Land Management and the Urban Economy in Sub-Saharan Africa

By Isaac F. Megbolugbe, PhD., FARES, FRICS

Johns Hopkins University

(Being text of one of the keynote presentation at the International Seminar on Emerging Urban Africa, Organized to honor and celebrate the life and career of Professor Akin L. Mabogunje, held at Transcorp Hilton, Abuja, Nigeria with the support of the United Nations Center for Human Settlement (Habitat) and the Nigerian Federal Ministry of Housing and Urban Development, holding from October 19- 23, 2006)

All protocols Observed.

Let me start by expressing my sincere appreciation for the invitation to keynote this session on land management and the urban economy to the Organizers of this International Seminar on Emerging Urban Africa. I am delighted to be here and join with all of you in the glorious celebration and acknowledgement of the career, achievements and the many contributions of Professor Akin Mabogunje. I want, in particular, to thank Lady Marian Yunusa for persuading me to lead our discussion during this session. 

For several reasons, I believe that this Seminar is a watershed event in the life and journey of urban Africa, to quote Professor Mabogunje “as it transits from its precapitalist and colonial past through a statist, centrally controlled political economy into a democratic political economy”. First, this event affords many of us the opportunity to gather and renew old acquaintances and also to join new social networks. Second and perhaps equally important this event offers us a collective platform to consider the foundation of scholarship and service that Professor Mabogunje has laid about African urban development. This occasion reminds me of the counsel of Apostle Paul to the Corinthians as recorded for us in the Holy Bible, 1 Corinthians, and Chapter 3. Apostle Paul talked about the need and priority of recognizing the foundation of our work of faith. He said Jesus is the only foundation for the Christians upon which they should build their own ministry. Our mission as urban professionals may not be divinely ordained as those of Apostle Paul, but it is important that we all understand and appreciate the foundation that Professor Akin Mabogunje has used his career, talents, energies and passion to lay so that those of us who come after him can focus on building on this solid foundation instead of wasting our talent, time and treasures on building another foundation. I am sure Professor Maboguje will be the first to admit that the economies of African countries, albeit led by their urban economies are not yet effectively integrated into the global markets of commerce, finance and culture. Much remains to be done, but we appreciate and honor the foundation that Professor Mabogunje has laid.

Based on the summary statements that we received from the Organizers of this Seminar, our charges during this session are two-fold. First to review six issues, and second, to discuss good and bad cases of stimulating the urban economy and of developing urban (and housing) finance mechanisms in Africa. Our discussion is expected to build a bridge to the next plenary session topic, which is the future of African cities.

The six issues that we are expected to review are:

1. Urban and rural development as a “virtuous circle”
2. The urban informal sector
3. The urban housing sector
4. Urban finance as in financing of urban assets
5. Dimensions of urban poverty
6. The market power of property rights

I have divided my presentation into seven parts. The first part describes the urban reality of Sub-Saharan Africa especially the ongoing manifestation of the nature and role of cities in African development as researched by Christine Kessides of the World Bank in a recent desk review of the urban transition in Sub-Saharan Africa (2004) .The relationship between urban and rural development operates as “virtuous” circle.  This section presents the evidence that Kessides adduced to support this characterization of the urban and rural development relationship.  The second part examines the relationship between land management and the urban economy especially the pivotal role of land and land management to national development. The third part reviews the literature on what cities require being productive and contributing significantly to the overall economy. It covers four topics: (1) the urban economic base and how it is dominated by the urban informal sector. (2) The residential/ housing sector. (3) Urban transport: mobility, and (4) Urban finance: infrastructure and services. The fourth part examines the land and housing dimensions of urban poverty. Part five examines the power of property rights as a vehicle for capital formation for investment as postulated by Hernando de Soto and its implication for boosting the urban economic base. The future of African urban development is discussed in part six. The concluding part summarizes the vision, strategy and road map that Professor Mabogunje has for the emerging urban Africa as far as I can discern from his work..

The Urban Reality of Sub-Saharan Africa 

Urban Transition: Christine Kessides in a recent desk review report confirms the fact that Africa is indeed going through its urban transition. She painted a clear picture of the reality of urban growth in Sub-Saharan Africa: African has been experiencing a historically high rate of urban growth. How high? Sub-Saharan Africa is facing close to a doubling of its urban population in less than 15 years. It is now about one third urbanized compared to South Asia’s 28 percent and is projected to be more than fifty percent urbanized before 2030. 

This urban transition is an opportunity as well as a management challenge. Urban development in Sub-Saharan Africa can and should benefit the countries. It should better serve national economic growth and poverty reduction agendas, but one of the conditions that is crucially needed to achieve this outcome is effective urban management. This is a subject that Professor Mabogunje has examined extensively.  It is an opportunity because typically urban areas concentrate much of the countries’ physical, financial, and intellectual capital. There is a long tradition of scholarship explaining the role of cities (or more generally, urban areas) as contributors to economic growth and to social transformation. The basic theoretical explanation is rooted in the concept of agglomeration economies, which has an even older academic history in industrial location theory. Agglomeration economies represent the productivity advantages that firms and industries gain by locating in proximity to each other and to large markets. The increasing returns can be internal to the firm, such as by permitting economies of scale in production. There can also be externalities arising in the markets for goods and services, enabling wider access to services, infrastructure, workers and buyers, and “knowledge spillovers” leading to more efficient exchange of information and lower transactions costs. Thus, urban areas function not only in line with traditional growth theories by aggregating larger pools of labor, inputs and capital. Even more importantly, they epitomize the process of endogenous growth whereby productive resources are used more efficiently and in new ways.

Recent research has suggested that despite the decline in transport costs in recent decades, physical proximity has become no less important to firms’ productivity. In fact, the growing role of information technologies and of knowledge-intensive production across many sectors seems to be favoring greater concentration of workers and activities using such skills, as opposed to diminishing the value of face-to-face interactions that cities offer (Gasper and Glaeser 1998, Glaeser 1998). Electronic communication has become a complement to face-to-face communication, not a substitute. Indeed it has increased the value of face-to face communication because routine matters can be handled via electronic communication, but valued-added and high impact communication is still handled face-to-face. Innovation is associated with the circulation of ideas and knowledge, particularly in technologically advanced and information-intensive activities that are favored by agglomeration (Glaeser, Kallal, Scheinkman and Schleifer 1992; Duranton and Puga 2002). 

Cities nurture entrepreneurs by providing centers of demand (larger markets). information- and technology-sharing, easier access to credit, and support for risk-taking (through income alternatives and through networks of other entrepreneurs). Most small-medium scale enterprises, and the informal economy in general, are disproportionately located in urban areas for such reasons (Becker 2004). Cities are also key to economic modernization and diversification to higher value forms of production. Successful competition in global markets requires mobilizing skills, information and technology, and capabilities for rapid response in production, marketing. services, transport and logistics. Enabling such productivity requires attracting and retaining the knowledge resources— highly skilled and educated workers and an environment rich in amenities that will fosters their interaction (OPDM, 2003). Recent institutional research focusing on the importance of dense networks of personal exchange and relationships that foster innovation confirms the value for entrepreneurs and educated workers to remain spatially connected, and the continued attraction for them of large cities (Storper and Venahles, 2004).

The advantages of cities and towns as marketplaces for goods, services and ideas do not arise entirely laissez-faire, independent of public policy. There is nothing in the academic theory of agglomeration economies that guarantees that the mere physical concentration of people and of firms will result in a well-functioning city, let alone a livable one. As identified by Rosenthal and Strange (2001) and summarized in Freire and Polese (2003), the microeconomic foundations of agglomeration economies are characterized by three elements: knowledge spillovers, labor market pooling, and input sharing. Each of these depends on the ability of cities—and notably, of their governments—to create an environment where: (i) economic agents can meet and communicate easily, (ii) workers can move among jobs throughout the area, and (iii) services of public infrastructure are adequately provided and productive inputs can move efficiently. Each of these conditions assumes therefore that a minimally effective institutional framework is operating in the urban area.

Failures of these ingredients undermine the economic performance of cities, especially in Africa. Poorly functioning cities create a drag where they should give a boost to firms. This is true of enterprises attempting not only to thrive in the domestic marketplace, but the failure to realize the benefits of agglomeration is particularly damning to firms who would like to export to global markets. There is no reason to believe that cities in Africa cannot contribute as much to the economy as in other Regions. But they require a commitment to ensuring that the urban assets are better managed to realize stronger gains. This is where this session comes in to talk about the need and nature of urban management for unblocking the contribution of the urban economy to both national growth and poverty reduction. Urban management that is participatory, transparent, accountable is important to Professor Mabogunje. He understands the importance of the catalytic nature of effective urban policy and urban management to urban development in African countries.

Urban and rural development operates as a “virtuous circle” “ The urban economy increasingly is becoming the economic powerhouse of African economies, with productivity growth and employment generation in the secondary and tertiary sectors having most potential in cities, rather than in their agricultural hinterland. However, both urban and rural economies stand to gain if rural-urban linkages (supplies to farms and farms to markets) are strong.”, Kessidies do indeed found evidence to support the view that the relationship operates as a “virtuous circle.” It is considered by some observers that the urban trend in Africa is a symbol of what has gone wrong with these economies—that Africa has shifted off a “natural” historical sequence of development that should lead from increased agricultural productivity to a phased emergence of towns and cities. Yet in most of the countries agricultural productivity has been stagnant, and some 250 million people on the continent (30-70 percent of the inhabitants of most of the countries) live in “fragile” ecosystems with limited agricultural potential (WDR 2003). The preconditions for a technology-based revolution in the sector, as experienced by Asia, are not apparent in most of the countries. It is evident, however, that access to urban-based activities as part of a household’s “livelihood portfolio” can raise the level of the rural economy by providing knowledge and resources that can be invested in inputs or capital stock for agriculture or for non-farm activities (Ellis and Harris 2004). Options for intensified agriculture and diversification into nonfarm production prove complementary, so they can also be fostered by common conditions—especially, by effective access to major urban markets.

The most constructive way of looking at the productive inter-linkages among urban and rural areas may be as a virtuous circle, whereby access to (urban) markets and services for non-farm production stimulates agricultural productivity and rural incomes, which in turn generate demand and labor supply for more such goods and services. There are multiple entry points into a circle and opportunities should be seized where they appear. Individuals, households and communities benefit wherever there is ease of access to markets and diverse economic activities, either through physical proximity (short distance to an urban center) or through individual mobility.  Even though cheap imports may pervade urban markets for certain foods, such as rice, urban demand for fresh and higher-value foods will continue to grow and should provide a strong impetus to efficient local production and marketing.

Land Management and the Urban Economy.

The problem of land management is core to Professor Mabogunje concern about urban management. Land management is a metaphor for urban management, local government management, or municipal management for Professor Mabogunje.  Land management can be viewed in at least three ways: estate, asset or natural resource. As a professional practice, estate management professionals will likely define land management as pertaining to the direction and supervision of an interest in landed property with the aim of securing the optimum return; this return need not always be financial, but may be in terms of social benefit, status, prestige, political power or some other goal or group of goals (Thorncroft, 1974). 

Land management can also be viewed from the perspective of asset management. After all land is one of two most important basic assets that every country has for its national economic development: land and labor. 

Finally there is also another focus to land management that comes from concerns about the quality and sustainability of the natural resources. Land is viewed as an important natural resource that needs to be managed carefully to ensure that the relationship between man and its natural environment remains stable and sustainable. The subject of environment management and its land management component is a vast and complex field of its own that is better left for another time and place. Our focus in this presentation is land management in relation to the performance of the urban economy:

The urban economy is an essential part of the national economy where leading economic activities take place and can be conveniently viewed as having two major components viz, its economic base and its residential sector (Renaud, 1984). The provision of infrastructure and labor services for both the economic base and the residential sector of a city has a major impact on the competitive position of the city.

From the above, it is apparent that there is a strong link between land management and the urban economy. More importantly, the link has to do with the existing mechanism or framework (in any given system) for efficiently and effectively allocating land to the various uses that sustain the urban economic base and the residential sector of the cities. In other words, it is usually of great interest to know the degree of efficiency and effectiveness of the framework (legal, economic and institutional) within which land is allocated to the various uses that support urban economic base and residential sector.

The importance of land and real estate to the performance of the national economy cannot be overemphasized: Land and real estate assets account for 45-75 percent of the wealth of developing countries. The assets have unique characteristics of being simultaneously a major input into production activities (agriculture, industry, and services) and into consumption by households of residential real estate and infrastructure services. For agriculture, land is the most important factor of production. For enterprises, especially of small and medium size, land and real estate are the largest cost center second only to labor. For poor households, land and real estate are the single most significant vehicle for saving and the largest item of expenditure. This is why land management assumes a very pivotal status in any serious discussion of national economic development and also poverty reduction agendas. Land management from this perspective involves “the timeliness with which processed land is made available in adequate amounts, at right locations, and at affordable prices to the people of a country in a way to ensure its optimum use in terms of efficiency, equity and the meeting of their basic human needs.” Mabogunje (2003). In a recent paper, Professor Mabogunje (2003), outlined six issues that are critical in determining the effectiveness of any land management system: These are:

How it establishes and perfects land records and information system;

How it improves land registration and transfer processes;

How it evolves a planning process to facilitate better utilization of land;

What techniques of land assembly it has developed which are administratively sound and also financially feasible;

What processes of land development it has put in place to provide a functional framework for infrastructure provisioning and related finances;

What measures it promotes for increasing the access of the poor to land assets.

We can examine these issues during our discussion period. Let me briefly cover three points: 

• land markets in the urban economy
• political aspects of land development and management
• land development and poverty alleviation

(1) Land markets in the urban economy. The urban economy comprises three basic markets: the urban land market, the urban capital market, and the urban labor market. These markets are inexorably linked and dependent on each other. Of these markets the land market most directly affects the urban environment and the quality of life in cities. Efficient and equitable land markets are a prerequisite for well functioning cities. However, most cities in developing countries of the region suffer from land market distortions caused by poor land development and management policies including poor planning, slow provision of infrastructure and services, poor land information systems, cumbersome and slow land transaction procedures, as well as under regulation of private land development, leading to unplanned or ribbon/corridor development of land in the urban periphery. 

(2) Political aspects of land development and management. The key to efficient land markets is the easy and rapid availability of developed land. This does not mean less regulation. In fact in the urban periphery there is need for more planning controls. What this means is proper regulation, which facilitates the development of land but at the same time provides rules, which protect the environment and improve the quality of life of urban residents. The main constraints to efficient land markets are often more political than technical. Land in and around urban areas are either owned by the government, or by tribes, clans, and the private sector or, owned communally. Often large landowners, be they governmental, communal or private, have a vested interest in maintaining the status quo. These vested interests gain more by keeping the land markets fragmented, without proper controls and by keeping the dealings in the land market non-transparent. While they profit from the status quo the prime loosers are the urban residents, particularly urban poor.

(3) Land development and poverty alleviation. The urban poor suffer most from a dysfunctional city. Distortions in the land markets allow land speculation, which often prices the poor out of the formal land markets, into the informal land markets, which are exemplified by slums, squatter settlements and illegal sub-divisions, mainly in the periphery of cities. This leads to longer commuting time and costs, very poor living conditions, caused by a lack adequate infrastructure and services, causing poor health and greater expenditure, thereby entrenching the cycle of poverty. In most cities, many of the low-income and middle-income households do not fare any better.

Urban Economy and Urban Development

In this section we cover four topics.

• The urban economic base and how it is dominated by the urban informal sector. 
• The residential/ housing sector and its relationship with the household sector of the economy: supplies labor, housing real estate, pension funds, insurance policies, savings, etc. 
• Urban transport: mobility, etc.
• Urban finance: infrastructure and services. 

The Urban Informal Sector. “The urban informal sector is increasingly taking the lion’s share of economic growth and employment generation in cities.” This has a lot to do with the informal land delivery system that has dominated the land supply in most of the African cities. The productivity of the urban economy is closely tied with the performance of the informal economy, which is the dominant sector of the urban economy. Another limitation imposed on the performance of the urban economy is the shortage of infrastructure facilities and limited availability of public services.

Individuals and firms have continued to build for themselves and provide their own services even in the absence of a functioning local government. In fact, the vast majority of constructed capital in African cities represents the self-provision of shelter and shops. But clearly much greater benefits could be mobilized for the country and for the urban inhabitants by providing complementary local public goods in a safe and secure environment for the urban economy. This implies focusing on basic investment and efficient functioning of the essential core of land and housing, environmental services, public transport and local public finance-typically the missing ingredients and weak links of the urban economies in Africa.

Housing Sector. “The housing sector is of major importance as an important investment industry with very significant output and employment generating linkages to other sectors (the traditional backward and forward linkages, and increasingly the linkages into the financial sector provides the opportunity to leverage the growth of the housing sector for the development of the urban economy as well as the national economy.  One of the most fundamental characteristics and advantages of an urban economy is that it is a large and diverse marketplace. But problems in the availability (and affordability) of land for firms and for housing, and the constraints in transport that reduce the effective mobility of goods and workers, can fracture the city into disconnected subzones that become dead ends, especially for the poor.

Investment in housing typically accounts for 2-8 percent of GDP, and the flow of housing services for another 7-18 percent of GDP in most countries. In the United States, the housing construction sector alone accounts for an estimated 5 percent of the economy and over 10 percent of economic growth. It has been estimated that a better functioning housing market could add 1-2 percent to India’s growth rate (McKinsey Global Institute, 2001). In Africa housing is produced overwhelmingly by the informal economy but is no less important as a source of employment and household income (through rental). Demand for housing and business real estate is likely to remain income-elastic, and so ensuring a healthy housing and land market (and related construction sector) should be a key element of any development and growth strategy in the region.

Elsewhere in Africa, as in many other developing countries, the common reality is for the public sector to dominate the ownership and use of urban land. At the same time, governments inadequately exercise their necessary role in protecting rights of way and preventing sensitive areas from settlement. Authorities overly restrict on-plot development, and generally under-provide the infrastructure that would valorize land. Mis-regulation contributes to very low-density sprawl, as new settlement is only affordable at the periphery-further raising the costs of infrastructure networks and complicating public bus services.

Experience in Africa and many other regions confirms that upgrading existing slums by providing basic infrastructure and communal services, with confirmation of existing tenure security (but not necessarily formal titles), is much less disruptive or expensive per household than trying to relocate residents or directing them into public housing.

However the most efficient solution for rapidly growing urban areas (even cheaper on a per-household basis than in-situ upgrading) is to block out areas in advance for new settlement and install very basic sanitation and street layouts, enabling progressive construction as the neighborhood grows (The Millennium Project 2005b).

The lack of effective and affordable mortgage financing and of micro-credit for progressive housing development, and disincentives for rental supply, make housing expensive even for middle class. There is a beginning of a mortgage system in many African countries, but these systems are likely to remain stunted in their growth, weak in their performance and shallow in their coverage until there is a deep and complete reform of legacy housing finance systems that were established during past policy eras. Besides financing, many problems remain that are rooted to a large degree in the supply constraints of the land market.

Public transport and urban mobility. Along with limited effective choices in location, urban firms and residents do not have good options for mobility. Failures in urban transport policy seriously compromise the movement of individuals as well as circulation of goods, again shuttering the urban marketplace.

An ongoing analysis of the affordability of public transport fares in a global sample of mainly large, non-African cities indicates that the poor are often simply priced-out of public transport which could cost a third of their income for normal use. A transport and poverty impact assessment for Lagos found that the average bus fare for normal use would require over 50 percent of household income of the poor, although drivers may charge less or more than posted fares. These figures compare to an affordability benchmark of 15 percent (Carruthers 2004).

A study of three African cities reports that in Addis Ababa (a city of 3.6 million people), 70 percent of trips are by walking and public transport is estimated to cost 3-37 percent of household income. The average distance walked per journey is 5kms. In Nairobi, it is 4 kms (where 48 percent of trips are by nonmotorized transport, including walking). And in Dares salaam, the average figures are 2.2kms and 45 percent, respectively. Roads are poorly designed for walkers and extremely unsafe-including for cars, especially given how they are managed. In Nairobi only 3 of 22 signalized intersections were working at the time of the study, and in Addis, only 52 of 359 traffic policemen had motorcycles (SSATP, 2002).

Most comparative city data on travel-to-work times, regardless of country income level, indicate that about 30 minutes is the mode and average. However, the UN-Habitat city data reveal that in Africa the capital or primate cities have much higher travel times- in the range of 45-60 minutes, sometimes more or double the figures for secondary cities in the same country (UN-Habitat Global Urban Observatory, 1998 data). The largest cities should be able to afford better management of roads and public transport systems than other urban areas, even with higher demand. Such figures testify to the policy neglect that leaves the upper middle class to exclusive use of motorized vehicles, and everyone else to walking.

Urban Finance: Financing Urban assets “A buoyant urban economy is the backbone for sound urban finance, including finance for enterprise, housing, urban infrastructure and services. Financing investments through loan financing in turn also acts as a stimulus for the urban economy. Such finance for most activities directly relies on the ability of households to pay over time to meet loan repayment and interest as well as recurrent costs out of user charges. For investments with a strong public – or merit goods dimension, financing through (local) taxation is a more logical route. A major taxation vehicle which is under-utilised almost everywhere (mostly for political and institutional capacity reasons) is the land- and/or property tax, which in principle is the only serious local tax available to local government and its agents.”

Urbanization tends to raise the profile of local government functions. It is therefore critical that as cities grow, the professionalism and accountability of local government mature as well. This obviously does not happen automatically. But with systematic support to improved practices and procedures, and in an environment where local and national authorities commit to making local government more responsive to citizens, municipal performance has improved remarkably.

There are many efforts throughout the Region to strengthen financial management capacity, but much work remains. Professor Mabogunje has written extensively on the need to enable municipal governments access capital markets to fund investment in their infrastructure and capacity to provide higher level of services. 

Land Management and Urban Poverty

Land and housing have a special significance for the poor. Often a house is not just a shelter it is also a place for income generation. Urban settlements of the poor in the region, as in other developing regions are characterized by home-based workshops from which the poor earn their incomes. When the poor are locked out of the formal land and housing markets they revert to the informal land and housing markets to meet their needs.

Bringing the poor into the formal land market.  Poverty can be defined as the lack of security and choices. For the poor these two elements are missing in the land and housing markets. They have very little choice as far housing is concerned and consequently, have to live and work in informal and illegal settlements. Moreover, they also do not have secure tenure in these settlements. 

The key to sustainable poverty alleviation is not to make the poor dependent on governments or non-governmental organizations but to empower them to increase their security and choices. In other words to enable the poor to operate in formal markets like other citizens.

Experience has shown that bringing the poor into the formal land and housing markets needs a two pronged strategy: increasing the choices available on the supply side and increasing affordability on the demand side.

Increasing supply of land for the poor. Early attempts by governments in developing countries to provide low-income housing focused on the provision of fully serviced public housing units. Urban migrants and squatter settlements were treated with open hostility. They were generally considered as “dead weight” slowing down the process of development and their illegal settlements were often flattened with the help of bulldozers.

As it became increasingly obvious during the 1960s and 1970s that attempts to curb rural-urban migration would not succeed and government housing programs were completely incapable of keeping pace with the enormous demand, there was a growing awareness that alternative methods would have to be found. Many experts (John Turner being the foremost) advocated that if low-income groups were provided security of tenure and, depending on the financial resources of the government, some basic infrastructure, residents would with time gradually improve their housing. It was argued that the role of the government in housing should be changed to be an enabler rather than provider. Both liberal and conservative groups have ironically supported the enabling role mainly because it empowers local community groups and the latter because it reduces the burden on the public purse. The various programs that have been employed to bring the poor into housing include sites-and-services, settlements regularization/upgrading and land sharing. 

Increasing effective demand for land for the poor. Traditional government approaches have concentrated on subsidizing the poor. However, in most instances this policy has not worked. The key problem with subsidies is that with scarce resources, most governments have been unable to subsidize all the poor who need housing. 

Moreover, subsidies are not sustainable and often do not reach the intended target group. Experience of sites-and-services and built housing has shown that often the middle classes and the rich benefit from subsidies rather than the poor. Furthermore, subsidies in general, make the poor dependent on the subsidizer, be it the government or a non-governmental organization

Effective demand is defined as demand for a good or service, which can be paid for. There are two basic elements to increasing the effective demand of the poor: organization and access to finance.

Community organization 

The poor as individuals are seldom able to afford land and housing. Experience has shown that the poor as a group are able to afford not only land but also housing. They are also better able to negotiate with the government or the private sector as a group rather than as individuals, as has been proven in the case of land sharing. There are several examples of poor communities organizing themselves to provide for their own housing.

Organized and articulate communities of the poor cannot only afford housing; they can also negotiate with governments and other actors more effectively.

Community-based organizations take several forms from welfare associations, to slum-dwellers federations to coalitions of poor. Communities often organize themselves when they face a common threat or need, such as the threat of eviction or the need for water supply. Often when the threat passes or the need is satisfied; the community organization disbands or becomes moribund. 

Non-governmental organizations have played a major role in organizing the poor. They have assisted the poor in building their capacities to work in group environments and to negotiate with government or the private sector. However, some times NGOs, either on purpose or inadvertently, make communities dependent on them for technical and management assistance. Such NGOs do not help the poor. They simply provide justification for their own existence.

Increasing savings and providing access to finance 

As stated earlier community organization has taken place when the poor feel threatened or have to satisfy a common need. The problem is often sustaining community organizations once the threat is removed or the need is satisfied. One way of accomplishing this is through community-based savings-and-credit schemes. Instead of being reactive (in response to a threat or a need) these schemes are proactive and therefore more sustainable. They not only organize communities but also increase the effective demand of the poor by increasing their savings and providing access to credit. Community-based savings-and-credit schemes preserve organized communities and increase the status of women in the community in addition to providing access to finance.

Governments can assist this process by creating finance facilities, which act as reserve banks for these “mini banks of the poor”.

Property Rights and the Urban Economy

The organizers wanted us to examine the power of property rights as a vehicle for capital formation for investment as postulated by Hernando de Soto and its implication for boosting the urban economic base. 

What is the de Soto hypothesis in his own words as he penned them in his controversial book titled The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.  

To quote (Hernando de Soto, 2000: 6-7):

“In the West,….. every parcel of land, every building, every piece of equipment or store of inventories is represented in a property document that is the visible sign of a vast hidden process that connects all these assets to the rest of the economy.  Thanks to this representational process, assets can lead an invisible, parallel life alongside their material existence.  They can be used as collateral for credit.  The single most important source of funds in the United States is a mortgage on the entrepreneur’s house.  These assets can also provide a link to the owner’s credit history, an accountable address for the collection of debts and taxes, the basis for the creation of reliable and universal public utilities, and a foundation for the creation of securities (like mortgage-backed bonds) that can then be rediscounted and sold in secondary markets.  By this process the West injects life into assets and makes them generate capital. The Third World and former communist nations do not have this representational process.  As a result, most of them are undercapitalized, in the same way that a firm is undercapitalized when it issues fewer securities than its income and assets would justify.  The enterprises of the poor are very much like corporations that cannot issue shares or bonds to obtain new investment and finance.  Without representations, their assets are dead capital.”

As paraphrased by Professor Mabogunje, The poor inhabitants of these nations – the overwhelming majority – do have things, but they lack the process to represent their property and create capital.  They have houses but not titles; crops but not deeds; businesses but not statutes of incorporation.  It is the unavailability of these essential representations that explains why people who have adapted every other Western invention, from the paper clip to the nuclear reactor, have not been able to produce sufficient capital to make their domestic capitalism work.  This is the mystery of capital.  Solving it requires an understanding of why Westerners, by representing assets (notably land) with titles, are able to see and draw out capital from them.”  

de Soto basically argues “capture and organize all the relevant information required to conceptualize the potential value of an asset and so allows us to control it” (de Soto, 2000, p.47) He estimates that if developing countries could provide secure property rights to residential property, they would be able to effectively “unlock $9.3 trillion of “dead” capital. There are good reasons to agree with de Soto that improving property rights should be an essential part of any reform. They are necessary conditions to any reform to improve tenure and legal framework for individual ownership. The challenge is that they are not sufficient conditions to unlock the trillion of dollars locked up in dead assets. There are many implementation problems with unlocking the wealth in urban land holdings. Robert Buckley of the World Bank recently outlined a set of implementation problems that potentially reduce the seemingly large gains from property rights reforms advocated by de Soto: (Cite: p.29)

• Titling is often a costly process. It is not just a matter of formalizing informal arrangements that already exist. Very often contradictory claims of ownership succeed the announcements of titling programs. As Woodruff (2001) shows, the costs of adjudicating these claims may abrogate the gains from titling.

• Much of the land on which informal houses are built is obtained through illegal squatting on private property, and compensation is not paid to existing owners. Therefore, any titling programs will have to consider providing amnesty for those who benefited from invasions. Whether such a process will result in greater respect for property rights is open to question. It is important to note that this phenomenon of land invasion is more common in Latin America and rare in Sub-Saharan African region.

• As Lee-Smith’s (1997) analysis of property contracts in Kenya shows, this sort of contract’s value depends in large part on existing and often unwritten contracts; such as the degree of access women have to property. The broader web of societal contracts and constraints, as well as a wide variety of political economy issues, may well reduce the value given to property titles in isolation.

• A title is less valuable if it cannot be used as collateral. Such a result occurs whenever there is no effective formal financial system, as is the case in many developing countries. Moreover, even if a formal financial sector is functioning, very often many of those who live in informal housing are self-employed or work in the informal sector, so that it is difficult for them to show proof of income—a necessary condition to obtain credit from formal financial institutions. The result is that in most developing countries, the collateral value of property title remains low.

• The articles in Payne (2002) argue persuasively that in most developing countries, what may be termed the anthropological perspective on tenure—that is, a continuum of tenure categories with different levels of security of tenure—applies. Across this spectrum, some may value titles much more strongly than others. Once again, no simple policy reform will change this situation.

Although the implementation problems that plague property reforms, Robert Buckley of the World Bank did conclude from his review of the literature that the major point of de Soto is valid, that is  “ land markets are enormous constraint on development” We need a complete market system that is socially created to suit the institutional forms and mechanisms that populate the local and urban development landscapes in these countries. 

Land and real estate assets are seriously underutilized as inputs in production and as vehicles for saving or leveraging of resources. The value of these dead assets or what some call sleeping assets is estimated by experts at more than three multiples of GDP in most developing countries, no matter way you look at it. Whether measured by formality of ownership, access to mortgage finance, access to infrastructure services, or the flexibility of re-deploying assets across alternative uses, significant disparities remain within and across countries. There is extensive evidence in the literature to support the proposition that improving the access to, and use of land and real estate especially in urban areas is critical to enabling the capital market financing of urban assets and creation of wealth at several levels of the economies and geographies of Africa, the Middle East, South Asia and Latin America.

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The cornerstone of any effort on the part of a nation to reform the land and urban real estate markets is the investigation of the unique characteristics that land and real estate assets have which are clearly associated with problems in the efficient use, exchange and development of land and real estate. Resolving these problems is a prerequisite to designing a well-functioning architecture for urban and real estate finance in any country and also being able to benefit from the market power of property rights reforms.

The Future of African Urban Development

The work of urban development in any continent is never done. Our experience in the West confirms this observation. I have just finished developing the curriculum of a new professional graduate degree in the business of urban planning and development that will blend planning, development, business and knowledge management as a single course of study.  This is an effort to train up a new cadre of urban development professionals who will lead the development and management of the cities of the future in the US. The background work for designing this curriculum gave me the opportunity to review the literature on cites and the premium compression that is taking place in the traditional real estate markets in the US.  First, cities are on the rebound and largely because cities are rearticulating their role and contributions to the competitiveness of their regional economies as they have worked to deal with many changes dealing with globalization brought about by huge advances in information and communication technologies. Cities in the west continue to preserve and even enhance their market power because they choose to remain competitive even if it means reinventing their value proposition. African cities cannot do no less and will need to do more in the days to come, especially given its current state of development and economic competitiveness.

In the recent study about the urban transition in Sub-Saharan Africa (2004) that I have already extensively quoted from, Christine Kessides of the World Bank urged both urban advocates and urban skeptics to devote less attention on debating the urban contribution to development in Africa rather she urges us all to expend real energy on unblocking it. As she puts it “to promote more sustainable growth and poverty reduction, much more attention needs to be spent unblocking the productivity-and welfare-enhancing potential of urban areas” She offered three suggestions for unblocking the development contributions of cities to national growth and poverty reductions. First, she said recognize and move beyond the myths that cloud much of the discourse on African urban development. She debunked three types of myths:

Myths about the demographics:

• African countries are not urbanizing faster than other countries have, and the distribution of urban population among large and very small cities is not unusual for their level of development. That said, the absolute rate of urban growth creates a major challenge for urban management, particularly in the secondary cities, which tend to be the most under-serviced.
• Internal migration is not the only, nor even main, source of urban growth in most of countries-nor is it responsible for urban poverty. Although data are limited, evidence indicates that migration has been favorable on balance for both sending and receiving areas in Africa. But population mobility is much more fluid than the rural-to-urban model, and households wisely diversify their activities across both areas.

Myth about the urban economics: Africa cannot simply be characterized as “urbanization without growth”, and the term does not even fit many of the countries. The economic growth that has taken place in the past decade derives mainly from urban-based sectors (industry and services), and this is especially true of the better-performing economies. But cities have clearly not lived up to their productive potential because of their widespread neglect and bad management.

Myths about cities and poverty: Urban poverty is not mainly a function of urban expansion, nor is it a sign of failure of the urban economies in Africa. There is evidence that much of the deprivation in cities, and the emerging urban public health problems, relate to institutional failures that perpetuate social exclusion and inequalities between the urban poor and the urban non-poor.

Second, she urges us to recognize what the cities can offer the national development agenda-and what this requires in turn. Much of the development dialogue over the past thirty years has been, and remains, obsessed with the view that attention to cities represents “urban bias”. Yet cities suffer the effects of genuinely bad urban policy and financial neglect, misguided incentives that distort the use of land and other investments, and hostile treatment of much of the population on which the city depends. What is needed by urban advocates and urban critics is a hard look both at what the urban phenomena can offer national development across numerous channels, and what support cities and local governments require in turn to achieve these results.

Good urban management feeds into the entire national growth and welfare agenda: stimulating agricultural intensification and diversification of rural income, poverty reduction, good governance, and fiscal resource mobilization. African cities have the potential to be a strong platform and laboratory for most of the economic and social behaviors that are needed for transformative growth and productivity- including creative innovation, technological application, entrepreneurship, openness of attitudes to change, and risk-taking. Firms and individuals find more opportunity in cities and towns despite the many problems there, and the forces of agglomeration and migration appear as strong in this region as they have proven elsewhere. Releasing the potential of Africa’s cities by addressing basic weaknesses in land markets, public transport and the provision of urban services could reduce an effective “binding constraint” to the future growth in Africa. At the very least, such a strategy would create a more hospitable environment for the investors and workers who will increasingly and invariably congregate in urban markets.

Third, African governments that are responsive to their citizens and eager for a sustainable growth path are increasingly looking to their cities and local authorities to play a greater role in the national development agenda. Local governments can become the strongest advocates for cities, and link up with each other (as the metro cities have done in South Africa) to share lessons and information to make their case. 

Concluding Remarks

The next panel will talk about the future of the African city. The future is likely to depend on how seriously we work to bring Professor Mabogunje’s vision into fruition. What is Professor Mabogunje’s vision for emerging urban Africa? How would urban Africa stand up to the intense competitiveness of the 21^st Century and meet the diverse and pervasive challenges of this era of globalization? Professor Mabogunje’s vision is clear to me based on his work. If we want to see clearly the future of Africa as he envisions it we must adopt his perspectives. First, Professor Mabogunje sees the future of Africa through a political economy framework. He sees problems of African development, as structural and effective solutions to him must be structural. For example, targeting low-income housing policy outside a framework of a comprehensive and coherent housing policy that builds a well functioning housing delivery system for all income groups is flawed. This is a valid perspective because the bulk of enabling infrastructure for delivering many of the urban services and developing many of the urban assets are one and the same utilized or are needed for every group in the society. It is fruitless and wasteful of valuable resources to be creating special circuits for various groups without solving the systemic or structural or institutional problems that plague these countries.

Second, Professor Mabogunje believes in a full-fledged free market economy as the basic underlying mode of production for the African urban development. This means a market that is capable of effectively connecting urban assets in African cities with the global capital markets. It means a complete market that integrates the various assets of the household sector of the economy with the primary, secondary, tertiary capitals markets and operates as “virtuous circles.”

Third, Professor Mabogunje believes in a modern African society imbued with real democratic culture. This democracy is accountable, participatory and transparent and it is most active at the local level. 

Strategy

Internal self-reliance

“…. mobilize domestically a relatively large pool of long-term savings to invest in its own national development.”

Sustainable national development (economy and politics)

“..sustainable development…as requiring that a country appreciates the need for and put in place all institutions required to facilitate its effective transition to a full-fledged free market economy and foster the consolidation of real democratic culture in its society.”

Roadmap

There is no short cut to African urban development and national economic development of African countries and development of modern African societies.

Radicalize institutions at the local and community levels

In the context of land management, Professor Mabogunje stressed how critical effective land management is for national development in many of his works. He laments the remarkable growth of the informal land market and the accompanying weakening of the capacity of the State to effectively manage the land resources for the nation as a result of the abysmal failure of the countries to deal effectively with land and real estate reforms or legitimize the various institutional adaptations that are already occurring through the civil societies of these countries. To enhance that capacity, land reform, like the Gordian knot must be cut. A successful land reform is impossible without a comprehensive land and real estate assessment or a land and real estate audit that is rigorous and analytical. Such an assessment is needed to provide a fact-based foundation for defining appropriate strategies for improving land market performance. It can be used also to design how best to radicalize customary institutions so as to facilitate the convergence of social and economic approaches to land management as in how best to harmonize and integrate traditional and statutory authorities in land management procedures.