Well-managed cities offer huge promise for Africa

Professor Mthuli Ncube

The economies of scale and agglomeration offered by Africa’s expanding towns and cities – including a concentrated pool of employees, larger local markets and lower transaction costs – mean that urban centres have the potential to become engines of growth and development, writes the African Development Bank’s Chief Economist, Professor Mthuli Ncube

Africa’s urban population is growing fast at 3.3 percent per year, the highest annual rate in the world. If current trends continue, by 2050 more than half of the continent’s population will be living in urban areas. This means that African towns and cities will be home to 1.2 billion people – nearly a quarter of the world’s urban population. Sub-Saharan Africa in particular has experienced an unprecedented rate of urban growth, which is expected to continue, bringing with it both benefits and challenges for municipalities and central governments alike.

During the past 50 years, Africa’s centres of economic activity have shifted markedly from agrarian to urban areas. The pull of better employment opportunities has been a significant driver of rural-urban migration, often at the cost of rural economic decline. Conflicts and civil wars in a number of African countries have accentuated this trend, as populations flee to towns in search of safety. Each year, 14 million more people join the urban population in Sub-Saharan Africa, with the vast majority (70 percent) living in informal settlements and slums.

According to UN-Habitat, it is estimated that Sub-Saharan Africa has the largest slum population in the world, with 199.5 million (or 61.7 percent) of its urban population living in such areas. These slums are characterised by shelter deprivations, overcrowding, little or no access to a safe water supply and sanitation, lack of personal security, and inadequate basic social, education, and health facilities. This represents a massive challenge for municipalities and central governments in their endeavours to meet the Millennium Development Goals (MDGs).

Despite the growth in slums, reports continue to highlight the positive links between economic development and urbanisation. Indeed, cities have played a pivotal role in sustaining economic growth in the continent over recent years, contributing about 55 percent to total GDP. If managed properly, towns and cities in Africa could generate as much economic output as those in other parts of the world (about 90 percent of GDP in the developed countries).

Expanding towns and cities offer unique opportunities to leverage economies of scale and agglomeration effects. They offer a larger manpower pool, a bigger local market, easier access to suppliers and specialised services, lower transaction costs, and an environment that encourages innovation. This means that goods can be produced more cheaply, public spending on infrastructure and services becomes cheaper per capita, and the construction of urban ICT networks is more financially viable.

Thanks to these effects, a city like Nairobi, home to around 5 percent of the national population, produces over 20 percent of Kenya’s GDP. Similarly, other towns and cities in Africa are more productive than rural areas. Urban centres are truly potential engines of growth and development. The issue then is how to harness and leverage the positive social and economic benefits that towns and cities can generate if properly planned and managed. And how to stop urban sprawl and slum areas, reduce pollution levels, and lift urban populations out of poverty and onto a trajectory of more equitable socio-economic conditions.

Improving living conditions in cities means framing a coherent urban agenda that will provide the right incentives for migration and suitable conditions for liveable and productive cities. This includes halting the growth of slums and informal settlements; focusing on the efficiency and capacity of municipalities to deliver basic social amenities; and developing an infrastructure commensurate with current and future population growth. There must also be better management of environmental conditions in cities; for example, by ensuring the safe disposal of both household waste and industrial/ toxic by-products, by cutting pollution levels through greater reliance on renewable energy sources, and by reducing traffic and industrial (CO2) emissions.

In short, a combination of land policy and planning, housing policies, and basic services coverage are key to a more equitable and inclusive urban expansion. The policy challenge is to promote convergence in living standards between villages, towns and cities. Policy decisions will be more effective if based on strategies for broad economic areas that integrate towns and cities with their surrounding rural hinterlands.

It is estimated that the demand for investment in basic urban infrastructure on the continent is in the range of $15-20 billion per year, while the demand for urban housing investment is $20-25 billion. This is far in excess of what African governments can realistically provide. The international donor community, multinational development institutions and financial development banks like the African Development Bank (AfDB) can play a role not only by investing directly in urban infrastructure projects and programmes, but also by leveraging investments from the private sector and helping to support public-private partnerships.

As we have seen, however, the challenge of urban development in Africa is not solely about finance – the core issues are institutional in nature. In this respect, the capacity and efficiency of those institutions responsible for developing and managing infrastructure and encouraging investments also need to be strengthened.

In 2011, the AfDB adopted a new urban development strategy, with the vision of making African towns and cities: (i) healthy environments for citizens to work and live in; (ii) competitive and bankable with a strong development base; and (iii) well governed.

The three pillars of this strategy are founded on the AfDB’s strengths and established track record in providing support. First, infrastructure delivery and maintenance, involving a twin-track approach targeting improvements to physical infrastructure and capacity-building in the development and management of that infrastructure. Secondly, urban governance, the objective of which is to build good governance systems and strengthen the capacity of municipal authorities promoting a culture of transparency and fiscal self-sufficiency. And finally, private sector development.

In order to scale up its support for urban development, the Bank group engages in partnerships with other major players (for example, World Bank, Cities Alliance, UN-Habitat, the Millennium Challenge Corporation), financial development banks and bilateral donor partners. The objective is not only to leverage additional resources, but also to promote coordination and harmonisation of activities, programmes and projects.

About the author:

Professor Mthuli Ncube is Chief Economist and a Vice-President of the African Development Bank Group.


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