A city’s long-term prosperity and welfare depends on its capacity to take advantage of opportunities for sustained economic growth, and its ability to extend these opportunities to all residents. To be productive, cities must find a way to provide economic prospects to the urban poor and their growing young populations.
The first step is to recognise the informal economy as a fundamental part of the economy. In developing cities, informal producers and traders are responsible for a significant part of the local economy, contributing to both job creation and the national gross domestic product (GDP). It is often the one place where people can find work.
However, in the minds of too many politicians and officials, informality is more likely to be associated with illegality than with entrepreneurship, human resilience and innovation. As a result, informality frequently becomes vulnerable employment, overlapping with a lack of legal protection, growth of slums, and poverty. It is important to stop demonizing the informal economy and view both the informal and formal as simply the economy.
A local economy that embraces informal employment benefits both the city and the working poor. Our experience consistently shows that cities that integrate informal activities into value chains are far more likely to be successful than those which demonise, harass and punish informal workers and traders.
Properly functioning, transparent and efficient land markets are another basic precondition for a city’s economic growth and social and shelter stability. Most urban land markets in developing countries are opaque, distorted and inefficient. In Africa, the coexistence of customary land ownership and common law property rights is still one of the most critical (yet resolvable) challenges, impeding the ability of city governments to plan for development and finance their investments. Unclear land ownership and tenure security directly impact the urban poor, undermining their rights to land, services and housing, boosting price inflation, and leaving them more vulnerable to external shocks. In the absence of regulatory frameworks, many of these land markets will be vulnerable to the emergence of parallel and corrupt land markets.
In our activities, Cities Alliance explores the role of the city in promoting the local economy, such as how to provide traders with the space to trade and growth their business and identifying structural constraints to service provision and connectivity. We also focus the relationship between a city’s economy and the hinterland, and the potential to trade with other cities and markets.