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 In cities such as Lagos, Nairobi, Accra, Kinshasa and Johannesburg,
growth remains robust and investors are prospering in the retail,
financial services, technology and construction sectors.
This means investors can now re-adjust their strategy for Africa.
Instead of taking a view on the continent as a whole, or choosing
one country over another, they can seize opportunities city by city.
Sub-Saharan Africa is urbanizing faster than anywhere else in the
world and city dwellers have more money to spend.
"In the current economic environment, investors want areas where
success is proven, growth is strong and will remain strong. Big
African cities give you that," said Jacob Kholi, a partner at Abraaj,
a private equity firm with $9 billion under management. "It has
become even more important to focus on these key cities than
before," Kholi added.
Nairobi is the most attractive destination for foreign investment,
according to a 2015 report by PricewaterhouseCoopers, followed by
Accra, with Lagos and Johannesburg equal third.
Consumption per capita in Accra is 1.6 times greater than the
average in Ghana, 2.3 times bigger in Lagos than the average in
Nigeria, and 2.7 times larger in Nairobi than nationally in Kenya,
Abraaj estimates.
Lagos, one of the world's fastest growing cities and with a
population of 20 million, expects economic growth of 7 percent this
year, twice the pace of the country as a whole.
Even South Africa, which is grappling with youth unemployment of
over 40 percent and could slip into recession this year, has areas
where industry is booming.
"Looking around here, you wouldn't know things were so bad,"
construction worker Sifiso Zwane told Reuters in Johannesburg's
wealthy Sandton business district.
"Rich people will always find a way to make more money," said Zwane,
with cranes filling the skyline behind him and billboards
advertising new retailers like Krispy Kreme doughnuts <KKD.N> and
Hennes & Mauritz <HMb.ST>.
There are similar stories elsewhere.
This year, Kenya is set to unveil the Two River malls in Nairobi,
the continent’s largest shopping center outside South Africa, with
brands like Porsche, Hugo Boss and France’s Carrefour already
booking space.
"The economy still has opportunities," said Gabriel Modest, a
jeweler who says demand for the gold necklaces and bracelets he
sells remains strong.
"Sometimes you have to treat yourself," he added, ordering a bowl of
muesli and yoghurt at an upmarket Nairobi coffee shop.
In Lagos, plans are in place to develop the vast
multi-billion-dollar Eko Atlantic city, a Dubai-style gated
community that will boast chrome skyscrapers, business parks, palm
trees and a marina.
"MEGA-CITY"
By 2025, Mckinsey estimates that more than 80 cities in sub-Saharan
Africa will have populations of more than one million, accounting
for 58 percent of the region's growth.
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This rapid urbanization means Africa's big cities will need more
roads, hospital and power stations, while growing numbers of new
inhabitants will be buying consumer goods like instant noodles,
washing powder and mobile phone cards.
Though some big companies like Massmart, Barclays and Nestle have
slowed expansion plans in Africa in the last two years they are
still making healthy profits in the big urban centers, according to
banking sources.
"Our investment is focused on cities where we see the best
opportunities even if the investment environment in the rest of the
country isn't as robust," said Louis Deppe, partner at Actis, an
emerging market-focused investment company.
"The 'mega-city' trend is still very much on the cards."
The share of Africans living in urban areas is expected to grow from
36 percent in 2010 to 50 percent by 2030, with cities expected to be
home to 85 percent of the national population in some countries,
according to the World Bank.
The rapid urbanization of mostly the young and unemployed is placing
a huge strain on infrastructure and will put pressure on politicians
to direct more resources towards cities. Inequality in African
cities is already among the highest in the world. African
governments with stretched public finances will need to improve
housing and social safety nets in cities and diversify their
economies to support rural areas in order to avoid an increase in
inequality that could stir up discontent.
"In a more risk-averse world, 'urban bias’ – where there are proven
returns - is likely to be reinforced. Investors will look at urban
areas," said Razia Khan, head of Africa research at Standard
Chartered.
"This trend runs the risk of the rural electorate being marginalized
– in especially unequal regions, it may raise political risks, and
the potential for unrest."
Back in Lagos, business is still expanding for cab-owner Cyril
Ugochukwu, whose earnings are running well above the target he set
for his business, which has contracts with online firm Easy Taxi.
"Individuals must make trips whether times are good or bad," he told
Reuters.
(Additional reporting by Duncan Miriri in Nairobi and Chijioke
Ohuocha in Lagos; Editing by Giles Elgood)
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