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Lagos set to overtake Johannesburg as 2nd largest African city by GDP

Dec 24 2017 13:47
Carin Smith

Cape Town - Lagos is set to overtake Johannesburg as Africa’s second largest city by gross domestic product (GDP) by 2035, according to a report by Mark Britton, associate director at Oxford Economics.

Lagos is expected to gain from policy reforms focused on improving the support for private firms. The city is forecast to become the most populous African city. Its population is expected to be 28.5 million by 2035 – more than double its current size.

The Global Cities report looked at urban trends. It provides an overview of the economic outlook for 780 city metros around the world. The data used covered headline economic, demographic and labour market forecasts, as well as household income and spending, growth in employment and output across key sectors.

The report found that Africa is set for rapid urbanisation and GDP growth with city populations to nearly double by 2035. The population of 93 main African cities is expected to rise to a total of 370 million from around 200 million in 2016.

Yet, despite the robust economic growth predicted, Oxford Economics forecasts that the majority of African cities will continue to remain relatively small in terms of scale. Therefore, it is not expected that any of the ten fastest growing African cities - except Cairo - will enter the top 100 global cities in 2035 based on GDP.

GDP growth

African cities are forecast to experience strong GDP growth of 4.5% per year in the period to 2035, exceeding the global city average of 2.9%.

With GDP growth exceeding population growth, GDP per capita within African cities will rise significantly over the forecast period. However, despite that, GDP per capita levels are expected to remain substantially behind the rest of the world by 2035, according to the report.

Cairo is set to be Africa’s largest city economy and enter the world’s top 100 cities by GDP list at number 84. The Egyptian capital is forecast to record 4.4% average annual GDP growth up to 2035. Cairo will continue to experience growth in services such as commerce and finance as well as an expansion within consumer services.
 
Despite its economic scale, however, it is forecast that Cairo will fall to third among African cities in terms of total population.

Among the ten largest African cities Khartoum in Sudan is forecast to achieve the fastest growth between 2017 and 2035, at 5.2%. Growth in Khartoum is likely to be boosted by the easing of the US trade embargo, which will help to facilitate an expansion of the city’s export sector.

East Africa
 
East Africa will likely lead the African cities’ expansion thanks to greater economic diversification. Seven of the top 10 fastest growing urban centres are in the East Africa region.
 
Oxford Economics forecasts that Bujumbura (Burundi), Freetown (Sierra Leone) and Dar Es Salaam (Tanzania) will have the fastest GDP growth between 2017 to 2035. In addition to Dar Es Salaam, Tanzania accounts for a further three of the ten fastest growing African cities.
 
According to the report, the relatively strong performance of these cities can be explained by political and institutional stability providing a basis for increased private sector investment, an increase in regional infrastructure spending and an expansion in the tourism sector.
 
"The growth prospects of African cities greatly depend on their ability to diversify their industrial structure and establish institutional stability whilst also developing in terms of education, health and infrastructure," the report predicts.
 
Oxford Economics explains that industrial structure has played an important role in recent economic performance.

During the 2000s and early 2010s commodity-rich African countries such as Nigeria and Angola greatly benefitted from the rise in global commodity prices, leading to significant increases in aggregate demand.

However, following the collapse in commodity prices in 2014, a reversal in this trend has emerged with economically diverse East African countries, such as Tanzania and Mozambique, outperforming countries more reliant on natural resources.
 
"Although the expected recovery in commodity prices in upcoming years will help reduce the gap in economic performance, we forecast that commodity-rich African cities will continue to lag behind the more diversified East African cities in terms of GDP growth," states the report.

"The combination of further global integration and urbanisation does, however, create challenges for cities at various stages of the development curve. Rapid population growth in emerging cities requires considerable management to ensure the infrastructure can accommodate the additional people."

This includes the provision of adequate housing, support services and transport networks, while also developing and maintaining the city as an attractive place to live and work. For example, in China, authorities are already having to implement policies to alleviate some of the negative aspects associated with rapid expansion.

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africa  |  lagos  |  cairo  |  johannesburg  |  africa economy  |  urbanisation
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