Table 1.3: Sector Share of Change in Real GDP between 2002 and 2007 Share of Change in Real GDP (Per Cent)
Compound Average Annual Growth Rate (Per Cent)
Resources
24
7.1
Wholesale and Retail
13
6.8
Agriculture
12
5.5
Transport and Telecommunications
10
7.8
Manufacturing
9
4.6
Financial Intermediation
6
8.0
Public Administration
6
3.9
Construction
5
7.5
Real Estate and Business Services
5
5.9
Tourism
2
8.7
Utilities
2
7.3
Other Services
6
6.9
Sector
Source: Global Insight; Arab Monetary Fund; McKinsey Global Institute: in McKinsey 2010, 2 Exhibit A.
CHAPTER ONE
and to adopting policies that energize markets, including the privatization of state-owned enterprises, reduced trade barriers, lower corporate taxes and boosted regulatory and legal systems.114 Despite these measures poverty persists and inequality has worsened, especially in countries that have experienced high growth rates such as Mozambique and South Africa. Bloemfontein, Buffalo City Metropolitan Municipality and Johannesburg (South Africa) have some of the highest Gini coefficients115 in the world.116
40
Global Flows of Investment into Africa The resources sector has traditionally played a key role in African economic performance and growth. The long-term implications are that resource depletion will likely take effect in African economies by 2060. Consequently, strategies for diversifying economies, particularly city economies, are of paramount importance in negotiating a more resourcescarce future in previously resource-abundant areas. Africa’s most diverse economies are Egypt, Morocco, South Africa and Tunisia. In these countries, sectors like banking, construction, retail and telecommunications contributed to more than 70 per cent of GDP growth over the past decade. The least diverse economies in Africa are oil and gas exporting countries. Algeria, Angola and Nigeria alone earned revenues of USD 1 trillion between 2000 and 2008 from petroleum exports.117 In these countries manufacturing and services account for only one-third of GDP growth on average. Investment flows into Africa and its cities are projected to rise in the medium term. Returns on investment into Africa between 2004 and 2008 were higher than anywhere else on the globe.118 In addition, labour productivity has risen by 2.7 per cent per annum between 2000 and 2010.119 By 2040, Africa’s youth is projected to constitute the largest labour force in the world at 1.1 billion, surpassing China and India. By 2020, growth in Africa is projected to create consumer markets of sufficient size and spending power to
attract multinational companies. It is projected that four opportunity categories (Table 1.4) could be worth USD 2.6 trillion by 2020. These include consumer facing, resource driven, agriculture and infrastructure sectors. The consumerfacing sector constitutes just over half of the revenue, with a compound growth rate of 4 per cent per annum (Table 1.4). Indeed, many multinationals have already entered Africa in expectation of this boom, and more are expected to follow. The key attraction for multinationals looking to forge new customer bases is the global significance of the large consumer markets. Cities play a key role in producing this consumer base. By 2020 Alexandria, Cairo, Cape Town, Johannesburg and Lagos will individually have household spending powers exceeding USD 25 billion per annum, while a dozen other cities will have consumer markets with spending powers of USD 10 billion per annum.121 These constitute key opportunities for global investors and speculators, and as the world’s economically third fastest-growing region,122 Africa will undoubtedly attract their attention as a prospect for investment, if political and economic stability levels can be guaranteed and cities hold significant power in determining the future trajectories of economic growth on the continent. Infrastructure investment and sector growth in Africa is significant, especially as infrastructure development will occur largely around service provision in cities and towns as well as improving connections between them (particularly inlandcoastal connectors). Infrastructure is projected to grow at the highest level – by 9 per cent per annum – between 2008 and 2020 (see Table 1.4). Currently, Africa’s infrastructure services are twice as expensive as elsewhere around the world,123 indicating demand pressure. An estimated USD 93 billion per annum is required to meet infrastructure needs, of which a third is for maintenance alone.124 Currently, infrastructure spending in Africa is around USD 72 billion, and private investment in it grew from 7 per cent in 2000 to 13 per cent by 2010.125 Nonetheless, the scale of investment