Over the past year our GSMA Digital Utilities programme has learnt a lot about the unique challenges cities in low- and middle-income countries (LMICs) face, as well as the role that digital innovation can play in helping to address these challenges.
Cities in LMICs face several concurrent challenges:
- Rapid urbanisation: Today, some 56% of the world’s population – 4.4 billion inhabitants – live in cities. This trend is expected to continue, with the urban population more than doubling its current size by 2050, at which point nearly 7 of 10 people will live in cities. More than 90% of this growth from now until 2050 will be concentrated in Africa and Asia.
- Urbanisation without structural transformation: According to UN-Habitat, 54% of the urban population in Sub-Saharan Africa lives in informal settlements (43% for Central and Southern Asia). UNDP estimates that approximately 40%of the world’s urban expansion from now until 2050 will occur in informal settlements. Between 1980 and 2020, the urban population in Africa rose faster than GDP per capita. This has important implications for cities’ built environments and their long-term ability to provide basic services to their residents. Instead of becoming dense, productive cities with well-connected neighbourhoods, many African cities are characterised by low-rise informal housing and urban sprawl. For city authorities and state-owned utilities providing basic public services, urban sprawl poses unique challenges. The capital expenditure required to provide basic infrastructure, such as water pipes or sewer networks, is deeply sensitive to the density at which urbanisation occurs. The expansion of urban land consumption outpaces population growth by as much as 50%, which is expected to add 1.2 million km² of new urban built-up area to the world by 2030.
- A growing divide in access to essential services: More than a billion urban residents lack access to essential utility services such as energy, water, sanitation and waste management, while up to 70% of the urban population of LMICs is reported to be underserved by municipal infrastructure and rely on informal or alternative arrangements to procure core services. These services are often inferior or unsafe, and more expensive than municipal services:
- A World Resources Institute study of 15 LMIC cities found that private water providers can charge as much as 52 times more than municipally supplied water
- In Bangladesh, only 36% of the poorest quintile in the urban income distribution have access to at least basic sanitation services, compared to 83% of the richest quintile.
- Research by Wood Mackenzie highlights that Nigeria’s diesel genset power generation capacity exceeds its grid generation capacity by more than 10 GW.
- In Kinshasa, the capital of the Democratic Republic of Congo, less than 10% of the 8,000 tons of solid waste generated daily is landfilled, with the rest left in uncontrolled dumpsites and eventually in local rivers.
- Climate change financing: Cities globally only receive 7-8% of the $4.5 and 5.4 trillion per year required to meet urban infrastructure investment needs from 2015-30. A substantial proportion of these funds (10-25%) is related to additional investment costs or incremental costs to ensure infrastructure is low emission and climate resilient. The urban climate finance gap is even more pronounced in regions such as South Asia and Sub-Saharan Africa.
To address these challenges, urban planners, policymakers and their partners must innovate and implement infrastructure and service delivery models that are inclusive, climate-resilient, commercially viable, and are suited to their local context.
On World Cities Day, and as we enter our new strategic partnership with the UK Foreign, Commonwealth & Development Office (FCDO) next year, we reflect on some the key themes that will be critical for our work in cities over the coming years:
Cities and climate change
Cities in LMICs are increasingly vulnerable to the impacts of climate change, including rising sea levels and storm surges, heat stress, extreme precipitation, inland and coastal flooding, and landslides. Risks such as coastal flooding or landslides are particularly pronounced in these cities because their urban development is frequently informal, creating sprawling, unplanned urban areas that suffer from a relative lack of adaptive capacity.
Cities account for 70% of global carbon emissions. While cities in LMICs currently do not display the same level of CO2 emissions as their rich country counterparts, these cities must develop without following the historic emissions trajectories of cities in higher-income countries if we are to achieve net zero emissions by 2050. To do so cities must adopt innovative, and integrated urban planning strategies that address interconnected adaptation, mitigation, as well as broader urban planning and development challenges.
With our work in the Digital Utilities programme, we have supported and observed several innovative ways through which cities can leverage technology to address these interconnected challenges:
- Circular economy solutions: Our recent report takes stock of how and where digital innovation supports circular economy models in waste management. It presents insights from the recently completed GSMA Innovation Fund for Digital Urban Services, which included organisations working on digitalising waste management.
- Water management: Digital solutions in water are transforming how utilities and customers interact. Mobile money is a game changer for revenue collection while IoT devices have created new ways to monitor water services and automate processes. Combined with mobile payments, IoT devices enable pay-as-you-go (PAYG) service models, and smart metering has become a clear use case. Finally, digital platforms and enterprise resource planning (ERP) apps are supporting more effective utility management and providing a foundation for digitalisation across utility operations. Through our GSMA Innovation Fund, we recently supported Diyalo a company providing these solutions to water utilities of all sizes in Nepal.
- Productive use and climate finance: Digital verification and monitoring tools can facilitate access to carbon credits and increase their integrity and transparency. In cities, productive use appliance such as clean cooking and cooling solutions can reduce emissions, save costs, and promote better health outcomes. Through our GSMA Innovation Fund, we have supported an electric cooking start-up ATEC serving urban customers in Bangladesh with e-cook stoves that generate digitally verified carbon credits and solar cooling start-up Koolboks targeting small businesses in Kenya, Nigeria, Uganda, as well as other markets.
Urban innovation and public-private collaboration
Many cities are known as hubs for disruptive innovation, new ideas, experimentation, and novel technological applications. This can produce successful new business activity, but it can also be a catalyst for improvements in urban service delivery, urban planning, and support cities’ climate transitions.
In May 2021, GSMA launched the GSMA Innovation Fund for Digital Urban Services with support from the FCDO. The fund was open to start-ups and early-stage companies providing essential urban utility services who leverage digital innovations to make these services more accessible, reliable, sustainable and affordable. Successful organisations were awarded between £100,000 and £250,000 in grant funding and were provided with technical assistance. Pitches were received from 335 organisations in 43 countries across Africa, South Asia and Southeast Asia, and from these, a cohort of nine organisations were selected.
Over the grant period the nine organisations collectively raised over $11 million in follow-on funding. Comprised roughly of ~$4.5 million in debt, ~$3.5 million in debt/equity rounds, and ~$3 million in other grants and awards. Since the grant closed in Q4 2023 a further ~$13 million has been raised, bringing the follow-on funding total for the round to approximately $24 million. The round served as a strong endorsement for the unique role that digital innovations can play in reaching low-income urban populations, supporting the cities’ green transitions, while also being a catalyst for vital funding flows to essential urban service delivery in LMICs.
The round also highlighted two different start-up approaches to scaling innovative approaches to urban services:
- B2C – When start-ups/SMEs partner with a public sector institution to provide a service/product to a customer base that traditionally falls within the public sector institution’s service mandate
- B2G – When start-ups/SMEs partner with a public sector institution to provide a service/product that improves the public sector partner’s operational efficiency
Partnerships between start-ups pioneering both of these types of solutions and public sector organisations have emerged as an innovative and impactful way to address critical gaps in essential urban services. Through our Digital Urban Utilities Forums, we bring together start-ups, local government officials, regulators, enabling organisations, and private sector partners in a city. Their aim is to discuss the barriers and opportunities associated with public-private collaboration for improved urban service provision. The forums, underline the developmental and commercial returns associated with innovative service delivery models, draw on impactful case studies that showcase the value of start-up public sector partnerships, create a space for open and honest reflections about potential partnership barriers and shortcomings, and identify relevant opportunities for deeper follow-up engagement. Learn more about our past forums in Lagos, Islamabad, Kigali, Kathmandu, Freetown and Delhi.
Intermediary cities
Intermediary cities – in this case defined as cities with less than one million inhabitants – account for the majority (58%) of the urban population in LMICs. In Asia, 54% of the urban population live in such cities, while only 16% of the urban population are in megacities. Meanwhile in Africa, up to 210 million people live in an estimated 1,400 intermediary cities. Cities with a population between 100,000 and 300,000 are also among the fastest growing with an average annual growth rate of 4.5% according to Africapolis. Despite their prevalence and importance, national governments and donor initiatives tend to prioritise larger cities such as capital cities (e.g. Nairobi or Kigali) and economic hubs (e.g. Lagos and Douala); with the development of intermediary cities often being overlooked or deprioritised. This is also highlighted when it comes to innovation and start-up activity, which tend to be concentrated in large cities.
This results in uneven development, unrealised potential, and unplanned trajectories of urbanisation. According to the OECD, cities between 50,000 and 1,000,000 residents have lower electricity grid connections, piped water access, and mobile phone ownership than their larger counterparts with a population above a million. For instance in Madagascar, fewer than 20% of people living in small and medium cities have access to drinking water, and in the past decade poverty in secondary cities throughout the country increased from 46% to 61%.
While larger and intermediary cities face some similar challenges, there are unique challenges when it comes to the development of intermediary cities(see our report for further details).
To address, these issues and support innovations in intermediary cities, we have partnered up with Connected Places Catapult, UN-Habitat, and Rwanda’s Smart City Hub to launch the Co-Designing Urban Futures initiative. We have just started a longer-term project to assess the innovation capacity of intermediary cities across Kenya, Uganda, and Rwanda, and look forward to continuing to engage potential partners, government stakeholders, and the wider urban planning ecosystem to collaborate and widen the scope and ambition of the initiative.
If you are at the upcoming World Urban Forum in Cairo, you can also learn more about this in our session on the 7th of November at 1pm.
Looking ahead
We are looking forward to continuing to support urban innovations in LMICs and are always open to partner and exchange with other organisations that share our objectives.
In addition to our new project on intermediary cities, we are also working on another longer-term research project looking at the role of mobile operators in the growing smart cities solutions ecosystem in LMICs. As we highlighted in our recent blog on the role of mobile operators in smart meter adoption in India, these solutions present a growing commercial opportunity for mobile operators, while also delivering significant commercial, climate, and development outcomes for utilities, customers, and societies.
Although urbanisation represents an immense opportunity — moving to a city is generally associated with higher standards of living, job opportunities and greater access to public goods —supporting cities in LMICs in addressing their concurrent challenges is critical for the global sustainable development agenda. With our GSMA Digital Utilities programme, we look forward to playing our part in supporting these cities to become engines of productivity, social mobility, and green innovation through digital solutions and public-private collaboration. If you’d like to learn more about our work or want to be a partner on some of our ongoing activities such as the Digital Urban Utility Forums, or the Co-Designing Urban Futures initiative, please get in touch at [email protected].
This initiative is currently funded by UK International Development from the UK Government and is supported by the GSMA and its members.
