Smart Cities in Africa: Economic Benefits Explained

Smart cities are transforming Africa’s urban landscape and driving economic growth. They use technology and data to solve urban challenges, creating jobs, improving resource management, and boosting investments. Here’s what you need to know:

Job Creation: Smart city projects are creating thousands of jobs, especially in green sectors like renewable energy, waste management, and construction. For example, South Africa’s Shongweni smart city project is expected to generate over 23,000 jobs.
Efficient Resource Management: IoT sensors and automation are helping cities save resources, reduce waste, and cut costs in areas like energy, waste collection, and transportation.
Investment & Tourism Growth: Cities with smart infrastructure attract foreign investment and tourism, with urban tourism revenue increasing by over 24% in some cases.
Key Technologies: IoT, renewable energy systems, and 5G networks are the backbone of smart cities, enabling better connectivity, energy efficiency, and real-time data usage.

Africa’s urban population is growing rapidly, and smart cities are helping meet the demand for sustainable, efficient, and connected urban living. Keep reading to explore how these cities are reshaping Africa’s economy and addressing challenges like infrastructure gaps and cybersecurity risks.

Smart Cities in the African Context: Part 1

Economic Benefits of Smart Cities

Smart cities across Africa are delivering real economic advantages, ranging from creating jobs to streamlining resources and boosting investments. These developments are reshaping urban economies and improving daily life. Let’s dive into how smart cities are driving employment growth and enhancing resource management, while also attracting investments and tourism.

Job Creation and Employment Opportunities

Building smart cities in Africa is fueling both immediate and long-term job growth. A key area of focus is the rise of green jobs in sectors like public transportation, waste management, renewable energy, and construction. Data shows that in African C40 cities, 7.5% of jobs (1.4 million) are directly green, with another 4.4% (830,000) indirectly tied to green initiatives. C40 mayors have pledged to create 50 million green jobs by 2030. For instance, South Africa’s Shongweni smart city project is expected to generate over 23,000 jobs while attracting around $822 million in private investment.

Programs in cities like Accra and Nairobi are also paving the way for green and tech-focused employment. In Accra, Ghana, a waste separation and composting initiative has employed over 850 informal waste collectors, including migrants. The Accra Metropolitan Assembly supports these workers with cooperatives, social insurance, and training programs, creating sustainable livelihoods.

"The city of Accra is committed to addressing climate action and creating local jobs together, and ensuring the working conditions of all workers, including informal workers, are improved."
– Elizabeth Sackey, Accra Mayor

Similarly, the Nairobi CHOICE Innovation Hub in Kenya is training over 100 young people for green jobs and helping launch ten green start-ups. Beyond green initiatives, smart city projects demand expertise in AI, robotics, and data analytics, while infrastructure projects open up opportunities in construction and related fields.

Better Resource Management Efficiency

Smart cities are not just about jobs – they’re also about making better use of resources. By leveraging IoT sensors, real-time data, and automation, these cities are cutting waste and improving efficiency. For example, municipal systems equipped with IoT sensors can monitor water, energy, and waste usage, reducing unnecessary costs and ensuring resources are allocated effectively.

Take smart public lighting systems: they adjust based on actual needs, lowering energy use and saving money. Waste collection has also become more efficient, thanks to sensors that monitor when bins are full, enabling optimized collection routes. Similarly, traffic management systems use smart sensors and cameras to analyze vehicle flow, reducing congestion by fine-tuning traffic lights and routes. Public transportation is also seeing improvements, with real-time updates on schedules and occupancy reducing delays and operational costs.

In Lagos, Nigeria, real-time energy monitoring systems are helping the city transition to cleaner energy sources. IoT sensors track energy use patterns, enabling adjustments that reduce waste and prioritize renewable sources like solar and wind.

Investment and Tourism Growth

Smart cities are proving to be magnets for foreign investment and tourism, driving significant economic growth. For instance, cities with smart infrastructure have seen a 24.3% boost in urban tourism revenue and a 17.2% increase in tourist arrivals.

Projects like Nigeria’s Eko Atlantic City highlight the economic potential of smart cities. By integrating ICT into urban infrastructure – covering water management, transportation, and housing – this project is setting a benchmark for sustainable urban development. In Lagos, subsidized public Wi-Fi and community tech hubs are making digital services more accessible, promoting inclusive growth. Additionally, smart technologies are improving tourism operations, enhancing visitor safety, and elevating service quality. These advancements don’t just attract tourists but also create ripple effects, revitalizing entire urban economies.

Technology Driving Smart Cities

The backbone of Africa’s smart cities is powered by cutting-edge technology, creating new economic opportunities and reshaping entire industries. Three main technologies are leading this transformation: IoT and big data analytics, renewable energy systems with smart grids, and 5G communication networks.

Internet of Things (IoT) and Big Data

IoT devices and big data analytics are fueling economic growth in Africa’s move toward smart cities. These technologies are transforming decision-making and resource management, with the potential to generate $14.4 trillion in economic value across the continent. Beyond urban areas, IoT is making waves in agriculture, where smart farming tools could boost farmers’ incomes by up to 30%.

Nigerian companies are at the forefront of this change. Lare Ayoola, MD/CEO of Tranter IT and IoT Africa Networks Limited, highlights IoT’s critical role:

"Without IoT data collection would be unfeasible; without IoT, data acquisition will be expensive; without IoT, smart agriculture, digitization of oil, smart building, and smart logistics would not have been possible."

The business world is taking notice. According to PwC‘s 2020 MSME Survey, CEOs predict IoT and Artificial Intelligence will be key drivers of business growth over the next three years. In oil and gas, for instance, IoT enables companies to save 10% to 40% in operational expenses and boost efficiencies by over 25% through real-time monitoring and predictive maintenance.

Ayoola further explains how IoT is reshaping Nigeria’s economy:

"I think the Nigerian economy should expect a substantial boost. The provision of IoT services and solutions in Nigeria enables improved productivity, minimizes waste, maximizes loss prevention, and makes decision-making much faster by providing a massive amount of data that can be analyzed and presented for decision-makers."

While IoT and big data are optimizing operations, energy solutions are undergoing a transformation of their own.

Renewable Energy and Smart Grids

Africa’s energy sector is undergoing a major shift with the rise of renewable energy and smart grid technologies. Solar and wind energy capacities have grown significantly in the last decade, and the continent holds immense potential. Africa is home to 30% of the world’s mineral resources essential for renewable technologies and has 650 million hectares of forest cover, representing 17% of the global land area. Currently, hydropower makes up 17% of electricity generation, with projections to reach 23% by 2040, while wind and solar contribute 8%.

Smart grids are making this transition more efficient and cost-effective. In South Africa, Eskom uses AI for predictive maintenance, enhancing grid reliability and reducing disruptions. Johannesburg’s City Power leverages AI-powered systems to analyze energy consumption patterns and weather data, enabling real-time grid management that reduces outages and improves efficiency. In Rwanda, Off Grid Box partnered with the government to deploy AI-powered mini-grids in rural areas, providing solar-powered electricity. These systems adapt to local energy needs, improving access to education, healthcare, and clean water in remote communities.

Smart grids offer a range of economic benefits. They simplify the integration of renewable energy sources, reducing dependence on fossil fuels. This shift not only supports climate goals but also bolsters energy security. Additionally, smart grids give consumers better control over their energy usage, leading to lower costs and more efficient consumption. These advancements are crucial for the economic sustainability of smart cities, cutting operational expenses and creating opportunities for growth.

As energy systems evolve, 5G technology is revolutionizing urban connectivity and communication.

5G and Communication Networks

5G technology is set to inject $11 billion into Sub-Saharan Africa’s economy by 2030, with an estimated 226 million 5G connections by then, representing 17% adoption in the region.

The World Economic Forum captures the transformative power of 5G:

"5G will change the world even more profoundly than 3G and 4G; it will be as revolutionary as electricity or the automobile, benefiting entire economies and entire societies." – World Economic Forum

With its lightning-fast speeds and low latency, 5G enables real-time communication across urban systems. This is especially impactful for autonomous transportation, where real-time data from sensors and cameras can optimize traffic light timings and public transport routes.

In Rwanda, Huawei is collaborating with the government to roll out 5G technology, boosting connectivity and supporting smart city projects. This technology also enhances logistics and supply chain management, improving trade efficiency and reducing costs across African markets. By 2029, 5G subscriptions in Sub-Saharan Africa are expected to reach 180 million, unlocking even greater economic potential as cities integrate this advanced connectivity.

These advancements in IoT, renewable energy, and 5G are not just enhancing urban life but are also creating a foundation for long-term economic growth and innovation across Africa.

sbb-itb-dd089af

Sectors Affected by Smart Cities in Africa

Smart city initiatives are reshaping economies across Africa, offering new opportunities for businesses and improving how citizens access services. Among the areas seeing the most dramatic changes are transportation, healthcare, and real estate development. These sectors are at the forefront of the continent’s urban transformation.

Transportation and Urban Mobility

Transportation in Africa is undergoing a major shift, fueled by smart city technologies aimed at improving urban mobility and reducing inefficiencies. Intelligent Transportation Systems (ITS) are playing a big role here, cutting travel times by 25% and reducing emissions and energy consumption by up to 20%. These systems also help lower accident rates in cities by as much as 20%.

Cities like Cape Town, South Africa, are leading the way with smart grids and digital public service platforms. These advancements have improved not only urban mobility but also energy usage and citizen engagement. Similarly, Kenya’s Konza Technopolis is setting a benchmark for sustainable urban centers by integrating smart transportation, energy systems, and public safety measures. A key enabler in all of this is Digital Public Infrastructure (DPI), which facilitates better connectivity, data integration, and system interoperability, ultimately lowering costs for transportation providers.

Despite these advancements, challenges remain. A striking 92% of major low- and middle-income cities in Africa still lack comprehensive transport maps. This highlights the urgent need to address infrastructure gaps as urbanization continues at a rapid pace. While transportation is a critical focus, smart cities are also making waves in healthcare and public services.

Healthcare and Public Services

Smart city initiatives are revolutionizing healthcare across Africa, addressing long-standing disparities and making services more accessible and affordable. The continent faces significant challenges, carrying 25% of the global disease burden with only 3% of the world’s healthcare workforce. However, digital health innovations are helping to bridge this gap. For instance, digital tools can cut healthcare costs for patients by 19%, reduce medication errors by 55%, and improve operational efficiency by 30%. AI-powered solutions alone could save up to 1 million lives by 2030, while remote healthcare options could extend services to over 700 million Africans.

Examples from the field showcase these advancements. In Kenya, Maisha Meds operates a platform that supports over 1,500 pharmacies, using mobile money to lower drug costs through digital reimbursements. Ilara Health, another Kenyan initiative, uses AI to diagnose respiratory illnesses by analyzing cough sounds. Rwanda’s Irembo platform allows citizens to complete government tasks online, streamlining public service delivery. Meanwhile, fintech innovations are tackling healthcare financing challenges, leveraging the region’s 44% mobile penetration rate.

The impact of these initiatives is clear. Africa’s average life expectancy has risen from 41 years in 1960 to 60 years in 2021, reflecting how digital health solutions are reshaping the healthcare landscape. These advancements in healthcare mirror the transformative changes happening in real estate and urban development.

Real Estate and Urban Development

Rapid urbanization is driving the need for smart city projects, which are revitalizing Africa’s real estate sector and promoting sustainable development. Projections show that Africa’s urban population will grow from 587 million in 2020 to over 1.5 billion by 2050. Smart city projects are stepping in to meet this demand.

Several large-scale developments highlight this transformation. Nigeria’s Eko Atlantic City is expected to create 250,000 new jobs, while South Africa’s Waterfall City is set to generate 86,000 jobs by its projected completion in 2025. Kenya’s Konza Technopolis aims to attract major investments in urban infrastructure, contributing significantly to the country’s GDP. In South Africa, Lanseria SmartCity is being designed to accommodate up to 500,000 residents, with plans for 50,000 residential units and around 5 million square meters of commercial space.

Other projects, like Vision City in Rwanda, are incorporating sustainability into urban planning. This development features energy-efficient buildings, green spaces, and digital connectivity, including solar-powered streetlights and free Wi-Fi in its central square. These projects not only raise property values and attract international investment but also prioritize environmental practices like renewable energy, efficient waste management, and green building designs. These efforts appeal to eco-conscious residents and investors, while also reducing operational costs, laying the groundwork for long-term economic growth.

Implementation Challenges and Solutions

Africa’s push toward smart cities holds immense promise, but turning these ideas into reality isn’t without hurdles. The journey demands innovative strategies and strong partnerships between governments, private entities, and local communities. Let’s dive into the key challenges – spanning infrastructure, data security, and policy – and explore how they can be tackled to pave the way for thriving smart cities across the continent.

Infrastructure Gaps and Funding Issues

One of the biggest roadblocks to smart city development in Africa is the lack of sufficient infrastructure. With an estimated funding shortfall of $130–170 billion annually for infrastructure projects, the challenge is daunting. This issue becomes even more pressing as urban populations are projected to surpass 50% of the continent’s total by 2035.

To close this gap, public-private partnerships (PPPs) have proven to be a game-changer. By pooling resources, expertise, and innovation from both sectors, PPPs can help cities tackle infrastructure needs that governments alone might struggle to address. However, success hinges on clear communication and aligned objectives among all stakeholders.

"The advancement of the African smart cities model will require coordinated efforts from public and private sector stakeholders in order to address the complexities associated with the delivery of Quality-infrastructure-investment, through a combination of direct investments, incentives, and innovative financing models." – African Development Bank

Real-world examples underscore the potential of PPPs. Take the Gautrain Rapid Rail Link in South Africa: this collaboration between the government and private sector has significantly improved mobility in Gauteng Province, cutting travel times and easing congestion. Beyond PPPs, international grants, impact investments, and streamlined decision-making processes can further fuel progress. Providing financial training to entrepreneurs and small businesses can also help build local capacity for smart city projects.

But infrastructure is just one piece of the puzzle. The sheer amount of data generated by smart cities introduces another layer of complexity – data security.

Data Privacy and Cybersecurity Risks

Smart cities thrive on data, but managing and securing this data is no small feat. Risks like data manipulation, infrastructure sabotage, and third-party vulnerabilities loom large. Globally, the stakes are high: in 2021 alone, over 5.1 billion records were compromised.

In South Africa, the challenges are compounded by limited funding, poorly staffed cybersecurity teams, and governance gaps. Even load-shedding – a recurring issue – can disrupt data continuity for centers relying on the national grid.

To counter these threats, cities need a multi-pronged approach. Regular audits, advanced technologies like blockchain and biometrics, and comprehensive security awareness training can strengthen defenses. Addressing the cybersecurity skills gap is equally important, requiring investments in education, workforce development, and professional certifications. Strong governance structures, including clear data protection policies and citizen education, are essential for managing risks effectively.

Policy and Regulatory Requirements

Beyond funding and security, smart city initiatives depend heavily on the right regulatory environment. Governments play a pivotal role in crafting policies that balance innovation, privacy, and equitable access.

Effective policies should encourage private investment while safeguarding citizen interests. These frameworks must also be flexible enough to adapt to rapidly changing technologies, offering clear guidelines for implementation. Involving local communities in the planning process ensures that smart city solutions are tailored to real needs, avoiding one-size-fits-all approaches.

Standardization is another critical factor. By adopting common standards for data sharing and system integration, cities can reduce costs and make solutions more scalable. Additionally, clear criteria for vendor selection are crucial, especially when evaluating proposals. For example, while Chinese firms often offer prices 30–40% lower than Western competitors, cities must weigh factors like security, sustainability, and long-term viability alongside cost.

Addressing these challenges – whether through innovative financing, robust cybersecurity measures, or thoughtful policies – will be key to unlocking the potential of smart cities in Africa.

Conclusion: Smart Cities’ Future in Africa

Africa is on the brink of a major urban transformation, driven by rapid urbanization and the growing need for smarter, more sustainable cities. The potential benefits are immense, and the time to act is now.

Economically, the numbers speak volumes. AI is expected to contribute $2.9 trillion to Africa’s economy, boosting GDP by 3% annually, creating 500,000 jobs each year by 2030, and lifting 11 million people out of poverty. Achieving these milestones will require decisive and coordinated efforts.

Collaboration is key to this vision. Lacina Koné, Director General and CEO of Smart Africa, highlights this urgency:

"As Africa’s urban populations grow increasingly diverse, we must look to technology and smart city solutions to build more livable environments and improve the delivery of public services. These initiatives have the potential to expand access to city services, improve public engagement, and spur economic growth".

The groundwork for this shift is already in place. With mobile connectivity reaching approximately 72% across the continent, Africa has the digital infrastructure necessary to support smart city solutions. Cities are increasingly leveraging IoT, AI, and big data analytics, and Africa accounts for 32% of the 22 projects supported by the Global Smart City Partnership.

For this transformation to succeed, cities must focus on strategic investments in infrastructure that can evolve alongside technological advancements. Sustainability should be a top priority, incorporating renewable energy, efficient waste management, and eco-friendly building practices. Crucially, local communities must be actively involved to ensure these initiatives are both impactful and enduring.

The opportunities ahead are vast, but so are the challenges. African nations must strengthen public-private partnerships, invest in adaptable infrastructure, and engage communities to ensure lasting change. Infrastructure projects alone can generate between 110,000 and 150,000 jobs for every $1 billion invested, showcasing the far-reaching economic ripple effects of smart city development.

Smart cities in Africa are more than just urban planning efforts – they are engines of economic growth, job creation, and improved living standards. The countries that embrace this digital urban evolution today will be at the forefront of Africa’s economic resurgence tomorrow.

FAQs

How do smart cities in Africa create jobs, especially in sustainable industries?

Smart cities across Africa are becoming hubs for job creation, especially in industries that prioritize eco-friendly technologies and practices. These cities are investing in areas like renewable energy, waste management, and sustainable transportation, all of which are driving the growth of green jobs. For instance, sectors such as water supply and waste management already have a large share of their workforce engaged in roles that support environmental sustainability.

By focusing on urban sustainability, these cities are unlocking significant employment opportunities. Take South Africa, for example – its ambitious climate initiatives are expected to create over 1.1 million jobs in sustainable industries. This strategy not only tackles pressing environmental issues but also strengthens local economies and enhances the resilience of cities across the continent.

How do technologies like IoT and 5G improve resource management in African smart cities?

Technologies like IoT (Internet of Things) and 5G are reshaping how African smart cities manage their resources. IoT devices collect real-time data on things like energy, water, and waste usage, giving cities a clear picture of consumption patterns and helping them identify areas where resources are being wasted. On the other hand, 5G offers the fast, reliable connectivity needed to process and act on this data efficiently.

When these technologies work together, cities can streamline services such as traffic management, energy distribution, and public transportation. The result? Lower costs, less waste, and better resource use. All of this contributes to improving daily life for people living in urban areas.

What challenges do African cities face in becoming smart cities, and how can they be addressed?

Building smart cities in Africa isn’t without its hurdles. Challenges like poor infrastructure, political instability, and a noticeable digital divide often stand in the way. Many cities struggle with outdated urban planning, unreliable utilities, and a lack of investment in technology, all of which slow progress. Add to that governance issues such as corruption and minimal community involvement, and the road to development becomes even tougher.

To overcome these barriers, the focus needs to shift toward locally-driven solutions that address the unique needs of each community. Prioritizing investments in digital infrastructure, improving access to technology for more people, and encouraging collaboration between public and private sectors can spark innovation and better resource management. These efforts can pave the way for African cities to develop smart city systems that are not only effective but also inclusive and tailored to their specific circumstances.