New cities set to alter investment landscape in Africa

  • The urban population of Africa is set to reach 722m by 2026, up from 286m in 2000.
  • Mega-cities face overtaxed infrastructure and urban planning constraints.
  • Ambitious charter city plans to help reshape the continent’s investment landscape.
  • Secondary cities poised to absorb population growth alongside talent and investment.

With Africa’s population projected to double by 2050, countries are planning new cities to house increased industrial activity and urban populations, and address the constraints of many of the continent’s mega-cities.

New urban developments around the globe are working to tackle issues surrounding population growth, sustainability and economic resilience. In 2015 Egypt announced that it would build a new capital. In addition to administrative offices, the New Administrative Capital is expected to host a stadium, various religious buildings, a theme park and more. Once completed, it is envisioned that the city will house some 5m residents in hopes of relieving congestion in Cairo. While construction was still under way, some 14 government ministries had relocated to the capital as of May 2023. The country plans to build some 20 new cities for 30m people over the next decade.

Africa has a history of urban development projects, and many cities on the continent – such as Abuja in Nigeria and Yamoussoukro in Côte d’Ivoire – were built or expanded shortly after decolonisation for economic or administrative purposes. As Africans are projected to make up 40% of the global population by 2050, these new urban centres will help house future generations, as well as drive investment and economic activities to new locales.

New urban developments

Africa’s building boom is reflected in foreign direct investment (FDI) inflows, with the continent’s FDI levels rising from $39bn in 2020 to $97bn in 2021 – an increase of 147%. With private entities driving much of the continent’s urban development, the creation of special economic zones (SEZs) featuring tax breaks and land rights grants have further incentivised investment. Kenya’s Tatu City, the construction of which began in 2016, represents the country’s first operational SEZ and houses 60 businesses attracted by incentives such as low corporate taxes and exemptions on import duties.

New cities are being erected in some areas to accommodate an expanding technology ecosystem, as African start-ups attract increased international attention and funding, and global tech firms look to establish offices in the region. Known as charter cities, these areas offer both the infrastructure to support business operations and educational opportunities to provide a locally trained workforce.

Located in the Lekki Free Zone outside of Lagos, Itana – formerly known as Talent City – represents the efforts of Nigerian entrepreneur Iyinoluwa Aboyeji to establish the physical infrastructure to support remote digital work in Nigeria. Alongside working spaces, improved internet connectivity and reliable electricity, the facility provides digital residencies, tax incentives and 100% foreign ownership to encourage entrepreneurs to set up shop.

Zambia’s Nkwashi, located outside of the capital of Lusaka, aims to house some 300,000 residents and is supported by African firm Thebe Investment Management. The development centres around a new science and technology university with the goal of training local talent to work remotely or at local branches of African tech start-ups or global firms.

Meanwhile, Konza Technopolis, located some 64 km south of Nairobi, is a key project in Kenya’s Vision 2030 under the supervision of the Ministry of Information, Communications and the Digital Economy. The 5000-acre site is expected to include infrastructure to support the country’s expanding IT-powered services sector, as well as light manufacturing activities and a university, with affordable housing provided for both employees and students.

Economic diversification is an important stimulus for new urban developments. Another planned satellite city in Nigeria, Enyimba Economic City in the south-east, is targeting a variety of sectors, from hydrocarbons to logistics to entertainment. The city is expected to generate 600,000 jobs and house up to 1.5m residents, with the first of six construction phases under way as of early 2023.

Secondary cities

In addition to new sites intended to drive economic expansion, secondary cities present attractive investment opportunities as governments look to ease housing concerns and infrastructure shortfalls in established mega-cities.

The approximately 1000-km coastal stretch in West Africa from Abidjan in Côte d’Ivoire to Lagos in Nigeria is expected to be home to some 51m people by 2035, with almost 25m living in the Lagos metropolitan area. Sustained population growth could make it the largest zone of dense, urbanised habitation on Earth by 2100.

While the concentration of wealth and population in mega-cities can pose a risk to economic stability, cities with populations between 100,000 and 1m people are set to play an increasing role in improving economic outlook across the continent, simultaneously easing stresses on mega-cities while providing housing for migrants from rural areas as countries urbanise. Such cities are likely to absorb two-thirds of the continent’s future urban population growth.

In May 2022 the city of Kisumu in Kenya hosted the ninth Africities Summit, with a focus on how intermediary cities can help in the implementation of both the UN 2030 agenda and the African Union’s Agenda 2063, which are targeting sustainable development globally and across the continent, respectively. During the Covid-19 pandemic Kenya improved water supply, market infrastructure and green spaces in Kisumu, part of its wider push to invest in 70 secondary cities around the country.

That same month the Malawi government launched its Secondary Cities Plan, which aims to guide the development of eight cities, part of a push to support a more equal distribution of wealth and create new economic opportunities.

Rwanda, Senegal and Uganda are among the other African countries with plans to construct secondary cities to accommodate both demographic and economic growth in the coming years. Ethiopia, meanwhile, has invested $35m to prepare 18 cities for growth, with support from New York University’s Marron Institute.

Last week the African Union and global investment company Temasek Holdings announced a plan to build as many as 123 new cities across the continent over the next two decades. Developed by South Africa-based urban development firm Africa123, the plan includes sustainable water and energy supplies alongside health care, education and economic infrastructure, and is seeking investment of approximately $150bn.

Africa123 has already begun a pilot programme in Ghana, with land secured for three settlements expected to house up to 3m residents in 800,000 residential units. The project aims to address a potential housing shortfall as the continent’s population grows. Indeed, the continent saw a shortage of 51m units in 2022 and is expected need to provide for 150m families by 2063.

Author: Oxford Business Group

This article was first published by the Oxford Business Group and is republished with permission.

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