African cities acute decline in productivity, jobs and revenues

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On Monday, May 4 2020, a section on Nairobi residents living in a slum in Kariobangi woke up to the demolition of their structures by bulldozers.

This came at the height of the covid-19 coronavirus pandemic in the country which is regarded as East Africa’s economic hub.

What the demolitions did was that many families were not only left homeless but their livelihoods were also yanked from them. However little they had, they have to go back to the drawing board to plan on what next in a very uncertain time.

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From being independent, they were pushed to become beggars- not only for food but also other basic amenities which they could have regardless of how meagre they were in their humble abodes.

And therein lies the challenge that is the survival of the vulnerable and economically marginalised in the African setting.

Nairobi is home to some of the richest people on the continent and with it being the hub of economic activity in Kenya, it also enjoys relatively cheap labour from the likes of Kariobangi dwellers whose houses were demolished. This means that with another problem to solve, the residents have to abandon their routine activities to handle the displacement.

The Economic Commission for Africa (ECA) is calling for adequate consideration of the vulnerability of city economies as African governments consolidate efforts and define stimulus measures to mitigate national and regional economic impacts.

This is as a part of its analysis to inform covid-19 policy responses which shoud target even the smallest of businesses including those who run them for day to day subsistence like those in Kariobangi.

“As engines and drivers of economic growth, cities face considerable risks in light of covid-19 with implications for the continent’s resilience to the pandemic,” states Thokozile Ruzvidzo who is the Director of the Gender, Poverty and Social Policy Division of the ECA.

On the continent, 600 million people reside in cities which account for more than 50 per cent of the region’s GDP. With a displacement like happened in Kariobangi, it means that the ripple effect will be felt especially when it comes to the economics of these cities.

Botswana, Uganda, Tunisia and Kenya register an even higher percentage of city populations at more than 70 per cent.

ECA notes that nearly a third of national GDP (31 per cent) comes on average from the largest city in African countries.

As such, the economic contribution of cities in the region is far higher than their share of population.

The covid-19 coronavirus employment effects are likely to be severe in urban areas.

Projections show that urban-based sectors of the economy including manufacturing and services which currently account for 64 per cent of GDP in Africa are expected to be hit hard by covid-19 related effects, leading to substantial losses in productive jobs.

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“In particular, the approximately 250 million Africans in informal urban employment (excluding North Africa) will be at risk. Firms and businesses in African cities are highly vulnerable to covid-19 related effects, especially SMEs which account for 80 per cent of employment in Africa. These risks are compounded by a likely hike in the cost of living shown for example by some initial reports of up to 100 per cent increase in the price of some food items in some African cities,” notes ECA.

Additionally, urban consumption and expenditure of food, manufactured goods, utilities, transport, energy and services is likely to experience a sharp fall in light of covid-related lockdowns and reduced restrictions.

“Africa’s cities drive consumption with their growing middle class with per capita consumption spending in large cities being on average 80 per cent higher at the city level than at the national level. COVID-19 related decline in urban consumption will thus impact domestic value chains, including rural areas,” notes Ruzvidzo.

Further, with the per capita expenditure of African local authorities being the lowest in the world at US$26, many local authorities are poorly resourced and less able to contend with the onslaught of the coronavirus pandemic.

Alarming also is the likely fall in revenue streams for local authorities due to covid-19 curtailing their already limited ability to respond to this crisis. Intergovernmental/national transfers which account for 70 to 80 per cent of local authorities’ finance are likely to be reduced due to immediate national response and recovery requirements. Own source revenues which are already low at only 10 per cent of local authorities’ finances with city level lockdowns and restrictions leading to reduced economic activity.

This could be further compounded by the displacements which disorient the small business owners in the informal settlements who keep the economy running as they rely mostly on the microeconomics where day to day needs are available in small packages suitable for just that day’s need.

Ruzvidzo adds that local authorities are frontline responders to such shocks and crises. Given the proximity to their constituencies, local authorities are well-positioned to and already do lead responses to some of the immediate effects, and doing so have a better understanding of needs and necessary measures, and enable higher transparency of accountability.

In light of these circumstances, ECA is proposing specific support to city governments to mitigate and respond to the economic effects of covid-19, in addition to the immediate health and humanitarian focus. Disaggregating the analysis and identification of priorities and responses at the sub-national and city scales is the first step.

Proactive measures are also needed for urban economic recovery including through measures to boost finances and capacities of local authorities as first responders, short-term bailouts and exemptions for SMEs to limit productivity and employment losses, social protection for those in informal urban employment while anticipating the potential of labour-intensive public work programmes for job creation in the medium term.

In the longer term, the acute vulnerability of city economies calls for efforts to revitalize and enhance the productivity of Africa’s cities through adequate investments to address the substantial deficits and barriers they face.

With more than half of Africa’s population expected to live in cities in just 15 years, the risks of poorly planned and managed urbanization are considerably high, rendering millions vulnerable to the effects of future shocks.

Read: Hunger most urgent need for Africa’s poor fighting Covid-19 pandemic

I have 10 years of experience in multimedia journalism and I use the skills I have gained over this time to meet and ensure goal-surpassing editorial performance. Africa is my business and development on the continent is my heartbeat. Do you have a development story that has to be told? Reach me at njenga.h@theexchange.africa and we can showcase Africa together.

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