Africa cities risingForecasting data and analysis from the EIU

September 18th 2012

© Economist Intelligence Unit

Contact us to learn more about how we can help your company plan your Africa strategy:

AfricaCities@ eiu.com

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Africa’s economy is growing fast

Real GDP growth (2012-2016 forecast)

Above 10%

7.5% to 10%

5% to 7.5%

2.5% to 5%

Below 2.5%

By 2012, 8 of the world’s 20 fastest growing economies will be African

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-2

0

2

4

6

8

10

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WesternEurope

US Brazil Russia Sub-SaharanAfrica

India China Sub-SaharanAfrica ex

South Africa

2011

2012

2013

GDP growth

Africa’s growth story has always revolved around commodities

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But Africa’s growth story is now more diverse

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� The ‘peace dividend’ – After years of armed conflict and military

rule, democracy is the latest wind of change sweeping across the continent

� Urbanisation - Half of all Africans are under 20, and are rapidly

moving to cities: more than 40% of Africans now live in urban areas

� Improved governance – Greater accountability comes hand-in-

hand with democracy and the slow strengthening of institutions

� Trade, not aid – Europe is still Africa’s largest trading partner, but

China’s share of trade has exploded in the last decade

� The rise of technology – The number of mobile subscribers in

Africa exceeded the 0.5 billion mark in 2010, allowing companies greater access to consumers

� Infrastructure investment – Chinese companies are building

roads and upgrading railways, ports and airports

Even though challenges for companies remain

• Katherine

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Poor roads – and not enough of them either

Bribery & corruption

Inefficient border posts Inadequate railway networks

Poor skill base Congested portsUninviting airports

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Changes in Transparency

International’s corruption rankings for African countries

since 2005

Companies are showing more interest than ever in expanding into Africa

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A recent survey conducted by The Economist Group of 217 global companies based in 45 countries revealed that expansion in Africa is a priority for two thirds of them within the next decade

42%

44%

46%

48%

50%

52%

54%

56%

Yes No

South Africa Elsewhere in Sub-Saharan Africa

Does your company operate in …

0%

20%

40%

60%

80%

100%

120%

140%

Existing Planned

South Africa Elsewhere in Africa

Plans to expand in the next 3 to 5 years…

* Economist Corporate Network survey, 2012

Companies need Africa city-level data and analysis

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� Companies looking to expand into Africa want to concentrate their strategy where growth and demographics are most favourable – in major cities.

� It is not enough to plan a strategy around nationally forecasted growth, but rather to have critical forecasting and business information on a particular city.

� In response to increasing inquiries from companies to understand African growth, the EIU has developed a tool to forecast key demographics and indicators for 25 of the fastest growing and most important cities.

Consumption in Africa is much greater in urban than rural areas

Source: World Bank

Why these African cities?

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� Based on key economic drivers, client feedback and a survey of Corporate Network members, the EIU identified 25 African cities (across 19 countries) that are of particular interest.

� These cities represent some of the best opportunities for growth, but up until now data has been lacking to support the case, and strategy, for market entry.

Algiers Tunis

Cairo

Alexandria

Khartoum

Kampala

Luanda

Cape Town

Durban

Jo’burg

Lusaka

Abuja

Nairobi

Douala

Dar es Salaam

Dakar

Accra

Kumasi

Abidjan Lagos

Mombasa

Casablanca Tripoli

Maputo

Addis Ababa

Introducing the EIU’s Africa Cities tool for city-level analysis

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1. Compare indicators across all 25 cities

2. View an in-depth profile of a city

3. Compare two cities head-to-head

The Africa Cities tool indicators

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Population and demographics

• Total population• Number of households• Total male/female population• Population aged 0-4• Population aged 5-9 ()• Population aged 10-14• Total population aged 15-19• Total population aged 20-24• Total population aged 25-29• Total population aged 30-34• Total population aged 35-39• Total population aged 40-44• Total population aged 45-49• Total population aged 50-54• Total population aged 55-59• Total population aged 60-64• Total population aged 65-69• Total population aged 70-74• Total population aged 75-79• Total population aged 80

Income and expenditure

• Total expenditure per annum • Expenditure per capita• Expenditure per household• Expenditure by category• Median income• %/Number/Total income/of people earning >$2,000 pa

• %/Number/Total income of people earning >$5,000 pa

• %/Number/Total income of people earning >$10,000 pa

• %/Number/Total income of people earning >$15,000 pa

• %/Number/Total income of people earning >$20,000 pa

• %/Number/Total income of people earning >$30,000 pa

• %/Number/Total income of people earning >$40,000 pa

Business demographics &

lifestyle indicators

• Internet users %• Mobile phone subscriptions• Number of salaried employees• Number of businesses• Number of businesses with turnover: 0 - 25m LCU

• Number of businesses with turnover: $10 - 50m

• Number of businesses with turnover: $50 - 100m

• Number of businesses with turnover: $100 - 250m

• Number of businesses with turnover: $250 - 500m

• Number of businesses with turnover >$500m

• Number of businesses with 0 -19 employees

• Number of businesses with 20 -99 employees

• Number of businesses with 100 - 499 employees

• Number of businesses with 500 - 999 employees

• Number of businesses with 1,000 - 4,999 employees

• Number of businesses with > 5,000 employees

Cost of living index

• Customised cost of living index for the 25 cities, comparing the costs of:

• Food and non-alcoholic beverages

• Alcoholic beverages and tobacco

• Clothing and footwear• Housing, water, electricity, gas and other fuels

• Furnishings, household equipment and maintenance

• Health• Transport• Communication• Recreation and Culture• Educations• Restaurants and Hotels• Miscellaneous goods and services

Our methodology

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EIU project managers, analysts & an on-the-ground network of African contributors

EIU Worldwide Cost of Living teamEIU Worldwide Cost of Living team

EIU Economics Unit

EIU Africa analysts

The Team Data gathering and estimation

Interviews with local statistical bodies as well as data collection from household and labour force surveys

Construction of a cost of living index for the 25 African cities

Estimation and econometric modelling of unavailable data

Sense-check of final data

Collation and front-end design

Design of an interactive Excel workbook with a graphical interface that allows quick comparison of cities.

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Key results – Cities paint a much different picture than nations

• Per-capita expenditure was higher in each of the 25 cities, than in their respective nations.

• Citizens in cities spent 94.4% more, per capita, than their countrymen as a whole.

• Africa is urbanizing fast and cities are attracting more and more migrants.

• As a result we are witnessing the emergence of “super cities”- each bringing considerable opportunities.

• The demographic profile of these cities can be much different than the national level picture.

Per capita city-level expenditure v national-level expenditure Demographic profile of Lagos v Nigeria

Key results – Demographics are favourable

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• While Africa as a whole has favourable demographics, the Africa cities we measured had notable differences between them:

• Cities like Nairobi, Addis Ababa and Mombasa have a glut of their population in the key 20-35 age demographic.

• The largest growth in population from 2012-2025 will come from Kampala, Dar es Salaam, and Lusaka

Key results – Expenditure is growing

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Expenditure per capita differs markedly across cities, depending on the product in question.

Key results - Cost of living differs between cities

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Cities like Luanda feature considerable inequality and official prices are extremely expensive.

What are companies doing with Africa Cities data?

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� Forecasting sales of their products and services in African cities

� Benchmarking African cities to find the best opportunities for their products and services

� Forecasting demand for their products and services

� Determining wages for staff in various African cities

� Finding new market opportunities among African consumers

Want to learn more about the EIU’s Africa Cities data and analysis?

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About the Economist Intelligence Unit:

The Economist Intelligence Unit’s forecasting and analysis has informed government and industry around the world since 1946, when we were founded as the research arm of The Economist.

Like The Economist we are independent of all governing bodies and corporations.

For the last 65 years we have provided focused business insight on any given industry, country and market to help clients take advantage of new opportunities, maximise capabilities and support both tactical and strategic decision making.

Contact us to learn more about the tools and analysis we have that can help your company plan your Africa strategy:

AfricaCities@eiu.comLondon: +44 (0)20 7576 8181New York: +1 212 698 9717Hong Kong: +852 2585 3888