African cities can overcome their infrastructure challenges
Africa is expected to have 1.2 billion urban residents by 2050, intensifying the need to develop Africa’s megacities and making infrastructure one of the key strategic priorities amongst senior leaders throughout Africa.
Episode 9 of KPMG’s recent Africa Conversation Series took a closer look at Prioritising Africa’s Megacities, focusing on the challenges surrounding development of Africa’s next major megacities, the importance of addressing these challenges and how to prioritise development to ensure maximum benefits for business and Africa’s growing urban population.
Sue Bannister, KPMG Director for City Insights, emphasised the importance of cities, “The world today is about cities. Cities are where it is happening these days. Research show that cities make people smarter and more creative.”
A megacity, by definition, houses more than 10 million people ‒ a factor that has raised questions in several quarters. “There’s a debate around what constitutes a megacity. Cities are becoming much more complex to manage and they are becoming as prominent and even superseding countries,” said Andile Skosana, KPMG Associate Director for Government Advisory Services, also described as an urban enthusiast.
This debate raises the question of what defines a city.
Bannister believes that we cannot simply look at the numbers to determine whether a city is a megacity. “We have to consider the tone of a city. In many cities, we are not sure how many people live there…. Although the administrative boundaries may say we have a certain number of people, there are usually many more.”
DeBuys Scott, KPMG Africa Head of Infrastructure, explained that cities contribute significantly to the economic development of countries.
While Africa has massive potential for economic growth, infrastructure challenges remain a reality.
“The gap between where Africa is and where we could be is huge…. Businesses cite road and transport infrastructure challenges as obstacles to functioning properly. Overcoming this will enhance the working environment for business,” said Bannister.
Skosana noted that this is not necessarily an impossible feat. “Although the challenges are big, Africa has the opportunity to learn and develop city systems that work somewhat better than our developed world counterparts. The opportunity on urban planning is to do things differently to make our systems work better. Africa was historically not capacitated sufficiently and the influx of people into cities is happening at a rate faster than what cities can do,” said Skosana.
“We are going through a phase where we are seeing more infrastructure development plans than at any time in history…. These are good plans but we need proper masterplans and to have a clear prioritisation process. Unless there is clear prioritisation, we cannot implement effectively,” said Scott.
Bannister noted that it is important for African cities to learn from each other because “African countries have similar challenges…”
Lagos is one of the African cities that fit into the official megacity definition. Wale Shonibare, Director, Infrastructure Finance at UBA Capital in Nigeria explained what works well in Lagos.
“Lagos’s Eko Atlantic city is a public-private partnership (PPP) where the state has been very involved in mobilising private sector investment to develop that area. The plans are very ambitious and will be developed within a period of 20 years to reclaim the Atlantic and build a business-friendly environment.”
Shonibare continued, “To get the private sector involved, you need to have the right regulatory environment. People need to feel that the environment is secure and the financial markets have to be able to support this level of infrastructure development. We have seen local banks willing to participate. Also, developers of a significant scale must be able to mobilise the amount of capital needed for an investment of that scale.”
Funding remains one of cities’ main challenges in improving and developing infrastructure.
Scott explained, “It is a challenge to get funding into these types of projects because people want to invest in a place where they can be sure.
The perceived risk profile of Africa is very negative, even though it is a different story on the ground (in reality).”Funding cities’ infrastructure plans requires partnership.
Skosana explained, “Governments cannot do it alone, and African cities are realising this.”
Bannister added, “Getting business to work hand in hand with government is extremely difficult. The private sector needs the government to work with them but also want to see the projects implemented and working.”
Scott believes that PPPs bring some advantages. “They bring a well-defined risk-sharing process, they bring private capacity, and also assist with the affordability question. While a good starting point, PPPs are not always the answer but bring valuable principles to be used for any project.”
Shonibare noted that developmental finance also plays a significant role in the development of megacities and setting up effective infrastructure bases as it can mobilise long-term funding in emerging markets and provides relatively low-cost finance in the long term.
Bannister believes that there is no silver bullet that will solve cities’ challenges, but cities need to take small steps and try to do the right things in consistent phases.