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‘African cities are not economically efficient’

World Bank’s Africa’s Cities: Opening Doors to the World report says typical African cities share three features that constrain urban development and create daily challenges for residents:

Crowded, not economically dense- investments in infrastructure, industrial and commercial structures have not kept pace with the concentration of people, nor have investments in affordable formal housing; congestion and its costs overwhelm the benefits of urban concentration.
Disconnected- cities have developed as collections of small and fragmented neighbourhoods, lacking reliable transportation and limiting worker’s job opportunities while preventing firms from reaping scale and agglomeration benefits.

Costly for households and for firms- high nominal wages and transaction costs deter investors and trading partners, especially in regionally and internationally tradable sectors; workers’ high food, housing and transport costs increase labor costs to firms and thus reduce expected returns on investment. The report underlined that 55% of African households face higher costs relative to their per capita GDP than do households in other regions- much of it accounted for by housing, which costs them a full 55 per cent more in this comparison.

In eight representative African cities, the report cited that roads occupy far lower shares of urban land than in other cities around the world.it said 20% of African cities are more fragmented than are Asian and Latin American ones. In Harare, Zimbabwe, and Maputo, Mozambique, more than 30 per cent of land within 5 kilometres of the central business district remains unbuilt.

According to the World Bank report, 472 Million people live in urban areas. That number will double over the next 25 years as more migrants are pushed to cities from the countryside. The largest cities grow as fast as 4 per cent annually. Urbanisation benefits people and businesses by increasing economic density. A worker in an economically dense area can commute more easily and consume a broader range of products. Firms clustered in cities can access a wider market of inputs and buyers. Scale economies reduce firms’ production costs- in turn benefiting consumers.

Population density is indeed strongly correlated with indicators of liveability- in sub-Saharan Africa as elsewhere. Yet Africa’s cities are not economically dense or efficient. They are crowded and unliveable. The report indicated that most urban residents are packed into low-rise, informal settlements without adequate infrastructure or access to basic services. Two of every three people in Lagos, Nigeria dwell in slums. Thus, even though households in densely populated areas of Africa are better supplied with services than rural households, the mere fact of higher population density does not imply a liveable environment.

Why do a majority of people in Africa’s cities live in slums? The immediate explanation is that the urbanization of people has not accompanied by the urbanization of capital. Housing, infrastructure, and other capital investments are lacking, especially outside the city center. Urban building stocks have low replacement values. Across Africa, housing investment lags urbanization by nine years.

It was shared that the population density of African cities is similar to that of many cities elsewhere. What is holding these cities back is their low economic density- the lack of thriving urban markets that depend on adequate infrastructure and conveniently connected clusters of residential and commercial structures. A dearth of capital and capital investment keeps Africa’s cities inefficient and less productive than they should be, limiting firms and workers to the production of goods and services for small and local hinterland markets locking them out of much more lucrative regional and international markets.

Many of Africa’s urban workers live in crowded quarters near the city center. In Dar es Salaam, Tanzania, 28% of residents are living at least three to a room; in Abidjan, Cote d’Ivoire, the figure is 50%. According to the report, the reason for this crowding is that most people must live near the downtown district or industrial zones if they hope to work. They cannot conveniently commute from outlying areas, because little or no affordable transportation is available. Africa’s cities also suffer from a lack of adequate formal housing around the urban core.

Consequently, people settle in relatively central informal settlements that are densely populated, ill served by urban infrastructure, and, by many measures, unliveable. Paradoxically, Africa’s cities are sparsely built and laid out but feel crowded. The report highlighted that the crowdedness of African cities is most apparent in their slums. On average, 60% of Africa’s urban population is packed into slums- a far larger share than the average 34% seen in other developing countries.

It shared that high rates of slum living within urban areas are characteristic of most African countries. Only two countries, Zimbabwe and South Africa, fall below the non-African average. The proportion of Africans living in slums is not high because Africa has higher urban population densities than other countries. The average population density of African cities tracks the global average; it ranks third among seven global regions.

Further, it was underlined in that report that people are clustering downtown locations not because of the amenities or decent jobs they can access in central locations. These patterns reflect broader dysfunctional ties in land markets as well as limited investments in transport infrastructure, limiting the choices that people can make on where to live and how to access jobs.

Capital investment in Africa over the past 40 years has averaged about 20% of GDP. In contrast, urbanizing countries in East Asia- China, Japan, and Korea-stepped up capital investment during their periods of rapid urbanization. The report said between 1980 and 2011, China’s capital investment rose from 35% of GDP to 48%; during roughly the same period, the urban share of its population rose from 18% to 52%. In East Asia as a whole, the report noted, capital investment remained above 40% per cent of GDP at the end of this period, helping the region become very dense economically.

The report said these contrast underline that Africa is urbanizing when poor- indeed, strikingly poorer than other developing regions with similar urbanization levels. It said supporting rising population densities in African cities will require investments in buildings, and complementary physical infrastructure: roads, drainage, street lighting, electricity, water, and sewerage, together with policing, waste and health care. In the absence of higher levels of capital investment at around Asian levels, the potential benefits of Africa’s cities are being overwhelmed by crime, disease, and squalor.

Furthermore, overcrowding increases exposure to communicable diseases. Inadequate drainage increases the risk of malaria, and lack of sanitation raises the risk of dengue. Lack of access to clean water is a leading cause of diarrhoea, which is responsible for an estimated 21% of deaths among children under five in developing countries- 2.5 million deaths a year, the report said.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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