Taking on such a large public debt burden when the GDP-to-debt ratio is already strained does not seem advisable
In his state of the nation address last month, President Cyril Ramaphosa heralded the construction of a new 5G-ready smart city around Lanseria airport in the next decade. With it, SA was belatedly thrust to the front of a continent-wide rush to establish smart and eco-friendly cities, a means of jump-starting the fourth Industrial Revolution (4IR) powered by digital technology.
Ramaphosa has been much criticised for his continued focus on heady goals and idealistic projects that are in stark contrast to the grim economic realities SA faces today. But he is not alone this time in his proclamations. Smart-city fever took hold in Africa more than a decade ago. There are 10 smart city zones in various stages of development in 54 African countries.
The most prominent include Kenya’s Konza Technopolis, Nigeria’s Eko Atlantic City, Ethiopia’s Wakanda City, Rwanda’s Vision City and Ghana’s Hope City. While all are public-private partnerships, the level of public funding required is still jaw dropping. With so much at stake for countries overburdened with debt, it is important to ask whether such grandiose plans truly serve the best interests of the African economy and populace as a whole.
On the face of it, smart city urban planning can be said to be the natural evolution of the tech hub boom and impressive digital infrastructural development witnessed across Africa within the last decade. Not burdened by legacy infrastructure — older technologies and infrastructure such as exists in the developed world — Africa has pole-vaulted straight into the digital age at pace. Tech hubs acting as development catalysts, attracting foreign direct investment and creating tens of thousands of jobs, have exploded in the last five years: from 117 in 2015 to more than 600 in 2020, with a 40% increase in 2018-19 alone.
This progress has happened at the same time as large increases in rates of urbanisation in Africa that are projected to be the fastest-growing globally in the coming decade and will result in half of all Africans living in urban areas by 2050, most of whom will be under 25. Harnessing this young population driven by innovation and budding success in the digital economy, it is hoped that smart cities will solve coming large-scale social problems and make them the smart move after all. The cities will cater for the exploding middle classes, set to triple on the continent in the next four decades. They are at the heart of economic growth in any economy and people will flock to the new urban centres to take advantage of their cutting-edge facilities and job opportunities.
Or so the theory goes, relentlessly expounded by a host of African government, investment bank and ICT reports, as well as international property developers all keen to join the smart city bandwagon in Africa.
The concept grew out of the rubble of the 2008 global financial crash and the downturn in urban property development. International property investment companies, hungry for new high-yield frontiers, found their appetite for speculative urbanism sat comfortably with the newfound visionary idealism of leaders across Africa, brought on by the advent of the tech boom.
But more than a decade on there is little to show for this initial optimism. Many of the projects have seen slow progress or have stalled completely. In many cases, the visions first proposed collided with the realities of a complete lack of infrastructural basics: It is easy to say that no legacy infrastructure puts Africa in good stead to take advantage of smart city technology, but when there is not even basic amenities such as a constant and reliable supply of water and electricity, smart cities become impossible to implement.
Apart from debt, smart cities may also end up worsening the very problems they claim they will solve, especially the rich-poor divide on the continent, with potentially devastating consequences for social and political stability.
It is questionable how committed private developers are to providing a decent stock of low-cost housing in these developments, where at best they seem to be an afterthought, as has been the case in the Kigali “smart neighbourhood” project Vision City. Or at worst there is downright opposition to them, as was the case in SA with the Modderfontein “African Manhattan” project, which was meant to create an eco-friendly mixed-use district and that ultimately fell through because of the Chinese developer’s refusal to consider low-cost housing at the insistence of the Johannesburg metro council.
In fact, the general claim that the dramatic increase in the African middle classes will drive demand for these shiny new cities is debatable when even the African Development Bank defines the middle classes in Africa as those that spend between $2 and $20 per day. Not exactly a level of expenditure in line with average housing costs in smart cities, which is envisaged to be $150,000 to $200,000.
It may be that SA is different in that its infrastructure and middle classes are more sophisticated than elsewhere on the continent, but this does not mean the same problems will not apply. Taking on such a large public debt burden when the GDP to debt ratio is already strained does not seem advisable, and at a time of a forthcoming global economic downturn is questionable at best.
It raises the question whether the public funds would not be better spent on further supporting the successful tech hub culture in the country with targeted training programmes in the digital realm, giving better access to capital funding for start-up companies, modernising outdated telecommunications regulation and bringing telecommunications costs down — as a recent SA in the Digital Age (Sada) report suggested — and of course getting the basics right and, in particular, establishing a reliable power supply once again.
If history is not to repeat itself, SA must take stock and pause for thought before taking on such a big gamble on what has been described as the future of the continent. It may turn into another bloated white elephant that encumbers the continent with yet more catastrophic debt.
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Autor(en)/Author(s): George Philipas
Quelle/Source: Business Day, 23.03.2020
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