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Ideas for growth
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Ideas for growth

What a rapidly urbanising Africa can learn from China’s experience

The parallels between Africa and China’s urbanisation trajectories could offer policymakers potential policy design lessons to learn from. For example, some of China’s recent successes in managing urbanisation, if adequately adapted to the unique and diverse African context, could potentially help the continent’s burgeoning city growth become more sustainable and equitable – but only with careful consideration of local circumstances.

Africa’s urban growth is set to move at a tremendous rate and scale between now and 2050. By 2035, over 50% of the continent’s population will be living in cities; by 2050 the urban population will be twice as large as it is today. In Africa’s biggest city Lagos alone, growth is projected to be the equivalent of 77 people moving there each hour between now and 2030. This speed of urbanisation is nearly unprecedented – except for one other place: China. Forty years ago, 80% of China’s population was employed in rural agriculture. Today, 60% live and work in cities. Within a short period of reforms to open up China’s economy after 1978, approximately 50 million people moved out of rural agriculture and into cities.

Although similar in pace and scale, China and Africa’s urbanisation experiences have had very different outcomes. China’s urbanisation has been accompanied by industrialisation, productivity growth and ultimately, economic growth for the whole country. Between 1978 and 2009, the country’s aggregate GDP grew on average by 10% annually – the equivalent of doubling the national income nearly every seven years. Across most of Africa, however, despite rapid urbanisation, industrialisation has been largely limited, and so has economic growth.

Given the recency and similar trajectories of the two regions – China’s shift to urbanisation came not too long ago and Africa is still relatively new in its urban transition – can African policymakers learn from the Chinese experience? It is, of course, clear that Africa and China are very different: Africa is a large and diverse continent made up of 54 countries, while China is one country, albeit a very large one with subnational economic and institutional variation. Each country has its own specific economic, geographical, historical and institutional compositions. Thus, it is only expected that there is no single policy approach that can be drawn upon and that will work for an entire continent.

Yet, on studying China’s urbanisation experience, some broad policy lessons can emerge, both in terms of what worked and what should be avoided. We explore this in much more detail in this framing paper and case studies of four cities – Addis Ababa and Hawassa in Ethiopia, and Nairobi and Mombasa in Kenya – that will be published in the coming months. Here, we provide an initial overview of four potential policy areas where delving deeper into the Chinese experience could potentially highlight some learnings for African policy makers.

The power of urban land 

A city’s most valuable asset is the land it is situated on. As more people move into cities and more investments are made, land becomes an increasingly scarce resource and – all else being equal – rises in value. Where governments have the tools to capture this increasing value, land can also be one of the most important sources of revenue for a city. If further re-invested into the city, it can further increase in value and unleash a positive virtuous cycle.

It is this virtuous cycle of land value capture that the Chinese government was able to take advantage of during their urbanisation. To do this, it instituted important reforms to the land ownership system: prior to the 1980s, the government was the sole owner and user of land, which prevented formal market transactions. However, with the promulgation of the 1988 Constitution, the government’s overall ownership of land was effectively split from use-rights. These use-rights could then be auctioned off to urban dwellers for a fixed period of time (usually 40-70 years) to develop the land. In addition, as the government remained the ultimate landowner, it could withdraw use-rights, with appropriate compensation, where it needed the land in public interest.

This major reform in the land system had two main effects: first, it allowed for a more market-based system to allocate land for more efficient and valuable use, without offering full private rights over it. Second, the revenues from the auction system allowed local governments to capture land value and further invest in infrastructure for growing cities.

In many African cities, land titles are not easily marketable due to complex land tenure systems, often with numerous overlapping rights and opaque administrative structures. However, in some cases, like in Ethiopia, the government is also the principal owner of land. We use this case to explore how this has affected the growth and management of Addis Ababa, Ethiopia’s largest city, and to study how its differences from the Chinese experience have prevented its government from fully unleashing the power of land to support urbanisation.

Houses, not slums

An important difference in the urbanisation processes of China and Africa is housing: whilst in Africa, the lack of affordable housing is resulting in growing slums, China’s urbanisation process has incentivised the emergence of a thriving private real estate market. In fact, in some Chinese cities, the surplus of housing is so large that they can accommodate four more months to four more years of urbanisation.

However, there are also challenges associated with this model, such as the emergence of so-called ‘ghost cities’, as well as fears of a large property bubble that, if burst, could have negative overall effects for the global economy.

The ability of cities to effectively absorb large waves of rural migrants is key not only from the perspective of liveability but to support firms, as we explore in the case study of Hawassa. We see from the Chinese experience the importance of creating incentives for both public  and private actors in the development of housing. Furthermore, it also requires financing arrangements that unlock capital to support this development. Although a further challenge with China’s model is that this has resulted in more high-income housing development. However, the emergence of so-called urban villages ensured there was sufficient affordable housing for lower income residents too. The case study of Hawassa, with its continually growing housing gap, highlights some of the many challenges that African cities face in ensuring an adequate supply of affordable housing. This gap has further knock-on effects on worker productivity, and ultimately on a city’s overall competitiveness.

Proactive investment infrastructure

A combination of mostly well-managed urban density coupled with large investments in transport infrastructure has helped China create some of the most well-connected cities in the world. Most of the movement in these cities takes place on road networks. China’s investments in roads has been immense: by the end of 2010, it had 74,000 km of roads, second only to the United States. China has also invested massively in public transport. For example, in 1999, China had no high-speed rail networks, but by 2010, with 7,400 kms, it had more than anywhere else in the world. Furthermore, China focused not only on hard infrastructure, but on enhancing the institutional management around it too. We compare these actions with recent reforms in roads and transport sector in Kenya as part of our third case study on Nairobi.

It is important to note that in this sector, there are also important lessons in what to avoid: China’s large capital investments have, for example, led to significant environmental stress. Further, we must remember that China was able to finance its large capital investments through the aforementioned land value capture and other mechanisms. Many Chinese firms are now embarking on similarly large investment projects across the African continent. However, the much weaker fiscal capacity of many of their counterpart governments in Africa is leading to growing concerns about unstainable debt – another example of how translating models across different contexts may lead to adverse outcomes.

Decentralisation, experimentation, and scale

One of the most pertinent areas where Africa can look for learnings is in the way the Chinese national government empowered its cities to experiment and take risks in developing policies to better meet the needs of their local contexts. This involved effective decentralisation, not only of administrative but of fiscal functions as well. Furthermore, local public officials were incentivised to experiment and their performance was monitored closely. This has led to some very successful outcomes, which have subsequently shaped much of the Chinese urbanisation process. For example, the aforementioned land reforms enshrined in the 1988 Constitution, were first tested at a local level in Shenzhen.

Across Africa, this type of decentralisation may be present on paper but has not been completely implemented in practice. In 2010, therefore, Kenya decided to institute a new Constitution with an aim of ensuring the actual implementation of a decentralised governance structure. Although the process of devolution is still ongoing, we explore what this has meant for city management using the case of Mombasa, Kenya’s second biggest city, in our fourth and final case study. Here, we show that in both countries, changes in fiscal relations between the central and local governments have impacted the incentives faced by the latter and the resources available for pursuing their goals. But while China’s decentralisation reforms unleashed the actions of frequently formidable “local developmental states”, Kenya’s decentralisation has created fiscal imbalances between national and county governments that have been unfavourable for urban development in the country’s largest cities.

Compare with caution

This blog has focused on the Chinese urbanisation experience and what learnings this may present for rapidly urbanising African countries. Comparisons have been drawn since both regions having faced (or as in Africa, are currently facing) hitherto unprecedented levels of urbanisation. However, we do this with caution as it is important to recognise that Africa is an extremely diverse continent and every country, and perhaps every city, will need policies and investments that are best suited to their own conditions.

Disclaimer: The views expressed in this post are those of the authors based on their experience and on prior research and do not necessarily reflect the views of the IGC.


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