Growing African cities: Tony Venables Dept of Economics, University - - PowerPoint PPT Presentation

Growing African cities:

Tony Venables Dept of Economics, University of Oxford & International Growth Centre

• What are the characteristics of successful cities?
• How are African cities performing?
• What will it take?
• Africa 1/3 of way through its urbanisation
• 500 mn Africans will enter cities in the next 30 years
• 350k per week
• Africa must build twice as much urban capacity in next 30 years as in last 100.

• Successful cities have high productivity
• Developed countries: doubling city size raises productivity 5%
• Cities are where new things happen
• Centres of innovation
• ‘Incubators’ for new firms
• What are the mechanisms? Scale and specialisation
• Thick labour markets
• Matching
• Specialisation – and incentives for workers to get skills
• Thick product markets
• Scale and competition
• Access to intermediate goods – forward and backward linkages
• Knowledge spillovers
• Scale economies in provision of utilities, public services

Urban potential I

• Mechanisms work through ‘connectivity’
• Worker<-> firm: Consumer <-> firm: firm <-> firm
• Connectivity requires:
• Transport infrastructure:
• Public investment
• Density:
• Private investment: residential and commercial
• Density is an outcome of efficient land-use:
• Market outcome with centre to edge rent gradients and
• Textbook ‘monocentric city’.
• ‘Crowding’ vs building tall

Urban potential II

Successful cities: employment density

4

Successful cities: residential density

5

Urban form: residential density

6

7

Brasilia Johannesburg Moscow

Urban form: residential density with non-market outcomes

• Cities are high cost.....
• Commuting, land values, capital costs of infrastructure

..... but offset by productivity advantage

• if they achieve efficient land-use, connectivity, productivity
• Cities can be self-financing
• Much of surplus created by cities is capitalised in land values
• Land values are a tax base:
• Ethically fair
• Non-distortionary
• Relatively easy to collect
• Sufficient to fund infrastructure (Henry George theorems)

Urban potential III

• Early urbanisation
• Urbanisation levels are high for per capita income levels
• Challenge for affordability of decent housing
• Excessive primacy:
• High share of urban population in largest city
• Typically not the ‘urban hierarchy’ seen elsewhere
• Low levels of investment
• Private:

Informality – bifurcated residential housing stock, sprawl  low density & inefficient land use.

(comparable figures – less dense than European cities)

• Public:

Poor transport infrastructure Poor public service provision  poor connectivity

• Employment: informality and failure to attract formal sector firms

African cities: stylised facts

• Attracting firms & creating jobs:
• Inefficiencies in land-use and lack of connectivity  high cost  low real wages but

high nominal wages

• Failure to attract footloose manufacturing
• ‘Urbanisation without industrialisation’
• Sunk capital and expectations:
• Expect slow city growth  expect low rents  build low  lack of density  slow city

growth

• Expensive to retro-fit
• Public finance:
• Weak tax system and/or low land values  hard to finance infrastructure  lack of

connectivity ….etc

In combination, these create real danger of low-level trap. Cumulative causation and multiple equilibria

Policy responses Raising investment – residential/ infrastructure/ commercial

• Residential
• Property rights
• Appropriate regulatory standards
• Mortgage markets
• Infrastructure
• To create connectivity and to coordinate expectations
• Utilities and other public services
• Public finance
• Commercial
• Efficient land-use/ infrastructure  lower cost business environment

Quantitatively – enormous challenge Across many areas of government – city, finance, law, regulation, industry, transport