African cities are not economically efficient
Business
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.
Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Business
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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