Bulls n Bears Entrepreneurship Zone :: Gerald Gondo: African urbanisation – a changing dynamic

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On a recent trip to Morocco to attend the 15th Annual Africa Private Equity
and Venture Capital Association (AVCA) conference, I had the pleasure of
being seated next to and in front of two young families on the aeroplane,
both returning home to Morocco after visiting friends and family abroad.

One father I chatted to was born and raised just outside Casablanca. An
actuary by profession, he was quick to rattle off some facts and figures
about his home country, with the most interesting fact being that Morocco is
looking to host the Football World Cup in 2026. Morocco’s plans to submit
its bid, against a united bid from the United States, Mexico and Canada,
certainly speaks volumes.

The conversation on the plane, along with the conference discussions, got
me thinking about the thematics synonymous with the African investment
narrative, one of which is urban dwelling. Urbanisation, in turn, is
synonymous with infrastructure.

The overall infrastrucuture gap in Africa, estimated at US$90bn per annum,
is widely acknowledged. Thus, investment practitioners specialising in
infrastructure investment on the continent are increasingly alert to the
need to match and tailor the provision of infrastructure funding to Africa’s
urbanisation realities, and how these realities differ from, or in some
instances, closely follow the rest of the world’s experiences. Many of the
presentations at the AVCA conference mentioned this statistic. Whilst
appreciating the fact that urbanisation will increasingly prove to be a
vital and critical element to the transformation of African countries,
comprehension of how the narrative of urbanisation has and will continue to
evolve is key.

Whilst many private equity funds reported participation in extraordinary
medium- and long-term opportunities across Africa, their investment returns
could be enhanced if the requisite infrastructure was in place.

An article by Ester Boserup, titled Economic and Demographic
Interrelationships in sub-Saharan Africa, comes to mind. The article posits
that urbanisation for most African countries started out during their
colonial periods in support of colonial economic needs, such as exports to
Europe. Unlike other regions, urbanisation was not brought about by, and did
not bring about, industrialisation. Now, with increased investment from PE
funds, urbanisation is starting to occur intrinsically as people move from
rural to urban areas to develop their own economic activities and
communities.

The Africa Development Forum succinctly supports this changing dynamic in
Africa. Across a number of the continent’s economic nodes, broad-based
economic prosperity and population density are occurring together despite
the infrastructural challenges. The collective challenge for African
policy-makers is to allow for greater trade and linkages between their
economies to create larger markets with better connectivity.

Of equal importance is the need to change the substance of the rural to
urban development narrative. According to the Africa Development Forum,
rural and urban development should demonstrate mutual dependence with
economic integration; in doing so, producing inclusive growth and
development in both rural and urban areas. African cities are growing fast,
but there is a need for urban infrastructure to support this growth,
alongside the provision of adequate basic services to new settlements.

Basic services include energy, roads, water, and information and
communication technologies (ICTs), amongst other things. Long-term growth
requires an efficient system of urban centres that include small, medium,
and larger cities that produce industrial goods and high-value services,
along with well-functioning transportation networks to link national
economies with regional and global markets.

Of course, funding is always an issue, but a constructive development is
the convergence between African pensions and savings with infrastructure
provision. This is firmly underway, with over $3.4bn in capital raised for
African infrastructure funds since 2012. Whilst this value only represents
just under 4% of the annualised overall infrastructure deficit for Africa,
it is a positive indicator of increased private sector involvement in the
funding of infrastructure as an asset class.—Howwemadeitinafrica 


<https://www.howwemadeitinafrica.com/pension-funds-financing-infrastructure-
africa/60087/gerald-600x350/> 

Gerald Gondo

 

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Bulls n Bears 

 

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