Think Piece for Discussion
22 February 2012
What Future Cape is not…
• An economic strategy
• Or even an economic
agenda towards a
strategy
• Instead, it is an informed
provocation about how
the world is changing
with an eye on 2040.
• It acknowledges that
economic intelligence
about sectors, clusters,
value chains and
investment patterns and
potential is vital.
• But, doing all this well will
still not enable us to
achieve resillient and
inclusive growth…
Storyline
1. Rising above the now: The point about understanding the
future is to equip us to act more effectively in the present
2. The changing world and our futures
3. Flashing dashboard: Pressing development challenges
4. Homebru Conceptual Framework
5. Proposed Priority Interventions
6. Having the conversation towards common purpose…
TOPVIEW: RISING ABOVE THE
PRESENT
If we don’t escape the present into
the future, we cannot solve the
problems of today; if we don’t act
now, we cannot achieve the future
we need in order to flourish…
The Changing World
Mega shifts
• Irrevocable geo-economic shifts
by 2030
• Socio-Digital media shift
(cellphone and internet impact
on consumption)
• Permanently resource
constrained world: implications
for prices and patterns of
inclusion and exclusion
• An era of systematic risk and
uncertainty due to climate
change impacts
Geo-economic shifts
v
Relative shares of global economic output, 1500-2000
35%
China
% Share of Global Output
30%
US
India
25%
20%
15%
10%
UK
Russia
Japan
5%
0%
Time
1500
1600
US
1700
China
1800
India
UK
1900
Japan
2000
Russia
Economic Growth Trends for Major Economic Powers (2000-2100)
IFs Base Case: National/Regional GDP at PPP (at 1995 constant USD)
120,000
China-EU
China-US
India-EU
India-US
India-China
100,000
GDP (Billion $)
80,000
India, China & Japan had the
largest urban populations in the
world till the early 19th century
60,000
40,000
20,000
2000
India
2010
China
2020
USA
2030
EU25
2040
Years
Japan
2050
2060
Russia
2070
2080
2090
Brazil
The US and EU continue as major powers till the 2030s, after which China
will typically lead for up to 50 years, while India comes up from behind
2100
In 2009, China & India accounted for less that 2% of
Western Cape trade!
Socio-digital shift
51,000% increase since 1995
Global material extraction in billion tons, 1900-2005
“Oil is back above $90 a barrel. Copper and cotton have
hit record highs. Wheat and corn prices are way up.
Over all, world commodity prices have risen by a
quarter in the past six months. So what’s the meaning
of this surge? Is it speculation run amok? Is it the result
of excessive money creation, a harbinger of runaway
inflation just around the corner? No and no. What the
commodity markets are telling us is that we’re living
in a finite world, in which the rapid growth of
emerging economies is placing pressure on limited
supplies of raw materials, pushing up their prices. So
what are the implications of the recent rise in
commodity prices? It is, as I said, a sign that we’re
living in a finite world, one in which resource
constraints are becoming increasingly binding.”
- Paul Krugman, International Herald Tribune, 28
December 2010.
Climate change impacts
Source: Left: IPCC Synthesis Report, 2001; Right: Smith et al 2009 PNAS
Economic implications of adaptation
Carbon Productivity
Per capita Production Carbon
Footprint
[USD GDP / tonne CO2e]
tonnes CO2e / capita / annum
City of Cape Town
670
7.8
Western Cape
770
6.1
South Africa
400
8.9
Required by 2050 (McKinsey)
for stabilisation at 450ppm
7,300
1.2
INSTALLATION
INSTALLATION
Turning
Point
“Creative destruction”
Learning the new
unlearning the old
A great
market experiment
Led by
Major
financial
technology
capital
bubble
Ending in
a stock market
crash
Uncertainty, institutional recomposition and
role shift
Degree of diffusion
of the new technological potential
EACH TECHNOLOGICAL REVOLUTION PROPAGATES IN TWO DIFFERENT PERIODS
The first half sets up the infrastructure and lets the markets pick the winners
the second half reaps the full economic and social potential
big-bang
2O - 30 years
DEPLOYMENT
DEPLOYMENT
“Creative
construction”
Led by
production capital
Applying the paradigm
to innovate
across all sectors
and to spread
the social benefits
more widely
Until maturity
and exhaustion
???
Financial crisis
2O - 30 years
State
intervention
Next
big-bang
Time
GREAT
SURGE
1st
Technological
Revolution
CORE COUNTRY
The
Industrial
Revolution
INSTALLATION
IRRUPTIO
N
Turning point
FRENZY
DEPLOYMENT
SYNERGY
MATURITY
1771
Canal mania
(Britain)
1793-97
Great British
leap
1829
Railway mania
(Britain)
1848-50
The Victorian
boom (Britain)
1893-95
Belle Epoque (Europe)
“Progessive era” (USA)
1929-33
(EU)
1929-43
(US)
Post-war golden age
(USA-Europe)
Britain
2nd
Age of Steam &
Railways
Britain (spreading
to EU & US)
3rd
Steel, Electricity &
heavy engineering 1875
US & Germany
overtake Britain
4th
5th
Oil, automobile &
mass production 1908
US (spreading to EU)
Information &
telecommunications1971
US (Spreading to EU &
Asia)
Big-bang
(Adapted from C. PEREZ 2002)
Transcontinental
investments in
railways, ships &
ports
Autos, electricity, radio,
aviation and real estate
(USA)
Telecoms & internet
mania & financial
instruments
(Global)
2001-02
2008-09
crash
GREEN NEW DEAL???
Institutional recuperation
SUSTAINABLE
SYSTEM?
1st
Technological
Revolution
CORE COUNTRY
The
Industrial
Revolution
INSTALLATION
IRRUPTIO
N
Turning point
FRENZY
AGRICULTURE
GREAT
SURGE
DEPLOYMENT
SYNERGY
MATURITY
1771
Canal mania
(Britain)
1793-97
Great British
leap
1829
Railway mania
(Britain)
1848-50
The Victorian
boom (Britain)
1893-95
Belle Epoque (Europe)
“Progessive era” (USA)
1929-33
(EU)
1929-43
(US)
Post-war golden age
(USA-Europe)
2001-02
2008-09
BUSINESS AS USUAL +
GREENWASH
Age of Steam &
Railways
Britain (spreading
to EU & US)
3rd
Steel, Electricity &
heavy engineering 1875
US & Germany
overtake Britain
4th
5th
Oil, automobile &
mass production 1908
US (spreading to EU)
Information &
telecommunications 1971
US (Spreading to EU &
Asia)
6th SUSTAINABILITY
AGE
2005
Transcontinental
investments in
railways, ships &
ports
Autos, electricity, radio,
aviation and real estate
(USA)
Telecoms & internet
mania & financial
instruments
(Global)
Renewables,
decoupling,
demateralisation,
sustainable living
(Global)
crash 2025
SUSTAINABLE LIVING
& GLOBAL EQUITY
SUSTAINABLE
SYSTEM
2nd
INDUSTRIAL
Britain
HOW READY IS THE WESTERN CAPE
TO JOIN THE ECO-INDUSTRIAL AGE?
Can the Western Cape Engage &
Address its Unique Development
Challenges?
The Changing World
Mega shifts
• Geo-economic shifts
• Digital media socio-cultural
shift (cellphone and internet
impact on consumption)
• Permanently resource
constrained world:
implications for prices and
patterns of inclusion and
exclusion
• An era of systematic risk and
uncertainty due to climate
change
Meta Implications
• Rise of regions and cityblocs as the nodal point of
the global economy
• Transition to an ecoindustrial era (adaptive
technologies to achieve ecoefficiency)
• Distributed settlement and
production logics (“local is
lekker; slow in nice”)
• Place-based innovation
systems
FLASHING DASHBOARD
Flashing Dashboard
1. Structural unemployment, with no sign of abatement (skills
mismatch)
2. Catastrophic impact of carbon pricing on the exports of the
Western Cape
3. Endemic social violence and crime that undermines social
cohesion, economic productivity and visitor economy
4. Low quality, dangerous and disconnected neighbourhoods
where the majority of citizens are trapped in poverty (food
insecurity)
5. Infrastructure crunch and cost
Unemployment
35.00
30.00
25.00
Western Cape
20.00
Eastern Cape
Northern Cape
Free State
15.00
Kwazulu-Natal
North West
Gauteng
10.00
5.00
0.00
Mpumalanga
Limpopo
Overview of the Western Cape labour market, 2011
“Around half a million individuals in the Western Cape were unemployed in
2011Q1, up from just under 400 000 in 2008, representing growth of 9.1 per cent
per annum over the three-year period. Provincial employment appears to have
been stagnant over the period at around 1.8 million.”
Impact of carbon tax
Any carbon pricing will affect South Africa and WC disproportionately. A ZAR100
carbon tax (either in SA or at EU border) would add R0.22 to the cost of a kilogram of
fruit from Theewaterkloof on average (more for grapes, less for citrus). The same tax
adds ZAR 0.06 – ZAR 0.09 to a kilogram of fruit grown in Chile (a major competitor).
Edible fruits and nuts is the Province’s biggest export earner (ZAR 10.6 billion in 2009)
which is 20% of all exports. But will lose competitiveness in a carbon constrained
world (as will most sectors). Second biggest exporter is mineral fuels, oils and
distillation (I assume from our refineries). 3rd biggest export is “spirits, beverages,
vinegar” .....which is agricultural.
Carbon Productivity
Per capita Production Carbon
Footprint
[USD GDP / tonne CO2e]
[tonnes CO2e / capita]
City of Cape Town
670
7.8
Western Cape
770
6.1
South Africa
400
8.9
7,300
1.0??
Required by 2050 (McKinsey) for
stablisation at 450ppm
• Average per capita CO2 emissions nationally have actually been
stable (come down from 9.2) around this very high level over the
past 15 years. A function of modest economic growth, some
population growth and some efficiency gains. Inequality in
emissions is a key WCape story.
Endemic violence
Symptomatic of a
wide-ranging number
of social pathologies
that cluster around
substance abuse,
sexual violence,
dysfunctional
parenting, splintered
households (absent
fathers), etc…
Unliveable neighbourhoods
“High-income households live in
low densities while low-income
households live in high
densities.” (CCT 2010)
Spatial dynamics of isolation and exclusion
Spatial traps of
educational,
health, economic
& social
dysfunction,
reinforced by
mobility barriers.
Encrusted by
cultural norms.
Trapped in an unviable fiscal model
1. Address housing
backlog via RDP
housing
5. Socio-economic
divisions deepen &
backlog pressures
worsen
4. Public and private
investments raise costs
and inefficiencies
through sprawl
2. RDP housing triggers
revenue generation
pressures
3. Revenue need fed by
private investments
that raise land values
which buoy taxes
Trapped in an unviable fiscal model: maintaining
standards in wealthy areas
Recap: Flashing Dashboard
1. Structural unemployment, with no sign of abatement (skills
mismatch)
2. Catastrophic impact of carbon pricing on the exports of the
Western Cape
3. Endemic social violence and crime that undermines social
cohesion, economic productivity and visitor economy
4. Low quality, dangerous and disconnected neighbourhoods
where the majority of citizens are trapped in poverty (food
insecurity)
5. Infrastructure crunch and cost
CONCEPTUAL FRAMES
The development challenge…
GDP: 7%
for 5m
jobs
Resilient growth
CO2: 42%
deviation
below
BAU by
2025
Inclusive growth
HDI:
0.597
0.80
Network infrastructure life-spans
Network infrastructure priorities
• Water & waste: enhance re-use and recycle with a low-skill
employment focus built into the service delivery model of all
municipalities
• Transport-oriented settlement planning and land-use
regulation, based on maximising new revenue streams
• New building standards for both top-structures and
subterranean infrastructures, phased in gradually to achieve
carbon per capita targets
• Reinforce a green economy regional innovation system to
facilitate a cost-effective transition to the new resource
standards
Social-cultural operating
system
(liveable communities)
Network infrastructure
operating systems
(resilient settlements)
Spatial & land-use
operating system
(equitable & inclusive)
Economic operating
system
(Inclusion & durability)
Priority interventions
1. Transition from Dirty to Clean Economy through a focus on
sustainable infrastructure as a catalyst for the Cape Green
Economy
2. Guarantee excellent public transport
3. Energy security
4. Liveable human settlements
5. Institutionalised growth management (inter-governmental,
multi-sectoral and inter-sectoral alignment)
6. Social transformation through building liveable communities
Sustainable infrastructure
Generally speaking sustainable urban infrastructure includes:
• Public transport networks;
• Distributed renewable generation and integrated energy
demand management initiatives and programs;
• High efficiency buildings and other development constraints
such as only permitting the construction of green buildings
and sustainable habitats with energy-efficient landscaping;
• Connected green spaces and wildlife corridors;
• Low impact development practices to protect water
resources.
Energy security
• Energy efficiency: The most effective renewable energy
initiatives in the Western Cape should be implemented in
tandem with energy efficiency measures that reduce the
quantum of energy required by the province.
• Public procurement: Public procurement of clean energy; the
retrofitting of government buildings; the charging of
differential levies for peak and off-peak electricity and the
building of more energy efficient low cost housing represent
important public initiatives aimed at supporting the
emergence of a local, renewable energy sector.
• Intra-governmental engagement: An engagement with
different spheres of government aimed at securing power
purchase agreements.
Housing access
• “The housing or shelter challenge must be rethought in
order to address the imperative of affordable, well-located
and healthy living conditions. Practically, this means that
building more of the current RDP housing matchboxes must
stop. Instead, public housing must be broadened and
reprioritised to secure a rebalanced allocation for upgrading,
low-income rental stock, gap housing (rental stock for lower
middle-class) and private-sector driven integrative efforts…”
Rebuilding place & community: Economic Inclusion
Care economy: homebased support
Green infrastructure:
enhance liveability &
pride
Community
Works
Cultural services for
children & youth
Protection &
maintenance of public
buildings & facilities
Rebuilding place & community: Integrated community
development via Community Works Programmes
Citizenship
Academy
Neighbourhood
design systems
Communitymanagement
• Train all community leaders
• Foster hard organising & man skills
• Build spatial planning literacy at the street &
neighbourhood levels
• Devolve some control over investment in local priorities
• Engage in cross-neighbourhood dialogue & negotiation
about l-term trade-offs
The Future regional competitiveness
will hinge on our capacity to
innovate in order to simultaneously
address spatial and social
inequalities in an environmentally
resilient way…
Key questions
• Does the story line make sense in the context of the Cape?
• What would the implications be for your sector if we focus all
our attention on learning how to become an eco-efficient
province/region by 2040?
• Is there a business model/social-organisation model in
becoming an eco-efficient province?
• Is there scope to foster a shared social purpose in deepening
and systematically addressing the intervention agenda?
• How best can we embed this agenda in the minds and plans
of all sectors and institutions of society?
Acknowledgements
• Cape Higher Education
Consortium (CHEC)
• African Centre for Cities at UCT
• Sustainability Institute linked to
University of Stellenbosch
• Commissioned by the Western
Cape Provincial Government
• Steered by the Economic
Development Partnership