With a rapidly increasing population, sharp rise in cost of living and an increased need for employment, migration from rural to urban areas has intensified considerably. As Trevor Manuel, South African National Planning Minister, recently noted, governments in Africa will need to make preparation for growing urbanisation and invest in infrastructure and human capital in order to facilitate sustainable growth on the continent.
In the African Mega Trends study recently conducted by Frost & Sullivan, it is predicted that by 2020, Africa will account for 15% of the world's urban occupants.
Urbanisation will lead to the formation of Mega-cities (with a minimum population of 8 million and a GDP of $250 billion in 2025), Mega-regions (a combined population of more than 15 million) and Mega-corridors (transport corridors joining two or more major cities or Mega-regions at least 60 kilometres apart, and with a combined population of 25 million or more). In addition, the mass migration will result in Mega-slums, as 70% of urbanised Africa will live in informal settlements.
"Currently, more than 820 million people live in slums around the world. This will more than double to 2 billion by 2020", said Phil Howarth, Frost & Sullivan Partner for Africa and Latin America, at the recent Frost & Sullivan's Growth Innovation and Leadership event held in August. "Unfortunate as this may be, many companies see huge opportunities in mega slum growth and, through analysing the challenges presented, are developing solutions to uplift human populations in these areas."
Urbanisation will ultimately result in a continent burgeoning with opportunity in "enabling" infrastructure, such as energy-efficient and resource-efficient technologies that were previously unavailable. In order to grow the top line and tap into a growing African population and an emerging middle class, companies will need to adopt or, possibly, change their current business models. Companies will be forced to innovate in terms of how they deliver their services to a rapidly growing urban population. One delivery model to be considered is that of a "hub and spoke" business model, where the "hub" assumes management responsibilities and regulatory compliance, and the "spoke" serves as the delivery centre with operations that can be scaled up or down, depending on customer requirements. This would assist companies to service and manage large numbers of dispersed clients seamlessly.
Urbanisation, as a Mega Trend, influenced Siemens to radically change its global organisational structure, which, prior to the end of 2011, was divided into 3 key divisions – Industry, Energy and Healthcare. In 2012, the company integrated a new "Infrastructure and City" division which integrates key competencies from its existing businesses to target cities as a single customer segment. A total global market opportunity of more than U.S. $3 trillion was identified by Siemens across major cities alone. The company believes that $300 billion of this represented the target market for its own products and services. This new division already realises a turnover of U.S. $17 billion and employs 80,000 staff globally.
"With approximately $41 trillion to be invested globally in infrastructure projects between 2005 and 2020, Africa is well-positioned to receive a significant portion of this," noted Howarth. "Infrastructure development is, thus, of paramount importance for growth of the future African economy."
Recognising urbanisation as a key component of a company's growth strategy will assist in identifying opportunities arising from this mass migration into cities. CEOs will then be able to develop strategies and business models that are more specifically targeted and aligned with this future growth.
New Mega Trends, the new book by Frost & Sullivan Partner Sarwant Singh, published by Palgrave Macmillan, identifies and evaluates emerging Mega Trends and their sub-trends, while translating these trends into opportunities for everyday business and personal life. New Mega Trends provides startling facts and thought-provoking case studies that not only inform the reader about their future, but also entertain them. If you are a leader with a corporate vision, or a strategic planner within your organisation, New Mega Trends will become your ultimate business guide book.
A preview of the content of the book is also available on Slideshare on slideshare.net/FrostandSullivan/frost-sullivans-new-mega-trends.
For more information about the New Mega Trends book by Frost & Sullivan, please contact Samantha James, Corporate Communications, at samantha.james[.]frost.com.
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