South African cities lose out on economic growth potential

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While Africa has seen a boom in population, economic growth and foreign direct investment, a number of countries have been pulling ahead of others, which has caused a remarkable amount of growth in some cities.

MasterCard has released its African Cities Growth Index (ACGI), and according to Professor George Angelopulo of the University of South Africa, there is one factor that determines or affects all the other variables – population growth.

“By the year 2100, 40% of people on the planet will be African. By 2035, the balance between those living in urban areas and rural areas will change. The underlying dynamic is the unprecedented rate of urbanisation,” he said.

The Growth Index takes a lot of factors into account (25 economic and social inclusion indicators) when compiling the health and potential growth rate of a city, but Angelopulo noted that foreign direct investment plays a huge role. Of the cities on the ACGI, the greatest investment (up to 1/5th of a country’s GDP) was in the technology, media and telecommunications sectors.

Who is investing in Africa? Well, according to MasterCard, the nations with the largest investment in the continent is the US, UK, UAE, France, Germany, China and South Africa.

At the top of this year’s ACGI list was Maputo, the capital of Mozambique. The city falls into the ‘Large’ African city category, and scored the highest when it came to potential for inclusive growth.

“Maputo’s inclusive growth potential falls into the medium-high category, attributed to its share of Mozambique’s foreign direct investment (FDI), which as a percentage of national GDP is among the highest in the world. The city boasts constantly improving levels of government effectiveness, regulatory quality, and ease of doing business,” MasterCard said at the release.

In terms of South African cities, Pretoria had the greatest potential for inclusive growth, followed by Johannesburg, Durban, Cape Town and Port Elizabeth. All South African cities fared worse this year that what it did last year.

For Pretoria, it managed to get a ACGI score of 39.611, compared to 39.641 last year, and ranks 22nd on the overall list. Johannesburg ranks 28th with a score of 34.603, Durban ranks 33rd, and Cape Town came in 36th with a score of 31.276. The last South African city to be measured was Port Elizabeth with a score of 27.594.

The reason for the sharp decline in the rankings are down to a number of factors. “Their positions are the result of decreasing economic growth and household consumption, and the more fundamental problems of labor inefficiency, low productivity, high unemployment, decreasing competitiveness and poor education,” the report said.

MasterCard

But it’s not all bad news. “It is only in areas of established infrastructure – financial and physical – and relatively high levels of governance, that the South African cities retain the potential to improve the economic well-being of their growing populations.”

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[Image – CC by 2.0/Paul Saad]

Charlie Fripp

Charlie Fripp

Charlie started his professional life as a motoring journalist for a community newspaper in Mpumalanga, Charlie explored different journalistic angles since his entry into the fast-paced world of publishing in 2006. While fostering a passion for the arts, Charlie developed a love for technology – both which allowed him to serve as Entertainment and Technology Editor for an online publication. Charlie has since been heavily involved in consumer technology for various websites and publications. He thoroughly enjoys World War II films and cerebral documentaries; aviation; photography and indie music. Oh yes, and he also has a rather strange obsession with collecting coffee mugs from his travels.

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