URBANIZATION AND INDUSTRIALIZATION FOR AFRICA’S TRANSFORMATION ECA PART II: URBANIZATION AND INDUSTRIALIZATION FOR AFRICA’S TRANSFORMATION ECONOMIC REPORT ON AFRICA 2017 11 December 2017, Addis Ababa, Ethiopia UNECA.ORG

Key policy messages ECA Structural transformation, industrialization and urbanization are linked in theory and practice Africa is undergoing a rapid urban transition offering opportunities to accelerate industrialization In Africa, linkages between urbanization and industrialization are weak Policy and institutional frameworks need to be adjusted, if urbanization is to be harnessed for Africa’s industrialization and structural transformation ECONOMIC REPORT ON AFRICA 2017 | URBANIZATION AND INDUSTRIALIZATION FOR AFRICA’S TRANSFORMATION UNECA.ORG

The imperative of Structural Transformation

Impressive economic growth xxxxxxxxxxxxxxxxxxxxxxxx

However, this growth is exclusive and jobless

Africa’s growth model: Constraint to inclusive growth Low productivity agriculture dominant Commodity dependent economies Low manufacturing share of GDP 60-70% of workers in informal economy Highest average GDP share of services Economic vulnerability to exogenous shocks

Urbanization and Structural Transformation

Urbanization in Africa ECA Urbanization in Africa In 2014, Africa was 40 percent urbanized but it is projected to reach 50 percent in less than 20 years by 2035 The number of urban residents in Africa nearly doubled between 1995 and 2015 and is projected to double again by 2035 reaching 867 million Africa, together with Asia will account for nearly 90 percent of the world’s urban population growth Africa’s urban growth rate of 3.4% is the highest in the world (Asia- 2.10%; Latin America & the Caribbean – 1.28%) Urbanization is taking place within 30 years in Africa unlike the 100-150 years span experienced by developed countries   UNECA.ORG

Urbanization in Africa Urban and rural population growth rate, 1980-1950

labour Structural transformation is necessarily tied to urbanization 10 Structural transformation is necessarily tied to urbanization Urbanization as a outcome Rural modernization sheds labour to cities Urban manufacturing and services absorb labour Declining share of agriculture in GDP & employment Demographic transition (low birth & death rates) Urbanization as a driver Cities offer economies of scale for productive sector expansion This movement of labour = urbanization productivity increase labour productive sector expansion An Urban Lens in National Development Planning | HLPD, Abuja 2017 UNECA.ORG

Sharing Matching Learning URBANIZATION ENHANCES INDUSTRIAL PRODUCTIVITY THROUGH AGLOMMERATION ECONOMIES AGGLOMERATION Sharing Matching Learning

HOWEVER, AFRICA IS URBANIZING WITHOUT INDUSTRIALIZING Urbanization and industrial employment in Africa, 2007-2015 urbanizing rapidly amid declining or stagnant industrial output natural resource exports and related spending appear to be driving urban growth, generating “consumption cities leading to “premature urbanization” jobless urbanization, has resulted in cities with poorer populations and higher informality overlap between Africa’s demographic and urban transitions

Linking Urbanization and Industrialization: A Theory of Change

THE URBAN-INDUSTRIAL NEXUS

DRIVERS Urban demand could be a driver of industrial development Middle class and urban consumption are rising with changing consumer patterns leading to increasing demand for manufactured and goods This presents significant opportunities for industrial policies to select and support high-growth sectors such as the food, housing, automotive, infrastructure Yet, increasingly, imports are meeting rising urban demand (e.g. processed foods)

ENABLERS- CITY LEVEL Well planned and managed cities offer large productive benefits for industrialization, yet barriers persist Disconnected and sprawling urban forms The spatial layout of cities, on whether urban form is compact and connected, or sprawling and disconnected, is important to economic functioning. Infrastructure deficits Infrastructure deficits are widely recognized as one the greatest barriers to industrial success in Africa. Poorly functioning land and property markets The functioning of urban land markets underlies the arrangement of urban space and is fundamental in both private finance and public revenues.

ENABLERS- SYSTEM LEVEL Diverse, balanced and connected national systems of cities play a vital role in enabling industrial development African countries often have unbalanced national urban systems (large primary city and less competitive smaller cities)

Inefficient land and property markets BARRIERS Undermine agglomeration economies and increase the costs of production Urban form Low density Disconnected Segregated Urban Infrastructure Transport Electricity Energy Institutions Inefficient land and property markets Doing business (permits, tax payments, contract enforcement, regulations)

Urbanizing to Industrialize: Key Policy Entry Points

The Centrality of National Development Planning

INDUSTRIAL POLICY Focus on existing comparative advantages in specific areas Prioritize labour extensive manufacturing Support existing sub-sectors Target sub-sectors driven by urban demand Integrate spatial considerations

SPATIAL TARGETING Urban system Support a more balanced national urban system Cater to spatial needs of targeted sub-sectors Leverage special economic zones in a connected geographical context Support complementarity among cities

URBAN POLICY: City level Better manage emerging urban form and increase density Improve land and property markets Invest in multi-modal mobility Ease housing bottlenecks Prioritize strategic infrastructure investments Prioritize industrial development in local economic development plans

Cross-cutting coordination and implementation platform Policies, institutions and budgets Link national and sub-national budgeting with industrial and spatial targets Cross-cutting coordination and implementation platform Strengthen sub-national spatial economic data Tools and guidelines on coordinated urban and industrial planning Finding the financing

To strengthen and ensure coordination between urban and industrial sectors: Recommendation 1: A Policy note or “white paper” to articulate key principles of drafting urban and industrial policies; this paper could inform the National development planning vision. Paradigm change. Recommendation 2: Establish mechanisms to coordinate urban and industrial development policies with other sectors and sub sectors, respectively (energy, transport, trade, education, ICTs...),at national and local levels. Recommendation 3: Strengthen competencies and provide technical, financial and institutional support to sub-national levels of governance in the area of economic planning and industrial development. Recommendation 4: Expand cooperation between urban and industrial sectors with national statistical offices and think tanks to generate new spatial economic data, especially at sub-national and city levels.

https://www.uneca.org/publications/economic-report-africa-2017 https://www.uneca.org/fr/publications/rapport-%C3%A9conomique-sur-l%E2%80%99afrique-2017

More info: Yemeru@un.org ECA THANK YOU! More info: Yemeru@un.org UNECA.ORG