05/02/2019 – Infrastructure Series / Urbanisation / Africa

City limits: Africa’s urbanisation challenge

Africa has the fastest urban growth rate in the world, yet the continent is ill-equipped to accommodate this swift influx. Robert Muggah (Co-founder of think tank Igarape Institute and digital risk firm SecDev Group), and Katie Hill (Senior Advisor at impact investment firm Omidyar Network and advisory firm Dalberg Global Advisors) explore the infrastructural challenges faced by urbanising Africa – and how countries should prepare for this rapidly emerging reality.

 

Already home to the world’s youngest and fastest-growing population, Africa is urbanising more rapidly than any other part of the planet. Currently home to 1.1 billion, Africa is expected to see the size of its citizenry double by 2050 – more than 80 per cent of that increase will be seen in cities (and will be particularly concentrated in slum regions). The implications of such turbo-charged growth are hard to fathom. Consider how Lagos – already Africa’s largest city – is predicted to expand by an astonishing 77 people every hour between now and 2030.

 

According to McKinsey, by 2025 there will be 100 African cities that are home to more than one million inhabitants – that’s twice as many as in Latin America. Africa is poorly prepared for such an urban explosion, with the continent’s major urban infrastructure gap of particular concern. Annual national public spending on infrastructure is stubbornly low across the continent, even when compared to other emerging markets. Africa’s countries annually spent an average of 2 per cent of GDP on infrastructure from 2009-2015, against India’s 5.2-per-cent spend and China’s 8.8 per cent. 

 

Not surprisingly, African cities often succumb to fragility. Some 60 per cent of all urbanites live in over-crowded and under-serviced slums. Around 25–45 per cent walk to work due to lack of affordable transport. Given the turbo-urbanisation dynamic playing out, such inadequate conditions could easily deteriorate further.

 

Another looming problem is that African cities are set to expand during a period of unprecedented climate stress. Africa’s urban areas are likely to suffer disproportionately from climate change, as the region as a whole is warming up 1.5 times faster than the global average. The strain on basic services and natural resource endowments – as Cape Town’s water crisis has demonstrated – is set to increase. If Africa does not find a way to build sustainable cities with greater access to private capital, then they risk becoming both unliveable and indebted. 

 

Over the next two decades, African cities will need to do much more, with much less. While national governments will need to step up and implement regulations to raise public finance, African mayors, city residents and businesses cannot afford to wait. A new mindset is urgently required. But this first requires facing up to the scale of the challenge.

 

Mind the gaps 

 

The continent’s urban infrastructure deficits are daunting to say the least. Africans will need to spend US$130–170bn annually to meet the continent’s basic infrastructure needs, yet the region is already facing financing shortfalls of US$68–108bn, according to the African Development Bank. Roughly two-thirds of the investments in urban infrastructure required by 2050 have yet to be made, according to the Brookings Institution, an American non-profit. To complicate matters, the majority of current financing comes from the public sector, as instability and regulatory confusion often deters private capital. Total capital investment in Africa from 1980-2011 averaged just 20 per cent of GDP, says Brookings – contrast that to the 40 per cent of GDP in the case of East Africa during a period of rapid urbanisation. Closing such gaps could boost GDP growth per capita across the continent by 2.6 per cent annually.

 

It is not just the urban infrastructure gap, but also the lack of city planning, inefficient land use, regulatory blockages and vested interests that are holding African cities back. The result is sprawling, fragmented and hyper-informal cities. Within such a context, it is scant surprise that African cities prove remarkably expensive to live in. According to the World Bank, African cities are 29 per cent more expensive overall than non-African cities with similar income levels. Locals pay a whopping 55 per cent more for housing, 42 per cent more for transport (including both vehicle prices and transportation services) and 35 per cent more for food. All of this slows down business too, slashing company productivity by close to half, while dramatically increasing the input costs of consumer goods.

One key reason for Africa’s infrastructure gaps is that municipal governments are cash-strapped and struggle to generate tax revenue. City authorities often lack the political discretion and financial autonomy to take action. Take the case of Dakar in Senegal, which was prevented by the central authorities from selling municipal bonds to investors back in 2015, resulting in the loss of US$40 million of capital. Now compare this to US cities, which raised more than US$111 billion-worth of municipal bonds for infrastructure projects in just two months in 2017. Cities in Africa have raised the equivalent of just one per cent of that amount – over the past 14 years.

 

Africa’s national and municipal leaders have no time to waste. They need to take the right steps to attract private investment for urban infrastructure. Foreign and domestic investors want the same thing: political and economic stability, predictable regulatory environments, stronger property rights, and credible plans and project pipelines. Yet most such basic preconditions are still in short supply across Africa. Without co-ordinating agents – be they forward-looking firms, large investors or third-party agents that de-risk investment – African cities are unlikely to take off.

 

Harnessing informal innovation 

 

The real question is: How will African cities absorb double their population while using just half the resources over the next 20 years? And how can this be done while improving overall quality of life? The good news is that the solutions are potentially closer at hand than many assume. A major part of the answer lies in employing new (and home-grown) technologies, building smarter infrastructure and harnessing the dynamism of the informal sector.

 

African cities are only just starting to reap the dividends of the Fourth Industrial Revolution. Mobile phone penetration is connecting all corners of the continent, and data generated from hundreds of millions of devices and cheap computing power can potentially improve urban living. Technological innovations such as solar photovoltaic systems, battery storage, IoT sensors and even satellites are rapidly falling down the cost curve. One outcome of this can be seen in Kenya, which recently became the first country in sub-Saharan Africa to launch a satellite into space. 

Despite their many challenges (or perhaps because of them), African cities are dynamic and creative. Most urban services – whether transport, energy, water, waste management, telecoms, housing or public security – are provided by informal, independent private providers. Consider public transit systems: according to WhereIsMyTransport.com, 70–90 per cent of public transit rides in African cities are supplied by informal, independent operators. These operators provide a vital – albeit sometimes dangerous and costly – service to citizens. Or consider Cambridge Industries, which is presiding over Africa’s first waste-to-energy facility in Addis Ababa. In partnership with China’s CNEEC and the Ethiopian government, the firm is supplying 30 per cent of the capital city’s energy needs from 80 per cent of its rubbish (most of which is deposited by local waste collectors).

 

Urban informality should not be construed as a problem, but rather as an asset – and a sign of resilience and agility. When exploring innovative financing solutions, the task for city planners and investors is therefore in maintaining the virtues of informality (demand-responsiveness, job-creation and self-sufficiency) while reducing its vices (unsafe conditions, low-quality services, unfair labour practices, and – at times – inefficiency and high costs for consumers).

 

Smart solutions for sustainable cities

 

There are a number of ways that African cities might start bridging the infrastructure gap. The first is to accelerate investment in technology deployment to achieve smarter urban infrastructure.

 

And many compelling solutions are poised for scale. A shortlist includes Kenya’s Upande, which uses IoT to manage water leakages and delivery; South Africa’s aforementioned WhereIsMyTransit.com, which facilitates routing of transit systems across African cities; Nigeria’s Rensource, which provides distributed solar and replaces polluting diesel generators in homes across Lagos; Nairobi’s Taka Taka, which collects 30 tonnes of waste every day and recycles about 90 per cent of it; Uganda’s CSquared, which is laying fibre optic cable across Kampala, Accra and other African cities; and poa! Internet, which provides affordable public and home wifi across urban slums in Kenya.

 

A major obstacle remains funding. While in the US, for instance, there are dedicated funds committed to scaling urban technology (such as Urban.us and the Urban Innovation Fund), there are no equivalent players in Africa. Despite the rapid growth of ‘impact investing’ in Africa, most funders shy away from companies tackling urban challenges for fear of government interference and higher capital requirements.

 

Another way in which African cities might start bridging the infrastructure gap is by developing comprehensive data analytics that drive smarter decision-making and investments in urban Africa. The good news is that there are growing reservoirs of structured and unstructured data already available from satellites, IoT networks and international and local agencies. The problem is that such data is still largely inaccessible, fragmented and messy. Finding a way to weave this information together could enable more effective and efficient investments, particularly to support the urban poor.

 

Affordable, inclusive developments

 

Reframing the debate on urban real estate development across Africa will also give a boost to infrastructure development. There are, of course, smart cities popping up across the continent – Eko Atlantic in Nigeria, Tatu City in Kenya and Vision City in Rwanda, to name but a few. While offering visions of the future, most of them are failing when it comes to providing affordable and inclusive options for the majority of Africa’s urban residents. Flagship projects that set a new standard for affordability, accountability, economic opportunity and sustainability are what is really required.

 

Achieving the right kind of urban infrastructural developments for rapidly expanding Africa may well hinge on investments being made in essential, cutting-edge research to precisely understand the expanding need. The University of Cape Town’s African Centre for Cities (ACC) is a terrific example of how local scholarship is shaping urban planning decisions. Donors such as the UK government’s Department for International Development (DfID) and the World Bank are already supporting such research, but more is needed. If cities are where the future happens first, then Africans need to invest more in their knowledge capital today. An African Urbanization Fellows programme – attracting the best technologists, urban planners and policymakers – would be a good way to start.

 

Accelerating urban innovation

 

An integrated ecosystem approach can help convert the aforementioned proposals into action. Such platforms already exist across North America, Europe and Asia – now it’s time to establish a platform dedicated to accelerating urban innovation for Africa. Such an organisation would help incubate local African innovations under one roof – acting simultaneously as an investment vehicle, a data platform, a real estate group and a research consortium that partners with municipalities to help them reimagine their future. 

 

By 2050, more than 1.3 billion Africans will call a city home. If they are to live with dignity and seize tomorrow’s opportunities, Africa needs to assemble the greatest minds in urban planning, technology and sustainability today.

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