Experts in Conversation: Africa’s urban future – part 1
To mark the release of WBEF’s Superstar Cities of Africa report later this week, we spoke with Andrew Alli about why investors should consider the rapidly urbanising continent.
Far from homogenous, Africa is a vast and diverse continent. Though some cities make strikingly outsized economic contributions, African cities are often overlooked en bloc. How can Africa’s urban centres realise their undoubted promise?
Kay Pitman, Thought Leadership Specialist, World Built Environment Forum
16 December 2021
‘A superstar is something that punches above its weight’, explains Sean Ellison, Research Manager with Cushman & Wakefield, and author of The Superstar Cities of Africa report. ‘This could be an individual or a company, sector of the economy or region – in the case of this research, it’s a city. When you’re trying to judge a city, is that you must separate national factors like legislation and security from those the city itself can control. Looking at cities in Africa, we found a group of cities that exhibiting superstar effects and are accounting for an outsized output’.
‘Africa is a vast and diverse continent. While the cities in northern Africa have long histories, many of those in sub-Saharan Africa are less than 100 years old. Despite their relative youth, many cities in sub-Saharan Africa have populations far beyond one million’, says Professor Jason Mochache, Associate Professor of Urban and Regional Planning at the Technical University of Kenya, Nairobi. In South Africa, the cities were organised based on a different system of growth. Cities were divided. This is also evident in other colonial cities. For example, Nairobi was a colonial city up until the 1960s, with a population less than 400,000. Today its population is over four million.
The challenges and opportunities associated with this mega growth are evident in the population: these are youthful cities. There is a huge potential labour force and potential for education and investment. At the same time, a large proportion of the population are not employed or do not have jobs that meaningfully engage them, and this has implications for security. Jason explains, in Lagos, Abuja, Kinshasa and Dakar, you’ll find the same patterns: a youthful population which is under employed and needs employment.
The scale of investment needed in African cities are quite significant, explains Jemima. Cities are challenged to finance themselves, and greatly rely on national government. Many national governments have their own issues: many are in depressed fiscal positions because of COVID-19 and have rising debt and an inability to raise revenues nationally through taxation. Many cities and municipal governments struggle with budget constraints and the inability to raise capital through capital markets because they lack a pipeline of ‘bankable’ projects.
A variety of instruments are required to meet city financing needs. Commercial finance institutions in Africa are not designed for infrastructure financing because the kinds of deposits they hold are short term in nature. ‘In Africa, we need to deploy investment solutions that help cities to mobilise domestic finance and also attract foreign and external finance’, says Jemima. ‘There is a place for concessional finance models, including grant and interest-free loans, and for blended finance instruments that combine debt and equity or use catalytic capital. Concessional finance is particularly relevant, as most infrastructure investment tend to be long term in nature, and the ability of users in Africa to pay for services tends to be limited.’ Investment by development finance institutions is also important because it can mobilise additional private capital. Development institutions can also provide grant funded technical assistance to prepare projects, or to help with designing facilities that invite additional capital.
‘The flows of foreign direct investment (FDI) in Africa are very low, at around 2-4% of global FDI flows. These flows have further contracted as a result of COVID-19 - by as much as 16% in 2020. We need to diversify investment sources’, explains Jemima. In Kenya, pension assets are a sizeable portion of GDP, and tend to be underutilised. More fiscal decentralisation could also help African cities, by removing jurisdictional barriers to FDI and domestic capital markets.
To realise the transformative potential of Africa’s cities, we must consider the climate risk to cities
Senior Manager for Capital Markets, FSD Africa
Mthobisi Masinga is Sustainability, City Resilience and Stakeholder Business Relations Manager for the Green Building Council of South Africa. He states: ‘We are still fighting the basics. When we talk about superstar cities and cities of the future, we have to keep that in mind.’ Thinking about sustainability can help to bridge the gap in service delivery, and to develop smarter cities and spaces. The right enabling environment and the right physical and fiscal strategies can empower people. ‘We need to start looking at climate action plans and their implications for development,’ Mthobisi states. The corporate environment wants to invest more in green and governments are increasingly considering sustainability from an operational and procurement perspective. ‘We want to have cities that are resilient, healthy and sufficiently robust to deal with the shocks that will come over time,’ he explains. ‘We are going through a green transition now. We need to upskill our cities and citizens and to better equip our infrastructure.’
Elizabeth Wangeci Chege is CEO of WEB for the Planet and Vice Chair of World Green Building Council. She says ‘we have a lot of people in African cities just trying to get their basic needs met. We tend to forget that there’s an opportunity around smart: looking at technology and using data to make better decisions.’
‘To realise the transformative potential of Africa’s cities, we must consider the climate risk to cities’, states Jemima Gathumi, Senior Manager for Capital Markets at FSD Africa. ‘According to the data on climate change vulnerability, nearly 80% of those 100 cities considered the ‘top cities’ in Africa are extremely vulnerable to climate change. We must build cities that are compact, connected and clean, if we are to secure a resilient and prosperous future for Africa.’
‘People often only think of commercial property as real estate’, explains Elizabeth. ‘The built environment is at the core of people’s functioning. We live in buildings and we use the built environment to move around. There is no option but to reach net zero carbon and net zero waste. A lot of people say “there is no planet B”, there is no second Africa either. To start building better, 100% of the financing for development has to be for sustainable development.’ While the impact of the pandemic was acutely felt by many, some cities state their wish to return to business as usual. Elizabeth states ‘there is a great opportunity to think about how cities function for people. To talk about carbon emissions, health and wellbeing, resource circularity, and culture as part of the recovery’. Vivian Ombwayo MRICS, Director of Research and Valuation at Broll East Africa agrees: ‘From building materials, all the way through to city financing, we have to be cognisant of the green aspect.’
A recent webinar on the post-pandemic future of infrastructure, jointly hosted by WBEF and the World Economic Forum, touched upon topics ranging from finance and sustainability to systemic injustice. Panellists discussed importance of infrastructure in creating a more sustainable and inclusively prosperous world. Here are some of the key points of consensus.
There is a great opportunity to think about how cities function for people. To talk about carbon emissions, health and wellbeing, resource circularity, and culture as part of the recovery
- CEO, WEB for the Planet and Vice Chair
World Green Building Council
The past 18 months saw the first pan-African recession in 50 years. Yet the outlook for the continent is one of optimism, with the African Development Bank forecasting a swift and sustained recovery. Africa, the world’ youngest continent, will soon only trail Asia in terms of global urbanisation. But making good on this enormous potential will require investment. In this webinar we ask: what makes a superstar city? To what degree is the potential of Africa’s cities untapped?