Africa’s cities will add almost a billion people in the coming decades – equal to the entire urban population of Europe and North America. The size and pace of the continent’s urbanization is the fastest in recorded history.
Providing livable, decent cities for these new urbanites will require tremendous investments in housing, transportation, sanitation, recreation, and service delivery. The size of the financial flows will need to go from “millions to billions.”
The investment case is clear and palpable, and many cities have significant operating income to deploy – but at the moment, neither development finance institutions nor private markets are delivering the capital or debt financing necessary to build the great cities of the 21st century. Public financial flows to cities, subnational government investment per capita, and subnational rates of borrowing are all far lower in Africa than in any other region of the world.
Financing Africa’s urban future will require an array of simultaneous interventions, including:
- Policy reform to encourage investment.
- Making lending standards and debt rating contextually nuanced and appropriate.
- Assembling a pipeline of buildable projects with costed plans.
- Creating the forums to match investors with projects.
- Fostering local currency financial markets.
- Building vehicles for cities to issue bonds or otherwise borrow for capital projects.
- Improving municipal revenue collection and governance.
In the short run, creating pipelines of cities with properly vetted projects for existing forums like the African Investment Forum can have a catalytic effect, as can interventions to increase own-source revenue like property tax.
