18 JUL 2018
Africa is going to take up a bigger and bigger share of the planning and development agenda in the coming decades, with its phenomenal projected population growth, rapid urbanisation and complex problems.
The risks are significant, but the opportunities are unlimited. Roz Wrottesley reports from the 4th RICS Africa Summit in Johannesburg.
“Africa is not a country…” Barbara Barungi, Managing Partner at Imara Africa Consulting in Nigeria, reminded her audience drily at the end of her keynote address.
In fact, it is 54 countries that the outside world often struggles to tell apart. Barungi’s macroeconomic forecast for the continent set the scene for the summit and prompted a question from the audience: is it the right time to invest in Africa?
This former lead economist for Nigeria at the African Development Bank went on to say, “It is the right time to invest, but what is important is to look at the regional variations, rather than the continent. And don’t base your investment decisions on future elections,” she added. “There are more than enough economies showing good prospects.”
The tone in early-2017 was thoroughly upbeat: the projected population growth was a revelation and speakers celebrated the abundant natural resources, unlimited renewable energy sources and huge increases in capital investment and foreign direct investment.
Certainly, economic growth has turned around in Africa since last year’s summit, which recorded a slump in Africa’s growth of 1.3% (from 3.5% to 2.2%). Yet the tone in early 2017 was thoroughly upbeat: the projected population growth was a revelation – Africa would have the largest workforce in the world in 2034, exceeding those of China and India – and speakers celebrated the abundant natural resources, unlimited renewable energy sources and huge increases in capital investment and foreign direct investment since 2015. The possibilities seemed endless.
This year, Barungi’s analysis shows that Africa was second only to Asia in GDP growth in 2017: 3.7% compared to 5.7% in Asia. (To put that in context: South America grew just 0.7% and Europe 2.4%.) And all the regions of the continent grew: ranging from East Africa by 5.9% to Central Africa at 1.3%. She said the IMF predicts further increases in 2018 and 2019, thanks to a rebound in commodity prices and growth in consumer spending and key sectors such as crude oil and natural gas extraction, mining, agriculture and services.
These reassuring figures gave the summit license to move on from 2017’s vision of the future to focus on the enormity of the task ahead and the need to disrupt established thinking and create smart solutions, rather than conventional ones, for the youthful population (median age 19.4 years) of the future. The urgent reality of the need for development – specifically inclusive development – in Sub-Saharan Africa, and the obstacles to be overcome right across this vast region preoccupied the conference delegates.
The theme of the conference, “driving sustainable growth through smarter urbanisation”, acknowledged the stark fact that around 80% of the world’s population lives in urban areas today and the figure will be closer to 90% by 2050 – of which more than half (56%) will be in Africa. So urbanisation is overwhelmingly the challenge, calling for rapid development of the infrastructure needed to accommodate the rapidly growing population, but also for all the things that make life worth living: healthcare and education, good jobs, green spaces, services and support systems.
"The future of cities is in vogue. But we should be focusing on the future of people. We should want to know how an intelligent city can learn from and adapt to those who walk its streets and work in its buildings. The internet of things, artificial intelligence, machine learning and big data are fundamentally changing our relationship with the built world. No more guesswork: increasingly, infrastructure assets are feeding back to operators and designers on performance. Millions of sensors now measure city dwellers’ use of and interaction with the spaces they shop and live in. But while smart tech is awakening our built environment, our goal should be for it to understand," says Sean Tompkins, RICS CEO.
Two extraordinary exercises in “smart city” development were unveiled: Konza Technopolis outside Nairobi and Kgale Lake City on the outskirts of Gaberone. Both are ambitious plans to take their countries into the fourth industrial revolution by creating cities built for the future.
Two extraordinary exercises in “smart city” development were unveiled in one of the summit’s break-out groups: Konza Technopolis outside Nairobi, in Kenya, and Kgale Lake City on the outskirts of Gaberone, Botswana. Both are ambitious plans to take their countries into the 4th industrial revolution (in which technology becomes more and more embedded in our surroundings) by creating cities built for the future. This, in the face of acute housing shortages in the existing cities and all the other problems that beset cities built for another era – for example, Nairobi’s notorious traffic jams, which are estimated to cost the country US$500m every day.
Eng. John Tanui, CEO of the Konza Development Authority, outlined the flagship project of Kenya’s Vision 2030 development plan, which aims to transform Kenya into a newly industrialised middle-income country providing a high quality of life to all its citizens by 2030. Konza visualises housing 260,000 citizens in a 5,000 acre greenfield development 70km from the capital city, complete with a commercial district , a university, a municipality and a range of urban amenities, all in a built environment of LEED- and/or Green Star-certified buildings powered and monitored by smart technology. A technology hub – Kenya’s Silicon Savanna – will house tech businesses and Data Central, which will serve the city and other clients, the government among them. The 3.5bn dollar project is in the process of attracting finance partners, with US$800m in hand and only 10% of funding coming from government.
In Botswana, K-Hill Property Development is masterminding the country’s first fully integrated, mixed-use development on 135 hectares of land 10 minutes from the centre of Gaberone. MD Moatswi Sekonopo described an environment encompassing luxury homes and affordable apartments, retail centres, sport and recreation facilities, schools, several hotels and a conference centre, a museum, botanical gardens, a cable car… all linked by secure fibre-optic internet and smart in every feature, from energy-conserving lighting, smart traffic and parking systems and interactive security and surveillance.
As Sekonopo puts it, “a smart city should be like a human body with senses that continuously and spontaneously react to changes and needs”, in the interests of sustainability and cost efficiency. While every need of the people who will live and work in Kgale City have been thought of, this is clearly a project designed to enhance the profile of Gaberone, the “diamond city” to which De Beers relocated its head office from the United Kingdom five years ago. He expects to secure private sector funding in the next six months and to start building prototypes of the various homes on offer immediately after that.
While he and Tanui expect their projects to be a stimulus for their local economies, to boost skills development and provide hundreds of short-and long-term jobs, there was some scepticism from the summit floor around the relatively upmarket nature of the developments, Konza’s distance from Nairobi, and the prospects of finding people with the experience to manage such sophisticated environments. One delegate queried the projects relevance when the demand was in the affordable housing market. “Why not fix Nairobi? Why do we need something new that will detract from Nairobi?” he asked.
Tanui replied that Nairobi was not being abandoned. “The IT infrastructure is as good as any city in the world and modernisation continues… it remains the capital city,” he said. “However, we are not addressing the knowledge economy issue and we must invest in that.”
Meanwhile, what about the economic future of Nairobi and the other sprawling urban hubs in SSA? Kinshasa in the Democratic Republic of Congo, for example, may have a population of 30m by 2050… “and it was not designed for the 10m people it has now”, said Liz Whitehouse, a trade development specialist and Managing Director of consultancy Africa House. “The urgent requirement of further infrastructure and access to jobs can be created only through growth in export-focused manufacturing,” she said.
Critical to this, she added, is to grow trade within the continent. Currently only 15% of SSA’s trade takes place within the 50 countries that make up the region, and 30% of that goes to South Africa. North America and Western Europe are Africa’s biggest trading partners.
“The cost of transport often makes our exports uncompetitive,” said Whitehouse, “while smuggling and inefficiency at ports of entry work against African manufacturers and destroy local industries.”
Martyn Davies, Managing Director, Emerging Markets & Africa, at Deloitte, could not have agreed more, delivering a heartfelt plea for a change in emphasis from the region’s traditional dependency on commodity exports to a much higher rate of manufacturing. “Commodities account for more than 70% of merchandise exports in 48% of African countries – and 80% in 33% of African countries,” he said. In an era of volatile commodity prices, diversification is long overdue.
"The buzzword is ‘inclusive’ growth,” he said, “but resource-driven economies are essentially non-inclusive: the resources are always captured by governments. They might use the money for infrastructure projects, but there are good and bad infrastructure projects… for example, a bad one was Nkandla... ” [the sprawling rural residence of South Africa’s former president, Jacob Zuma, which was upgraded with public funds].
"We need to focus predominantly on manufacturing. It is vital for lower inequality because it absorbs labour; it’s a remedy for structural unemployment. Countries with the highest levels of manufacturing added value (MVA) as a proportion of GDP present opportunities for employment and higher equality. The most successful countries of all – for example, in Asia – have no resources," says Davies.
With infrastructure the acknowledged emergency in African cities, project finance became one of the other themes of the summit. Infrastructure advisor Sheila Galloway, Group CEO of the Utho Group, said her experience all over SSA indicated that “lots is happening, but there is a long way to go”.
She said many African governments were paternalistic about development. “They want to raise the capital themselves… and when they go out looking, it’s China that steps in. We need to start finding a way of not continuing with that model. It only exacerbates our problems.
“I am a big proponent of public-private partnerships (PPPs). South Africa has gone a lot further with these than anyone else and I’ve found that when the government was committed to it, it made sure the institutional environment was suitable.” Anyone who has travelled on Johannesburg’s Gautrain Rapid Rail Link to or from the airport will testify to a PPP project that is an enormous asset in one of Africa’s fastest-growing cities.
Investec Asset Management’s Alastair Herbertson, an infrastructure specialist who focuses on unlisted and privately negotiated lending, agreed that the private sector needs to be much more involved. There is excess liquidity globally, he said, and it is “sensible and clever” for countries in Africa to use the excess liquidity. But not any more; “it is not tenable for governments to take on any more debt; that kind of government finance is not sustainable or serviceable, he said.
“The private sector can manage the funding stream. If Africa is going to build infrastructure, it will have to go that way, instead of using the fiscus.”
Fellow panelist Siyabonga Gama, Group Chief Executive of South Africa’s freight rail network, Transnet, agreed that money was available, “but we just don’t seem to have the ability to write bankable projects”. Galloway agreed: “If you’ve got a bankable project you WILL get money, but the due diligence and feasibility studies are not there. These governments doesn’t believe feasibility studies are necessary. They might have done one 15 years ago, when they want to build the road now.”
Frustration is inevitable when a task is as enormous, complex and urgent as this, but there was no lack of commitment to the challenge. “The opportunities are so diverse and widespread… it is a very fertile continent to invest in. Governments must just get out of the way,” said Herbertson.
Nor was there a lack of ideas and convictions. Whitehouse was adamant that “African growth must be led by the private sector: we need to step up and control our own destiny. It’s all takes too long; we’ve got to speed things up. We’ve got to stop looking externally for solutions – a lot of our problems are African and must have African solutions. We need to apply different principles from our own development.”
Panelist Tom Mundy, Johannesburg-based head of JLL’s Sub-Saharan Africa Advisory group, said it is all too easy to beat up SSA markets for being left behind, but it’s not true. “You can get a loan on your phone very quickly. It allows financing at reasonable rates. It allows banks to reach people. If you allow money to flow, it empowers people.”
He referred back to the very low level of intra-African trade, pressing for lower import duties and the liberalisation of trade across borders. “Make SSA, and Africa in general, less dependent on other countries,” he said. “Encourage greater transparency and accountability; both are very weak. We withhold information; we should flood the market with information. Then the big winner would be the consumer.”
He might see his wish come true if a new trade agreement, signed by 44 of 55 African Union members in March, in Kigali, Rwanda, is ratified and successful. Whitehouse pointed out that eight existing regional trade agreements have not been a great success, but she said this one, if Africa can pull it off, will be “enormous and very exciting”. The Africa Continental Free Trade Area (ACFTA) would have a combined GDP of US$3.1 trillion and serve 1.2 billion people, with the aim of guaranteeing free movement of people and investments, expanding intra-African trade through co-ordinated trade liberalisation and enhancing the competitiveness of industries through scale production and better use of resources. Several countries, including Nigeria and South Africa, have not yet signed up, but have signaled their intention to do so.
Nkuli Bogopa, Executive Director of property company Broll SA, recalled a statistic she had heard at the 2017 summit: that 70% of the world’s wealth lies in real estate. “Property professionals need to recognise that and take responsibility for the direction we take.
“We’ve spent a long time today on the harsh realities we face, but this sector is best placed to recognise opportunities. We see building, trade and industrial development, so we have a responsibility to use that knowledge to plan locally: what do our economies need? Then we must take the driver’s seat.”
As Tompkins said at the beginning of the day, “Remind yourself that learning doesn’t end at graduation. We’ll need professionals who are intellectually curious, adaptable and agile – never afraid to try new things – to create these intelligent places.”
In India, he said, thousands of professionals are graduating every year from the RICS School of the Built Environment, and Indian companies, government departments and industry bodies are adopting the RICS standards. “In Africa, our challenge is to achieve a similar scale of growth. Ethics, diversity and standards must underlie everything we do.
“Professionalism is the key to unlocking a sustainable future for Sub-Saharan African cities. It is vital that we build the profession here in Africa, for it’s they – you – who will help ensure Africa’s built environment will change for the better.”