Africa’s competitive cities for jobs and growth have lessons to teach others

Cities do not always need to overhaul their economies— sometimes it is enough to do what you already do, but do it better. – World Bank Group

 

A competitive city is a city that successfully facilitates its firms and industries to create jobs, raise productivity, and increase the incomes of citizens over time. Kigali, Rwanda’s capital city is one of such, according to the World Bank.

In its report, Competitive Cities for Jobs and Growth; what, who and how, the global lender notes that of the largest 750 cities in the world, three-quarters, including Kiga­li, have grown faster than their national economies since the early 2000s, and the primary source of job creation in these cities has been the growth of private sector firms.

History has shown that development cannot be achieved by public sector initiatives alone. The private sector, as an engine of economic growth, plays a vital role in any nation’s drive to eradicate poverty and foster an inclusive society. This is because the private sector – in particular through its small and medium-sized enterprises (SMEs) – is the main source of employment. The African Development Bank (AfDB) estimates that the SME sector alone contributes more than 45 percent to employment and 33 percent to GDP.

The growth of the private sector has, therefore, fostered economic growth on the continent and has made cities where the business sector thrives more competitive than others. Cities in the top quartile of Sub-Saharan Africa (for example, Onitsha, Nigeria; Dar es Salaam, Tanzania; Kumasi, Ghana) created jobs at a rate 4.5 percentage points faster than the rest. For each of the other regions of the world, this gap is at least 3 percentage points.

According to the World Bank, competitive cities include more than just the popular ones like Johannesburg, capital cities like Nairobi, or centers of commerce like Lagos. “They are often secondary cities, and they are experiencing rapid industrialization.”

Data in the study rated Nigeria’s south eastern city Onitsha, the northern city of Meknes in Morocco, as top competitive cities. “The success of these competitive cities was not a foregone conclusion: many of them exhibited success amid adversity—for example, many of them are landlocked and in a lagging region of the country,” the global lender notes. On average, job growth was faster in market towns and production centers (annual averages of 3.5 percent and 3.3 percent, respectively) than in creative and financial services centers.

Competitive cities also enjoyed good investment flow, according to the study. In FDI capital investment relative to city GDP, low-income market towns account for 45 percent of cities among the top 10 percent of performers. Sub-Saharan Africa populated the top bracket with as many cities as the East Asia and Pacific region, with Nigeria’s capital city Abuja and Addis Ababa, Ethiopia leading. These cities punch far above their weight in the global competition for mobile, production-oriented capital, the World Bank notes.

Another attribute of the cities that the World Bank considers as successful is that they make the most of what little they may have had to power ahead of competitors. It could be a skilled workforce, geography, language, cultural ties, technical know-how, existing industry base, and product and market knowledge. A good example is Kigali, Rwanda, a city that leveraged its nearby gorilla-viewing opportunities to build a MICE (meetings, incentives, conferences, and events) sector, thereby harnessing a national-level focus on national parks, and by designing and marketing a world-class master plan to encourage hotel and tourism investors. Likewise, Tangier,  a Moroccan port city which has been a strategic gateway between Africa and Europe since Phoenician times got improved national investment in a large new port to attract foreign investors in automobile manufacturing and supplier industries. These companies pay higher wages than previous local averages.

Like in job creation, market towns did well in the average income metric, although production centers saw the highest annual average increase in incomes at 4.6 percent. “Conversely, many creative hubs struggled to raise living standards: household disposable income increased by only 0.7 percent on average,” the World Bank notes. In sub-Saharan Africa, there were mixed fortunes; as the top tenth of cities grew incomes by 11.0 percent a year, the bottom tenth saw household incomes fall by almost 4.0 percent.

The World Bank notes that there is no single recipe for becoming a competitive city, but adds that some common patterns can be identified and some specific techniques can be utilized by city authorities designing and implementing economic development strategies.

Having realised that improving the competitiveness of cities is a pathway to eliminating extreme poverty and to promoting shared prosperity, city leaders need to be familiar with the factors that help to attract, to retain, and to expand the private sector, which has been proven to foster job creation and economic growth.

The 750 cities included in the dataset used by the World Bank are the world’s largest urban agglomerations or metropolitan areas with populations of at least 400,000, according to the list compiled by the Population Division of the United Nations Secretariat Department of Economic and Social Affairs. Some “strategically important” cities, such as country capitals that did not make the threshold population of 400,000, were then added to the list.