the Middle Class Household Growth by City of the 2013 study to

address problems of data availability for most cities.



Raw Unit Type

Transfor-mation

TypeTransformation

ExplanationData


GDP Per Capita Growth14.3% City

Projected 2013-2018

average real growth

%Max Coun-try Full List

Divisor



set at 0.

Canback Danglar GDP per Capita real growth, city level

www.cgidd.com


14.3% City

Projected 2013-2018

average real growth


Divisor



set at 0.

Canback Danglar Household Consumption real growth, city level

www.cgidd.com

Health7.1% Country Latest 2012 Index As is As is United

Nations

Component of overall Human Development Index ranking, Health Index measures average life

expectancy at birth.

http://hdrstats.undp.org/en/

tables/

Education7.1% Country Latest 2012 Index As is As is United

Nations

Component of overall Human Development Index ranking, Education Index measures adult literacy

(two-thirds weighting) and combined primary, secondary, and tertiary gross enrolment ratio

(one-third weighting).


tables/

Gross Fixed Capital Formation

5.7% Country Latest 2011 or 2012 % As is x 100 (data

already a %).


Gross Fixed Capital Formation is a percentage of GDP at a national level.



Electricity2.9% Country 2013 Index As is As is World Bank

Doing Business component is a composite measure of procedures, time, cost for small to medium-

size business to get a new electricity connection for a standardized warehouse with standardized electricity needs. Libya (2011) uses older data as

2012 data not available.


Sanitation2.9% Country Latest 2011 % As is x 100 (data

already a %).


Moroni (2010), Malabo (2006), Asmara (2008) use older data due to lack of updates.



Appendix Two |

Leading Indicators



Raw Unit Type

Transfor-mation

TypeTransformation

ExplanationData


GDP Per Capita Growth14.3% City

Projected 2013-2018

average real growth


Divisor



set at 0.

Canback Danglar GDP per Capita real growth, city level www.cgidd.com


14.3% City

Projected 2013-2018

average real growth


Divisor



set at 0.

Canback Danglar Household Consumption real growth, city level www.cgidd.com

Health7.1% Country Latest 2012 Index As is As is United

Nations

Component of overall Human Development Index ranking, Health Index measures average life

expectancy at birth.


tables/

Education7.1% Country Latest 2012 Index As is As is United

Nations

Component of overall Human Development Index ranking, Education Index measures adult literacy

(two-thirds weighting) and combined primary, secondary, and tertiary gross enrolment ratio

(one-third weighting).


tables/

Gross Fixed Capital Formation

5.7% Country Latest 2011 or 2012 % As is x 100 (data

already a %).


Gross Fixed Capital Formation is a percentageof GDP at a national level.



Electricity2.9% Country 2013 Index As is As is World Bank

Doing Business component is a composite measure of procedures, time, cost for small to medium-

size business to get a new electricity connection for a standardized warehouse with standardized electricity needs. Libya (2011) uses older data as

2012 data not available.


Sanitation2.9% Country Latest 2011 % As is x 100 (data

already a %).


Moroni (2010), Malabo (2006), Asmara (2008) use older data due to lack of updates.



Appendix Two |

Leading Indicators continued


Appendix Three |

City Scores

Country City Overall Index Score Leading Indicators Composite

Lagging IndicatorsComposite

Brazil São Paulo 47.9 56.4 37.4

China Chongqing 51.2 51.0 51.3

India Chennai 35.6 44.1 24.1

Indonesia Jakarta 53.9 61.9 44.4

Peru Lima 56.9 63.1 49.8

Philippines Manila 49.0 51.4 46.4

Algeria Algiers 34.7 35.0 34.4

Algeria Oran 30.5 27.3 33.4

Angola Huambo 24.7 15.3 31.3

Angola Luanda 28.7 20.1 35.1

Benin Cotonou 30.4 28.1 32.6

Botswana Gaborone 38.0 33.6 41.9

Burkina Faso Ouagadougou 29.5 24.1 34.1

Burundi Bujumbura 17.5 14.1 20.3

Cameroon Douala 31.4 31.2 31.6

Cameroon Yaoundé 29.1 27.0 31.1

Cape Verde Praia 30.2 34.6 25.1

Central African Republic Bangui 15.6 20.4 7.6

Chad N'Djamena 20.3 23.0 17.2

Comoros Moroni 22.1 21.5 22.7

Democratic Republic of Congo Kinshasa 32.2 38.8 23.7

Democratic Republic of Congo Kisangani 29.9 34.7 24.2

Democratic Republic of Congo Lubumbashi 30.7 36.0 24.1

Djibouti Djibouti 32.9 31.3 34.5

Egypt Alexandria 29.4 33.7 24.4

Egypt Cairo 35.4 44.1 23.5

Equatorial Guinea Malabo 11.7 12.4 11.1

Eritrea Asmara 8.6 8.8 8.3

Ethiopia Addis Ababa 32.3 39.3 23.1

Gabon Libreville 45.9 43.6 48.0

Ghana Accra 50.9 51.1 50.7

Ghana Kumasi 45.6 38.5 51.8

Guinea Conakry 30.4 39.7 15.2

Guinea-Bissau Bissau 18.7 16.6 20.6

Ivory Coast Abidjan 38.7 35.7 41.4

Ivory Coast Yamoussoukro 37.5 29.1 44.4

Kenya Mombasa 29.6 27.5 31.6

Kenya Nairobi 37.3 37.6 37.0

Lesotho Maseru 34.3 32.0 36.4

Liberia Monrovia 36.3 47.4 9.4

Liberia Tripoli 44.8 59.1 14.8


Appendix Three |

City Scores continued

Country City Overall Index Score Leading IndicatorsComposite

Lagging IndicatorsComposite

Madagascar Antananarivo 24.5 29.4 18.3

Malawi Lilongwe 23.9 25.5 22.2

Mali Bamako 29.8 34.2 24.5

Mauritania Nouakchott 45.6 51.2 39.1

Mauritius Port Louis 40.8 44.3 37.0

Morocco Casablanca 47.3 51.7 42.3

Morocco Fes 37.7 36.2 39.1

Morocco Rabat 38.1 34.7 41.2

Mozambique Maputo 39.6 46.1 31.7

Mozambique Matola 42.3 46.7 37.4

Namibia Windhoek 36.7 34.5 38.8

Niger Niamey 29.3 31.7 26.5

Nigeria Abuja 39.3 35.8 42.5

Nigeria Ibadan 34.3 26.6 40.6

Nigeria Kaduna 33.9 26.8 39.8

Nigeria Kano 31.7 28.2 34.9

Nigeria Lagos 40.8 40.9 40.7

Nigeria Port Harcourt 38.0 29.1 45.1

Republic of the Congo Brazzaville 38.9 47.9 27.0

Republic of the Congo Pointe-Noire 39.2 45.7 31.3

Rwanda Kigali 36.2 35.6 36.8

São Tomé and Príncipe São Tomé 44.5 54.3 31.6

Senegal Dakar 32.1 35.6 28.2

Seychelles Victoria 44.5 47.1 41.7

Sierra Leone Freetown 46.8 40.0 52.7

South Africa Cape Town 33.7 35.5 31.8

South Africa Durban 34.3 32.9 35.7

South Africa Johannesburg 38.6 43.6 32.9

South Africa Port Elizabeth 31.5 27.7 34.9

South Africa Pretoria 39.6 43.9 34.8

Sudan Khartoum 30.8 30.2 31.3

Swaziland Mbabane 11.1 10.0 12.0

Tanzania Dar es Salaam 39.2 46.0 30.9

The Gambia Banjul 36.1 36.5 35.8

Togo Lomé 30.4 31.4 29.5

Tunisia Tunis 47.0 51.0 42.7

Uganda Kampala 36.6 40.4 32.3

Zambia Lusaka 38.2 36.1 40.2

Zimbabwe Harare 26.6 32.2 19.2


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