Our future is set to be urban. Today, more than half of the population live in urban areas and 1.5 million people are added to the global urban population every week. A staggering 90% of this urban population growth will take place in African and Asian countries with rapid urbanisation placing huge demands on infrastructure, services, job creation, climate and environment. But this global urban transition presents significant opportunities too, with vast potential for emerging cities to act as powerful and inclusive development tools.
Cities are hungry, global economic engines and the economic powerhouses of the global economy. In 2015, 85% of global GDP was generated in cities. In fact, for millennia cities have been our centers of activity, drivers of growth and bastions of productivity. No country has ever reached middle income status without urbanising. By harnessing economies of scale, cities have a special ability to achieve more than the sum of their parts, adding value for both people and companies. This means they are more productive than other economic structures, by attracting firms, sharing knowledge, ideas and honing pools of talent.
With rapid urbanisation primarily taking place in developing countries of the Global South, the growth of cities and economic development are inextricably linked. For example, the rise of China’s middle class – a distinctly urban phenomenon that has lifted 500 million people out of poverty in less than 30 years – is testament to the power cities uniquely possess to elevate living standards.
Developing countries can capture an urbanisation ‘dividend’ that creates jobs, raises productivity, reduces infrastructure costs and environmental impact, supports new enterprise and shares this prosperity widely. As a result, the growth of the ‘Next 10’ large cities in Sub-Saharan Africa represents a major opportunity for business. However, these benefits are not automatic and poor infrastructure could derail the pace at which these cities grow and prosper.
Dubai is an example of a city that identified a physical gap in the world map and made its mark. It saw the potential in a role for a modern tier one hub city connecting East and West capturing the age of global travel that was enabled by extended range modern aircraft. Africa city leaders must also think about specialisation, why people will be drawn to their cities, what the city will produce and what its function will be both regionally and globally.
We also see increased competition between cities for talent, investment and firms. Increasingly, the ability to compete depends on much more than simply creating an attractive regulatory or fiscal environment to attract inward investment. Top of the agenda in today’s globally mobile world is making places where people really want and choose to live. While cities’ primary draw has traditionally been employment opportunities, people are now attracted by the quality of life a city offers.
Uncontrolled rapid urbanisation presents acute challenges for national and local governments such as constrained capacity and finance for infrastructure delivery, investment in service provision, proper planning, governance and transport. Unplanned and poorly managed urbanisation can give rise to inequity, pollution and costly sprawling development patterns.
Cities can also create inequality and often have the largest gaps between the ‘haves’ and the ‘have nots’. A sign that the city is wealth-creating perhaps, transforming the prospects of some citizens, but an economy where the benefits are shared more widely offers a stronger and more resilient foundation for society and security. To do this cities need to enhance levels of participation in city governance, improve connectivity, stimulate small business enterprises and deliver inclusive infrastructure.
Combatting the challenges of rapid growth, and realising the opportunities requires new business models, technologies and planning approaches that challenge the traditional city development models. Innovation and technology is enhancing the liveability, sustainability and productivity of ‘smarter’ cities in both northern and southern hemispheres. Countries that are entering a period of rapid urbanisation can therefore make better choices about urban development about how to position themselves in the global or regional economy.
Growing cities require substantial investments in infrastructure if they are to continue expanding at their present rate. We’ve estimated that we will invest $78 trillion in global infrastructure over the next 10 years alone to accommodate this growth. New York, Beijing, Shanghai and London will need $8 trillion in infrastructure investments alone and it is arguable that the deficit in sub-Saharan Africa is unknown and underestimated, and funding this infrastructure can be a real headache for national and local governments.
Over 60% of Africa’s urban dwellers live in informal and unplanned settlements and 41% of the urban population in Sub-Saharan Africa do not have access to electricity. With over 80% of the infrastructure not yet built, these countries have an opportunity to learn from both the successes and mistakes of the past. For example, templating growth via a well-planned urban hierarchies of cities and efficient deployment of key infrastructure to support this is essential.
Infrastructure investment needs to recover its costs, either via tax or user charges. Whilst government traditionally is positioned to deliver the former, the private sector is critical to the latter. Two things need to change in developing countries.
First, cities need to greatly increase their local revenue to fund their public infrastructure investment needs. This comes from improved tax collection and the implementation of land value capture that is realised when new development takes place and income generating services (parking is an obvious example here). Infrastructure with revenue streams such as energy, transport, water and ICT can be privatised with a wide range of Public Private Partnership (PPP) structures available to do this.
Second, housing is a particular and ubiquitous challenge in search of an innovative solution. From San Francisco to Addis Ababa, the pressure to supply affordable housing is reaching critical status. Solving it will require real innovation, particularly in new models for land administration and property markets. Some cities are beginning to address the challenge in novel ways. In Chile, land with secure rights of tenue is being handed over on which people to build their own homes, sometimes will basic plumbing or proper foundations included. Other examples include modular housing that can be extended as householders’ income increases and they start to have families. Developments in technology such as 3D printing also offer the potential to be positively disruptive as means to deliver low-cost decent housing.
While sustainable cities occupy only 0.5% of the world’s land, cities consume 75% of its natural resources and account for 80% of global greenhouse gas emissions. Our global sustainability and climate change challenges must therefore be resolved in cities.
We are currently subsidising urban sprawl that encourages inefficient urban development, increased private vehicle use and unaffordable infrastructure - we should in fact be doing the opposite. The evidence suggests that environmental factors have a real impact on economic activity. Despite China’s impressive economic transformation, according to the World Bank China’s poor urban air quality and water pollution costs the economy 6% GDP each year. In the US the cost of sprawl is estimated to be $1trillion per annum.
Cities must therefore become cleaner, resilient and more environmentally efficient. The integrated and compact design of transport, infrastructure and land use is at the core of providing a foundation for a truly sustainable city. Denser, well-planned living is more efficient and creates a far lower cost burden in terms of infrastructure and private costs for citizens than a sprawling suburban city. And these types of cities are also healthier places to live, imposing a lower burden on healthcare and other services.
Technology is fundamentally changing the way we live, as we embrace new digital platforms through which citizens and businesses can interact with each other and the city immersed in the ‘internet of things’. Such technologies have the potential to help our cities to operate more efficiently and therefore leading to improved productivity and economic growth. So technology is helping new and existing cities get smarter but it should not be an end in itself – rather an enabler. Digital and data-driven solutions are helping cities work better from App-based transport solutions to municipal data collection using smart phones.
There have also been a number of ambitious attempts to design the ‘perfect’ new build eco-city from Dongtan in China, to Masdar in Abu Dhabi, Migaa near Nairobi and Songdo in South Korea. These experiences have taught us valuable lessons about what works. The global smart cities market is expected to grow from USD 312.03 Billion in 2015 to USD 757.74 Billion by 2020, at a CAGR of 19.4%.
New business models for delivering public services is a major opportunity. Increasingly, the notion of building a city from the ‘bottom up’ is taking hold. This includes new approaches that build on the sharing economy, featuring self-build, co-operatives, micro industries and greater connectivity. Autonomous and participatory trends in planning and service delivery are facilitated by technology, invigorating cities though local action and simulating a culture of contribution and enterprise.
Technology platforms are transforming how public transport is delivered with millions of users and drivers connected via platforms like City Mapper which brilliantly integrates public transport information thanks to open data policies, It’s likely that, in future – and particularly in developing economies – that we’ll see an explosion of start-ups locally, using technology to create radical new solutions for today’s challenges often replacing the need for fixed assets as evidenced by Africa’s leapfrog move straight to mobile telephony.
A bottom-up approach to urban management deploys technology horizontally instead of vertically, enabling smart citizens rather than just smart cities.
The current model of urbanisation is unsustainable. A crucial policy implication for government and business is not just to make the mega city workable but to address the urbanisation challenge at its source by helping to combat the distressed migration of 200,000 people a day from the countryside to the city.
How cities evolve will be determined by the collective actions of city governments, people and businesses. Cities are more dynamic than ever before and local government will play an increasingly facilitative rather than prime delivery role. Business and private investment needs to step up and in to the challenge taking greater responsibility for service delivery, infrastructure investment and job creation. This should be a symbiotic relationship bringing benefits to the firm, people and the city.
Larger international businesses should give careful attention to their expansion efforts and how to position themselves to capture the potential of the new markets that will be created through rapid urbanisation. Executives must assess the risks and opportunities of high-potential economies and get in early enough to shape and contribute to growth.
Business behaviours will change too. The private sector will be challenged to be more open, sustainable, collaborative, innovative and flexible in their approaches. The Global Cities Business Alliance (GCBA) offers a platform of city-business dialogue to explore this evolving and important relationship.
For decades urbanisation has been viewed as a consequence of growth, but today we have an opportunity to shape it. A carefully negotiated 22 page document known as the ‘New Urban Agenda’ was agreed and adopted by governments at Habitat III, the 2016 United Nations Conference on Housing and Sustainable Urban Development held in Quito, Ecuador; an event that takes place only once every 20 years. It makes a wide range of important commitments to sustainable urbanisation setting a clear reference point for both governments and business.
Implementing the commitments made in Quito however will require new skills and partnerships than the ones that created it. This represents an exciting window of opportunity for new ideas, approaches and actors across the urban development landscape including key roles for the private sector, the investment community and technology. It remains to be seen however whether we will make the most of this opportunity to plan, build and run better cities.
 UN-ESA https://esa.un.org/unpd/wup/Publications/Files/WUP2014-Highlights.pdf,  PwC analysis of United Nations, Department of Economic and Social Affairs, Population Division (2014),  World Bank Group (2009) World Development Report 2009: Reshaping Economic Geography,  The New Climate Economy, Seizing the Global Opportunity,  World bank,  PwC Capital project and infrastructure spending outlook 2015,  PwC Cities of Opportunity,  UN-Habitat (2013),  World Bank (2015),  United Nations, 2015,  World Bank (2007) The Cost of Pollution in China,  The New Climate Economy, Seizing the Global Opportunity,  MarketsandMarkets, Smart Cities Market by Solution and Services for Focus Areas, http://www.marketsandmarkets.com/Market-Reports/smart-cities-market-542.html