A New Report Reveals the Economic Power of Africa’s Cities

By Jaya Ramachandaran

PARIS | ABIDJAN | ADDIS ABABA (IDN) — Urbanisation enhances gross domestic product (GDP), finds a new report by the Sahel and West Africa Club (SWAC/OECD) in partnership with the United Nations Economic Commission for Africa (ECA) and the African Development Bank (AfDB).

Africa’s Development Dynamics 2022 The Economic Power of Africa’s Cities analyses data from four million individuals and firms in 2 600 cities across 34 African countries. It claims to offer the most extensive assessment of the impact of Africa’s cities on social and economic outcomes.

The report finds that urbanisation in Africa contributes to better economic outcomes and higher standards of living, with cities notably outperforming national averages across most socioeconomic indicators including the share of skilled jobs, wages, education and access to service and infrastructure.

Speaking at the virtual launch on April 26, Dr Ibrahim Assane Mayaki, SWAC Honorary President and CEO of AUDA-NEPAD, said: “Africa’s cities […] have maintained their economic performance despite growing by 500 million people over the last 30 years, providing several hundred million people with better jobs and improved access to services and infrastructure. This in a context of very limited public support and investment is probably one of the most underappreciated achievements of African cities.”

In her welcome remarks, Edlam Yemeru, acting Director of ECA’s Gender, Poverty and Social Policy Division, said: “Africa’s urbanisation is a game-changer. The shift is not just demographic but is also reshaping economic and social outcomes substantially. Cities must therefore be placed at the core of national economic policymaking.”

Benefits of urbanisation are:

  • Improvement in GDP growth. Approximately 30% of Africa’s per capita GDP growth over the last 20 years has been due to urbanisation and the agglomeration economies generated.
  • Economic transformation. Skilled workers account for nearly 36% of total workers in urban areas while in rural areas, they make up just under 15% of the workforce.
  • Enhanced access to financial services. Approximately 49% of urban households have a bank account compared to only 17% of rural households.
  • Higher education levels. The average urban dweller receives 8.6 years of formal education, while their rural counterpart attends school for only half as many years.
  • Cities benefit rural areas. Rural areas close to cities perform better than remote rural areas in terms of employment, education, access to finance and infrastructure. For example, the share of rural households that has a bank account is twice as high among rural households that live within 5 kilometres of a city as compared to those that live 30 kilometres from the closest city.
  • Clusters of cities provide new opportunities. Five out of six major African urban clusters cross national borders, providing new pathways for economic development and regional integration.

Nevertheless, the report notes that economic and political constraints continue to limit the potential of cities to contribute more meaningfully to economic growth and social development, running the risk of leaving many people behind. It further identifies an urgent need for timely data and new locally tailored approaches to meet the existing and emerging challenges of African cities.

Against this backdrop, the report proposes actions that policy makers can take to maximise the benefits of urbanisation and unlock the full economic potential of Africa’s cities:

  • National governments should anchor cities in national development and economic planning through better co-ordination of national and local development policies, by leveraging cities as drivers of development and investing in infrastructure that connects cities and increases productivity.
  • National governments should empower local governments by considering them as equal partners in shaping economic development, allowing city authorities to manage their investment decisions and build their skills.
  • National governments should boost local investment capacity through improved finances by implementing predictable and stable intragovernmental transfers, increasing local revenues through taxes, tariffs and fees, and facilitating greater access to debt financing.

In his closing remarks, Mr. Solomon Quaynor, AfDB Vice President for the Private Sector, Infrastructure and Industrialization, said: “Urbanisation is one of the most important transformations the African continent will undergo this century.” [IDN-InDepthNews – 29 April 2022]

Image source: UNECA

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