World’s Fastest Growing Cities are in Asia and Africa

The world is undergoing the largest wave of urban growth in history. In 2007, for the first time, more than half of the world’s population were living in cities. In the 2000s, the fastest and largest urban growth took place in Asia and Africa, creating huge opportunities for investors and marketers of consumer goods and services, but also increasing risks of environmental and social hazards.

Key points

  • The world’s fastest-growing cities in the 2000s were found predominantly in Asia and Africa. Between 2000 and 2010, the urban population grew by an annual average of 3.3% in the Middle East and Africa and by 2.7% in Asia Pacific, compared with a global urban growth rate of 2.1%;
  • In other regions, especially in advanced economies, urban growth rarely exceeds 2.0% annually and in Eastern Europe, the urban population actually fell by an average 0.1% annually over 2000-2010. Yet even modest urban growth creates important opportunities in consumer markets;
  • In most of the world, urban population growth is driven mostly by natural population growth, while in China rural migration is the predominant driver. The demographic profile of population growth creates differences in consumption patterns;
  • Fast-growing cities create opportunities for businesses and investors, in improving access to consumer markets and creating demand for infrastructure and services;
  • Yet the unplanned and informal nature of urban growth in many cities in the developing world amplifies environmental and social hazards, and increases risks to the business environment.

Cities in the developing world

  • Globally, Guangzhou in China had the largest population growth (in absolute terms), growing by 3.3 million between 2000 and 2010. It was followed by Karachi in Pakistan (3.1 million increase) and Delhi (2.9 million increase). The ten cities with the largest population increments between 2000 and 2010 were all located in Asia and Africa;
  • According to UN figures, 324 global cities with a population of over 750,000 registered rapid growth of more than 20.0% between 2000 and 2010. The fastest-growing city was Abuja in Nigeria (139.7% increase) followed by the Yemenite cities al-Hudayda (108.1% increase) and Ta’izz (94.0%). Of the 324 fastest-growing cities, 53.1% were located in Asia Pacific, 24.4% in Africa and the Middle East, 16.0% in Latin America and the remaining 6.5% in North America, Australasia and Western Europe;
  • Of the world’s 324 fastest-growing cities between 2000 and 2010, 84 were in China. Of the world’s regions, Asia Pacific had the largest growth of urban population between 2000 and 2010, with an increase of 378 million;
  • Africa, the world’s least urbanised continent, is also the one with the fastest rate of urbanisation. The average annual rate of urban population growth in the Middle East and Africa between 2000 and 2010 stood at 3.3%, compared to 2.7% in Asia Pacific, 1.7% in Latin America, 1.3% in North America, 0.9% in Western Europe and -0.1% in Eastern Europe;
  • Latin America’s urban population grew by 18.9% between 2000 and 2010, and there were considerable differences between countries with slow urban growth such as Argentina (11.4% increase), and countries with fast-growing urban populations such as Guatemala (40.3%).

Population of the cities with the largest population increases: 2005-2015 million

Graph1

Source: Euromonitor International from national statistical offices/UN. Note: cities presented are expected to have the largest population increments between 2005 and 2015.

Slow growth in Europe and North America

In Europe and North America, fast-growing cities are rare and present the greatest business potential amid general population stagnation:

  • Slow urban population growth characterises Europe, North America and several Latin American countries such as Argentina and Chile. It is part of general population stagnation and in some cases decline. In the EU, for example, only a handful of cities registered average growth of 2.0%-3.0% per year over 2000-2010 including Manchester (UK), Palma de Mallorca (Spain), Galway (Ireland) and Maia (Portugal);
  • In the USA, large cities in the southern parts of the country registered the fastest growth, due to the influx of Latin American immigrants. San Antonio, Houston and Phoenix, for example, grew by an average 1.6%-2.1% annually over the 2000s;
  • While urban growth in Europe and North America may appear muted compared to Asia and Africa, it should be considered against the slow and sometimes negative general population growth in those countries. The most striking case is Eastern Europe, where the total population shrank by 3.2% between 2000 and 2010, and the urban population fell by 1.3%, because of emigration and low fertility rate. For marketers of consumer goods and services, it is vital to identify the urban centres with the fastest growth, as they have the most potential. In Russia for example, Moscow grew by 3.1% between 2000 and 2010, while the country’s population fell by 3.5%.

National population growth compared to fastest-growing city: 2000-2010 %

Graph2

Source: Euromonitor International from national statistical offices/UN.

Opportunities for businesses

  • The fast growth of cities in Asia and Africa fosters a huge demand for urban infrastructure and services, creating opportunities for businesses and investors;
  • Urbanisation makes consumer markets in the developing world more accessible. While rural areas are often difficult to reach due to the poor state of road and rail networks, urban centres are usually located in major transport hubs;
  • Middle class consumers reside almost entirely in large urban centres, where government offices, businesses and universities are located. This makes large cities the natural market for consumer goods and services aimed at middle and upper income households.

Yet rapid urban growth also creates risks:

  • Many cities in the developing world are expanding rapidly without adequate urban planning and infrastructure. Large parts of the urban population reside in informal settlements and slums. This increases environmental and health hazards, as the January 2010 earthquake in Port au-Prince, Haiti, demonstrated. The city, whose population grew by 33.6% in 2000-2010 according to UN figures, was vulnerable to natural disasters because of its inadequate power and water systems, and poor building standards;
  • Rapid growth can also create polarisation between rich and poor. Acute social inequality can turn cities into hotbeds of crime and social unrest, which add risks to the business environment.

Consumption patterns depend on the drivers of growth

  • According to a 2009 UN report, natural population growth accounts for most of the increase in urban populations globally. In Latin America, Africa and South Asia, natural population growth contributed about 60.0% of urban growth in the 2000s. Migration – from rural areas or other cities – accounted for an additional 20.0%, while 20.0% came from the incorporation of rural settlements into cities due to urban sprawl. In advanced economies, the weight of international immigration is higher, estimated by the UN at 33.3%;
  • A very different situation exists in China and several other Asian countries, where urban population growth has been driven primarily by rural migration to cities. Experts estimate that rural migration and the incorporation of rural settlements in towns accounted for more than 80.0% of urban growth in China between 2005 and 2010;
  • Migrants to the city are more likely to send part of their income to families in rural areas or other countries as remittances. This limits their purchasing power and propensity to spend, especially on luxury goods and services. However, the needs of migrants creates a market for services such as communications and financial transfers;
  • Consumers who were born and raised in cities have other preferences from rural migrants. They are more likely to spend on discretionary goods and services, from food to entertainment.

Prospects

Asia and Africa will continue to lead the world’s urbanisation trend:

  • The urban population in the Middle East and Africa will grow by 34.4% between 2010 and 2020, the fastest in the world; Asia Pacific’s urban population will increase by 21.4%, Latin America by 14.9%, while the lowest growth at 0.0% is expected in Eastern Europe;
  • By 2015, Mumbai is set to become the world’s biggest city with a population of 15.7 million. It will be followed by Karachi (15.2 million);
  • According to UN estimates, in 2025 China will have 140 cities with a population over one million, compared with 109 in 2010. This growth will be driven by rural migration;
  • In India, the UN estimates that urban growth will take the form of suburbisation, and the fastest growth is expected in intermediate cities of under 500,000 in the vicinity of the Indian metropolitan cities.
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