RPT-Africa’s big cities offer investors hope in hard times – Reuters

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(Repeats story from Sunday)

* Big cities still growing despite slowing economies

* Investors eye returns on consumer goods, financial service

* Urbanisation stirs social problems, potential unrest

* Graphic on Africa’s urbanisation: reut.rs/1W6TbYv

By Joe Brock

JOHANNESBURG, Feb 14 Africa’s biggest economies
have been hammered by the collapse in commodity prices over the
past 18 months but there are still investment bright spots to be

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

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

“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
and Hennes & Mauritz.

There are similar stories elsewhere.

This year, Kenya is set to unveil the Two River malls in
Nairobi, the continent’s largest shopping centre 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 jeweller 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.


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.

This rapid urbanisation 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 centres, 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 urbanisation 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)

RPT-Africa’s big cities offer investors hope in hard times – Reuters