• Rapid urbanisation presents challenges, but also opportunities for business, society and sustainable growth
• Key challenges include: infrastructure delivery and housing provision, increasing local revenues, attracting  investment, equity and sustainability
• Opportunities include: capitalising on the urbanisation productivity ‘dividend’, using technology to create new solutions and harnessing the green growth potential of efficient cities

With 1.5 million people moving into the world’s cities every week, there will be an additional 2 billion new urban citizens by 2050 – mostly concentrated  in developing countries. In these regions, constraints on government skills, finance and institutions to deliver sustainable growth are already leading to unplanned and unmanaged growth. This places an enormous strain on infrastructure investment, the environment, social structures and municipal services.

This tidal wave of rapid urbanisation is now a global issue, as demonstrated at the Habitat III summit in October this year where the United Nations agreed and adopted a New Urban Agenda – a radical set of commitments ranging from local economic planning to urban design.

But there is currently minimal guidance on what better urbanisation actually looks like. PwC’s megatrends series explores the implications of rapid urbanisation for business and society.

Currently, the highest levels of urbanisation are in the developing countries of the Global South – Africa, Asia, Latin America – where medium sized cities will experience the greatest growth by 2050. Emerging cities have an opportunity to capture a dividend that creates jobs, raises productivity, reduces infrastructure costs and environmental impact, while supporting new enterprise and shared prosperity.

In these countries PwC leads an alliance that delivers the UK-funded support facility Infrastructure and Cities for Economic Development, (ICED), which is helping to shape and influence better urbanisation and infrastructure development in a range of countries in Sub-Saharan Africa and South Asia.

But these benefits are not automatic. Uncontrolled rapid urbanisation presents acute challenges for national and local governments, including raising local revenues, investing in infrastructure, property provision and improving sustainability.

Dan Dowling, city & urbanisation director at PwC, commented:

“We are seeing growing levels of competition between cities for talent, investment and business.

“Increasingly, the ability to compete successfully depends on much more than creating a regulatory or fiscal environment attractive to inward investment. Cities’ primary draw has traditionally been employment opportunities, but now people are attracted by the quality of life a city has to offer.”

To improve quality of life for all residents, cities need to increase their local revenue to fund their investment in open space, leisure and cultural facilities. Tax collection, distributing the proceeds of new development and generating income stream from services like parking and permits, all contribute to this.

Investing in good infrastructure is fundamental to fast-growing cities. PwC estimates that $78 trillion in global infrastructure is necessary over the next 10 years to accommodate this growth, with New York, Beijing, Shanghai and London needing $8 trillion in infrastructure investments alone.

Housing is another challenge for cities. From London to Addis Ababa, the pressure to supply affordable housing is reaching critical status.PwC analysis on affordability in London for 20-39 year olds found that, without family assistance, it would take 18 years of saving to afford a home in the capital. Even more pressing is the 60% of Africa’s urban population living in poorly serviced and economically isolated informal settlements.

Dan Dowling said:

“Solving this issue will require innovation, particularly in new models for land administration and the development of functional property markets.

“Leveraging the role of the private sector to develop affordable and sustainable housing will also be key requiring national, regional and city governments to work more closely with businesses.”

Environmental factors also have a significant impact on economic activity. PwC says cities need to become cleaner, resilient and more environmentally efficient to prosper. The integrated and compact design of transport, infrastructure and land use is at the core of providing a foundation for a truly sustainable city.

Technology can help cities get smarter and cope with rapid urbanisation. From App-based transport solutions to municipal data collection using smart phones, technology offers new ways to deliver public services.

Dan Dowling concluded:

“Technology can bring real transformative potential to both developed and developing cities. But while recent technological advances offer exciting solutions to urbanisation challenges, they should not be an end in themselves. Solutions are contextual to municipal resources and also societal structures and social norms.

“Our primary contribution to this important global problem is how to shape the nature and character of the cities so that they are able to expand efficiently, affordably and equitably over the long term.

“For the New Urban Agenda to succeed, it’s crucial that we engage not only the policy makers, but also those people and institutions that can help deliver it including the private sector.”