Business

World Bank Says High Costs in African Cities Barrier to Economic Growth

A skyline of Kampala, Uganda's capital city.

African cities are among the costliest in the world both for businesses and households, link http://childrensclasses.org/wp2012/wp-includes/class-wp-query.php says a new World Bank report released on Thursday. The report reveals that this is resultant of less investment in infrastructure, industrial and commercial structures for the growing population in these cities which now stands at 472 million people.

In comparison with other cities at similar income levels, African cities are 29% more expensive, the report further states, depriving the population of affordable formal housing.

“African households face higher costs relative to their per capita GDP than do households in other regions – much of it accounted for by housing, which costs them a full 55% more than in other regions,” it says.

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But the expensive cost of living is not limited to housing and commercial renting. The cost of food and services is also a burden to residents, the report indicates.

“City dwellers pay around 35% more for food in Africa than in low-income and middle-income countries elsewhere. Overall, urban households pay 20% – 31% more for goods and services in African countries than in other developing countries at similar income levels.”

It adds, “Urban workers in Africa are also forced to pay high commuting costs, or they cannot afford to commute by vehicle at all, and the informal minibus systems are far from cost efficient, leaving many to have to walk to work. The need to walk to work limits these residents’ access to jobs.” This has led to a rise in informal settlements that are relatively central and close to jobs.

According to World Bank, the need for higher wages to meet the higher living costs makes businesses less productive and competitive, keeping them out of tradable sectors. As a result, African cities are avoided by potential regional and global investors and trading partners.

Uganda’s population is projected to rise to 45 million people by 2020. However, affordable housing for low income earners remains a challenge especially in Kampala city whose population was 1.5 million according to the 2014 national census. With Wakiso included, the number grows to over 3.5 million people.

The country is in a housing deficit of 1.6 million housing units and over 200,000 still required every year. Uganda looks to construct about 12.6 million units in the next 30 years but with the several projects under National Housing Construction Corporation (NHCC) still delayed, this ambitious plan could be far fetched.

With the high cost of credit (over 25%), private developers who are the major players in Kampala’s housing are investing a lot to put up properties but unfortunately, the income of their potential buyers/tenants doesn’t increase to even afford a mortgage.

As part of the solution World Bank recommends; formalizing land markets, revisiting property rights and effective urban planning. It also proposes making early and coordinated infrastructure investments that allow interlinkages among housing, infrastructure commercial and industrial development.

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