At present cities in sub-Saharan Africa are among the most expensive in the world for businesses and will stay closed off to the world unless policymakers reform urban land markets and invest in infrastructure according to the World Bank.
Economies in sub-Saharan Africa are struggling to keep pace with their rapidly growing populations, the number of people living in urban areas is expected to grow by 187 million people by 2025 – the equivalent of the entire population of Nigeria.
As a result, cities such as Dar es Salaam, and Kampala are looking increasingly unattractive to investors and entrepreneurs. This has led to them producing fewer goods and services for trade.
The World Bank has stated that Africa needs more affordable, connected and livable cities if it wants to thrive and this will require improving economic and social dividends.
The World Bank report proposes a number of reforms, including formalizing land markets, clarifying property rights and instituting effective urban planning, as well as investing more in physical and institutional infrastructure. African cities have been built and organized in a way that has led to people living in smaller, fragmented neighbourhoods that lack good and affordable transportation to connect people to jobs.
The authors state that “Without either high physical density or adequate connective infrastructure, an urban area falls short of its potential: it cannot offer firms the cost efficiencies and job matching advantages that open a city’s doors to regional and global trade.”
High costs of living are also making African cities unattractive to companies looking to set up businesses. Housing, food and transport in a sub-Saharan African city cost, on average, nearly 30 percent more than in other regions with similar income levels. African urban dwellers pay 55 percent more for housing and 35 percent more for food.
These higher living costs mean that companies need to pay higher wages, making them less competitive than their global rivals. As a result, companies tend to remain local in scope, missing out on global trading opportunities, and also passing higher costs on to their local customers.
To combat the current situation, the World Bank is calling on African leaders to implement policy and investment reforms to move cities in a more globally competitive direction. This will mean implementing policies to strengthen institutions that govern land markets in these cities, which will enable them to clarify and formalize property and land rights, update regulations and make developing land more efficient and attractive.
The World Bank has also urged African leaders and investors to put money into “early and coordinated infrastructure investments” to increase productivity, liveability and affordability.
The development finance institution says it will support these reforms through a variety of activities, including offering financial instruments such as guarantees to help attract other sources of nongovernmental funding, in order to “meet the magnitude of the investment challenge going forward.”