2014 Mastercard African Cities Growth Index Understanding Inclusive Urbanization

Knowledge Leadership

2014 MasterCard African Cities Growth Index Understanding Inclusive Urbanization

By Dr Yuwa Hendrick-Wong & Professor George Angelopulo Acknowledgements

The authors thank Rodger George (Deloitte Consulting (PTY) LTD.) for his advice when designing the MasterCard African Cities Growth Index and Desmond Choong (The Quiet Analyst LTD.) for technical support during data gathering and analysis.

Foreword 4 Introduction 5

ONE | ABOUT THE 2014 MASTERCARD AFRICAN CITIES GROWTH INDEX 7

TWO | THE CITIES OF THE 2014 INDEX 8 Illustration 2.1: The six international comparison cities of the 2014 MasterCard African Cities Growth Index 8 Illustration 2.2: The 74 African cities reviewed by the 2014 MasterCard African Cities Growth Index 9

THREE | DATA AND RANKING 10 Lagging Indicators 10 Illustration 3.1: Lagging indicators 10 Figure 3.1: Lagging indicator ranking by city 12 Leading Indicators 13 Illustration 3.2: Leading indicators 13 Figure 3.2: Leading indicator ranking by city 14

FOUR | CITY RANKING 15 International Comparison Cities 15 Table 4.1: International comparison cities 15 Figure 4.1: Inclusive growth potential - comparison city array 16 Large Cities 17 Table 4.2: Large cities of more than 1 000 000 inhabitants 18 Figure 4.2: Inclusive growth potential - large city array 19 Figure 4.3: 2014 MasterCard African Cities Growth Index - large cities by rank 20 Medium Cities 21 Table 4.3: Medium cities of 500 000 to 1 000 000 inhabitants 21 Figure 4.4: Inclusive growth potential - medium city array 22 Figure 4.5: 2014 MasterCard African Cities Growth Index – medium cities by rank 23 Small Cities 24 Table 4.4: Small cities having fewer than 500 000 inhabitants 24 Figure 4.6: Inclusive growth potential - small city array 25 Figure 4.7: 2014 MasterCard African Cities Growth Index - small cities by rank 26

FIVE | FINDINGS 27 Conclusion 28

2014 MasterCard African Cities Growth Index 3 Foreword

This is the second African Cities Growth Index released A great example of this is our collaboration with public by MasterCard as part of a portfolio of insight reports and private stakeholders across the continent to enable that examine the economic landscape and potential for economic growth through the increased adoption of growth in Africa. This Index, which analyzes 74 African electronic payments. The citizens of Nigeria, South cities and ranks them according to their inclusive growth Africa, Kenya and other countries already experience the potential, serves as a valuable resource for governments, benefits of these collaborations, particularly as related to investors, academics and the business community to map financial inclusion. the continent’s future success from the perspective of inclusive urbanization. There is much credible and relevant investigation into financial inclusion and inclusive economic development. In this edition, authors Dr Yuwa Hedrick-Wong and Prof However, there is a lack of research into the link between George Angelopulo place particular emphasis on inclusive inclusive urbanization and inclusive growth. It is for this urbanization, where the physical, economic and social reason that MasterCard supports academic research such development of a city benefits all its inhabitants. Inclusive as the African Cities Growth Index. urbanization leads to inclusive growth, which occurs when citizens from all levels of society have equal opportunity By increasing the scope of the Index from 19 African cities to participate in and benefit from expanding economies. in 2013 to 74 this year, we have produced a volume of Financial inclusion, in turn, is an integral part of inclusive credible, relevant industry and market intelligence. It is growth, particularly in the urban context. relevant to MasterCard’s customers, industry associates, and merchants as they grow their businesses, adopt At MasterCard, we believe that the only way to ensure alternative payment solutions and migrate from cash to sustained, inclusive economic development is through electronic payments. the financial inclusion of all individuals, communities and countries. This drives our business strategy in Africa, where The findings of the Index highlight the importance of less than a quarter of adults have an account with a formal the development of inclusive cities as a means to deliver financial institution, and where more than 90% of all sustainable and equitable economic growth and inclusion transactions take place using cash. for more people around the world.

MasterCard understands that solving for financial inclusion We hope that the 2014 MasterCard Africa Cities Growth is not a one-size-fits-all proposition, nor is it achieved Index brings greater perspective to your assessment of overnight. Complicating the provision of financial Africa’s economic prospects. 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 Michael Miebach the concept of shared value. President, Middle East and Africa, MasterCard

4 2014 MasterCard African Cities Growth Index Introduction

The current economic recovery is turning into one of the (GDP) growth. In other words, for every one percent of most complicated, protracted, and difficult in history. world GDP growth, world trade grew by 1.4%. Between Persistent uncertainty is compounding risks to doing 2008 and 2013 however, the pace of growth in world trade business. slowed to half that of world GDP. This sudden reversal hit emerging markets hard, especially those dependent on A common analysis is that the global economy suffers from exports. In 1990, emerging markets collectively accounted inadequate aggregate demand. Debts over-burden both for only about 19% of total world trade, but that figure has individual consumers and the public sector, which means since increased to 42% of total world trade2. As emerging decreased fiscal expenditure and growth in household markets have become far more export-driven in the last income, the latter leading to reduced consumer spending. several decades, few markets were unaffected. As a result, the business sector is reluctant to invest, even though in many markets it has the financial capability. In sub-Saharan Africa, much of the growth in the previous Weak investment slows employment and income growth, decade came from two related sources. The first was the which further aggravates weak aggregate demand. commodity windfall, which hugely improved the region’s terms of trade. The second was increasing investment from For emerging markets, this is a reversal of fortunes. China, related to China’s demand for resources and its The first decade of the 21st century was very good to need to secure future supplies. China’s increasing demand emerging markets. Cheap finance, boundless risk appetite, for resources was behind the so-called ‘commodity super- and a commodity windfall boosted growth everywhere, cycle’ that generated the windfall for sub-Saharan Africa. including Africa. A ‘rising tide lifts all boats’ phenomenon The current slowdown of China’s growth, on the heels of characterized the 2000s, making it virtually impossible the weak and problematic global economic recovery, is a for economies not to grow. By 2007, only three countries double whammy for sub-Saharan Africa. in the world failed to record economic growth: Fiji, Zimbabwe, and the Democratic Republic of Congo1. Countries in Africa need to implement many political and socio-economic reforms successfully to sustain strong In contrast, the current decade has unfolded very differently. economic growth. Of these, we believe that urbanization is particularly critical and inclusive urbanization the ideal. The BRIC countries - Brazil, Russia, India and China – Cities today are vital gateways that connect countries to supposedly the most promising of emerging markets, the global economy. They are powerful hubs for business have been struggling in recent years. Brazil and Russia are innovation, income and employment generation. recording economic growth that is particularly sluggish. Weighing on many analysts’ minds now is whether the Sub-Saharan African is urbanizing quickly. According to potential of emerging markets was just a ‘fairy tale’. United Nations (UN) estimates, 60% of sub-Saharan Africa’s population will be living in cities by 2050, almost doubling Concern about the economic future of emerging markets today’s 36%3. The economic future of this vast continent is not just a matter of usual market mood swing. It is simply will be determined in its cities. a fact that, globally, achieving sustained economic growth today is decidedly more challenging than in the past. Where there is inclusive urbanization, a city’s critical mass and economies of scale support the flow of knowledge Consider the shift in world trade growth, which illustrates and capital. This generates ever-expanding opportunities this point well. for large business conglomerates as well as for small businesses and entrepreneurs. This environment stimulates In the previous four decades, world trade growth averaged indigenous innovations, driving wealth creation that is some 1.4 times that of world Gross Domestic Product widely shared.

1 International Monetary Fund, World Economic Outlook database. 2 International Monetary Fund, World Economic Outlook database. 3 United Nations Population Fund, World Urbanization Prospects.

2014 MasterCard African Cities Growth Index 5 This in turn empowers a growing middle class that For developing countries attempting to thrive within a promotes a dynamic and resilient urban consumer market. still-weak and under-performing global economy, inclusive urbanization is a prerequisite for sustainable growth and In contrast, where there is exclusive urbanization, most development. 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 Dr Yuwa Hedrick-Wong 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 Professor George Angelopulo 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.

6 2014 MasterCard African Cities Growth Index One | About the 2014 MasterCard African Cities Growth Index

The MasterCard African Cities Growth Index (ACGI) maps (iii) Medium-low inclusive growth potential - the future success of Africa from the perspective of 30-39.99 ACGI score inclusive versus exclusive urbanization, and by implication (iv) Low inclusive growth potential - the economic outlook of the continent. 0-29.99 ACGI score

First launched in 2013, the ACGI initially assessed 19 of the In the concluding Chapter Five, the ACGI discusses most important cities in sub-Saharan Africa. That report these arcs. 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

2014 MasterCard African Cities Growth Index 7 Two | The Cities of the 2014 Index

The maps below provide the geographic locations of the geographic sub-regions of East, West, North, Southern and six international and 74 African cities analyzed by the ACGI Central Africa. in 2014. These sub-regions are color-coded consistently To maintain consistency throughout the report, the United throughout the ACGI for easy reference. Nations geoscheme4 divides the continent into its macro

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

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

8 2014 MasterCard African Cities Growth Index Illustration 2.2: The 74 African cities reviewed by the 2014 MasterCard African Cities Growth Index

2014 MasterCard African Cities Growth Index 9 Three | Data and Ranking

The ACGI analyzes inclusive urbanization and inclusive The ACGI also examines the extent to which these basic growth potential using composite sets of lagging and services benefit the majority as opposed to the elite. leading indicators.

In addition to common economic indicators such as Lagging Indicators growth of GDP per capita, the ACGI includes social The twelve lagging indicators describe conditions that have inclusion indicators, inextricably linked to economic contributed to the status of the examined cities. They are performance. For example, if urban residents have a strong reflective and make use of the latest annual data, available voice regarding how their city is run, and are able to hold at end-2013, on the set of measures illustrated below. government officials accountable, then it can be expected that urban infrastructure is more established and in Six of the 12 lagging indicators cover governance issues, better condition. This in turn creates better conditions for while the balance measure specific dimensions of domestic and foreign investment. economic and population growth: Indicators related to the business environment are an • GDP Per Capita Growth and Household Consumption important dimension to consider because it is impossible Expenditure Growth identify real growth at the city to have a dynamic city without a dynamic business sector. level; Inclusive urbanization requires that the business sector is open to the widest possible participation, with ease of • Urbanization refers to the percentage of urban, entry and exit being critically important conditions. compared to national, population;

Illustration 3.1: Lagging indicators

Household Consumption GDP Per Capita Growth Urbanization Expenditure Growth

Political Stability and Absence Government Effectiveness Regulatory Quality of Violence

Governance Voice and Accountability Rule of Law Control of Corruption

Middle Class Doing Business Population Growth Household Growth

10 2014 MasterCard African Cities Growth Index • Political Stability and Absence of Violence identifies These indicators, when moving in a positive direction, are the perceived likelihood of social instability; both causes and consequences of inclusive urbanization. Collectively, they assess the level of inclusive growth • Government Effectiveness refers to the provision of achieved by the cities under review. public services and civil servants’ susceptibility to political pressures; The ACGI gives each indicator a fixed, geometrically averaged weighting6. The outcome is an overall lagging • Regulatory Quality relates to governments’ ability to indicator score for each city, arranged to generate a generate private sector development; lagging indicator city ranking.

• Voice and Accountability reflects citizens’ perception Appendix One provides detailed data and transformation of their freedom to select their governments and information for the lagging indicators. enjoy rights such as freedom of expression and 5 association; The World Bank, Ease of Doing Business Index. 6 See http://www.potgieter.org/doku.php?id=mv index • 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.

2014 MasterCard African Cities Growth Index 11 Figure 3.1: Lagging indicator ranking by city

12 2014 MasterCard African Cities Growth Index Leading Indicators

The following twelve leading indicators point to the • Projection of GDP Per Capita Growth is a fundamental emerging potential of cities. These are forward-looking measure of future economic performance; and are determined by conditions, practice, policy and investment already in place or expected to be in place • Foreign Direct Investment (FDI) is an external driver soon. The set of measures, illustrated below, make use of of economic growth and a measure of a city’s appeal the latest annual data available at end-2013, or projections as an investment destination with far-reaching for the period 2013 to 2018. ramifications for its future;

Infrastructure is central to the criteria used in the set of • Household Consumption Expenditure Growth is an leading indicators: internal economic driver and a measure of domestic demand as a source of economic growth; and • Gross Fixed Capital Formation points to investment, the prime mover of growth that generates • Mobile Subscriptions measures the proliferation of momentum for future economic expansion; mobile telephony, which is indicative of the economic growth of developing economies. • The availability of Electricity is an essential support of economic growth in urban areas; The leading indicators form an assessment of the cities’ potential for inclusive urbanization and growth. The • Water and Sanitation are representative of variables’ measurements are weighted and geometrically development indicators and are prerequisites for the averaged in the same way as the lagging indicators. The well-being of urban residents; results derive a leading indicator score for each city, and corresponding ranking. • Health and Education are important investments in human resources and are used as pillars in the UN’s Appendix Two provides detailed data and transformation Human Development Index7; information on the leading indicators.

• Air travel, examined by two indicators – Air 7 Connectivity and Air Capacity – points to how well United Nations Development Programme, Human Development Index each city is connected to other cities, and hence its significance as an economic hub;

Illustration 3.2: Leading indicators

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

Water Foreign Direct Investment Health Health & Health Electricity Mobile Subscriptions Education Education Infrastructure

Sanitation Air Connectivity Air Capacity

Air Travel

2014 MasterCard African Cities Growth Index 13 Figure 3.2: Leading indicator ranking by city

14 2014 MasterCard African Cities Growth Index Four | City Ranking

By consolidating the lagging and leading indicators, the Table 4.1: International comparison cities 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. CITY COUNTRY

Appendix Three provides the underlying data for the Chennai India composite scores.

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

International Comparison Cities Manila Philippines

With an overall score of 56.5, Lima ranks ahead of the São Paulo Brazil 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.

2014 MasterCard African Cities Growth Index 15 Figure 4.1: Inclusive growth potential - comparison city array

16 2014 MasterCard African Cities Growth Index Large Cities

For the second year running, the capital city of Ghana - At the very lowest levels of inclusive growth potential, Accra - ranks highest of all African cities included in this regional bias is evident when considering Yaoundé study, with an overall score of 50.9. It falls somewhat (Cameroon), Luanda and Huambo (Angola), and N’Djamena short of Lima, but it is the only city in Africa with inclusive (Chad) are in Central Africa; and Harare (Zimbabwe) and growth potential comparing favorably to cities like Jakarta Antananarivo (Madagascar) are in East Africa. or Chongqing. Accra also ranks higher than Manila, São Paulo and Chennai. Regional clustering is not the sole determinant of inclusive growth potential or lack thereof, although there is a Accra has a population of approximately 2.3 million significant regional spillover with geographic penalties inhabitants, and is the nucleus of a broader urban zone and benefits accruing from factors such as neighboring of about four million inhabitants. The city is a growing stability, natural resources or proximity to markets. industrial and services center. The potential for inclusive growth is primarily the result With some exceptions, Accra consistently ranks well across of the implementation of political, economic and social the ACGI’s assessment criteria and is among the highest in policies. 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.

2014 MasterCard African Cities Growth Index 17 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

18 2014 MasterCard African Cities Growth Index Figure 4.2: Inclusive growth potential - large city array

2014 MasterCard African Cities Growth Index 19 Figure 4.3: 2014 MasterCard African Cities Growth Index - large cities by rank

20 2014 MasterCard African Cities Growth Index Medium Cities

The regional pattern of the higher- and lower-ranking Table 4.3: Medium cities of 500 000 to cities in the medium city group is similar to the large city 1 000 000 inhabitants 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 CITY COUNTRY 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 Asmara Eritrea end of the medium-high growth potential category. It has a swiftly increasing population, high rates of FDI and Central African Bangui industrial concentration. Matola’s growth links to that of Republic Maputo, the Mozambican capital that it adjoins. Banjul The Gambia Following 2011’s Arab Spring and the political turmoil that ensued, Tunis, and indeed Tunisia as a whole, now Bujumbura Burundi shows political and security improvements expected to result in greater future economic growth. In terms of pure Democratic Republic economic growth, Tunis does not perform as well as the Kisangani of Congo 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 Libreville Gabon and ease of doing business. Lilongwe Malawi Off a relatively low base, the economic growth projections for Nouakchott, Libreville and Matola are high. However, all Matola Mozambique face governance challenges and difficulties incorporating all inhabitants in their expanding economic sectors. This Monrovia Liberia tends to result in insufficient employment opportunities and concentrated wealth at the top end of society within Nouakchott Mauritania narrow sections of their city populations. Oran Algeria

Republic of Pointe-Noire the Congo

Tunis Tunisia

2014 MasterCard African Cities Growth Index 21 Figure 4.4: Inclusive growth potential - medium city array

22 2014 MasterCard African Cities Growth Index Figure 4.5: 2014 MasterCard African Cities Growth Index – medium cities by rank

2014 MasterCard African Cities Growth Index 23 Small Cities

Interestingly, the small cities with highest inclusive growth Table 4.4: Small cities having fewer than potential are all from Africa’s island states. 500 000 inhabitants

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 CITY COUNTRY 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 Bissau Guinea-Bissau than the three Southern African cities that follow – Gaborone (Botswana), Windhoek (Namibia) and Maseru Djibouti Djibouti (Lesotho). The latter three fall into the medium-low category. Mbabane (Swaziland) and Malabo (Equatorial Guinea) are the small cities offering the lowest prospects Gaborone Botswana of inclusive growth.

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

São Tomé and Príncipe is resource-rich. The recent discovery of oil in the Gulf of Guinea is a predictor of high Mbabane Swaziland and continuing GDP growth, but its government has not eradicated the income inequality and political instability Moroni Comoros 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 Port Louis Mauritius 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 Praia Cape Verde because of steep projections of GDP growth on oil revenues. São Tomé São Tomé and Príncipe

Victoria and Port Louis can anticipate far lower GDP growth but they have significantly higher levels of Victoria Seychelles governance and mobile connectivity, more diversified economies and established middle classes. While they Windhoek Namibia 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.

24 2014 MasterCard African Cities Growth Index Figure 4.6: Inclusive growth potential - small city array

2014 MasterCard African Cities Growth Index 25 Figure 4.7: 2014 MasterCard African Cities Growth Index - small cities by rank

26 2014 MasterCard African Cities Growth Index Five | Findings

After examining the 74 cities of the 2014 ACGI in separate If infrastructure, education, and improved governance and groups according to their population size, it is interesting regulation follow the economic expansion that results to consider parallels offered by similar inclusive growth from their resources, economic inclusivity in these cities potential that exist whatever the size of the city. will increase.

In the High category of inclusive growth potential are Somewhere between the first and second categories lies cities with legislation, policy and resources in place to Tripoli (Libya). The city has a high overall score, reasonably increase economic inclusivity among their citizens. These good infrastructure and, following the contraction of cities, despite some persistent barriers to inclusive growth, its economy during the civil war, a steep increase in have sufficient forward momentum to ensure that more GDP. However, political instability and degrees of poor of their residents participate in the mainstream economy, governance still beset the city. and share the benefits of growth over the next five years. If Tripoli’s conditions stabilize and it addressed its Accra stands out as the only African city in this category, governance and business issues, it is highly likely that the and therefore as the city in Africa with the greatest city will rank a lot higher in inclusive growth in future. promise of inclusive economic growth. The Medium-Low category comprises cities categorized Accra is not Africa’s most populous city, nor is it the richest by stasis and drift, arrayed across the middle to lower in terms of per capita GDP. Ghana is not the country with inclusivity spectrum. Reasons for this drift may be lack of the best resource endowment. Accra is the top-ranked resources, low growth and reduced growth prospects, but city in Africa because of the progress it has made in more significantly their opaque or ambiguous strategic creating conditions that are most conducive to inclusive direction. urbanization. Notable among these are the cities of Johannesburg, At the country level, it is worth noting that Ghana has had Pretoria, Durban, Port Elizabeth and Cape Town (South four successful elections following a peaceful transition of Africa); Abuja, Ibadan, Kano and Port Harcourt (Nigeria); power in 2000. The findings of the ACGI therefore affirm Cairo (Egypt); Lusaka (Zambia) and Algiers (Algeria). the importance of advancing and protecting individual freedom and rights to ensure ongoing economic The goal of inclusivity may well exist in such cities, but development. attaining it is undermined where economic development and foreign investment policies are uncertain, Following some distance behind and so falling in the infrastructure is neglected and resources are not allocated Medium-High category are Tunis (Tunisia), Casablanca to long-term structural improvement. (Morocco), Lagos (Nigeria), Kumasi (Ghana), Victoria (Seychelles) and Port Louis (Mauritius). In this category Finally, the Low inclusive growth potential category are cities with inadequate structural foundations or includes cities with reigning conditions that undermine governance for higher inclusivity. or preclude economic inclusivity. A significant difference between many of these cities and those in the second However, they have the necessary resources to address category is the absence of FDI or extractive industries on these issues. These are cities with the greatest unrealized a scale that makes economic expansion and inclusivity a potential for improving inclusivity. viable proposition despite structural impediments.

2014 MasterCard African Cities Growth Index 27 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.

28 2014 MasterCard African Cities Growth Index Biography | Dr Yuwa Hedrick-Wong

Dr Yuwa Hedrick-Wong is Chief Economist of the A student of philosophy, political science, and economics, MasterCard Center for Inclusive Growth. He is also HSBC Dr Hedrick-Wong studied at Trent University and pursued Professor of International Business at the University of post-graduate training at the University of British Columbia British Columbia, Canada, and Global Economic Advisor and Simon Fraser University in Canada. He also received at MasterCard. post-doctoral training in energy and resource economics and scenario forecast and planning. Dr Hedrick-Wong is an economist and business strategist with 25 years of experience gained in over thirty countries. He lives with his wife and their cat on Salt Spring Island, He is Canadian and grew up in Vancouver (British off the west coast of Canada, and is an eager apprentice in Columbia), but has spent the last 20 years working in the fine art of gardening. 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 ICICI in 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.

2014 MasterCard African Cities Growth Index 29 Biography | Professor George Angelopulo

Professor George Angelopulo’s area of interest is Professor Angelopulo holds a DLitt et Phil (University of the relationship between corporate integration, Johannesburg) and academic positions at the Department communication and sustainable competitive advantage. of Communication Science at the University of South Africa (Unisa), and CENTRUM Católica, the business school He has published in peer-reviewed journals, presented of the Pontificia Universidad Católica del Perú. academic papers, produced standard academic works, edited and authored a number of books, always retaining a Prior to his academic career, Professor Angelopulo worked focus on the corporate world. in media and advertising in Africa.

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.

30 2014 MasterCard African Cities Growth Index Appendices

2014 MasterCard African Cities Growth Index 31 Appendix One | Lagging Indicators

Raw Transfor- Data Indicator -Name & Level Period Unit mation Transformation Additional Description Source Links Weighting Type Type Explanation Source

Divisor is coun- GDP per Capita real growth at city level. In the GDP Per Capita Growth Max Coun- try with largest absence of data for Gaborone, Praia, Moroni, Canback 14.3% City 2013 % try Full List raw score. Djibouti, Malabo, Bissau, Maseru, Port Louis, www.cgidd.com Danglar Divisor Negative scores Windhoek, Sao Tome, Victoria, Mbabane, Banjul, use set at 0. urban area figures adjusted to city population.

Divisor is coun- Household Consumption real growth at city level. Household Consumption Max Coun- try with largest In the absence of data for Gaborone, Praia, Moroni, Expenditure Growth Canback City 2013 % try Full List raw score. Djibouti, Malabo, Bissau, Maseru, Port Louis, www.cgidd.com 14.3% Danglar Divisor Negative scores Windhoek, Sao Tome, Victoria, Mbabane, Banjul, use set at 0. urban area figures adjusted to city population.

Divisor is coun- Household Consumption real growth at city level. http://info. Political Stability and Max Coun- try with largest In the absence of data for Gaborone, Praia, Moroni, Canback worldbank.org/ Absence of Violence City 2013 % try Full List raw score. Djibouti, Malabo, Bissau, Maseru, Port Louis, Danglar governance/wgi/ 2.4% Divisor Negative scores Windhoek, Sao Tome, Victoria, Mbabane, Banjul, use sc_country.asp set at 0. urban area figures adjusted to city population.

Raw index range is from World Bank, http://info. Government Effectiveness -3.5 to 3.5, Reflects perceptions of likelihood that World worldbank.org/ 2.4% Country Latest 2012 Index As is transformed to government will be destabilized or overthrown by Governance governance/wgi/ a 0 -100 range unconstitutional or violent means. Indicators sc_country.asp using a linear transformation.

Raw index range is from World Bank, Reflects perceptions of government ability to http://info. -3.5 to 3.5, Regulatory Quality World formulate and implement policies and regulations worldbank.org/ Country Latest 2012 Index As is transformed to 2.4% Governance that permit and promote private governance/wgi/ a 0 -100 range Indicators sector development. sc_country.asp using a linear transformation.

Raw index range is from World Bank, http://info. -3.5 to 3.5, Reflects perceptions of citizens’ ability to participate Voice and Accountability World worldbank.org/ Country Latest 2012 Index As is transformed to in selecting government, freedom of expression, 2.4% Governance governance/wgi/ a 0 -100 range freedom of association, and free media. Indicators sc_country.asp using a linear transformation.

Raw index range is from World Bank, Reflects perceptions of agents’ confidence in and http://info. -3.5 to 3.5, Rule of Law World willingness to abide by the rules of society, quality worldbank.org/ Country Latest 2012 Index As is transformed to 2.4% Governance of contract enforcement, property rights, police, governance/wgi/ a 0 -100 range Indicators courts, and the likelihood of crime and violence. sc_country.asp using a linear transformation.

Raw index range is from Control of Corruption World Bank, Reflects perceptions of public power exercised for http://info. -3.5 to 3.5, World private gain, including petty and grand forms of worldbank.org/ Country Latest 2012 Index As is transformed to 2.4% Governance corruption, and the ‘capture’ of the state by elites governance/wgi/ a 0 -100 range Indicators and private interests. sc_country.asp using a linear transformation.

32 2014 MasterCard African Cities Growth Index Appendix One | Lagging Indicators continued

Raw Transfor- Data Indicator -Name & Level Period Unit mation Transformation Additional Description Source Links Weighting Type Type Explanation Source

Doing Business score excluding Getting Electricity component. Ease of Doing Business Index measures www.doingbusi- Country 2013 Index As is As is. World Bank regulations divided into 10 components that ness.org directly affect businesses. Libya (2011) uses older data as 2012 data not available.

Divisor is coun- Population Growth Max Coun- try with largest Canback Country 2013 % try Full List raw score. www.cgidd.com 14.3% Danglar Divisor Negative scores set at 0.

http://data. Urbanization World Bank, worldbank.org/ x 100 (data World De- Percentage of urban population compared to total Country 2013 % As is data-catalog/ 14.3% already a %). velopment population. world-develop- Indicators ment-indicators

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. Middle Class Household Growth x 100 (data Canback Low – mid segment of lower class. Family City 2013 % As is already a %). Danglar head’s educational level is elementary 14.3% 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.

2014 MasterCard African Cities Growth Index 33 Appendix Two | Leading Indicators

Raw Transfor- Data Indicator -Name & Level Period Unit mation Transformation Additional Description Source Links Weighting Type Type Explanation Source

www.cgidd.com Divisor is coun- Projected Max Coun- try with largest GDP Per Capita Growth 2013-2018 Canback City % try Full List raw score. GDP per Capita real growth, city level 14.3% average real Danglar Divisor Negative scores growth set at 0.

www.cgidd.com Divisor is coun- Household Consumption Projected Max Coun- try with largest Expenditure Growth 2013-2018 Canback City % try Full List raw score. Household Consumption real growth, city level 14.3% average real Danglar Divisor Negative scores growth set at 0.

Component of overall Human Development http://hdrstats. Health United Country Latest 2012 Index As is As is Index ranking, Health Index measures average life undp.org/en/ 7.1% Nations expectancy at birth. tables/

Component of overall Human Development Index Education ranking, Education Index measures adult literacy http://hdrstats. United 7.1% Country Latest 2012 Index As is As is (two-thirds weighting) and combined primary, undp.org/en/ Nations secondary, and tertiary gross enrolment ratio tables/ (one-third weighting).

http://data. Gross Fixed Capital World Bank, worldbank.org/ Formation Latest 2011 x 100 (data World De- Gross Fixed Capital Formation is a percentage of Country % As is data-catalog/ 5.7% or 2012 already a %). velopment GDP at a national level. world-develop- Indicators ment-indicators

Doing Business component is a composite measure of procedures, time, cost for small to medium- Electricity size business to get a new electricity connection www.doingbusi- 2.9% Country 2013 Index As is As is World Bank for a standardized warehouse with standardized ness.org electricity needs. Libya (2011) uses older data as 2012 data not available.

http://data. World Bank, Sanitation worldbank.org/ x 100 (data World De- Moroni (2010), Malabo (2006), Asmara (2008) use 2.9% Country Latest 2011 % As is data-catalog/ already a %). velopment older data due to lack of updates. world-develop- Indicators ment-indicators

34 2014 MasterCard African Cities Growth Index Appendix Two | Leading Indicators continued

Raw Transfor- Data Indicator -Name & Level Period Unit mation Transformation Additional Description Source Links Weighting Type Type Explanation Source

Divisor is coun- Projected Max Coun- try with largest GDP Per Capita Growth 2013-2018 Canback City % try Full List raw score. GDP per Capita real growth, city level www.cgidd.com 14.3% average real Danglar Divisor Negative scores growth set at 0.

Divisor is coun- Household Consumption Projected Max Coun- try with largest Expenditure Growth 2013-2018 Canback City % try Full List raw score. Household Consumption real growth, city level www.cgidd.com 14.3% average real Danglar Divisor Negative scores growth set at 0.

http://data. Gross Fixed Capital World Bank, worldbank.org/ Formation Latest 2011 x 100 (data World De- Gross Fixed Capital Formation is a percentage Country % As is data-catalog/ 5.7% or 2012 already a %). velopment of GDP at a national level. world-develop- Indicators ment-indicators

2014 MasterCard African Cities Growth Index 35 Appendix Three | City Scores

Leading Indicators Lagging Indicators Country City Overall Index Score Composite Composite

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

36 2014 MasterCard African Cities Growth Index Appendix Three | City Scores continued

Leading Indicators Lagging Indicators Country City Overall Index Score Composite Composite

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

2014 MasterCard African Cities Growth Index 37 Notes

38 2014 MasterCard African Cities Growth Index