GDP per capita for Africa was much lower at the same level of urbanisation as other regions, because African economies grow from a low baseline. File Photo: IOL

JOHANNESBURG – The African Development Bank (AfDB) has warned that economic growth in Africa, including in South Africa, was being constrained by macroeconomic instability, a poor investment climate, and inadequate infrastructure as populations in cities continue to expand.

The AfDB said in a report on Monday that rapid urbanisation had created challenges for Africa, despite opening up new opportunities to stimulate innovation, boost economic development, and transform human well-being.

The report said while the majority of leading economic hubs were still in advanced economies, the centre of economic activity was moving toward the developing and emerging markets.

However, gross domestic product per capita for sub-Saharan Africa was much lower at the same level of urbanisation as other regions, because African economies were growing from a low baseline. 

“Cities in Africa are costly for households, workers and businesses. Because food and building costs are high, families can hardly remain healthy or afford decent housing. Because commuting by vehicle is not only slow, but expensive, workers find it hard to take and keep jobs that match their skills,” it said.

“And the need for higher wages to pay higher living costs makes firms less productive and competitive, keeping them out of tradeable sectors. As a result, African cities are avoided by potential regional and global investors and trading partners.”

South Africa is one of those sub-Saharan countries struggling with rapid population growth and inadequate infrastructure. 

The country's economic growth has been revised down to 0.6 percent this year as the fiscal deficit remains high and the country continues to face revenue shortfalls.

The AfDB said weak capacities of municipalities had limited professional and institutional capacities for managing urban growth and development.

AfDB President Takehiko Nakao said cities enabled economies of scale in delivering public infrastructure and services, such as transport, communication, power, water, and sanitation. Takehiko said this requires co-ordinated and holistic policies, planning, and governance to make structural transformation more inclusive.

“Cities offer access to key infrastructure, institutions, and services for a good quality of life,” he said.

“They can be centres of innovation for a more liveable future for all. But realising that potential requires forward thinking and flexible planning, adequate capacity at the municipal level, and good governance.”

The AfDB offers a range of recommendations for improving finance for infrastructure development, including improving fund transfers to the local governments, relationships with international development partners, as well as support and regulatory environment for public-private partnerships.

This also includes a proposal to establish an Urban and Municipal Development Fund, which would enhance technical assistance and capacity building on urban planning, governance, and project preparation.

“The scope and implications of a 4.5 percent urban growth rate for the African continent are unprecedented and will require co-ordination among governments, donors, and financiers to maximize development outcomes,” it said. “Local governments are critical to advancing the delivery of basic services and closing the infrastructure gap.”