Africa must sustain economic growth of cities

African leaders need to implement political and socio-economic reforms to sustain the strong economic growth of their cities and connect their countries to the global economy, Dr. Yuwa Hedrick-Wong, a global economic advisor at MasterCard who is also a Professor of International Business at the University of British Columbia in Canada, has said.

He said cities are vital gateways that connect countries globally, and they represent powerful hubs for business innovation, income and employment generation.

Dr. Hedrick-Wong made this statement at the launch of the 2014 MasterCard African Cities Growth Index (ACGI) in Accra.

He explained that when there is inclusive urbanisation, the city’s critical mass and its advantage of economies of scale will support the flow of knowledge and capital -- and this will enhance ever-expanding opportunities for large business conglomerates as well as for small businesses and entrepreneurs.

“This environment stimulates indigenous innovations, driving wealth-creation that is widely shared.This will as well empower a growing middle-class that promotes a dynamic and resilient urban consumer market.”

In contrast, Dr. Hedrick-Wong explained that where there is exclusive urbanisation, most of the wealth generated in cities benefits the elite -- who very often straddle government and the business sector.

“Left behind in the informal economy, the majority of the population is stuck in sprawling slums and excluded from most urban services and facilities. In this scenario, the city becomes an agglomeration of poverty, over-crowding and eventually a bottleneck to growth.

“Sub-Saharan Africa is urbanising quickly. The economic future of this vast continent will be determined in its cities,” he said.

According to United Nations estimates, 60 percent of sub-Saharan African’s population will be living in cities by 2050, almost doubling today’s 36 percent.

The 2014 MasterCard African Cities Growth Index ranked Accra as the African city with the highest inclusive growth potential, comparing favourably to cities like Jakarta and Chongqing.

Sets of historical and forward-looking indicators were used to rank the cities’ level of inclusive urbanisation, forecasting their potential for inclusive growth.

The 74 analysed cities were organised into three categories by population size: large (over one million), medium (between 500,000 and one million) and small (under 500,000). Once ranked, the cities fell into one of four bands describing their inclusive growth potential -- high, medium-high, medium-low or low.

Among the 12 indicators are Gross Domestic Products (GDP) per capita growth and household consumption expenditure growth, urbanisation, political stability and absence of violence, government effectiveness, regulatory quality, voice and accountability, rule of law, control of corruption, doing business, population growth, and middle-class household growth.

These indicators, when moving in a positive direction, are both causes and consequences of inclusive urbanisation. Collectively, they assess the level of inclusive growth achieved by the cities.

“On balance, however, Accra is the African city with the greatest promise of inclusive growth and a better material life for its population in the years ahead,” said Professor George Angelopulo of the University of South Africa and co-author of the ACGI.

“The city is not Africa’s most populous or richest in terms of per capita GDP, but it has made progress toward conditions that are conducive to inclusive urbanisation.”

He explained that while the city, and Ghana as a whole, does face macroeconomic challenges, the country has had four successful elections following a peaceful transition of power in 2000.

The ACGI affirms the importance of advancing and protecting individual freedoms to ensure ongoing economic development, he said.

Professor Augustine Fosu, an economist at the Institute of Statistical, Social and Economic Research at the University of Ghana, in an interview with the B&FT after the launch, said: “Ghana should be delighted and feel energetic, and also make it clear to the political leaders that they are accountable to the public; and that they should continue to execute programmes and infrastructure toward the growth of the citizenry”.

He hailed the findings of the index, adding that Ghana has achieved a lot of success in its economic and developmental growth.

He added: “If urban residents have a strong voice regarding how their city is run, and are able to hold government officials accountable, then it can be expected that urban infrastructure will be better established and in better condition. This in turn creates better conditions for domestic and foreign investment. Indicators related to the business environment are an important dimension to consider, because it is impossible to have a dynamic city without a dynamic business sector”.