Urbanisation directly influences industrial outcomes - experts

Deliberate efforts are needed to link urban and industrial development in the context of national development planning to effectively address poverty, unemployment and informality in Africa, experts have said.

Deliberate efforts are needed to link urban and industrial development in the context of national development planning to effectively address poverty, unemployment and informality in Africa, experts have said.

This was revealed at the launch of the 2017 edition of the UN Economic Commission for Africa’s flagship publication, the Economic Report on Africa themed: “Urbanisation and Industrialisation for Africa’s Transformation,” in Kigali last week.

“Reconnecting urban and industrial development through deliberate policies, strategies and investments is a priority for the sustainability of both cities and industries,” said Giovanie Biha, Deputy Executive Secretary, UN Economic Commission for Africa.

The report focuses on how Africa can advance inclusive and sustainable growth by better linking urban and industrial development advocates for African policy makers to view urbanisation as an opportunity, especially for industrialisation.

“We know that with urbanisation the scale and type of consumption is rapidly changing in cities, which can stimulate domestic manufacturing. A fast growing middle class in Africa’s cities is consuming more goods, with changing preferences,” said Biha.

“Food, housing, infrastructure are only some of the examples. Governments could target domestic industry and value chains in order to meet this demand.”

The report proposes for policy makers to better appreciate that the way in which urbanisation is planned and managed directly influences industrial outcomes and therefore structural transformation targets.

It shows that well planned and managed cities and national urban systems are necessary for improved performance of industrial firms and ultimately increased job creation and productivity.

Findings from the 11 country case studies – including Rwanda – illustrate innovations and deliberate strategies to promote cities and national urban systems better suited to enable industrialisation.

“For instance, the role of Rwanda’s urban based business services, especially financial and ICT sectors, in creating a positive investment climate is highlighted,” said Biha. “The business service sector in the country has been supported by investment facilitation, strong political commitment, strategy development and upgrading of the regulatory framework.”

Richard Mushabe, the division manager for national planning and research at the Ministry of Finance, said he appreciated ECA’s efforts and especially the report as it comes to feed into the government’s current urbanisation policy arrangements.

Mushabe said: “These discussions have come at the right time as we are working on many pertinent aspects including our vision 2050.”

He acknowledged that urbanisation requires coordinated initiatives.

“We need an integrated plan which ensures that our cities can improve the lives of our people and can enhance inclusive growth of our economies,” he said.

Building on the insights from the previous editions, the 2017 report critically examines how African countries can take advantage of urbanisation to accelerate industrialisation.

The 2016 report focused on how African countries could pursue a low-carbon trajectory for green industrialisation.

On key policy messages in the latest report, Edlam Abera Yemeru, the Chief of the Urbanisation Section of ECA’s Social Development Policy Division, said the continent is undergoing a rapid urban transition which offers considerable opportunities to accelerate structural transformation if harnessed through deliberate planning.

Theory and evidence show, she said, that urbanisation and industrialisation are closely associated but this has not been the case in Africa.

“In Africa, the links between urban and industrial development have been weak and the region is rapidly urbanising amidst weak or stagnant industrialisation. And there is an urgent need to connect policies and strategies for urban and industrial development for better performing cities and industries,” Yemeru said.

Structural transformation is necessarily tied to urbanisation, she said, adding that rural modernisation sheds labour, and that manufacturing and services absorb labour.

Well planned and managed cities offer large productive benefits for industrialisation, yet barriers such as infrastructure deficits in addition to poorly functioning land and property markets, persist, according to her.

By 2035 Africa’s urban population is projected to reach 49 per cent presenting considerable demands for employment, services and infrastructure, but creating advantages for economic growth. By then, it is noted that half of Africa’s population will be urban, compared to just one third in 1990.

This rapid urbanisation, experts say, creates growing challenges in terms of infrastructure and services’ needs, but it can also be a driver of industrial development on the continent, under the right policy framework.

The event provided an opportunity to discuss the challenges of industrialization and structural transformation on the continent and for Eastern Africa in particular.

In most of the 14 countries covered by the report, the share of the manufacturing sector has declined over the past 10 years while the services sector has expanded rapidly.

It is noted that despite a weak structural transformation process, the long-term growth outlook remains promising in eastern Africa.

The GDP growth rate is estimated at 5.6% in 2017, the same as in 2016, which is down from the exceptional performance of the past five years, with Ethiopia achieving an average annual growth rate of 9.5% and Rwanda 7.2% between 2012 and 2016, but remains well above the African continent average of 3.1% in 2017.

Andrew Mold, acting ECA regional Director, highlighted some of the growth catalysts such as massive investments in infrastructure or dynamism of some service sectors such as trading, finance, and tourism.

However, it was noted, these increased investments have started to stretch budgets and structural constraints remain such as weak credit to the private sector or exchange rate volatility.