Africa’s urban population will triple over the next 25 years, and African countries will need to invest up to 5.5% of their gross domestic product (GDP) in urban development to avoid rapid slum growth.
This was the conclusion shared by experts at the roundtable discussion “Mobilizing finance for urban development and planning” held at the African Investment Forum in Rabat, Morocco from December 4th to 6th.
Hastings Chikoko, senior director of cities at Big Win Philanthropy, a philanthropic foundation focused on development projects in Africa, drew attention to the phenomenon of rapid and poorly controlled urbanization. he asked.
“The problem is a failure of planning, which leads to a lack of housing infrastructure and the emergence of shantytowns,” said Eric Gambo, associate director at Kenyan law firm G&A Advocates LLP. “Our countries cannot afford financing and this is affecting our cities. The debt/GDP ratio of African countries is around 65 percent,” Gambo added.
Abimbola Akinajo, Managing Director of Nigeria’s Lagos Metropolitan Transport Authority (LAMAT), acknowledged that many of Africa’s largest cities face the same reality of severe lack of funding.
Panelists agreed that a key challenge is to increase sources of investment by making greater use of the private sector, development finance institutions, investment funds, and pension funds, in addition to state and local government resources.
Investment diversification needs to be coordinated with appropriate measures and regulations introduced by central governments and city authorities. This means improving urban governance, building capacity to plan and design bankable projects, better planning investments in local government, and modernizing revenue collection. Payments by users for various services (such as highway tolls) could help finance these provisions
Ednick Muswell, head of water and sanitation at eThekwini, an urban municipality in KwaZulu with a population of 4 million people and a budget of $3.9 billion, introduced eThekwini as an example of successful urban management in Africa. “We have no debt to ESKOM (public electricity company) and our budgetary discipline is the result of good management. The municipality’s credit rating is high and investors trust us.” Muswell added that U.S. pension funds and banks are willing to invest in Yzakwini, and Yzakwini could also raise funds in the capital markets.
However, Chicoco says other cities on the continent have fallen victim to poor and biased risk perception by African investors, which is impacting costs.
“Debt is high in Africa and unless we find a way to address this problem, cities will run out of resources for development,” he warned.
Mohan Vivekanandan, executive director of the Development Bank of Southern Africa (DBSA), a founding partner of the African Investment Forum, said cities need to do careful planning to attract investors. “Major projects have to be city-led and designed so that the private sector can benefit from investing in your city.”
investor appetite
Abdurrahman Diallo, Managing Director of the African Solidarity Fund, believes that the vast needs of African cities for roads, housing, water and sanitation cannot be met without strong support from financial institutions.
Capital markets are also adapting to new norms as cities develop.
“We need to think ahead,” said Neza Hayat, head of the Moroccan Capital Markets Authority. The Agency adopts a regulatory framework tailored to the needs of the local market and has developed green bonds (2016) and municipal bonds, which have helped Agadir attract capital market investments since 2020.
Tierno Habib Khan, Managing Director of Shelter African Development Bank (ShafDB), pointed out that Africa needs 53 million more homes and $10,000 billion is needed to build them. His agency covers 44 African countries and works on the urban housing value chain, and Habibuhan stressed that low-cost housing (up to $10,000) is a viable solution thanks to appropriate construction techniques. He called on investors to come to Africa, where the housing market alone is worth between $700 billion and $800 billion.
African Development Bank Group Vice President for Private Sector, Infrastructure and Industrialization, Solomon Quayner, concluded the forum by reminding that the African Development Bank is committed to connecting urban entities with competitively priced financing and supports local governments in developing public-private partnerships. He noted that six projects worth a total of more than $4 billion attracted investor interest at the African Investment Forum’s board meeting.
