Archives for posts with tag: McKinsey

Highlights from McKinsey report on “How to Make a City Great”:

-by 2030 60% of the world (5 billion people) will live in cities.

-While cities are world’s economic engines, they also account for the most resource consumption and greenhouse gas emissions.

-The report focuses on what successful leaders do to make their cities great. Cites 3 things:  smart growth (that balances the economy, social conditions, and the environment), doing more with less, and winning support for change by delivering results swiftly.

-Smart growth:  simpler tax codes, focus on clustering industrial sectors in city, invest heavily in infrastructure, train English speakers, constantly set short term achievable goals, adopt regional perspective and collaborate within that region, make planning inclusive (bottom up), build high-density areas (smaller more compact infrastructure), regulate construction projects to build “green” projects, provide opportunities and infrastructure for the marginal residents of the city.

-More with less:  embrace technology, rigorously monitor expenses.

-Win support for change:  be accountable, provide citizens information, build a high-performance team, invest in education, create culture of accountability.

Not surprisingly, there was little ground breaking information in the report. What did strike me was actually how balanced and, in my view, spot on much of the report was (although it was corporately vague and general also). I guess I was hoping it would be actually prescriptive rather than just descriptive couched in prescriptive language. I was looking for it to layout steps and priorities at each stage of development rather than a laundry list of everything cities should be doing (even when doing more with less it’s impossible to do everything). I have an image in my head of representatives from a global corporation equipped with the McKinsey report on Africa sitting down at a meeting with the governor of an African city who has a copy of this city report in his briefcase, and each side being miffed at McKinsey:  the governor annoyed of the portrayal of Africa as a fruit ripe for the picking, where resources can be extracted and consumerism sold, and the corporation disappointed that the governor is demanding infrastructure investment and environmental pledges in exchange for business licenses and trading rights. I guess that’s the nature of soliciting information from a consulting firm.

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I recently had a chance to read McKinsey’s 2010 report on Africa’s economic outlook and another on what, in their view, makes a “good city.” Here are a few things that stuck out to me:

MGI Report on Africa

-Currently there are 52 African cities with more than 1 million people (as many as Europe)

-By 2030 50% of Africans will live in cities (already more Africans (40%) live in cities than Indians (35%), and the continent is not far behind China’s 45%)

-From 1990-2008 African trade with Europe and N. America declined (51% to 28%, and 16% to 15% respectively) while trade with China grew from 20% of total African trade to 28%

-China’s infrastructure commitments in Africa now surpass the World Bank’s (11.6 billion in financing in 2006 and 2007 versus 4 billion from the WB over that same period)

-The African labor force by 2040 is expected to be 1.1 billion (Larger than China’s or India’s, and every continent’s outside of Asia)

-Effective education is still sorely lacking in Africa (test scores have actually declined or stagnated for much of the continent) while its governments spend nearly 20% of their budget on education versus 11% for OECD nations.

-Africa’s largest oil exporting nations (Nigeria, Angola, Libya, Algeria) have dangerously undiversified economies compared to their international peers (Malaysia, Indonesia)

-23% of Africa’s largest resource deals now have an infrastructure or industrialization component, up from 1% in the 90s. For example, China’s 2008 deal with the DRC for cobalt and copper included 2.9 billion to construct 3200 km of railways, 31 hospitals, 145 health centers, and 2 universities (I’d like to know how much of this has been completed).

-African daily oil exports to China have quickly risen from 1% in 1995 to 13% in 2008 (the US and Europe receive 30% and 37% of Africa’s oil respectively)

-African governments (65%), private sources (25%), and foreign aid (10%) combined are currently investing around $72 billion per year in new infrastructure across the continent. Still the continents infrastructure is only somewhere between one half to a fifth of Russia, Brazil, China, and India’s. The report estimates that the continent needs to invest $118 billion a year to catchup and keep pace with its economic growth ($46 billion more per year than it currently invests). Chinese and private investment could help reach this goal, as both sources are increasingly at double digits rates.

-In 2008 37% of Africans had mobile phones, 39% had access to electricity, and 63% had access to improved water sources, versus 48%, 84%, 89% average for each those categories in Russia, China, Brazil, and India.

A few thoughts on the report:  it’s troubling how critically lacking Africa is in basic education compared to other areas of the world…this lag is what I would predict to continue to create instability in many African countries–under educated citizens are more likely to be easily manipulated by politicians who play up “tribal” or other divisions to instigate violence. This lag can be traced to the state colonialism left Africa at independence when many African countries (like the DRC in particular) had less than a dozen university educated citizens in the whole country. Now many of the few educated Africans leave the continent for better opportunities for them and their families in America and Europe, creating a serious brain-drain—I’m curious if this recent narrative of “Africa Rising” is bringing many of those doctors and business people home like what happened in Rwanda once Kagame stabilized the country and opened it up for businesses. The article also seems to find optimism in Africa’s rapid urbanism primarily because of the consumer focused business opportunities it creates when so many potential customers are bunched closely together in a city. Is this what cities are to businesses? Places to export resources and sell people cheap stuff? Doesn’t that sound like the model of the slave trade in west Africa? Why don’t business perspectives like McKinsey see cities as places where services can be more effectively delivered or hubs for better education that can lead to more stable nations and thus better business locations? Again it’s going to come back to well educated and savvy leaders in Africa who can make business deals that provide substantial infrastructure and education improvements in exchange for resources. Highlights from McKinsey’s city report will be up soon.

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