Africa’s economic development drives urbanisation and consumption
By the year 2030 Africa will have 17 cities with more than 5 million inhabitant.
Amid unrest, conflicts and crises but at the same time enormous economic potential, the new Africa is marching towards urbanisation and new technology, with many of its governments working hard to achieve political stability.
Driven by strong demographic pressure (half of all Africans are under 19 years of age!), the current population of 1.28 billion people is expected to grow by a further billion over the next 20-30 years. This enormous expansion will lead to rapid growth in urbanisation.
A new book entitled Africa’s Business Revolution by Acha Leke and Georges Desvaux (McKinsey) and Mutsa Chironga documents the growth of the continent, noting that in 2015 Africa had just six cities with more than 5 million inhabitants whereas in 2030 it will have 17, including 5 with a population of more than 10 million. The process is already under way with 24 million Africans moving to the cities each year.
Despite variations between different areas, the continent’s GDP growth is positive overall (+3.6% in 2017 with +4.1% forecast for the two-year period 2018-2019), as is disposable income, two indices that together create the conditions for exponential growth.
While risks remain, there are also countries that are relatively stable and growing rapidly. A study conducted by AfrAsia Bank showed that total private wealth in Africa grew on average by 13% between 2007 and 2017 and by 3% in 2018. A further 34% increase is expected over the next 10 years to reach $3,100 billion by the end of 2027. Mauritius, Ghana, Rwanda and Uganda will be the strongest performing markets with private wealth growth rates of between 90% and 150%. The projections for Ethiopia, Mozambique, Zambia, Kenya, Botswana and Namibia are also relatively strong (between +50% and +80%), while positive albeit less exceptional growth is forecast in South Africa, Angola, Morocco, Egypt, Ivory Coast, Tanzania and Nigeria.
Due to the growth in disposable income and consequently consumption, there is an urgent need to develop a local manufacturing industry capable of meeting domestic demand. Industrial output is currently estimated at around $500 billion (12% produced by Chinese companies), a potential that could double over the next decade.