Foreign investment lacking in African cities

30 November 2015–Current foreign direct investment (FDI) levels are nowhere near enough given the rate of urbanisation in African cities, which should diversify for better resilience and socio-economic benefits. That is a key take-home point emerging from one of the first discussions at a four-day Johannesburg conference, Africities 2015, which gathers together local authorities to think about city futures.

Graeme Harrison from Oxford Economics on Sunday told delegates that over half of FDI into African cities came from extraction and real estate but these same sectors have limited trickle-down benefits. Commodity prices are under pressure and the economic landscape is also shifting, he said. “Everybody thinks Africa is the next frontier but so much investment has been in commodities … You need to turn around FDI, be attractive to the right sectors and get the benefits that you want.”

Harrison’s points were made in the context of a current UN-Habitat project that looks at investment flows for urban development in African cities and seeks partner cities for case studies. Figures showed Africa’s largest 100 cities are expected to add 100 million more urban dwellers over the next 15 years, and half the continent’s growth in GDP will also come from cities. But Africa attracts only 2 percent of global FDI and is unlikely to close the gap on current trajectories. Until the global recession, FDI in Africa was a positive story, Harrison said. “A lot of the low-hanging fruit has been picked so cities have to try very hard to get on an upwards trajectory.”

Europe and America are becoming less important, his data also showed. Overall, Dubai is the number one city investor in Africa. There are regional surprises too on this score: in the United States, Dallas (not New York) tops the list, Asia is led by Delhi (not Tokyo), and in Europe the city of Paris beats London. This spatial dimension was differently underscored by Ronald Wall, from Erasmus University in Rotterdam, who vividly pointed out global inequalities in economic flows using a series of maps that visualised these statistics.

Wall said that although the developed world exchanged enormous amounts of FDI, Africa was excluded. He called this a “dislocation” from the system, with insufficient south-south investment to compensate. How to avoid the negative implications of FDI was essential, Ward added, as it’s taken over from trade as the prime indicator to measure integration of cities while accounting for the lion’s share of GDP, mostly in greenfield investments.

Discussion points coalesced around objections to a perceived Eurocentric approach, including assumptions about best practice, and a call for more contextualisation and co-operation. Affordable housing was cited as better denoting the city than real estate investments for the privileged, for example.

“We have huge housing deficits but this is not what real estate is addressing. It’s about the few while the majority live in slums”, said one audience member.

Panellist Banji Oyelaran-Oyeyinka, director of the regional office for Africa at the UN Human Settlements Programme, agreed housing was at the centre of everything and also frames the whole debate about urban infrastructure since “you can’t live in bricks and mortar.” He suggested the research points should be taken in good faith but called for nuance. “Africa is very complex, it is not a country,” he said. “Things have also changed a lot, social change and governance. Lagos is not what it was 10 years ago, neither is Dakar. Let’s walk together.”

Photo via Roger Gordon


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