What opportunities does urbanisation present for people living in African cities? How much does it really contribute to the economy? And what wider advantages can it have for rural dwellers?
In our latest podcast episode, Philipp Heinrigs – head of unit at the OECD – talks to Stephen Gelb about the recent Africa’s Urbanisation Dynamics 2022 report, delving deeper into the key findings and what the analysis reveals about socioeconomic development opportunities in Africa’s fast-growing cities.
Philipp Heinrigs is head of the OECD’s Sahel and West Africa Club secretariat at the OECD and co-author of Africa’s Urbanisation Dynamics 2022.
Stephen Gelb is a principal research fellow and team leader of the international economic development group at ODI and leads ACRC’s neighbourhood and district economic development domain research.
Africa’s Urbanisation Dynamics 2022 is available to download via the African Development Bank, UNECA and OECD.
The full podcast transcript is available below.
Intro Welcome to the African Cities podcast.
Stephen Gelb Good afternoon, everybody. My name is Stephen Gelb. I am a senior research associate at ODI in London. But in the African Cities Research Consortium, ACRC, I lead the neighbourhood and district economic development domain, which is one of the eight domains in the project. And I’m sitting here actually in Manchester with Philipp Heinrigs from the Sahel and West Africa Club within the OECD. So Philipp, welcome to Manchester, and maybe just introduce yourself if you like and say a little bit about the Sahel and West Africa Club and then we’ll get into the report.
Philipp Heinrigs Sure. Thank you, Stephen. A pleasure to be here in Manchester. I’m Philipp Heinrigs, I’m head of unit at the Sahel and West Africa Club at the OECD and leading our work on cities and urbanisation and food system transformation.
Stephen Gelb Great to have you. And we, Philipp and I, are going to have this conversation about a report which has recently come out from the OECD, UNECA and the African Development Bank, on which he was the lead author. It’s called Africa’s Urbanisation Dynamics 2022: The Economic Power of African Cities. And I’ll just say right at the beginning that I’ve read it to prepare for today. It’s a very, very interesting and, I think, important report, I think breaking a lot of ground in terms of analysing urbanisation in Africa and in particular from the economic perspective, which is, of course, the perspective that I’m coming at it from. So, Philipp, why did you do this report and what does the OECD hope to achieve by bringing it out?
Philipp Heinrigs Yes, thank you. Very good question. So the idea for the report came from talks and exchanges with colleagues at UNECA and the African Development Bank on the need to present thorough data analysis on the economic contribution of cities and urbanisation in Africa to development. In the past, there have been reports and studies, but in many cases they have been rather local, on a smaller sample of cities and countries. So what we did here is we looked at around 4 million individuals and firms and 2,600 cities across 34 countries in Africa and analysed socioeconomic indicators and performance across the sample of data.
Stephen Gelb And so what do you hope to achieve with that? What are its main goals, aside from just doing some good analysis?
Philipp Heinrigs Yeah. To get on to this… we believe that cities and urbanisation is an incredible opportunity for Africa’s development and it is not sufficiently taken up at the policy level in Africa and outside Africa. So we thought that this publication might help clarify some of the doubts and questions around the economic contribution of cities to development. And I think we managed to do that by showing very strong trends that are valid across the continent, in actual fact.
Stephen Gelb Okay, great. So I’m going to ask you to give us the main messages, the main headlines that come out of the report. But before you do that, let me just say that the report can be downloaded from the OECD website at a cost of €36. I know because I tried, but it can also be, I think, much more freely downloaded, let’s say, from the websites of the other two organisations, the UN Economic Commission for Africa, UNECA, and the African Development Bank. So people who want to read it, and I think after, I hope after our discussion that you will want to read it, I think go to those two websites. But Philipp, tell us, what are the main headlines, the main points that you want people to hear about?
Philipp Heinrigs So I think from the analysis, there are three key messages that come out. So the first one is that large cities perform better than small cities, and small cities perform better than rural areas. So this is something we expected to see. And this is also observed across the world, in terms of socioeconomic performance. But we were surprised by the difference in performance, which is larger than in other regions of the world. The second message that comes out strongly is that small cities perform much better than rural areas. So here we see that there is a particular premium in Africa to be located in a city, in terms of access to services and infrastructure, but also to economic opportunities. So this clearly comes out from the data and is something that surprised us. And the third message from the analysis is that cities do also benefit rural areas and, again, across a series of indicators, like access to skilled employment opportunities, educational attainment. Rural areas closer to cities perform better than more distant rural areas. So from the analysis, these are the three key messages clearly coming out and that we describe in detail in Chapter 1 of the report.
Stephen Gelb And it’s using specific data sets which exist, but you’ve used them in a very creative way.
Philipp Heinrigs Yeah, the constraint for this type of analysis is you need geospatial data, so that you can match these surveyed households or firms to a location. So there are two main databases we use. The first one is the demographic and health surveys that contain many indicators on socioeconomic information, on individuals and households. And we also used living standard measurement surveys of the World Bank that also are geospatial. And then the second crucial database we used, it’s the Africapolis database on cities and urbanisation in Africa, which applies a homogeneous definition to what is an urban agglomeration across the African continent and includes all cities of the urban network, starting at 10,000 inhabitants. So we could match the survey data to a location across the spectrum of city classes.
Stephen Gelb And I think one of the things that’s most impressive about the report is that it’s using that data in a very original way and coming up with analysis, which actually hasn’t appeared anywhere else. It hasn’t been done by academics or by other international organisations. It’s very rigorous, but also aimed at a very practical set of recommendations which we’ll get onto. So it’s relevant, I think, for policy people, but also for researchers in the urban space. And one of the points that comes out is that, in your estimates, around one third of GDP growth in Africa, I think for the last 30 years, has been contributed by urbanisation, not just by the urban areas, but by the urbanisation process. And that’s quite, I think, important, it’s important to have that sort of number that people can then do further work and see, even if it’s an average across the whole continent, we can see how it applies in different contexts.
Philipp Heinrigs Yes, this number, we also felt that there was a need for producing an estimate for the effect of agglomeration economies. So it’s 30% of GDP per capita growth, to be precise. Obviously, we were constrained by the data availability. We are happy for people to dig into that and see what they come up with. We are confident of the scale, but it’s obviously just an estimate based on the available data. But we think it’s a lower range estimate in actual fact.
Stephen Gelb That it’s something to start…
Philipp Heinrigs Of course.
Stephen Gelb And stimulate more work to try to make it more accurate. So and you mentioned about the effects of agglomeration economies and that’s sort of where I want to take the conversation now, because there’s two things really about it. One is that you put agglomeration and the impact of agglomeration economically on the table and try to give this quantitative estimate of what its effects are. But then you, and I’ll just mention the two things that I’m a little bit worried about that we can discuss. One is, you make the point that agglomeration in Africa, unlike other parts of the world, has not been accompanied by what we economists call structural transformation, the industrialisation process, which improves employment, both in quantity but also in quality, which improves exports, which changes what is produced in Africa. The urbanisation process has been different. And then the other point which you mention, but isn’t in the report, but isn’t really emphasised, and I’m going to put you a little bit on the spot, and that’s about the inequalities – both, I think the inequalities in terms of the benefits, but also the costs of agglomeration. But let’s talk about the structural transformation and then come back to the other.
Philipp Heinrigs Yeah, yeah, perfectly. This is actually part of, maybe the main part, why we did this report, because in Africa, as well as internationally, this debate on why do we see urbanisation without structural transformation and what does it imply for policymaking – should policymakers invest into urban areas or not? Right? So this was one of the reasons we did this report. We wanted to have a look at the data and see is it worthwhile investing in cities and what for? And I think what the data shows is that we do have agglomeration effects in Africa. We see, for instance, that the share of skilled employment is two-and-a-half times higher on average in cities than in rural areas. We see that wage employment is higher in urban areas than rural areas. So we have these benefits that are materialising. At the same time, it is true that we do not see what some people might expect to see in the data, like the massive increase in manufacturing employment, something that we saw in the East Asian experience. Maybe here an important point that I would like to make is, when we talk about Africa’s urbanisation, I think it’s crucial to keep in mind the dynamic of the urban growth. So over the past 30 years alone, Africa’s urban population has grown by 500 million people. So this is a tripling of the total population – it’s a massive growth. And it’s not only growth of existing cities, but this is also emergence of new cities. It’s massive in terms of what it implies in transforming societies, transforming political geographies, economic geographies, social life, cultural life. And it’s important to keep this in mind and to judge the process that we see and the indicators we present in the context of this growth. And we think what we show is that the performance of cities didn’t improve over time, in relative terms, but it maintained its performance. So, in a sense, cities absorbed, the urban area absorbed these 500 million people and providing them with the better opportunities in terms of jobs, employment, education. So it’s in itself an achievement. But obviously, going forward, there are more investments needed in making and leveraging the agglomeration effects better and providing better job opportunities, better services.
Stephen Gelb But maybe tell us a little bit about the specific, how does agglomeration work? Because it seems to have worked to some extent in Africa, as in other parts of the world, in the sense that you’re saying that the population is growing, but the situation hasn’t gotten worse. But it hasn’t worked nearly as well in Africa as in other parts of the world. And so how do we understand why that has happened? You do in the report, you unpack it, you talk about the effects which economists talk about, of matching, sharing and learning. And is it something about those that is not properly working, or working as well as it could, in Africa as compared with other developing countries?
Philipp Heinrigs Yes. Yes. I think looking at the past 40 years, we can clearly say it didn’t work the same as it worked in other parts of the world. That’s the average, right? There are obviously also huge differences across African countries and across African cities and sometimes within the same country as well. For me, there are probably three answers to why this might be the case. I think the population growth is one dimension, so it’s a dynamic of growth, of population growth, urban growth. And societies with rapid population growth, the first objective is actually the sharing of employment opportunities and not the accumulation of capital, in a sense. So you have an interest of accommodating more people to the economic activities without necessarily looking at productivity issues. So this might be one factor. The second, I think, is that investments into leveraging agglomeration economies and making cities work better in terms of planning, in terms of infrastructure, in terms of services, have been less than in other regions of the world, and this we also showed in the report, that even compared to other low- and middle-income countries, African cities invest much less per capita into their cities than countries in other parts of the world.
Stephen Gelb That’s, I think, particularly the sharing element of agglomeration, which by sharing is meant when you have a large population in a city, it makes it cheaper on a per capita basis, it should make it cheaper on a per capita basis to build roads, build energy systems, water systems and so on. But for some reason, this hasn’t worked as well in Africa as it has in other regions, like East Asia or even Latin America. Would that be a reasonable way of thinking about that aspect of agglomeration? You see, what I find interesting, I’ve been thinking about agglomeration quite a lot in the last year or year and a half, and trying to understand, and the research that has been done tends to talk about these three effects of matching, which is basically bringing suppliers of labour, but also of inputs together with those who will buy customers. And that happens more effectively and at lower cost in cities, because of the population. Then there’s the sharing, which is this point about infrastructure and other public facilities. It also applies, of course, in education or health, and so on. It’s much cheaper to supply those public goods and services in cities on a per capita basis. And then there’s the learning, which is about exchange of ideas and innovation and so on. And so people talk about those as working and explaining why, you know, London and New York, Paris, are big cities, successful cities in many ways, and have grown in that way. But there’s less interesting work, I think, trying to explain why it hasn’t happened in the same way, why Lagos, which is as big as London or Paris, is not as successful. So it’s getting already into the issue of the costs of agglomeration and the balance between costs and benefits.
Philipp Heinrigs Yes. I think when we say that Africa’s cities work well, what we do in the report, it’s within the context of the countries. So it’s obviously not saying that Lagos, Kinshasa, Jo’burg perform as well as London, New York and Shanghai. So obviously, it’s within the context of their countries that African cities perform much better. So why do they not perform as well as other global cities that you mentioned? Because I think they’re faced with different constraints. First of all, it’s like they’re witnessing their expansion now, what London, New York, witnessed 100 years ago. So now it’s the backlog in investment that is needed to make these cities work better, to increase this matching and sharing and learning takes time to fund, to plan, to implement. And that’s why I think we will see over time these benefits materialising. At the moment it’s not sufficient, in terms of investments being done, not sufficient. And also the linking, the look at how to best benefit from these agglomeration economies is not really in the policy agenda, I think. We try, somehow many of the economic policies are still sectoral and not place based, so we will look at a value chain in one particular sector, but we might not look at why doesn’t it happen in one city and one territory? And what is the constraint across sectors that needs to be taken care of to make the whole system work better?
Stephen Gelb So you point very much to the context as not addressing the mechanisms that will make agglomeration work better. You mentioned Shanghai, and there are other cities in China like Guangzhou and so on, which have actually grown and developed in the same era as Lagos or Kinshasa, cities in India like Delhi or Mumbai, in Latin America, Sao Paolo in Brazil. They seem to work a lot better, or, at least, the national economies are doing better and the cities seem to be working a little bit better in terms of linking up with global processes than the cities in Africa. So beyond that global North versus global South distinction, what is it that’s holding things back in Africa, do you think?
Philipp Heinrigs We always get taken to these big cities and talking about the metropoles we all know. But I think what we did in the report is actually look at all the cities and look at the distribution and small cities, intermediary cities, inland cities, and try to see if there’s something fundamentally different about urbanisation in Africa to the rest of the world. And what we see is not so much because they do perform better, as we expected, based on observations from other parts of the world. So now if you were to go to the details of why Lagos compared to Rio and why Abidjan compared, it’s a different story, I think. But I think the expansion that is taking place in Africa in the context of financial and administrative capacities is considerable. So this has to be kept in mind when we talk about it. And China had more resources to invest in cities. They had a better administrative framework on how to manage cities, with city regions, provincial cities. So there was also the planning side that was adequate, but also funded sufficiently. And this is something we see in Africa, where there’s just not enough resources to to keep pace with the population growth.
Stephen Gelb Okay. Well, let’s come back to these policy things. But before we get into that, I wanted to just talk a little bit about inequality, because you say actually, I think, in the report that the bigger cities tend to be more unequal, even in Africa. And there is certainly a lot of OECD work about cities in Europe and so on, where inequality is quite strongly associated with city size. But in the report itself, you don’t talk that much about the poor, the people at the bottom end of the distribution. I wouldn’t say that there’s an assumption that it’s all going to happen for them as the economies in the cities get on track, but there’s not much attention paid to the way in which they benefit much less from the benefits of agglomeratio and, I would say, also perhaps pay a larger share of the costs associated with agglomeration, like congestion, like crime, like high cost of housing relative to their incomes, pollution, and so on, which are the standard costs. And you mention that briefly, but don’t get into it in any detail. I wonder if you want to say something about that now.
Philipp Heinrigs Yes, clearly, these are key aspects for thinking about cities and urbanisation, including the environmental aspects that you mentioned. In this report, we didn’t look at that and particularly because, as we talked about it initially, the idea for this report was looking at other agglomeration economies, what was the contribution to wellbeing and GDP? Yes, you’re right. We have a section on wealth distribution, and we see that you are much more likely to be in the top wealth quintile living in a big city compared to a rural area. So, in a sense, we see that the benefits from living in the city also translate in wealth outcomes, as measured by the DHS surveys. However, as you say, globally with city size, inequality increases because you have so many different jobs and opportunities that increase the spectrum of what you can do and how you’re paid for these opportunities. We think it’s important in the policy arena, now, when we think about, okay, urbanisation is going to continue for the next 20, 30 years in Africa, how do we plan this expansion and how do we think, for instance, about poor households? How do we think about their access to opportunities, to their access to services? This I think should be one of the key issues that have to be in the urban plans for Africa’s future cities.
Stephen Gelb I think the thing we should get on to talk about now, because you’ve got, and again, it’s mentioned in the report, and also interestingly in the report at the end, the OECD got four or five people to write almost responses, but on particular things they were interested in, and one of our ACRC colleagues, a team leader in Lagos, wrote a very interesting short piece on what she called “waithood”. It’s by Taibat Lawanson, who is at one of the universities in Lagos, and she refers to waithood as being the kind of state of suspended animation almost between childhood and adulthood, which is very relevant in Africa, where you’ve got very large numbers of young people who can’t really access the workforce because there’s not enough jobs there. And so they’re forced back onto their own resources, in terms of creating livelihoods. And this, as we know, is the situation of the majority of the population in most African cities, they are working in the so-called informal sector at very low-productivity, low-earning activities. And so, you’ve then got to think, how do we move beyond that? How does Africa start growing? It is growing, but it’s got to change the nature and direction and structure, the quality of that growth, in order to create more jobs, create more wealth in the society. And so let’s talk about what the report says about that and what you think. And I’ve obviously got my own ideas, but you go ahead.
Philipp Heinrigs Yeah. Maybe just quickly to the last chapter of the report, where we have Taibat Lawanson and other people, the idea for the section was actually knowing that we take a very limited view on urbanisation, on the socioeconomic, right? So we thought we invite different perspectives, just to show how broad the subject is and how much comes in there. So to tease a bit, the different dimensions of what it needs and what it is living in a city and what makes agglomeration and how the reality is. We also have looked at some of the policies, some of the implications that come out of this work and for us we structured them around three key messages, so that: there needs to be better inclusion of cities and urbanisation and national development planning; there needs to be more local economic development strategies and plans by local government, by local areas; and there needs to be thinking about how are we going to fund these programmes and policies. So at the national policy level, for us, put simply, besides sectoral policies, there has to be a more territorial place-based approach to how the same policies might lead to different outcomes, and different regions do not have the same constraints, same opportunity. So we have to have a better inclusion of the differences and particular features of cities, right? Also what we say in the section is to focus not only on the capital city, not only on the biggest city, but the entire urban network, connect the urban network better, but also look at the rural-urban linkages. So broadly speaking, this is this. On the local economic development, this is where you need to have this complementarity between national policies, national objectives, national strategies. But then you also need the local complement to it. So how do you implement in the local area? What are the specificities of these local areas in terms of endowments, opportunities, constraints?
Stephen Gelb By local, do you mean areas within cities or smaller cities?
Philipp Heinrigs Usually we refer to local government areas. So these are jurisdictions that are in charge of implementing certain policies or service delivery activities.
Stephen Gelb When you say you’ve got to have the same policies, but they will have different outcomes, in a way, the way I read it, this idea of the place based, is that you’ve got to have the same sort of philosophy and policy strategy. But the first step, which I think is very important, is to understand the place. And what is happening in each place is different. And what’s the analysis of the place then decides the specific policy interventions that might work in that place but would not work somewhere else, which has a different starting point. So, in a way, the policies are not going to be the same, although the approach to policy making almost is one that you are pushing. That’s what I understand by place based.
Philipp Heinrigs Yeah, this is exactly what it is. So you have national strategies or plans or policies, like educational policies or environmental policies or economic policies. But then again, even if you have the educational policy, you can say this is the target in terms of educational attainment, capacities, female gender balance and education facilities. But then does it need … In some places the need is a school and others need teachers, in another place it’s something else. So this is how you translate the national policy strategy into effective operational measures at a local level. So this is where the local becomes the translation of a national strategy. But at the same time, besides that, there’s also a need for local economic development policies, so that they are developed based on potential and constraints within specific territory. So this can be developing a biotechnology cluster, based on having a good university department in biology and then trying to find the funding, or you’re based in a cocoa planting area, and then you need to attract investments into the cocoa value chain. So really see what your local economy has as potential, where’s the constraints? Who do you need to bring together to make this sector grow and provide opportunities for your local people?
Stephen Gelb Looking at the potential means looking at the sectors and what’s being produced, but also, I think, at the skills and composition of your labour force, which you’ve obviously got to increase and improve. But you’re starting from what it is now and it’s best to begin with a good analysis of what you have.
Philipp Heinrigs Yeah, it’s always easier to start with something that you already have a foot in, right? So basing your strategies on something that you know you can develop, it’s in many cases easier than starting something from scratch. And there local governments do have the advantage of better knowledge of the area and more contact and coordination with the different stakeholders that are necessary to drive these policies and implement.
Stephen Gelb Coordination was the next word I wanted to pick up on. So I’m glad you mentioned it. Because I think you’re saying coordination in two senses. One is what you just said, which is that governments don’t have to do it all on their own and shouldn’t in some ways do it all on their own, and can’t. But they need to bring in business, outside investors, civil society organisations, trade unions and those sorts of group that bring people together, if those exist. So it’s got to be this kind of multi-stakeholder grouping which makes these decisions together and then implements them together, because that gives a much more solid basis. But then also coordination, in the sense of thinking about the different arenas or domains. So not just thinking about the industrial approach, the sectoral approach, but also about developing skills and education, about electricity, water, transport, the infrastructure needs. And thinking about that in the round, which often – it seems like an obvious point – but for the most part doesn’t happen in many places in the world. So how do you bring that together?
Philipp Heinrigs The idea of local economic development is that you try to understand why something is not happening or what is needed to make it happen, and look at your particular constraints, because sometimes it’s a skill that is lacking to the skilled workforce, other times it’s the access to electricity or road network. And that’s why you have to coordinate and talk to different stakeholders to first understand where the constraints are. And then you also have to involve others – again, civil society, organisations, university – to see how you can develop solutions and approaches to decrease these bottlenecks and build the environment that is conducive. Because often there’s one thing that is missing, but this is still enough for the whole system not to work. And this is the logic, or one of the logics, of the local economic development to try to really get the system right.
Stephen Gelb There’s a key role in there for the local government, which often is not emphasised… other approaches to economic development tend not to give a big role to local government. They put all the emphasis on national government.
Philipp Heinrigs Yes and this is also something we say in the report, is how much national policies are supportive of local government initiatives. So this is, for instance, decentralisation laws and regulations. This is something that is crucially important to empower local governments more. But then there’s also the capacity within local administrations to coordinate and think and implement these types of policies. So they need to have the legal and administrative environment to be able to do it, but we also need to develop the capacity within these local administrations to actually effectively develop strategies and plans.
Stephen Gelb The capacity, both in terms of the skills and organisational capabilities, but also the money.
Philipp Heinrigs Yes.
Stephen Gelb And that’s a big part of your message as well.
Philipp Heinrigs Yes. Clearly a lot of money will be needed for Africa’s cities, for services, for infrastructure, for climate, environmental-related technologies and investment. So it’s clear it needs money. But there are also many initiatives and programmes and things you can do that do not need a lot of money initially. For instance, your zoning laws and land planning strategies, they don’t necessarily need money. You just have to plan that this area we’re going to reserve for public buildings, there is going to be roads. So initially this doesn’t cost money. So it is really about the plan, the capacity and the money. So the three are equally important I would say.
Stephen Gelb But again, some of the most compelling numbers in your report were about the low investment and spending in African cities on infrastructure and so on. I mean, remarkably smaller than in other parts of the world, and that’s clearly something that has to be addressed. We have to bring things to an end, but I think that’s a very interesting chapter, talking about how the financial arrangements need to change, so that cities have access to more resources, both in their own jurisdictions, but also accessing the capital markets, to be able to raise money to make the investments and then repay the debt that they have raised, which I think is something that has not really been thought much about in most of Africa, but is something that needs to be focused on. So I think we have to come to an end now. But just to repeat, again, this is an incredibly interesting and stimulating piece of work that you’ve done and hopefully the start of a lot more work in your own organisation at the OECD, but also elsewhere by academics and other researchers. There’s lots of issues which I think are quite controversial, which we haven’t touched on much. I was interested in the idea of place-based versus space-blind approaches, which has been a big debate. But maybe we can have a conversation about that another time. Firstly let thank me you very much for…
Philipp Heinrigs It was a pleasure being here.
Stephen Gelb …doing the podcast, doing the webinar we had earlier. The webinar’s on the ACRC website, if people want to have a look at that. And the report, again, it’s called Africa’s Urbanisation Dynamics 2022: The Economic Power of Africa’s Cities. Philipp Heinrigs is the lead author. You can find it on the OECD website or else on the UNECA and African Development Bank websites, which are probably easier for most people to access. So thanks very much, Phillipp, and let’s keep it going.
Philipp Heinrigs Thank you. Thank you, Stephen. Nice talking to you.
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