Urban economic growth in Africa: Analyzing constraints to agglomeration

Many of the major cities in developing countries, especially in Africa, are failing to reap the economic benefits of urbanization. These cities are not able to drive structural transformation, boost growth, create jobs in tradeable industries, and contribute to national economic growth compared with cities in other countries, such as those in China or most developed countries. On World Cities Day (October 31), we should take the time to reflect upon the economic opportunities created by effective urbanization and policies for helping all cities meet their potential in bettering the lives of their citizens.

As policymakers, urban planners, and development practitioners try to tackle the issues of rapid urbanization, they face numerous roadblocks and constraints. In response to these challenges, the Brookings Institution’s Africa Growth Initiative has formulated a framework to help identify key constraints to productive urbanization as published in the working paper, “Urban economic growth in Africa: A framework for analyzing constraints to agglomeration.”

With Africa’s urban population expected to nearly triple by 2050—adding 800 million people, the current urban population of Europe and North America combined—the urgency of addressing these challenges is paramount. Recent African urbanization analyses have confirmed the problems of limited job creation, inadequate structural transformation, and poor livability seen in many sub-Saharan African cities today. At an urbanization level of around 40 percent, African cities are relatively poorer than other developing regions when they were at similar levels of urbanization (Figure 1). Because per capita GDP is low, public and private investments in housing, infrastructure, and other capital are lacking. Issues of limited land management and lack of infrastructure contribute to African cities being fragmented, with low levels of accessibility to jobs and social services. All these factors contribute to African cities having high costs: For example, urban residents pay 55 percent more for housing and 42 percent more for transport in Africa than in other regions.

A range of national macroeconomic, social, and political challenges—such as poor monetary policy, trade, and fragility—affect all cities in a country, but there are also a number of challenges particular to specific cities. There is no one-size-fits-all solution to these challenges, and cities’ relative capacity to address the issues will vary. Taking the creation of productive jobs, particularly in tradeable sectors, as our objective function, we develop a framework detailing three major types or categories of constraints to a city’s ability to benefit from urban agglomeration: accessibility, the business environment, and public sector governance (Figure 2).

Figure 2: Framework for productive cities

Source: John Page, Jeffrey Gutman, Payce Madden, and Dhruv Gandhi. 2020. Urban economic growth in Africa: A framework for analyzing constraints to agglomeration.

Measures of accessibility—both within and between cities—describe how well a city connects workers to firms and firms to markets. Notably, our framework takes a cross-sectoral approach to accessibility. For example, intracity access to jobs, measured by number of jobs available within a set commute from different neighborhoods, can be seen as a land management issue (in terms of housing and employment locations) or as a transport infrastructure service issue.

The business environment is an important determinant of firms’ costs, which affect firms’ abilities to compete in international markets. In our framework, we focus on issues that may arise at the city level rather than broader national issues that may affect cities such as macroeconomic stability, trade, or fragility. Given this consideration, we identify labor and human capital, the regulatory environment, and services and infrastructure as important components of the local business environment.

Public sector governance, as applied in this framework, is a second-order constraint that describes the ability of institutions at either the national or subnational level to address accessibility and business environment constraints. In this regard, the framework focuses on the distribution of fiscal and functional responsibilities between different levels of government, as well as the functional and fiscal capability/capacity of government agencies.

Given these three categories of analysis, we have developed a set of indicators that allow us to analyze the performance of individual cities. Many of these indicators are drawn from publicly accessible data available for a range of cities worldwide, but some indicators require city-specific analysis. Measures of intracity accessibility, for instance, have only become feasible recently with the advent of new methods for geospatial analysis using satellite imagery; we intend to use these methods to measure both the level and distribution of accessibility within a city. Furthermore, measures of public sector governance will require surveys of key stakeholders in government, civil society, and the private sector. Surveys will focus on how policies are actually carried out: For instance, if there are clear land rights, how transparently are they applied? If there are land use regulations and zoning laws, are these contributing to misaligned land uses or directed at protecting public interests? Are rules for appropriating private property for investments, such as road rights-of-way, fair and transparent?

Further application of the framework will require a more detailed understanding of the political, economic, and social context of the cities that are the subject of interest. It will also require data collection for a number of indicators for which no internationally comparable data or accepted methodological norms exist. For these reasons, our next step in attempting to validate the approach will be to focus on applying the framework to several case-study cities in Africa. This process will involve collaboration across various institutions with expertise in urbanization and the specific constraints described above.