Understanding and promoting cities as drivers of economic development – Fellows’ seminar by Gulelat Kebede

“Many African cities are underperforming, and the link between urbanisation and development, ubiquitous elsewhere, has not been automatic or strong for Africa. Africa’s cities are growing in population, often without strong job creation in formal, high-productivity and tradable sectors, resulting in urban poverty and lost opportunities for development,” said Gulelat Kebede of the Milano School of Management, International Affairs and Urban Policy, The New School.

Kebede - 1STIAS Fellow Gulelat Kebede during his seminar presentation on 5 April 2018

“However, in the last two decades, as The Economist captured it, the perception of Africa as ‘a hopeless continent’ has already shifted to ‘Africa rising’ with cities as the engine of its growth,” continued Kebede.

“But,” said Kebede. “Africa has yet to unlock the full potential of its rapid urban transition. In that context, there is a need to focus on the quality of urbanisation and urban forces driving job-rich economic growth. We need an African urban narrative with an economic lens or focus, rather than simply a focus on urban challenges such as housing shortfalls and slums.”

Kebede was talking about his current STIAS project for which he is teaming up with colleague Liz Paterson Gauntner. They will use quantitative and qualitative approaches to assess which characteristics of the urban landscape are most important for labour-intensive manufacturing sector growth in African cities. The project will cover four countries – Ethiopia, Morocco, Nigeria and South Africa – and will use secondary data, local knowledge, primary data collection, interviews and policy review. The purpose is to identify and tease out the way the economic and spatial links work at priority sector level and to generate better understanding of and insights into the urban development opportunities arising from them.

“Some have argued that it is not urbanisation per se[1] but the quality of cities that matter for facilitating development. The many mechanisms that make urban space productive, which are described by the umbrella term ‘agglomeration economies’ in theory rely on density, connectivity and clustering. However, empirical research on the specific qualities of cities most important for facilitating job growth in development-driving sectors in the Africa context is lacking, leading to an ongoing policy debate about how much and which types of investment in cities is needed for development.”

Kebede indicated that their study seeks to address this evidence gap, and to overcome some of the severe shortages in subnational economic data by constructing a new dataset on labour-intensive manufacturing clusters and their specific locations in these four countries.

He related how urbanisation is linked to structural transformation. “Africa, along with Asia, is the epicentre of rapid urbanisation in the 21st century. Urbanisation is good news for development with urbanisation and economic growth positively associated. Countries urbanise as their economies transition from agrarian to industrial and service sectors.”[2]

“Therefore the rationale for cities to develop is economic development and structural transformation, in other words, the shift of labour into higher-wage urban jobs,” he said.

“Urbanisation and development are intimately connected – there is no sustained real economic growth without cities.”

However, these links have been weak in Africa. In the first two decades of post independence, African countries, supported by import-substitution strategies had a nascent but growing manufacturing sector.

“This did not last long,” said Kebede. “ As documented in detail in the 2017 Economic Report on Africa of UNECA, share of manufacturing peaked in the late 80s and began declining, setting off a process of premature de-industrialisation and making the informal economy the default employer for the majority of the growing urban population. Though the rebounded economic growth of Africa since the mid nineties and the positive contributions of structural changes to growth and productivity observed in recent research studies[3] are encouraging signs, a turnaround in manufacturing growth for many African countries remains a serious challenge.”

Urbanisation should be good for economic growth and poverty reduction because of the physical closeness of enterprises, economies of scale, lower transaction costs, more specialised services and the concentration of labour, diversity of skills, and knowledge spill over. Though urban areas in many African countries already contribute the largest share of GDP, countries in the region have yet to harness and exploit these urban economic advantages to their full potential.

“Researchers have asked why the urbanisation/development link is weaker in Africa and forwarded different explanations,” he said. “Urbanisation in Africa has continued to increase even when economic growth and structural change was not happening, and with the cumulative lag in investment, many of our cities have become crowded, expensive and constrained by infrastructure deficits, and perhaps experiencing premature diseconomies of agglomeration.”

The missing link: strengthening the economic and spatial visions of development

Space has been largely missing from economic discourse or poorly understood and integrated in national development planning.

“This is unfortunate,” said Kebede, “economic and sector policies often have a spatial impact, which is much stronger than that of spatial or urban policies per se. This is changing though, albeit slowly. African governments have in recent policy statements like that of the African Union Summit underscored the transformative role of cities and expressed their determination ’to reap the potential benefits of cities and towns as centres of economic growth and places of opportunity and prosperity for all African people in the course of economic development and structural transformation’.” [4]

“Resurrecting industrial development as part of broader structural transformation and creating a national system of cities that are connected spatially and functionally are policy priorities reflected in national industrial and urban policies. A crucial component will be bringing these two pieces together and linking the national spatial vision to priority economic sectors.”

“Two thirds of cities are still yet to be built in Africa, and this provides an enormous opportunity if countries take advantage of it by planning ahead to build compact, productive and resource-efficient cities, including using leapfrog technologies. The question is not whether urbanisation will happen but how to manage it or respond. It is a myth to think that we can slow urbanisation or that it can happen on its own. Good urbanisation is not a spontaneous outcome.”

“But,” added Kebede, “there is not much time, we are told an urban transition that used to take a century or longer in present-day rich countries is now taking 35 years and is happening in poor countries with limited capacity.[5] There is a closing window of opportunity, and we need to move fast and smart, focusing on urban qualities that matter for job-rich economic growth and development.”

“Because job creation is at the centre of development priorities for Africa, we are trying to understand the urban spatial attributes or components of agglomeration economies that specifically help or hinder labour-intensive industries. Agglomeration economies are context-specific, and different firms and industries have different location preferences.”

Co-ordination a broader challenge

Kebede observed that cities can only be successfully built with synergy and co-ordination between sectors and space, and between scales of space and levels of government.

“You can’t build a city overnight. Cities are a long-term product of actions by households, firms and government agencies. This means, when the foundations are not laid out well, and when co-ordination is lacking, scarce resources will be wasted and cities become locked in less-productive systems,” he said.

“In such a context, more investment is not always the answer, or sufficient. For example, we notice there is housing without people, people without housing and housing without jobs. Some of these happen due to lack of co-ordination, resulting in wasted and misallocated resources. In many cities housing comes ahead of infrastructure and planning, driving slums and unplanned settlements. Reversing it is beyond one institution or sector.”

“Urbanisation is complex and multi-sectoral. We need to understand the different elements and the links between them. If sectors and spaces are not aligned then the development we want will not be achieved,” he continued. “We need a sustainable urban transition with more bottom-up, inclusive processes that, in the long run, are geared to making African cities productive, inclusive and resource efficient. This is a huge development agenda. In that context, the urban conversation needs to move from rhetoric and theory to policy action, from the ‘what’ to the ’how’.”

With this research Kebede and his colleague Gauntner aim to contribute to that conversation and to addressing the data gap that remains a key challenge in urban research in Africa.

Endnotes:

[1] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4123908/#pone.0103799-Turok1

[2] UNECA (2017) Economic Report on Africa.

[3] Rodrik D, McMillan G and Verduzco-Gallo Í. Globalization, Structural Change, and Productivity Growth, with an Update on Africa. World Development 2014;63: 11–32.

[4] Decision 29 of the African Union Summit (Assembly/AU/Dec.29 (II)) of July 2003) – available at https://au.int/sites/default/files/decisions/9548-assembly_en_10_12_july_2003_auc_the_second_ordinary_session_0.pdf

[5] Henderson JV. ‘Cities and development’, Journal of Regional Science 2010; 50(1): 515– 540.

Michelle Galloway: Part-time media officer at STIAS
Photograph: Christoff Pauw

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