In this column called “The Indicator,” we will be taking an economic or financial statistic from East Africa and breaking it down into bite-sized nuggets of knowledge for investors.
The indicator figure is 39,816,054
39,816,054 is the estimated total number of people living in cities in the East African Community (EAC) countries. This corresponds to a mere 24.6% of the population in urban areas. Conversely, nearly three-quarters of the East Africa population live in rural areas according to the most recently available statistics from 2015.
What do you mean by urban population?
Urban population, as defined by the respective countries, is the number of people living in cities or municipalities deemed as urban as opposed to rural or other designations. While not an exact or consistent definition across countries who have varying degrees of laws governing municipal and regional districts, the intention of this article is to illustrate a viewpoint on where people in EAC countries reside and the impacts of both the distribution of people and the increasing rate of concentration of people living closer to each other.
Which EAC country has the highest and which the lowest rate of urbanization?
In the EAC, Tanzania has the highest percentage of the population in urban areas at 31.6% as well as the largest total population of 16.6 million people. Burundi has the lowest rate and urban population size at 12.1% and 1.3 million people total. Rwanda has 28.8% of the population living in cities whereas Kenya and Uganda have 25% and 16.1% of their citizens in urban areas respectively.
How does urbanization in the EAC compare to other regions of the world?
Urbanization of the EAC at 24.6% is less than half of the world average of 54% urbanization.
City states of Singapore and Monaco have 100% urbanization along with island nations of Anguilla, Nauru, Saint Maarten, Bermuda, and the Cayman Islands. Close behind are Middle Eastern Countries of Qatar and Kuwait at 99.2% and 98.3%. In comparison, the highest urbanization in Europe is found in Belgium at 97.9%.
Burundi has among the lowest urbanization globally at 12.1% followed by Papua New Guinea at 13.0% and Malawi at 16.3%. There is a relatively high correlation with poverty and a higher proportion of the population living in rural areas.
Is urbanization in the EAC increasing or decreasing?
Urbanization in the EAC is definitely increasing and rapidly. The world average increase in urbanization is 2.0% more citizens living in cities whereas the EAC sees urban populations growing at an average of 5.4%, more than double the rate of urbanization per year. This means that the population of cities throughout East Africa grow at more than 5% per year or that we can project that at this rate East African cities will double in size in less than 15 years.
What’s behind the increase in urbanization in the EAC?
More people are moving to the cities of East Africa for an opportunity, mostly due to the opportunity for a better life economically than what could be found living in rural areas.
What challenges do increasing urbanization pose?
More people produce more congestion. Congestion in many senses of the word, as in increased traffic as well as respiratory congestion due to increased pollution from more cars and factories in urban areas.
The more people living in cities the more homes are needed and the more human waste generated. Environmental degradation is usually a result of increased urbanization. Increased inequality increases dramatically as temporary housing solutions become informal settlements and slums, crime increases, and quality of life for all people living in the city declines.
What is being done in the EAC to lower the impacts of increased urbanization?
On the traffic and transport congestion front, all major cities of the EAC are experiencing necessary road improvements and expansions at varying degrees. In addition, programs like Tanzania’s Bus Rapid Transit System are seeking to reduce the number of cars on the road through fast, clean, and reliable public transport throughout Dar es Salaam.
Several initiatives are ongoing in EAC countries to attempt to mitigate the negative effects of pollution and waste. The Tanzanian National Bureau of Standards inspects all new vehicles to ensure compliance with air safety standards. The American Environmental Protection Agency has partnered with Kenya on the Global Methane Initiative. This program aims to lower methane output by streamlining solid waste management in Kenya’s urban areas. In July of this year, Rwanda is launching an air pollution monitoring project. Air Pollution monitoring stations will be placed in at least eight different areas throughout the country equipped with machines to directly test the level of pollution emitted from vehicles and motorcycles
The Tanzania Strategic Cities Project, A World Bank Group project, has recently received $130 million to assist in waste collection points, urban roads, drainage points, bus stations, and sanitary landfills in several secondary cities and EAC level summits have been calling for a harmonization of both pollution and waste management policies for member nations.
EAC institutions are also active in solving the housing effects of increased urbanization. For example, both the Tanzanian National Housing Corporation and the Ugandan National Housing Corporation along with several NGOs are working on solutions for affordable and accessible housing. Kenya is facing a similar circumstance and the World Bank Group has recommended stronger support for the housing finance market. These combined efforts should create more affordable housing, investment, and job growth.
In addition, several global development institutions are working with government institutions to reduce the incentives of moving to cities by improving the lives of people living in rural areas. Their programs are aiming to increase the rate of electrification, access to improved water sources, and agriculture investment.
What investment opportunities emerge from increased urbanization?
Despite the challenges for citizens and government, increased urbanization is a net positive for business and investment. A higher concentration of people in an area reduces transport and logistical costs and importing or manufacturing certain consumer goods becomes more economically feasible.
Increased urbanization has the effect of increases in demand for items including cement, steel, construction services, affordable housing, other building, and housing products, security services, telecommunications, consumer products, health and education services, restaurants and groceries. In short, urbanization has the effect of improving all primary sectors of the economy.
Well-structured investments in areas of increasing demand following the trend of increased urbanization can yield significant investment returns in the medium to long-term.
How can I learn more?
To learn more about the topics in this article you can visit:
CIA Factbook Statistics on Urbanization: https://www.cia.gov/library/publications/the-world-factbook/fields/2212.html
World Bank Investing in Urban Resilience: https://openknowledge.worldbank.org/handle/10986/25219
Tanzania Bureau of Standards on Air Pollution: http://www.tbs.go.tz/index.php/highlights/view/air_pollution_need_for_annual_inspection_of_automobiles
World Bank on Waste and Other Infrastructure Investment:
About the authors:
David L. Ross is Managing Director of Statera Capital and US Ambassador to the Open University of Tanzania active in growing companies in Eastern and Southern Africa through primary investment, investment advisory, strategic partnerships, and executive education. Connect on LinkedIn at http://tz.linkedin.com/in/davidlross1 or at [email protected]