Markets & Finance

Africa yet to see the big housing picture as satellite cities target middle-class


An artistic impression of Konza City. Critics warn that such satellite cities come with a range of flaws that might damage overall urban development in the long run. Photo/FILE

Just over a year after former President Mwai Kibaki officially kick-started the construction of Konza City, the site for the flagship IT hub located about 80km from Nairobi lies empty, save for the occasional herd of grass-grazing impalas. Residents of Konza town, on the edge of the site, are losing hope.

They say the land-buying frenzy that was sparked off by speculation surrounding the project is dying off, and visitors are now few.

On Mombasa Road, at the junction that leads to Konza, several businesspeople who set up last year, targeting prospective land buyers, didn’t return after Christmas, and more are thinking of leaving.

Konza was announced as “Africa’s Silicon Savannah”, in reference to the American Silicon Valley, an Sh800 billion project meant to create more than 100,000 jobs by 2030, housing for 185,000 people, complete with all necessary services from entertainment to hospitals, to restaurants, and position Kenya as East Africa’s IT hub.
But the Konza Technopolis Development Authority (KTDA), in charge of the city’s development, has yet to release a design publicly, and the project now seems to have stalled.

Among the issues holding back construction is a disagreement between KTDA and Tetra Tech Inc, the US company that won the contract to oversee the construction of the new city. But to most residents, they think the government has shifted its energy towards the standard gauge railway project.

READ: Konza City consultancy in talks over Sh1.7bn payment

It is not only Konza technopolis that seems like a pipe dream. Nairobi’s other satellite project has been slowed down by a series of financial setbacks.

Stephen Jennings, then CEO of Renaissance Group, which owns Tatu City in Kiambu County, stepped down last year after the company disclosed a $272 million (Sh23 billion) debt and announced the sale of land holdings in Ghana and Zimbabwe as well as other business lines to stay afloat.

Tatu was announced as Kenya’s largest privately-led urban development plan, and is supposed to house 64,000 people once completed. It is now unclear whether Renaissance will be able to follow its initial plans.

READ: Tatu City feels the weight of debt after shareholder wars

Such setbacks might serve as a warning for similar projects on the continent— and there are quite a few. Over the last couple of years, plans for ultra-modern, and often luxurious satellite cities have been announced in several countries, from Nigeria’s Eko Atlantic to the DRC’s La Cité du Fleuve, to Ghana’s Hope City among others.

While some are strictly residential, others are open to commercial activity or, like Konza and Hope, geared toward the IT sector. But the stalled or never-ending projects might not be the only thing worrying developers and governments. Satellite cities, critics warn, come with a whole range of flaws that might damage overall urban development in the long run.

“It’s been tried many times in various parts of the world and it’s generally a disaster,” says Vanessa Watson, a professor of city planning at the University of Cape Town.
According to Ms Watson, successful satellite cities require a heavy, continuous investment to be truly independent from the main city, which few projects have been able to achieve in the past.

“The satellites won’t be self-sufficient. There’s no way they can provide the whole range of facilities that people need probably for the next 20, 30 or 40 years,” she says. “The traffic problems are going to escalate.”

Observers also fear these projects are geared mostly toward the upper-class and the real estate will be out of reach to most.

Already, Eko Atlantic and La Cité du Fleuve are branding themselves as an upscale project. While other developers such as Renaissance, the owner of Tatu City, are open to including affordable housing units to their plans, the current state of the real estate market shows possibilities for social inclusion are limited – in Kenya, only 11 per cent of working adults earn enough to support a mortgage.

READ: House prices stall as high mortgage rates lock out first time home buyers

The problem is not necessarily to have private, upscale developments, but rather to place a huge bet on a single socio-economic class that might not bite the hook.

The proliferation of high-end estates around Nairobi shows private developers are still not willing to tap into the low-cost market, even though this is where the needs are the biggest. Only a few like the Jamii Bora Makao estate in Kisaju has deliberately sought to fill that gap.

READ: Challenge of providing low cost housing for buyers

Misevaluating the housing market has had dramatic consequences for developers in the past. Nova Cidade de Kilamba, a project near Luanda financed by China-based Pierson Capital, was built on the basis that Angola’s oil wealth would ignite the growth of a new “middle class”.

But like in many African countries, Angola’s resource boom has largely failed to translate into poverty reduction, and the middle class couldn’t afford the houses as anticipated.

Originally sold between $125,000 (Sh10.8 million) and $200,000 (Sh17.2 million), Kilamba’s apartments were simply out of reach for most Angolans. The city looked like a ghost town for two years, until President José Eduardo dos Santos slashed prices down to $70,000 (Sh6 million) in a desperate effort to increase demand.

Satellite cities also pose a direct threat to the main cities; by attracting the upper class and formal businesses, they deprive large urban centres of a much-needed tax base and divert state resources allocated to infrastructure building.

“This revenue loss would have to be compensated for either by imposing higher rates or levying new taxes on the less affluent residents who cannot move, or by lowering the quality of existing services, for want of resources,” states the 2012 East Africa report, released by the Society for International Development.

Satellite cities reveal a clear trend in Africa for governments to rely heavily on private-led, isolated infrastructure projects, going against what UN-Habitat currently advocates for in terms of urban growth—dense population.

In the case of techno cities like Konza and Hope City, in Ghana, isolated IT developments seek to replicate the model of the Silicon Valley, but ignore that this model has largely been abandoned even in the US in recent years, as tech start-ups and their employees have been heading back to urban centres like the Bay Area, Chicago and New York City.

Other cities in the world, from Toronto to London, Buenos Aires, Bangalore and Singapore have emerged as tech and venture capital hubs. Clearly, sub-Saharan countries are going against global trends when it comes to urban development, but why?

Ms Watson feels the reasons are perhaps ideological. “I think quite a lot of African countries still have an anti-urban bias, they actually don’t want to see cities growing too fast,” she says.

As noted by Belgian PhD student Jan Van der Broeck, who is conducting research on Tatu and Konza, projects for gated estates in the periphery of Nairobi tend to promote an image of quiet, pastoral lifestyle in stark contrast with the sometimes chaotic reality of the city, appealing to the rural origins of uprooted families.

In a recent paper, Ms Watson further exposed this willingness to escape the city by underlining how far removed architectural designs for satellite cities and master plans can be from the reality. While 3D renderings showcase shiny skyscrapers and large, decongested avenues, words like “world class,” “smart” and “green” can be spotted all over the briefs.

Cities in sub-Saharan Africa often offer visions of the new Dubai or Singapore, a vision than more often than not fails to address how the new or revamped city will incorporate slums, which make up over 60 per cent of the population in Nairobi, or the informal economy.

Ms Watson advocates instead for a healthy partnership between various levels of government and private actors to ensure the growth of inclusive cities. “I think it would be possible to harness the resources and energy of the private sector,” she says.