Why don’t urbanisation and economic growth correspond in Africa?

Kinshasa, DR Congo. Image: Getty.

Most of the time, urbanisation and economic growth go hand in hand.

This might seem counterintuitive; when most people think of fast-growing cities across Africa and Asia, they think of the squalor and poverty of slums. So why do urbanisation and economic growth correspond?

Most people move to cities in search of economic and social opportunity. They are looking for more education and better jobs, and cities create wealth; people become more productive as they move from agriculture to industry and services. As a result, there is a close relationship between urbanisation and income.

Source: Coalitions for Urban Transition based on World Bank data.

In sub-Saharan Africa, most countries have enjoyed rapid economic growth as their towns and cities have expanded. In Ethiopia and Tanzania, for instance, the rural-urban transition has seen incomes rise as people grasped new employment opportunities in cities.

However, as the next graph shows, the relationship has broken down in too many African countries.

This graph shows the relationship between urbanisation and GDP per capita in 17 African countries. The direction of the arrows shows the direction of this relationship between 1990 and 2017.

If urbanisation and economic growth corresponded, every arrow would be pointing to the top right corner. But as you can see, the arrows point in every direction.

For Burundi, the Central African Republic (CAR), the Democratic Republic of the Congo, Liberia and Zimbabwe, all of their arrows point to the top left-hand corner. This indicates that as the country has become more urbanised, average incomes have fallen instead of risen.

In CAR in 1990, 35 per cent of the population was living in urban areas and the average person earned $490 per year. In 2017, 40 per cent of the population lived in urban areas but the GDP per capita had dropped to $418.

Why has this happened? One possible answer is that urbanisation in CAR has not happened because of “pull factors” such as better livelihoods in cities. Rather, it has happened because of “push factors”, where people have fled to cities to escape the violence in the countryside.

Equatorial Guinea tells a different story. In the graph above, the country has an almost horizontal arrow pointing to the right: this means that it has enjoyed a tremendous increase in average income without corresponding growth in the urban population.


Does this mean that rural Equatorial Guineans are now super-rich? Sadly, no. It just means that the large oil reserves discovered in the 1990s in Equatorial Guinea have led to much higher average incomes.

Most of this money has been captured by those directly involved in the industry, rather than shared within the country. Resource extraction is a capital-intensive activity that barely creates any local work. As a result, the benefits in this instance are not effectively distributed across society.

Furthermore, Equatorial Guinea does not have any significant industrialisation. There are no decent jobs drawing people to cities. As a result, urban growth has lagged far behind economic growth – and inequality has soared.

Of course, these factors are only a part of the answer. The graph presents many different countries with very different economic, social and political contexts. However, all of these examples call for ambitious policies from African national governments to ‘fix’ the relationship between growth and urbanisation and sustainably tap into the potential of cities.

By providing essential infrastructure and land tenure to urban dwellers, governments can enhance health and education and therefore economic productivity.

A new report from the Coalitions for Urban Transitions shows that National Urban Policies (NUPs) are a powerful tool at the service of African governments to drive change in cities and unlock their economic, social and environmental potential. If well designed, NUPs can ensure that urbanisation serves the national economic interest – and can ‘repair’ the broken relationship between urbanisation and growth on the African continent.

Catlyne Haddaoui is a research analyst for the Coalition for Urban Transitions.

 
 
 
 

To see how a city embraces remote work, just look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”