Africa’s urbanisation and structural transformation
We don’t know the name, or the place and exact date of birth, of the baby who changed world history. My guess is that she was born somewhere in Africa in 2007. Not that she cared as she lay there all wrinkled and raging at the disagreeable turn her life had just taken, but it was thanks to her that for the first time ever, the world had more urban dwellers than country folk.
Africa itself won’t pass that landmark until sometime in the 2030s, but when you look at the numbers rather than the percentages, you can see why this year’s African Economic Outlook from the OECD Development Centre, African Development Bank, and UNDP is focusing on “Sustainable Cities and Structural Transformation”. In 1990, Africa was the world’s region with the smallest number of urban dwellers: 197 million. Now it has more than twice that at 472 million, and the urban population is expected to almost double again between 2015 and 2035. By 2020, Africa is forecast to have the second highest number of urban dwellers in the world (560 million) after Asia (2348 million).
Most of us, including many of the people who live in them, probably have a negative impression of African cities. Lagos-based Bayo Olupohunda warns that “intractable traffic gridlock, breakdown of law and order due to social exclusion, amenities crises are the signs of population apocalypse…”. Likewise, The Guardian is running a series on cities just now, and the headlines of its articles about African metropolises like Kinshasa and Nairobi talk about chaos and pollution.
It’s worth noting, though, that African urbanisation isn’t mainly due to the megacities we always hear about. In fact, between 2000 and 2010, urban agglomerations with fewer than 300,000 inhabitants accounted for 58% of Africa’s urban growth, compared with 29% for those with populations over a million. Nor is it due to rural-urban migration: migration accounts for less than a third of urban population growth in 22 African countries. It accounts for over 50% in only 7 countries (Burkina Faso, Cabo Verde, Lesotho, Namibia, Rwanda, Seychelles and South Africa, whereas it contributed to half of Asia’s urban population growth. The Outlook groups African countries into five types according to their stages in three processes: urbanisation, fertility transition, and structural transformation.
Whatever their individual characteristics, the Outlook, exposes a daunting series of problems facing Africa’s urban areas. In many African countries, a large portion of the urban labour force remains trapped in low-productivity informal services activities, and access to public goods is unequal. Moreover, despite Africa’s slow industrialisation, the costs of environmental degradation are large and increasing, adding to the economic and social challenges of urbanisation.
The speed of the economic transformation could be a problem as well. Some economists are concerned that African countries – and developing countries generally – are moving into the service sector too early in their development trajectory and that this “premature deindustrialisation” may damage future growth prospects by depriving economies of the benefits of industrialisation for sustained growth and economic convergence. For example, if people are moving out of farming into hotel and restaurant work or street trading, especially informal jobs, the sectors they move into are likely to see productivity growth slowed by this influx of cheap labour.
And yet, despite all the readily available negative evidence, the Outlook argues that urbanisation could boost structural transformation – moving economic resources from low to higher productivity activities, essentially from traditional agriculture to manufacturing or services. In part, this view is based on economic history. Cities everywhere have traditionally provided “a large and diversified pool of labour, a more dynamic local market, more cost-effective access to suppliers and specialised services, lower transaction costs, more diversified contact networks and greater knowledge-sharing opportunities, and an environment that encourages innovation”.
They are also ideal for cashing in on one of the trends defining the new economy. Often this is referred to as the “sharing economy”, but as Diane Coyle argued at an OECD seminar earlier this year, “matching” is a better term to describe what platforms like Uber or AirBnB do – they match the demand for something to those supplying it. Cities help firms match their requirements for labour, materials, and premises better than towns or rural area. Larger markets bring more choices and opportunities. Cities also afford firms access to a wider range of shared services and infrastructure because of the scale of activity. Firms gain from the superior flow of information in cities, which promotes more learning and innovation, and results in higher value-added products and processes.
Bayo Olupohunda recognises this, arguing that if well-managed, Lagos could be efficient, “enabling economies of scale and network effects. Furthermore, the proximity and diversity of people as seen in Lagos can spark innovation and create employment, as exchanging of ideas breeds new ideas”. He also recognises that these benefits don’t come automatically though, and that “the availability and quality of infrastructure are at the core of many of the challenges faced by a rapidly urbanized Lagos.”
The Outlook makes the same diagnosis for African cities in general, citing three policy-related issues: public and private actors have not sufficiently upgraded the urban infrastructure; steadily high fertility rates in urban areas have contributed to overcrowding through fast urban growth; and dysfunctional real estate markets have led to the explosion of informal housing. To tackle the problems, governments and the private sector will have to invest twice as much by 2050 as they have since the years of independence, but policies to restrain urbanisation have tended to be more popular than policies to use urbanisation to boost structural transformation.
This may be changing. The Draft Africa Common Position on Habitat III, the Third UN Conference on Housing and Sustainable Urban Development taking place in October, states that Sustainable Development Goal 11 to make cities and human settlements inclusive, safe, resilient and sustainable, “needs to be considered together with goals 8, 9 and 10 on matters relating to promoting economic growth as well as full and productive employment; building infrastructure, industrialization and innovation, as well as reducing inequality within and between countries”.