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Economic Opportunities of Megacities in Sub-Saharan Africa

Economic Opportunities of Megacities in Sub-Saharan Africa

The uninterrupted flow of people from rural communities to urban areas has remarkably increased over the past 100 years worldwide. This migration trend, leading to the formation of megacities, will continue over the next decade with 60 percent of the world population expected to live in urban areas by 2030 based on projections from the United Nations (UN).

The UN defines megacity as a metropolitan area with population of over ten million residents. Euromonitor International reported that 33 of such cities exist in the world as of 2017. If the threshold is lowered to five million, the number of qualified cities goes up to 47. Between now and 2030, the significance of megacities in global economic affairs will continue to rise. Megacities will alter the economic landscape of the world as 15 percent of world GDP will come from these cities. Developing countries, which currently have the highest number of megacities, 26 out of 33, will play a dominant role.

In Sub-Saharan Africa (SSA), high youth population continues to fuel urbanization since young people are always seeking the excitement of urban life, job opportunities and higher quality of life. Mckinsey Global Institute is forecasting that African cities with more than five million inhabitants will rise from six in 2015 to 17 by 2030 and cities with over ten million people will increase from three to five, adding Dar es Salaam, Tanzania and Luanda, Angola to the region’s current megacities of Cairo – Egypt, Kinshasa – Congo DRC and Lagos – Nigeria.

By projection, Luanda would increase its population by 60 percent, Cairo would add 6.3 million inhabitants to become Africa’s largest megacity with about 30 million people and Nigeria’s urban size would grow by nine percent over the next decade. In addition, 89 African cities across the continent will have population of 1 million or more according to Mckinsey Global Institute. Although the middle class emerging from this pattern of urbanization will drive strong economic growth in the future, additional burdens that will come with high density living demand urgent attention to limit economic, social and environmental hardships such as traffic congestion, pollution, income inequality and high crime rate.

Based on this imminent urban population surge, the affected countries are seeking solution-based engagements with both local entrepreneurs and foreign investors to provide infrastructure upgrade and contemporary urban planning. Existing and upcoming megacities in the continent require coordinated investments in housing, healthcare, sanitation and waste management, energy, clean water supply and education including transportation facilities that would boost access to regional and global markets. It is the only way to achieve the productivity gains that other developing regions have achieved through urbanization.

This urbanization trend presents a unique opportunity to U.S. service and infrastructure companies with appetite for business expansion in Africa. Already many Asian companies, especially Singaporeans, have taken advantage of this situation to establish strong presence in Africa’s city-planning sector.

Surbana Jurong, Meinhardt and Hyflux are Singaporean firms leveraging their domestic experience to solve urban-infrastructure problems in Africa. Evidently African stakeholders are engaging them in planning for the future of cities facing unprecedented pressure. From Surbana Jurong’s city planning of Kigali, Rwanda, the sewage treatment systems in Nairobi, Kenya, the master planning of Lekki new township in Lagos, Nigeria to Hyflux’s multi-billion dollar development of infrastructure, utilities and environmental solutions for the Star City township project in Morogoro, Tanzania, these companies are making impact in urban planning and city development projects across Africa.

Africa offers extraordinary opportunities for those who are prepared to overcome short-term difficulties. It is extremely important for American companies to understand the geography of Africa’s growing cities and deploy strategies to succeed in this very dynamic and evolving business environment.

Kemi Arosanyin is an International Trade Development Specialist and Director, Africa Trade Expansion Program at the World Trade Center Miami. She writes, speaks, and advises on trade and investment in sub-Saharan Africa.

US Exports to ‘Sub-Saharan’ Africa Surge to $1.7 Billion

Washington, DC – Over the past ten months, the US Export-Import Bank (EXIM) has reportedly authorized a record $1.7 billion in financing to support exports of American-made products to sub-Saharan Africa.

This record-setting surge “has not only empowered U.S. small businesses to sell their products in global markets, but has also supported more than 10,000 American jobs which contribute to strengthening the U.S. economy,” the trade bank said.

The announcement was made as EXIM President and CEO Fred Hochberg participated in the US-Africa Leaders Summit that recently convened in Washington, DC.

EXIM also said it will pledge $3 billion in financing to support US exports to sub-Saharan Africa over the next two fiscal years and that it had recently signed a memorandum of understanding (MOU) with Angola “to strengthen collaboration on the financing of American-made exports” to the central African nation.

Two-thirds of the population of Sub-Saharan Africa lacks electricity and earlier this month, the bank approved a loan guarantee for $17 million to support long-term financing by the West African Development Bank (BOAD) for the Azito Power project in Cote D’Ivoire.

Financing for steam turbines used in the Azito Power project will support 40 manufacturing and engineering jobs in Schenectady, New York, and Bangor, Maine, said EXIM. The project is part of a long-term strategy to strengthen the region’s power capacity and, in turn, help to position economies there for growth, it added.

Three Louisiana small businesses benefit from EXIM’s $43 million financing of a liftboat destined for Nigeria.

The “Bellator” liftboat is a self-propelled vessel, 150-foot long by 118-foot wide, that lifts and suspends equipment and personnel up to the level of an offshore drilling platform.  About 300 employees of C.S. Liftboats, Inc., of Abbeville, Louisiana, together with Gulf Island Fabrications of Houma, Louisiana, will construct the high-tech vessel.

The Nigerian buyer also contracted for prefabricated liftboat-mounted modules for housing workers; these are built by Fiberglass Unlimited Inc. of Raceland, Louisiana.  This is Nigeria’s first purchase of a new, US-made liftboat system.

According to the bank, Pennsylvania employees of GE Transportation “will benefit from the bank-supported export of GE’s locomotives with Pennsylvania-made engines and components to Transnet in South Africa.”  In its recent transaction, EXIM authorized a $563.5 million loan guarantee to support financing for the sale of 293 locomotives being manufactured by GE Transportation.

EXIM “is firmly committed to equipping US exporters to realize the vast economic opportunities emerging throughout sub-Saharan Africa, which is home to seven out of 10 of the world’s fastest-growing markets,” said EXIM’s Hochberg. “Each transaction the Bank supports creates jobs for local US businesses and strengthens our relationship with a region that has a strong prospect for long-term economic growth.”