Is it time for Africa to consider charter cities?

What is the Charter Cities Institute (CCI)?

We’re a non-profit think-tank here in the United States. We also have CCI Zambia that leads our Africa work, which is where most of our projects take place. Our vision at CCI is to empower new cities with better governance to lift tens of millions of people out of poverty.

We’re all about poverty alleviation. Charter cities are about solving two huge challenges that cities and countries of the global south face over the course of the 21st century. One is unprecedentedly rapid urbanisation. This is combined with low levels of state capacity and low levels of governance in those areas to adequately grapple with that rapid urbanisation.

Those are the problems that charter cities are aimed to help resolve.

What exactly is a charter city?

It’s no surprise that with a new idea like Charter Cities, there are a few different definitions floating in the ether.

Paul Romer coined the term charter city in a famous Ted Talk in 2009. Basically a high-income, well-governed country like Canada would come in to a low-income, poorly-governed country. The example he used was Honduras.

Honduras would agree to cede a city-scale chunk of land to Canada, which would import its good institutions into that chunk of land. Those better institutions and that improved governance would kickstart investment and business formation that would create jobs and you’d get this sustained cycle of economic growth.

That’s a very simplified version of Romer’s model. He got a lot of pushback on that. Some people saw it as  neo-colonial: these guys from Canada coming into a low-income country – we’ve tried that before.

Our version of charter cities is different. We envision a public-private partnership between a host country and an urban developer. And the reason we wanted to get away from Romer’s model is that we saw it as politically unfeasible, because these countries won’t readily mess with their own sovereignty.

That’s a very emotive and charged subject – not just for the host government, but for the citizens who put those governments in positions of power. And it’s not desirable in the long-run, because you want the local government, the host government, to learn over time.

You often learn these things by doing. And if you outsource it completely, for example to Canada, then that short-circuits that learning process when it comes to governance. So we got away from that model that messes with sovereignty and focused on a public-private partnership between the host country and an urban developer.

We see that as very feasible. In fact, it’s very common. PPPs are used throughout the world in various sectors from infrastructure to education. So governments are used to them. There are already build-operate-transfer (BOT) arrangements in which a government has this aim or policy objective in mind.

It may have a BOT with a private sector entity in which the private sector builds an asset, runs it for a bit in the initial years and then transfers it after an agreed duration of time. That’s exactly what we’re talking about with this. That’s number one.

And number two, we think this model is better for charter cities because there is a self-financing mechanism and it aligns incentives better. Why does it do that? Because it’s a private-sector entity. When you have a developer in place, its motive, its incentive is to maximise its profits.

Developers do that by maximising land values. How do you maximise land values? Well, you make the place as attractive to businesses and residents as humanly possible.

And you do that by creating a great city, a thriving city with great amenities with a conducive business environment that allows these businesses that move there to thrive.

Which issues facing Africa do you think charter cities can solve?

The 21st century is going to see 5bn new city residents. And I want to put that in perspective because that’s an unprecedented number.

In the less than 30 years to 2050, 2.5 billion people will be added to cities. Of that growth, 96% is happening in low- and low-middle-income countries of the global south. And flipping now to the lack of capacity and governance side of things, a lot of these countries do not have the ability to grapple with that influx of people, the tsunami of human beings.

I break it down into three particular challenges. One is the legal. Cities as a unit in a lot of these countries do not have the legal authority over the different policies that they need. Some cities do not have policy authority over their own land use and urban planning.

How is the city supposed to grapple with growing 4%, 5% or 6% per year if it doesn’t have that policy authority over those areas? Just give them the appropriate set of authorities over the right set of policies.

Number two is financial constraints for these cities. Only three out of the 54 countries in sub-Saharan Africa have the legal power to issue municipal bonds enshrined in their constitution.

This leads to there being basically no market for municipal bonds on the continent. This is an absurd reality in the place that’s the most rapidly urbanising place on the planet. Because municipal bonds are the main way that European cities and North American cities in the now-rich world financed their urban growth.

The third big constraint is that even if these cities in lower-income places had the legal powers, even if they had the financial capacity to issue municipal debt, if those two things cannot be channelled into the technical capacity to actually get the infrastructure built, to build the road, to install the sewers, to build the electricity, then all is not right.

You need all three of those things and most of these cities across the global south lack them. And charter cities are a way to quickly crowd in capacity in those three areas, legal, financial, and technical.

Is there a danger of charter cities deepening inequality by creating elite urban enclaves?

There are hundreds of new city projects happening across the globe.

A lot of them are enclaves or end up being enclaves for upper-income segments. And so that does have an exacerbating effect on inequality.

One of the things that I focus on is to try and figure out ways to nudge some of these hundreds of new city developments that are already occurring across the globe – to influence them to think about how to integrate low- and middle-income parts of the income distribution more into their thinking. Because cities can be these great beacons of opportunity and upward mobility, but only if you have in mind that you have to provide housing and amenities at a price point that’s affordable for the whole income distribution.

A lot of these new city developments can often be affordable or attainable only to upper-income segments. We’re trying to rectify that and working with several of our new city projects to do just that.

You are focusing on a coalition for African cities. What are you trying to achieve with that?

At CCI a few years ago we were in early chats with governments, and the chat would go great, and the government would inevitably ask: who else is doing this?

And we didn’t really have a great answer because it was just us and, and a few other San Francisco-headquartered organisations.

That’s where Africa’s Next 50 Cities Coalition was born. Its whole purpose is to bring together and mobilise the key stakeholders and partners involved in designing, financing, building, and operating these new city developments effectively and mobilising resources on behalf of these new cities.

We have several new city projects as coalition members. It involves governments from Zambia, Kenya, Uganda, Tanzania and others. And it involves organisations like ourselves, like the African School of Economics and a few other academic institutes.

And then finance organisations. This has been a great platform to exchange best practices across these new cities. The nascent new city doesn’t have to repeat the same mistakes that the more established, older, new cities went through.

We also have the launch of the world’s first global comprehensive new cities data set. Over the last year and a half, with a data collection partner called Adrianople Group, we’ve been collecting data on hundreds of new developments across the globe. Not just surface-level characteristics like location, but also more deep characteristics, like what are the governance structures of these new cities? Do they have devolved authority to levy taxes and raise their own sources of revenue and the like? We launched that data set publicly on 30 May .

This is an abridged version of the interview. Listen to the full version on the African Business podcast “Can charter cities unlock African Economies? – Kurtis Lockhart, Executive Director, Charter Cities Institute”.