Beyond the megacity

Africa’s cities are undergoing unprecedented change. From the rapid influx of Africans into bustling urban centres to the new cities that are being built from the ground up, the diversity of cities on the continent is massive. Africa is one of the world’s most rapidly urbanising regions: the World Bank estimates that, together with Asia, it will add 90% of an additional 2.5bn urban dwellers globally by 2050.

The continent’s urban population has been touted as one of its key growth and investment opportunities, yet much attention has revolved around its so-called megacities, defined as those with a population of more than 10m. Lagos, Nigeria’s commercial capital, Cairo in Egypt and Kinshasa in the Democratic Republic of Congo currently fall into this category.

Yet according to research by global consulting firm McKinsey, more than 80 cities in sub-Saharan Africa could be home to over 1m people by 2025. While all of the continent’s cities will have to overcome the myriad challenges associated with rapid urbanisation, their potential is often overlooked when contrasted with their larger counterparts. 

The World Bank’s 2014 World Urbanization Prospects report states: ‘Whereas several decades ago most of the world’s largest urban agglomerations were found in the more developed regions, today’s large cities are concentrated in the global South, and the fastest-growing agglomerations are medium-sized cities and cities with 500,000 to 1m inhabitants located in Asia and Africa’.

Smart-from-the-start cities

Without the legacy of historical infrastructure, and of modest size, these cities arguably have an opportunity to leapfrog more-developed countries in the construction of both smart’ and traditional cities.

The high levels of mobile phone penetration – there are well over half a billion active connections on the continent today – and growing access to the web “will be a core foundation for the potential of cities to run good quality services for citizens and businesses
everywhere,” argues Mary Keeling, IBM’s manager for economic analysis of smarter cities. “The billions of connected devices and sensors will generate mountains of data that hold the potential to be analysed to extract insights in every industry and domain.” The major challenge going forward will be translating raw data that is collected in Africa’s cities and effectively analysing it.

Smart cities – built from the ground up to incorporate modern technology into basic infrastructure – are more novelty than norm, but examples such as Kenya’s Konza Techno City represent an important potential model for replication across the continent. The $14.5bn project, 60km outside of the capital Nairobi, aims to become a technology hub when it is fully completed in 2019. Planners are hoping to capitalise on the burgeoning tech industry in East Africa and entice skilled workers from around Kenya. Highly specialised projects such as this are vital to attracting foreign investment in industries that are highly dependent on FDI for funding.

Future leaders

A number of less high-profile and ‘off the radar’ cities are showing signs that they could be future economic leaders in Africa. Côte d’Ivoire’s economic and political capital, Abidjan, is well on its way to establishing itself as a city of tomorrow. “Despite concerns over security right now, following the attack on nearby Grand-Bassam, I’m advising clients to take a close look at Abidjan in Côte d’Ivoire,” says William Attwell, Africa analyst at Oxford Analytica. Attwell believes that the transport infrastructure and electricity supplies are improving greatly, with Côte d’Ivoire’s  government diligently working to establish a more welcoming investment climate.

A 2015 Into Africa report by PricewaterhouseCoopers placed Abidjan top in both middle-class growth and diversity, out of 20 leading African cities. Geographically well placed, the city is also home to one of Africa’s biggest ports, with the harbour undergoing a $2.5bn expansion project until 2020.

Other medium-sized cities, including Kumasi in Ghana and Mombasa in Kenya, are experiencing higher incomes and better education levels than ever before, but “without the demographic pressures we’re seeing in megacities such as Kinshasa,” adds Attwell. Mombasa’s port is also being upgraded, strengthening its prospects as a regional trade hub.

Welcoming environment

Creating a friendly business-operating environment that limits investment risk is very important in attracting international financing. Private equity investor Actis has targeted Zambia’s largest city and capital Lusaka as a key African city, partly due to its favourable location at the centre of the sub-Saharan African logistics thoroughfare.

Actis has committed to spending $200m on a commercial park in Lusaka, a further sign that financiers are more than happy to part with their money in cities that are politically stable and actively courting investment.

While improving the business climate is not a ‘cure-all’ for Africa’s cities, it does represent a step in the right direction.

“There are the obvious headline concerns that most foreign investors think about, like personal security, but there is still a lot that city administrations can do to improve investor confidence by making sure they get the basics right, like ensuring that water and electricity supplies are reliable and transparent property registration systems are in place,” says Attwell.

Smaller cities may lack the financial clout of larger megacities, but if they focus on the areas where they are strongest, whether it be convenient location, skilled workforce or high working-age population, these flourishing cities will be the engines of growth in an increasingly prosperous Africa.

The recent falls in commodity prices have had a significant adverse impact on Africa’s prospects, but there are still opportunities in cities across the continent.

“Throughout Africa, the potential to create jobs and opportunity in informal urban economies is greater than it is in the formal economy,” according to Edward Paice, director of the Africa Research Institute. “If the right enabling conditions are provided, the scope for well-managed cities to increase revenues and thereby generate cash for investment in services is substantial.”

Finbarr Toesland