That’s more than one million more people arriving every week, in a city somewhere in the world, each with an expectation of better access to jobs, better education for their children, better health care and a better quality of life.
And this trend is only increasing - in 1950 one in four people lived in cities, it is currently over two in four and in just 20 years it will be close to three in four. This is an issue weighing heavily on the minds of governments, the private sector and NGOs, and it’s an issue that differs by geography.
In this Aurecon Thinking Paper, Colin Dominish – Industry Director for Communications and Utilities and Matt Coetzee – Urbanisation Expertise Leader discuss the threats and opportunities placed on the world’s largest cities by the trend towards urbanisation.
They look at the options for delivering “cradle to grave” infrastructure plans with innovative approaches to maximise the benefits and minimise the costs of solving the conundrum presented by everyone wanting to live in the one spot.
Matt: Statistically, we have very clear data to show that personal earnings, infant mortality and education levels all improve with increasing levels of urbanisation. Of course people sense this and they respond by relocating to the cities. On the flip side, we also know that cities can be dangerous, congested and polluted. The trick of course is to find ways to minimise or eliminate those negatives, while we enhance the positives. As the world becomes increasingly urban, there is no greater challenge for all of us.
Colin: What do these challenges mean across the communications and utilities sector? That’s a question weighing heavily on the minds of governments, owner/operators and the financiers who fund infrastructure, and it is something that clearly differs by geography.
Power generators in developing countries are simply trying to meet electricity demand in rapidly urbanising areas as quickly and cost effectively as possible. While developed countries look to balance peak load, cope with falling overall demand, and offset carbon outputs by converting to greener power generation solutions.
Power transmission and distribution companies in developing countries have massive plans to interconnect across national boundaries so electricity can be shared between large population centres. While at the same time, developed countries are trying to minimise the impact of peak loads without raising social concerns about “gold plating” their existing assets. The power retailers are facing more informed consumer bases, who are calling for “smart grid” solutions to help them offset rising electricity costs.
Water utilities in developing countries are falling well short of the Millenium Development Goal challenge to meet rising demand for access to “on network” clean water and sanitation. Developed countries are looking to technologies to offset water scarcity and reduce operational costs.
And telecommunications companies globally are rolling out greater capacity to address the burgeoning requests for faster data speeds driven by people being more connected to each other in urbanised environments, whether it is over wireline or wireless technologies.
Matt: It’s true that urban pressure is taxing policy makers and infrastructure. What are a few examples of utilities facing clear challenges to meet the forecast needs of rapidly urbanising centres?
Colin: According to the United Nations, China is grappling with having sufficient water supplies - especially for Shanghai. Geographically speaking, Shanghai is a city abundant in its water resources but almost all surface water has been polluted in different degrees by urbanisation. The water quality doesn’t meet drinking water standards, reducing water availability further. Some experts predict that current forecasts of 600 000 more people moving to Shanghai each year will see the city run out of enough water to support the city within this generation.
In South Africa, surging demand for electricity as people move into urbanised areas is leaving companies like Eskom with a need to increase generation substantially. Rolling blackouts and power supply constraints are impacting the country’s gross domestic product growth outlook. Even with new power stations currently under construction, the country is at risk of achieving its desired growth rate of 6% this year as a result.
In Kenya, mobile telephony is now the basis for the financial system, with m-payment services becoming the key currency. As people migrate to urban areas, they use m-payment services to send money to their extended families living in rural regions as it appears to be a much more reliable method to transfer money than traditional banking methods. Mobile payments work by storing a consumer’s credit or debit card within the SIM card and employing near-field communication (NFC) technology or sending money by text message. All this has required phenomenal growth in the underlying mobile telecommunications network. In 2000, some 180 000 Kenyans had access to a mobile phone. By the end of 2006, that figure had grown to 7.3 million people - an increase of more than 4000%.
In Australia and some other developed nations, energy consumption is actually reducing and power generators are turning their plants off at times. With between 10% and 25% of maximum demand occurring for only 1% of the time, power bills are increasing because of inefficient use of the system. It has been estimated that 25% of retail electricity costs in New South Wales are derived from peak events that occur over a period of less than 40 hours per year. A lot of these issues are being attributed to the use of air conditioners in big cities all being turned on between 4pm and 6pm as people come home from offices that are air conditioned.
Matt: Adding to all of this is the impact of the weather and climate change on large cities. The 2011 tsunami impacting Japan, flooding in Jakarta and Brisbane in 2012 and 2013 and the New York “super-cell” storm that wreaked such widespread damage are just a few examples.
Two thirds of urban areas with populations exceeding five million are in coastal zones at risk from sea level rise and event driven flooding. The vast majority of these are in emergent economy regions. The greatest concentration of intense and multiple natural hazards are in Central Africa, Asia and the western regions of the Americas. The Central African and Asian high risk areas correspond to areas of future intense urbanisation. Rising sea levels coupled with increased natural disasters all portend for greater impact on big cities and their enhanced populations.
Colin: And one of the key questions that stakeholders are asking me is how do we plan for the future consequences of urbanisation?
Matt: Planning is absolutely essential. But because the issues we are dealing with here are so dynamic and complex, the expectation from our clients is that the planning is particularly comprehensive, more so than in the past.
Specifically, the plans need to consider short as well as long terms needs, but also need to determine how to integrate social, physical and financial considerations. We are seeing cities seeking to understand the socio-economic and environmental drivers for change and then link those directly and explicitly to solutions such as land use plans, transport infrastructure outcomes and improved utilities.
The planning cycle needs to address environmental impacts - ensuring resource use efficiency and responding to the adaptation and mitigation imperatives of climate change. It must consider ways to maintain economic growth and ensure sustainable communities. This all requires effective coordination and strategic planning - to identify priority investments, create special purpose investment vehicles to implement them, and structure appropriate financing.
Colin: Solutions need to be holistic, and as I mentioned earlier, can vary by geography. So we are often called upon to undertake economic, environmental and social impact assessments. In parallel, we provide public and private financing options assessments, strategic infrastructure master planning, disaster management plans and help stakeholders develop appropriate governance and institutional arrangements.
In the communication sector, we are helping our clients to roll out broadband and mobile communications networks in Australia, New Zealand and South Africa. Our site selection and design of fibre cable routes and mobile tower deployments will help people connect faster in many different ways. Ultimately, broadband and mobile services will form the backbone of economic and social interaction, while also enhancing education and health services for millions of people.
In sub-Saharan Africa, we are assisting in master planning of power transmission and distribution networks to allow countries to share their electricity. As these countries grapple with the challenge of urbanisation, they are taking strong steps to ensure they can manage the increasing demands being placed on their power networks now and into the future.
The governments of Mozambique, South Africa and Swaziland have been collaborating to jointly develop the shared Maputo River Basin to support the provision of clean water to big cities in each country. Aurecon took a leading role in the execution and management of studies which provide a detailed water resources assessment, as well as recommending management and development options, for the basin.
We believe that there is a need for governments to lead the way in positioning our big cities for the future and for the private sector to work with governments in pursuing these solutions.
Matt: This is a very interesting trend. In almost every jurisdiction in the world we are seeing substantial infrastructure shortfalls, and in most instances these cannot be met by government funding alone.
Colin: South Africa forecasts a need for R670 billion to address their water shortage and access issues, and R350 billion for their electricity demand issues, over the next decade. The Australian electricity network requires AUD 100 billion of investment in electricity generation and transmission infrastructure by 2020, in order to guarantee reliable electricity supply both to domestic users and to meet growing industrial demand from expanding resources production.
Matt: Governments are actively encouraging the private sector to contribute to reducing these shortfalls and the proliferation of government programmes supporting public private partnerships (PPPs) is evidence of this. Countries in South East Asia, such as the Philippines and Indonesia, are particularly active in this space. The interesting consequence of this may be the extent to which the public and private sector start interacting on policy matters, as well as just being funding partners.
Colin: It is a big challenge and consultants like Aurecon must broker discussions between government and private entities on where precious investment dollars should be spent.
We are also assisting in delivering “cradle to grave” infrastructure plans with innovative approaches to maximise the benefits and minimise the costs of solving the conundrum presented by everyone wanting to live in the one spot.
Urbanisation won’t break the big cities if these solutions are adopted and implemented quickly and efficiently. The opportunity is not to contain urbanisation, but to position for it to enhance urban resilience, quality of life and economic growth.
The Will urbanisation break the big cities? thinking paper is one of a suite Aurecon experts are developing covering this complex and evolving issue.
In a previously published thinking paper, Stephan Jooste, a Civil Engineer and specialist PPP consultant at Aurecon who is based in Tshwane, South Africa examines, The transition towards a sustainable Public Private Partnership regime.