Session 3: Building Effective Cities for Growth

Professor Sir Paul Collier began by stating if rural livelihoods are Africa’s past, cities are the future. They bring people and firms together, and this density unlocks the potential for enhanced creativity and efficiency. Statistically speaking, each time you double the size of a town or city, you raise the productivity of those in it by 5-10%. But when we break down the numbers, we see that some cities have a much stronger relationship between size and growth, while others have none at all. The link depends on policy.

The fact that Africa is less than half way through its urbanisation is a great advantage to build efficient, effective modern cities. Africa’s cities are also developing alongside Africa’s natural resource boom. This is also opportune, because the growth from resources is unsustainable, but if these resources are invested in reliable sources of long-run growth can build growth for the future. Efficient cities, and human capital development through education, are the best investment opportunities out there.

Building efficient cities is difficult, though. So far, African states haven’t succeeded in building efficient cities, and there’s a risk that the second half of Africa’s urbanisation will be like the first.

Urbanisation involves three distinct urbanisation process around three sets of assets. The first set of assets is infrastructure, and these investments are made by the government (local or national). The second set of assets is housing, in which investments are made by households; typically in a developed economy, half the capital stock is housing, so this is hugely important. The third set of assets is commercial, invested by firms.

The productivity depends on the complimentarity between these three sets of assets; but the government only controls infrastructure. Of course, the government can influence housing and commercial investment through regulation, but a lot is still uncontrollable. Thus, the success of urbanisation depends on government’s actions, and the actions of households and firms.

In most African cities, households have been the first mover in the investment process. The second mover has been business, and the last mover has been the government putting in infrastructure. This is disastrous, as people arrive in cities to inadequate, inefficient, dangerous infrastructure which cannot be conducive to productivity and growth. The right order is that the government works first to put in place infrastructure, before households move on mass.

Informal settlements such as slums may feel crowded, but they in fact have low economic density: people live in single-storey dwellings, with very low incomes. Whereas a city’s density should be greatest in the centre, gradually reducing towards the periphery like a pyramid.

How can cities regulate to encourage dense, pyramid-like, cities? Cities should target- instead of single-storey dwellings and separate commercial buildings- three to four storey buildings, with shops on the ground floor and houses above.

The second important ingredient is proper regulation. This does not, in fact, mean tight careful regulations like those seen in colonial times (and generally retained since then). Tight regulations leave no opportunity for poor households to comply, and so informal housing proliferates. The informality of poor housing also precludes poor people from obtaining land and property rights, and hence mortgages and other forms of finance. Rental income tax is also precluded from landlords with informal dwellings. Regulations must attempt to facilitate the integration of the poor into the formal housing market, through revising them downwards as far as safety allows.

What about infrastructure? For low and middle income cities, buses are the only way forward. These must be coordinated with regular, reliable schedules, and infrastructure such as bus lanes- which are rarely implemented in Africa. Private individuals invest in cars and motorbikes in a way unmatched by the government’s investment in buses, although the government can never build enough roads for private transport to deliver efficiency.

Mr. Richard Kikonyogo, Stategy Management Officer at Kampala Capital City Council discussed the Ugandan context. He stated, in Kampala when we talk about economic clusters, in their current form, we see natural clustering in transport, artisan workshops, retails, restaurants and bars. But in its current state Kampala is economically unsustainable: the central government fundamentally drives its economy. Meanwhile, our economic hubs tend to have poor infrastructure and facilities, and are congested and spread congestion further; they tend to have poor customer service and no standardisation; they, like the government cluster, in fact, tend to be hugely informal; they are overwhelmingly user-centric, grounded in immediacy and daily survival rather than any long-term planning. That’s not to say that they have no organisation or systems- legal systems are in place, for example, but they engagement with these tends to be difficult.

As a result of the situation in Kampala, we have insecurity and hazardous safety, social unrest, low levels of innovation. If these trends continue, there is a risk we will have an ungovernable, unserviceable city with an awful environmental footprint. This city will have 8-15 million people, and one of the youngest populations in the world. The changes Kampala must make will demand behaviour change, which we don’t yet understand how to achieve.

Thirdly, Mr. Steve Akuffo, Commissioner of the Ghanaian National Development Planning Commission asks – Cities are agents of economic change. But how to we make sure that change is as positive as it can be? Although Accra was one of the first cities in Africa to have a master plan, its development has always combined the formal and the informal. Our city underwent some rapid burst of population growth, at which points much development was sporadic and plans weakly implemented. A central problem is a lack of effective, affordable housing, while large middle class houses are encroaching on potential land for their development and livelihoods.

Finally, Mr. Horatio Max Gorvie, an Engineer in Freetown, stated that his city is overpopulated, with seriously inadequate urban services, from roads to water and sanitation to public education. They followed the path described by Paul Collier earlier, whereby households invest in migration to the city in advance of government investment in urban infrastructure.

An interesting discussion then followed. A respondent asked: Is it infrastructure, or planning, that needs more attention? Collier responded: In order to implement plans, a tax base is needed, and the most hopeful source of revenues is the appreciation of land values. In Africa this value rise has been captured by individuals owning land (especially the political class), rather than the government for public spending. The second question posed the following: If someone moves from A to B, it is because B looks more attractive. Shouldn’t we, then, seek more equitable distribution of resources between A and B, to prevent overpopulation and crowding in cities? Collier responded: There’s always a hierarchy of cities within a country, and having a network of efficient cities can be more effective than having one ungovernable mega-city.

By Sally Murray, Country Economist, IGC Rwanda