Cities and urban areas function as engines for economic growth as they mobilize labor and capital to create economies of scale through the agglomeration of production factors and increase productivity. They also create a consumer base through whose consumption of manufactured products encourages economic growth. Consequently, cities generate economic value that amount up to 80 percent of the global GDP. They also expand as rural labor is pushed out as a result of green innovation and technological development.
Interestingly, Africa's cities have expanded neither through industrialization nor technological innovation. Africa’s urban population is relatively small compared to other regions of the world but its growth is expected to accelerate in the near future. However, this rate of expansion and attention is unaccompanied by an improvement in physical and institutional infrastructure. As a result, Africa's urban areas are sprawled by the expansion of slums while social infrastructure such as road, power, water and sanitation, and industrial production facilities is far from sufficient.
As Africa's urbanization comes with many side effects triggered by the infrastructure deficit, the development of economic and social infrastructure could aid its economic transformation. Using the various methods of pooled OLS, fixed effects model and system GMM, estimations on the future demand for infrastructure in the road, water and sanitation, and power sectors were conducted. Results indicate that demand is highest in the power sector followed by road and then by water and sanitation.
Based on Korea's experience and expertise and in consideration of the calculated estimations, Korea can cooperate with Africa by developing policies for urban planning (soft infrastructure), building physical infrastructure (hard infrastructure), and providing assistance in the establishment of industrial complexes. Detailed examples include reforming land regulation systems, establishing the Intelligent Transport System (ITS) and utilizing co-financing capital for infrastructure development.