Financial and Projection Modelling of the
Ekurhuleni Metropolitan Municipality
Capital Investment Framework (CIF)
Executive Summary
Task 1, 2 and 10
March 2015
DEMACON Market Studies
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
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The information contained in this report has been compiled with the
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
TABLE OF CONTENTS
EXECUTIVE SUMMARY .............................................................................................................................4
1.
PROJECT METHODOLOGY ..................................................................................................................4
1.1
Outcome of The relevant Tasks .............................................................................................6
2.
POLICY OVERVIEW ............................................................................................................................7
2.1
National Policy Framework ....................................................................................................7
2.2
Provincial and Regional Policy Framework ........................................................................ 11
3.
ECONOMIC PROFILE ....................................................................................................................... 15
3.1
Reference Framework ........................................................................................................ 15
3.2
Local Economic Trends ...................................................................................................... 17
3.3
Labour Profile ...................................................................................................................... 37
3.4
Synthesis............................................................................................................................. 44
4.
DEMOGRAPHIC OVERVIEW.............................................................................................................. 45
4.1
Population, Households and Household size ..................................................................... 45
4.2
Population and Household Growth ..................................................................................... 47
4.3
Employment Profile ............................................................................................................. 49
4.4
Synthesis............................................................................................................................. 50
5.
BACKLOG ERADICATION ................................................................................................................. 52
6.
SCENARIO MODELLING ................................................................................................................... 55
6.1
Growth Modules .................................................................................................................. 55
6.2
The CIF Optimum Budget Split ........................................................................................... 62
6.3
Synthesis............................................................................................................................. 64
7.
TASK 1 AND 2 CONCLUSION ............................................................................................................ 65
7.1
Key Findings of the EMM Landscape ................................................................................. 65
7.2
Significant findings with respect to the CIF Growth Scenarios ........................................... 67
7.3
Appraisal and Pointers ........................................................................................................ 67
7.4
Future Tasks ....................................................................................................................... 68
8.
ECONOMIC IMPACT OF LAND DEVELOPMENT PROJECTS (TASK 10) ................................................... 70
8.1
Introduction ......................................................................................................................... 70
8.2
Economic Impact Assessment ............................................................................................ 70
8.3
Advantages of the Proposed Major Developments ............................................................ 80
8.4
Impact of Major Developments on Secondary Economies ................................................. 80
8.5
Conclusion .......................................................................................................................... 85
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
EXECUTIVE SUMMARY
1.
PROJECT METHODOLOGY
Demacon Market Studies were commissioned by the Ekurhuleni Metropolitan Municipality
Focus Project Management to compile a comprehensive research study for the Modelling of the
Ekurhuleni Metropolitan Municipality Capital Investment Framework (CIF). The purpose of the
study is to inform the CIF, and as such assist with the refinement of the CIF geographic priority
areas and the refinement of the Capital Prioritisation Model (CPM).
The research study consists of ten interrelated tasks. The following table defines the
methodology used for Task 1, 2, and 10.
Table 1.1. Project Brief
Task
Activities
Task 1 – Backlog Eradication
The following modelling is required so as to assist with the
refinement of the CIF geographic priority areas and the
refinement of the Capital Prioritisation Model:
1. Modelling backlog eradication and economic growth
scenarios for the EMM against the Capital Prioritisation
Model (CPM) percentage categories and the EMM capital
budget to give an indication on an applicable split between
economic development and urban restructuring.
2. Modelling scenarios on the rate of job creation and
economic growth based on internal and external
investment into economic development for the EMM
(relates to Task 2.
Task 2 – Economic Growth
The following modelling is required so as to assist with the
refinement of the CIF geographic priority areas and the
refinement of the Capital Prioritisation Model:
1. Modelling scenarios on the estimated EMM revenue
growth based on the CPM percentage allocations of the
EMM capital budget and taking into consideration external
investments (National and Provincial Government, and
Private Sector).
2. Modelling scenarios on the estimated GDP contribution
from the EMM.
3. Modelling scenarios on the estimated job creation levels in
EMM.
4. Identify optimum public and private economic development
projects; including flagship projects.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Task 10 – Economic Impact of
Land Development Projects
Task 10 must be read and understood as a breakdown of
information required that will feed into tasks 1 and 6 with
reference to the scoring system of the Capital Prioritisation
Model, and the impact that internal and external investments
will have on revenue generation, economic growth, GVA
contribution, job creation and pressure for future space
demands. The following assessment is required so as to
assist with the refinement of the CIF geographic priority areas
and the refinement of the CPM, and to inform the Investment
and Development Incentive Policy:
1. Description and calculation of the Project Cost with a
breakdown of the following elements:

Cost of infrastructure upgrading (water, electricity,
sewer, roads, storm-water, transport and ICT)
which will include inter alia:
o Developers Contribution
o Municipal Contribution
o Internal and External Services

Construction
cost
landscaping, fixtures)

Cost/value of the equipment to be installed on site
/ in the buildings (value of the overall
development)
(earthwork,
building,
2. Economic Impact with a breakdown and description for:

Factories, that will include the Rand value of
production per year after construction and as
calculated over a fixed period (25 years) for all
industries
establishing
within
the
new
development

Retail, industrial and commercial to calculate the
annual turnover of businesses establishing in the
new development

Contribution to the GVA from new businesses and
industries establishing in the new development

Increase in land value based on the Municipal
valuation roll.
3. Income Generation: Calculated increase in income
generation for the EMM over a fixed period (25 years)
from:

Property taxes;

Fixed Service Fees;

Profit from municipal services

Other additional income
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
4. Job Creation: Estimate the number of jobs to be generated
from the new development based on:

During the construction phase

Direct jobs (within the new development area0

Indirect jobs (stimulated by the new development)

Distinction between formal and informal job
opportunities
5. General:

Land development projects are to be understood
as both internal and external development
projects. Where ‘internal’ implies EMM initiated
projects and ‘external’ implies both external
government entities / parastatals and private
investors. This includes land development projects
that have completed the planning phase.

Description of the development (i.e. Status, type,
and scope of development)

Each sub-element as outlined above for task 10
will be defined

Formulas utilised in the calculation and / or
determining estimations will be provided.
1.1 Outcome of The relevant Tasks
Task One of the CIF financial and projection modelling study aims to identify the optimum split in
terms of how the EMM budget expenditure should be allocated towards the CPM percentage
categories. Furthermore Task One will seek to identify how backlog eradication needs to be
addressed in the scope of the EMM budget, yet at the same time contributing to economic growth
and creating rateable assets. As such modelling scenarios will be developed for economic growth
and backlog eradication as per percentage split as part of the Capital Prioritisation Model. Lastly
Task One will identify the job creation opportunities and economic growth (i.e. additional GVA)
created by the internal and external investments on economic development interventions within
the EMM.
Task Two of the study is aimed at determining the GDP contribution and estimated job creation
levels that could be created by the EMM budget expenditure. This step is informed by the
modelling of the EMM revenue growth, based on CPM percentage split and also taking into
account external investments (which relates to the last outcome of Task One). Finally Task To
aims to identify the optimum public and private economic development projects, based on the
projects’ ability to contribute to the EMM economy and create a catalytic effect, which will
contribute to additional job creation, increased business sales, and GVA contribution.
Task 10 of the study is aimed at determining the economic impact created by a number of major
developments identified for the EMM. The task will seek to identify the development concept and
location of each of these major developments which will serve as input in determining the
economic impact. The economic impact assessment will analyse the effects created during both
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
the construction and operational phases, in terms of additional business sales, additional GGP
and additional employment opportunities.
2. POLICY OVERVIEW
This section analysed numerous policy documents on a Macro, Meso and Micro scale to
determine different development sectors identified within each policy document for future
development. In addition, the sectors identified for future development are cross-referenced from
a macro to micro level to establish / ensure proper alignment within the CIF in terms of future
investment and development within the CIF priority areas.
The following paragraphs briefly look at the national, provincial and regional policy framework
affecting the EMM and the CIF.
2.1 National Policy Framework
The policy framework on a Macro Level includes the following national policy guidelines:
2.1.1
National Spatial Development Perspective 2006
The NSDP 2003 provided a spatial vision and framework to steer detailed policies and
investment decisions towards the achievement of common national objectives. In accordance
with this vision the NSDP envisaged a situation where South Africa will become a nation in which
investment in infrastructure and development programmes support government’s growth and
development objectives.
In order to contribute to the broader growth and development policy objectives of government,
the NSDP puts forward a set of five normative principles:

Principle 1: Rapid economic growth that is sustained and inclusive is a prerequisite for
the achievement of other policy objectives, among which poverty alleviation is key
 Principle 2: Government has a constitutional obligation to provide basic services to all
citizens (e.g. water, energy, health and educational facilities), wherever they reside
 Principle 3: Beyond the constitutional obligation identified in Principle 2 above,
government spending on fixed investment should be focused on localities of economic
growth and/or economic potential in order to gear up private-sector investment, to
stimulate economic activities and to create long term employment opportunities
 Principle 4: Efforts to address past and current social inequalities should focus on
people, not places. In localities where there are both high levels of poverty and
demonstrated economic potential, this could include fixed capital investment beyond
basic services to exploit the potential of those localities. In localities with low
demonstrated economic potential, government should, beyond the provision of basic
services, concentrate primarily on human capital development by providing education and
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
training, social transfers such as grants and poverty-relief programmes. It should also
reduce migration costs by providing labour-market intelligence to give people better
information, opportunities and capabilities, to enable them to gravitate – if they choose to
– to localities that are more likely to provide sustainable employment and economic
opportunities
 Principles 5: In order to overcome the spatial distortions of apartheid, future settlement
and economic development opportunities should be channelled into activity corridors and
nodes that are adjacent to or that link the main growth centres. Infrastructure investment
should primarily support localities that will become major growth nodes in South Africa
and the Southern African Development Community (SADC) region to create regional
getaways to the global economy.
Implications for the EMM CIF
The National Spatial Development Perspective identified the following main sectors for future
development / expansion
 Innovation and experimentation
 Production of high value, differentiated goods (not strongly dependent on labour)
 Production of labour-intensive, mass-produce goods (more dependent on labour costs
and / or on natural resource exploitation)
 Public services and administration
 Retail and private-sector services
 Tourism
In terms of prioritising projects for the EMM as part of the CIF, it is important to take into
account these important sectors identified by the NSDP for future development.
2.1.2
National Development Plan: Vision 2030
The National Planning Commission has recently created the draft National Development Plan
2030. The National Development Plan (NDP) offers a long-term perspective. It defines a desired
destination and identifies the role different sectors of society need to play in reaching that goal.
The plan focusses on setting in place the things that people need to grasp opportunities such as
education and public transport and to broaden the opportunities through the economic growth
and the availability of jobs. The primary theme throughout the plan is aimed at reducing poverty
and inequality by 2030.
Some of the key objectives and enabling milestones of the NDP include the following:






Reduce the number of people who live in households with a monthly income below R419
per person (in 2009 prices) from 39% to zero
Increase employment from 13 million in 2010 to 24 million in 2030.
Raise per capita income from R50 000 in 2010 to R120 000 by 2030.
Increase the share of national income of the bottom 40 percent from 6 percent to 10
percent.
The unemployment rate should fall from 24.9 percent in June 2012 to 14 percent by 2020
and to 6 percent by 2030. This requires an additional 11 million jobs. Total employment
should rise from 13 million to 24 million.
The proportion of adults working should increase from 41 percent to 61 percent.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015


















The proportion of adults in rural areas working should rise from 29 percent to 40 percent.
The labour force participation rate should rise from 54 percent to 65 percent.
Gross Domestic Product (GDP) should increase by 2.7 times in real terms, requiring
average annual GDP growth of 5.4 percent over the period. GDP per capita should
increase from about from about R50 000 per person in 2010 to R110 000 per person in
2030 in constant prices.
The proportion of national income earned by the bottom 40 percent should rise from
about 6 percent today to 10 percent in 2030.
Broaden ownership of assets to historically disadvantaged groups.
Exports (as measured in volume terms) should grow by 6 percent a year to 2030 with
non-traditional exports growing by 10 percent a year.
Increase national savings from 16 percent of GDP to 25 percent.
The level of gross fixed capital formation should rise from 17 percent to 30 percent, with
public sector fixed investment rising to 10 percent of GDP by 2030.
Public employment programmes should reach 1 million by 2015 and 2 million people by
2030.
The proportion of people with access to the electricity grid should rise to at least 90
percent by 2030, with non-grid options available for the rest.
The country would need an additional 29 000MW of electricity by 2030. About 10 900MW
of existing capacity is to be retired, implying new build of more than 40 000MW.
At least 20 000MW of this capacity should come from renewable sources.
Ensure that all people have access to clean, potable water and that there is enough water
for agriculture and industry, recognising the trade-offs in the use of water.
Reduce water demand in urban areas to 15 percent below the business-as-usual
scenario by 2030.
The proportion of people who use public transport for regular commutes will expand
significantly. By 2030, public transport will be user-friendly, less environmentally
damaging, cheaper and integrated or seamless
Durban port capacity should increase from 3 million containers a year to 20 million by
2040.
Competitively priced and widely available broadband.
Everyone must have access to an equal standard of care, regardless of their income.
Implications for the EMM CIF
The objectives and actions identified in the National Development Plan should be taken into
account in the development policies, strategies and frameworks of the EMM. The Capital
Investment Framework of the EMM should therefore take cognisance of the development
goals as set out in the NDP (Figure 3.1).
Development objectives specifically relevant to the CIF relate to the following goals:
 Decrease the growing unemployment rate of the local economy
 Increase the labour force participation rate
 Increase investment in economic sectors that indicate high economic growth and
employment contributions, so as to strengthen the EMM economy and the GVA
contribution.
 Expansion of infrastructure development, ensuring increased access to basic services
 Transforming human settlements – Develop a strong and efficient spatial planning
system. Upgrading of informal settlements and creating employment opportunities in
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
close proximity to these settlements.
 Densification and infill development for more integrated urban settlements
The National Development Plan further urges coordinated action for spatial targeting that
indicates where investment should be focused:
 Tackle spatial development patterns directly
 Combine the use of multiple instruments:
o Strengthening strategic spatial planning
o Coordinate the use of Planning, regulatory and investment tools and strategies
o Leverage public transport infrastructure, land and housing investments
o Use a spatial focus to target more public resources
As such the CIF needs to be a tool which aims at:
 Responding systematically, and over time to entrenched spatial patterns across all
geographic scales that exacerbate social inequality and economic inefficiency
 Implementing strategically chosen catalytic interventions to achieve spatial
transformation in a manner that supports locally driven governance
 Striving to achieve a balance between spatial equity, economic competitiveness and
environmental sustainability
2.1.3
The National Industrial Policy Framework, 2007
The NIPF has the following core objectives for South Arica’s industrialisation trajectory:





To facilitate diversification beyond the economy’s current reliance on traditional
commodities and non-tradable services that require the promotion of value-addition,
characterised particularly by the movement into non-traditional tradable goods and
services that compete in export markets and against imports.
To ensure long-term intensification of South Africa’s industrialisation process and
movement towards a knowledge economy.
To promote labour-absorbing industrialisation path, with the emphasis on tradable labourabsorbing goods and services and economic linkages that create employment.
To promote industrialisation, characterised by the increased participation of historically
disadvantaged people and marginalised regions in the industrial economy.
To contribute towards industrial development in Africa with a strong emphasis on building
the continent’s productive capacity and secure regional economic integration.
Implications for the EMM CIF
The NIPF 2007 indicates the development path for the Country and the EMM should align to
its vision of economic diversification and industrial intensification for increased labour
absorption. Diversification and intensification in the EMM should focus on:
Medium technology sectors – metals; fabrication; machinery and equipment;
chemicals and plastics; paper and pulp; oil and gas; and jewellery. These sectors
employ substantial numbers of people and have significant prospects for
development.
 Advanced manufacturing – e.g. automotive, aerospace, electronics, and nuclear
energy. These sectors require high levels of skills and technology development, and
with EMM’s labour profile indicating and increase in skilled and highly skilled labour

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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
force, the shrinking manufacturing sector can be expanded to include these sectors.
 Labour intensive sectors – e.g. agriculture and agro-processing, as well as furniture
and leather manufacturing show promise to absorb lower skilled labour, and can be
used to counter the loss of semi-skilled and unskilled labour
 Innovation and technology
2.1.4
Regional Industrial Development Strategy
The RIDS calls on all regions to build their industrial economies based on local competitive
advantages and opportunities. It aims to bridge the first-second economy gap in South Africa
based on the spatial development principles of the NSDP.
The strategic objectives may be summarized as follows:






Attempt, as far as possible, to reduce economic disparities between regions, address the
needs of both the first and second economies, and narrow the gap between them
Pay particular attention to the needs of those regions which are lagging behind the
national norms
Enhance current regional strengths and lead sectors of the economy
Promote sustainable economic growth and employment in provinces and municipalities
Build regional competitive capabilities and firm-level support measures
Enhance regional performance in attracting foreign direct investment.
Implications for the EMM CIF
The EMM should promote development and investment in key economic sectors within its
second economy areas, so as to ensure the growth of these areas. Development proposed for
second economy areas should be prioritised within the EMM CIF
2.1.5
Industrial Policy Action Plans (IPAP1 & IPAP2)
2.2 Provincial and Regional Policy Framework
Gauteng is one of the major economic cores of South Africa and includes the Ekurhuleni which
consists of six planning / urban management zones. The EMM is located in the Gauteng
province, east of Johannesburg, and south of Tshwane. Following is a brief overview of the
Provincial and Regional development frameworks influencing future development:
2.2.1
Gauteng Spatial Development Framework, 2010
Gauteng Province has adopted the Gauteng Spatial Development Framework (GSDF) as the
core policy framework intended to guide decisions relating to the location and nature of physical
development in Gauteng. The five critical factors which have been identified to direct future
spatial development in Gauteng are:

Resource-based economic development: Three strategic thrusts have been formulated to
guide future economic development:
o The re-alignment of the manufacturing sector towards high value added activities
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
o
o




The development of the province as the smart centre of the country; and
The development of the finance and business services sectors with emphasis on
financial services and technology, auxiliary business services, corporate head
office location and business tourism
Contained urban growth through the implementation of the urban edge as vehicle, which
is determined at a provincial level and informed by local government
Re-direction of urban growth, which aims to implement the principles of planning
legislation and policy where the integration of residential areas with areas of employment
opportunities take place.
Rural development beyond the urban edge (the greenbelt) to achieve a more balanced
growth system
Mobility and accessibility, which underpin the principles of development. Hence, road and
rail development should be geared at implementation to above proposals.
Identified Development Sectors
The Gauteng Spatial Development Framework identified the following main sectors for future
development / expansion according to a resource-based economic development approach.
Three strategic thrusts have been formulated to guide future economic development:
 The re-alignment of the manufacturing sector towards high value added activities
 The development of the province as the smart centre of the country
 The development of the finance and business services sectors with emphasis on
financial services and technology, auxiliary business services, corporate head office
location and business tourism.
2.2.2
Gauteng Employment Growth and Development Strategy, 2009-2014
The Gauteng Employment Growth and Development Strategy (GEGDS) for 2009 – 2014 focuses
on the first strategic priority of the Gauteng MTSF, namely to “create decent work and build a
growing, inclusive economy”. While there have been great strides forward since the end of
apartheid, there remains significant, structural challenges that need to be addressed on the road
ahead. A primary imperative is the need to ensure more inclusive and sustainable economic
growth forward. The vision of the GEGDS is therefore: “An inclusive and sustainable Gauteng
City Region that promotes a developmental and equitable society.”
In trying to reach the destination of being an inclusive and sustainable economy, Gauteng will
need to tread a particular path. This “growth path” will be one that necessitates profound
structural changes in the provincial economy. Gauteng envisages that the economy will need to
shift, as rapidly as possible, to an endogenous economic growth trajectory that is based primarily
on “innovation”, “green growth” and “inclusivity”. To elaborate further, Gauteng will not have an
economy that provides decent work and economic opportunities for all, unless it can become:

An innovating economy, which ensures that economic energies are unlocked, that
existing resources are used more productively, and that the knowledge-based economy is
continually strengthened and intensified. ‘Innovating’ is used in the broad sense of the
word. It is necessary to encourage science and technology innovation, socio-economic
innovation, environmental innovation and even the innovating spirit of the everyday
entrepreneur in both formal and informal sectors of the economy.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015

A green, environmentally friendly economy, which capitalizes on the enormous economic
value to be gained by investing in green processes and products, and which uses existing
resources in a more efficient and sustainable manner, thus reducing the carbon footprint
of Gauteng. Gauteng needs an economy based on green technologies, green jobs, green
energy and green production processes that reduce the ever higher input costs stemming
from unsustainable resource use.
 An “inclusive” economy, that dramatically expands access to economic opportunities to all
historically marginalized and excluded economic actors, either as workers or
entrepreneurs. An inclusive economy depends on a number of factors. An example is
community-led local economic development that stimulates and affirms the
entrepreneurial energy and spirit in communities, thereby enabling the economy to grow
‘from the bottom up’. However, above all else, an inclusive economy depends on the
accessibility, connectivity and interaction made possible by infrastructure investments that
are: strategic (including transport and ICT); socio-economic (relating to education and
health); and bulk (energy, water, waste and sanitation, transport and rail, information and
communication technology, and so forth). Infrastructure, understood in this way, will make
the largest impact in creating opportunities for work, access to income and economic
participation.
The GEGDS explains the strategic interventions by which Gauteng will work to make this
innovating, green and inclusive economy a reality. The strategic interventions are organised into
5 ‘strategic pillars’. The five pillars are:
 Transforming the provincial economy through improved efficiency (economic dimension)
 Sustainable employment creation (economic dimension)
 Increasing economic equity and ownership (equality dimension)
 Investing in people (social dimension), and
 Sustainable communities and social cohesion (social dimension)
Implications for the EMM CIF
The Gauteng Employment Growth and Development Strategy identified the following main
sectors for future development / expansion:
 Innovative economy: Science and technology innovation, socio-economic innovation,
environmental innovation
 Green economy: Green processes and products
 Inclusive economy: Accessibility, connectivity and interaction made possible by
infrastructure investment
2.2.3
The Gauteng Global City Region Strategy
The Gauteng City-Region is an integrated cluster of cities, towns and urban nodes that together
make up the economic heartland of South Africa.
The primary objective of the Global City Region (as highlighted in the Gauteng Growth and
Development Strategy) is to build Gauteng into an integrated and globally competitive region
where the economic activities of different parts of the province complement each other in
consolidating Gauteng as an economic hub of Africa and an internationally recognised global city
region. The main aim of this is to encourage great internal coherence and cooperation within the
Province, for greater external competitiveness.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Implications for the EMM CIF
The Gauteng City region Strategy identified the following main sectors for future development
/ expansion:
 Mining
 Manufacturing
 Financial and Business Services
 Innovation and trade
2.2.4
Growth and Development Strategy for Gauteng, 2025 and 2055
The six (6) growth sectors and clusters, listed below, were identified for targeted and increased
support and investment. The targeting was based on the potential and opportunities that these
sectors offer in terms of nominal and real investment growth, value added growth, employment
growth and productivity (value added / employee).
These sectors and clusters are:







Smart Industries (including ICT, Pharmaceuticals)
Trade and Services (including Finance and Film)
Tourism
Agriculture (agro-processing and bio-tech)
Manufacturing (steel related industries, automotive parts and components, Beer and malt)
Infrastructure expansion and investment
Implications for the EMM CIF
The Growth and Development Strategy Gauteng Industrial Policy Framework identified the
following main sectors for future development / expansion:
 Food and beverages: Including agro-processing
 Furniture: Role of government as a consumer of furniture should be considered
 Textiles and clothing: Focus on innovation and new technology, export capabilities,
achievement of firm and value chain competitiveness training and incentive support
measures
 Construction
 Machinery and Equipment: Specific emphasis on manufacturing of power boilers,
valves and pumps
 Automotive and Components
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3. ECONOMIC PROFILE
The purpose of this section is to outline the salient features of the market area economy
(reference is made to the EMM and its six regions) in terms of selected time series economic
indicators; most notably the economic profile and growth trends within the local economy.
Subsequent sub-sections provide a concise overview of the local economy in terms of the
following aspects:

Reference Framework

Local Economic Trends

Labour Profile

Synthesis
3.1 Reference Framework
The causal relationship between economic sector performance and property market performance
is illustrated in Diagram 3.1.
Diagram 3.1: Causal Relationship between Economic Performance and Property Sectors
© 2012 H du Toit, MSc, PhD (in process)
Indicators such as production, inflation, interest rates and exchange rates influence Personal
Consumption Expenditure (PCE) – Diagram 3.1. PCE is a major demand driver for a broad
spectrum of economic goods and services, including retail and accommodation. Gross
Geographic Product (GGP), in turn, serves as leading indicator for property market performance.
Diagram 3.2 identifies macro-economic factors that affect all real estate markets as well as the
rest of the economy. In essence, this framework indicates that government expenditure has a
crucial impact on the economy in general as well as the space economy in particular. The
assumption is that the majority of government expenditure has a spatial element to it.
15
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Diagram 3.2: Factors Affecting Space and Capital Market Equilibrium
Macro Factors
Spatial
Non-Spatial
Oil Prices
Unexpected inflation
Industrial production
Change in term structure
Government spending
Market risk structure
Farm income
Exchange rates
Net exports
Tax law changes
Spatial distribution
Existing supply of all capital assets
Demand for capital assets (with different
Employment, income,
(covariance of return with factors)
risk characteristics)
population
Stock in corporations that own real
estate
Demand for space
Direct investment in real estate equity
Services by users
(leases and residuals)
Land & improvements
Mortgages and hybrid mortgages
Franchise agreements
Various types of real estate securities
Leases with other tenants, etc.
All
other
capital
assets
(bonds,
government securities, etc. in the US
Capital Market Equilibrium
and rest of universe)
Investors hold optimal portfolios
Risk premium for relevant factors
Existing
supply
(type
Expected return (discount rates and
Space Market Equilibrium
location)
Current vacancy
capitalisation rate) for real estate
Equilibrium rental rate
Expected rents
Expected vacancy
Expected new space
Expected absorption
Riskiness of rent (covariance of rent
with factors)
Construction or
replacement cost
Fee simple value of property (Unencumbered by
Equal in long-run equilibrium
leases)
(including land)
(Market financing)
Value of existing
Value of residual
Value of special
leases
(lease renewals
financing
and reversion)
Source: Adapted from Fisher, 1992, p.164
16
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3.2 Local Economic Trends
This section provides an indication of the economic landscape of the EMM and its six regions.
The data indicates the dominant economic sectors, growth sectors as well as the comparative
advantages of regional and local economies. These ten sectors are:










General government services
Community, social and other personal services
Finance and business services
Transport and communication
Trade sector (Wholesale and retail; catering and accommodation)
Construction
Electricity and Water
Manufacturing
Mining
Agriculture, forestry and fishing
3.2.1
Tertiary Sector
Secondary Sector
Primary Sector
Location of Economic Activity
Map 3.1 indicates the location of economic activity within the EMM economy per mesozone
together with the CIF geographic priority areas. It is evident that the highest value of economic
activity is located in the CBD nodes of Alberton, Germiston, Edenvale, Kempton Park and
Springs. Movement towards the Johannesburg CBD also sees an increase in the value of
economic activity, while a movement away sees a decrease in the value of activity.
It is clear from the map that the largest portion of economic activity mainly falls within the three
geographic priority areas. Furthermore it is also evident that the largest economic activity takes
place within Region A, followed by Region B and D.
17
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 3.1: Location of Economic Activity in the EMM and Priority Areas, 2014
18
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3.2.2
Size of the Economy

Gauteng Provincial Economy contributed 35.6% towards the national economy in 2011.
The EMM’s economy contributed 24.8% towards the Gauteng economy.
 The City of Johannesburg (38.5%) was the largest contributor, followed by the City of
Tshwane (26.8%).
 Together, the three metropolitan areas contributed 90% to the total provincial GVA, and
the remaining 10% came from the Sedibeng District (4.8%) and the West Rand District
(5.2%).

Figure 3.1 indicates the economic size of the six regions found within the EMM.
Figure 3.1: Size of economies, 2011
Source: Demacon ex Quantec, 2014
Findings: (Figure 3.1)
In 2011, the largest contributor to the EMM’s economy was Region A (32%), followed by
Region B (22%) and Region F (16%).
 The smallest contributors were Regions C and E (9%).

3.2.3
Economic Profile
The economic contributions are contributed by the ten major economic sectors to the total
economic production of the economies. Table 3.1 indicates the contribution of the ten major
economic sectors to the total economic production of the EMM’s economy, compared to the
provincial and national economies. The table shows the sectors that are the main drivers in the
economy and the contribution of each of these sectors to the provincial and national economies.
19
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 3.1: Economic Profile and Sector Contribution
South Africa
Gauteng
Ekurhuleni
Economic
Profile
 The finance and business services sector is

Dominant
Sectors

the largest contributor to the national economy
The second largest contributing sector is the
manufacturing sector, followed by general
government services
The country is characterized by a relatively
large tertiary sector, and limited primary sector
activities
 Finance and business services is the largest



and dominant sector of the provincial economy
Limited primary and secondary activities take
place, aside from the manufacturing activities
General government services is the third
largest sector, followed by the trade sector
Somewhat similar to the national economy
Econom ic
Sectors
Sectoral
Contribution
to the
National
Economy
Econom ic
Sectors
South Africa
(R'm illions)
CoE
Percentage
(R'm illions) Contribution
R 41,553.00
R 2,291.40
5.5%
Agriculture
R 41,553.00
R 506.95
R 99,415.00
R 13,291.96
13.4%
Mining
R 99,415.00
R 3,018.69
3.0%
R 289,015.09
R 115,698.61
40.0%
Manufacturing
R 289,015.09
R 41,119.29
14.2%
Utilities
R 34,749.00
R 12,202.06
35.1%
Utilities
R 34,749.00
R 3,028.00
8.7%
Construction
R 58,241.00
R 25,299.60
43.4%
Construction
R 58,241.00
R 5,818.48
10.0%
Trade
R 234,630.01
R 86,776.65
37.0%
Trade
R 234,630.01
R 21,983.09
9.4%
Transport
R 172,733.09
R 56,124.15
32.5%
Transport
R 172,733.09
R 15,067.47
8.7%
Finance
R 400,382.58
R 159,940.36
39.9%
Finance
R 400,382.58
R 32,032.56
8.0%
Community
R 103,600.93
R 25,931.57
25.0%
Community
R 103,600.93
R 6,033.64
5.8%
Government
R 258,405.00
R 105,005.49
40.6%
Government
R 258,405.00
R 20,581.69
8.0%
R 1,692,724.69
R 602,561.85
35.6%
TOTAL
R 1,692,724.69
R 149,189.86
35.4%
ex
20

finance and business services sector is the
second largest contributor to the EMM
economy, followed by the trade sector
Somewhat similar to the provincial economy
Mining
Manufacturing
Demacon
Gauteng
Percentage
(R'm illions) Contribution
dominant sector
 Very limited primary sector activities
 A relatively strong tertiary sector, as the
Agriculture
TOTAL
Source:
South Africa
(R'm illions)
 Manufacturing is by far the largest and most
Quantec,
1.2%
2014
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
EMM Economy





According to Christian Rogerson, Ekurhuleni incorporates what is claimed “the
largest concentration of industrial activity in South Africa, and in sub-Saharan
Africa”.1
The EMM can be described as the industrial heartland of South Africa,
representing more than 8,000 industries. From the world’s largest producer of gold a
century ago, the geographical area formerly known as the East Rand, has become a
global competitor in the business and industry sectors. The mining boom that led to
the emergence of the East Rand, also prompted the growth of a substantial
manufacturing support base in the area.2
The EMM forms the manufacturing hub of Gauteng, and this is also evident in
terms of its contribution to the national manufacturing sector (14.2%). The areas
contributing to the manufacturing sector of the EMM as well as the type of
manufacturing activities, is discussed in the following paragraphs (Map 3.2).
Similar to that of the Gauteng Province, the construction sector within the EMM,
although relatively small, contributes significantly to the national construction sector.
This is due to the higher levels of infrastructure investment and development within
the metro, compared to other more rural and peri-urban areas.
The services / tertiary sector of the EMM is also a strong contributor to the
national services sector, with strong trade, transport and finance sectors. It is evident
that in terms of the contribution to the nation economic sectors, the Gauteng province
and the EMM monitors a similar trend, with the construction and manufacturing
sectors accounting for a large percentage of the national construction and
manufacturing sectors, as well as the large contributions from the tertiary / services
sectors.
Map 3.2 to Map 3.5 illustrates the geographic distribution of economic activity for the
Manufacturing sector, the Finance and Business Services sector as well as the Trade sector
(which includes wholesale trade, accommodation and catering services).
a) Manufacturing GVA

From Map 3.2 it is clear that the majority of the manufacturing activities take place within
Region A and Region B of the EMM.
 There is also some manufacturing activities taking place on the south-eastern side of the
metro, i.e. Region D and Region E.
 The areas that mainly contribute to the total manufacturing GVA correlates with the
industrial areas as depicted in the EMM SDF. These areas include:
o
The Olifantsfontein and Clayville industrial area is situated to the north of
Tembisa and accommodates predominantly heavy industrial activity and even
some noxious activity.
1
Rogerson, C.M. 2005. Ekurhuleni: Towards a Local Industrial Policy for Driving Pro-Poor Growth and a People-Centred
Economy.
Available
from:
http://siteresources.worldbank.org/INTLED/Resources/3396501144099718914/ProPoorEkhurleni.pdf. Accessed: 07/05/2014
2
South African Cities Network. 2014. Ekurhuleni Overview. Available from: http://www.sacities.net/workwith/ekurhuleni.
Accessed 07/05/2014
21
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
o
o
o
o
o
The Isando, Spartan and Jet Park complex, which is situated west of O R
Tambo International Airport and focuses predominantly on a range of light
and heavy industrial activities.
The Germiston industrial area comprises a portion to the east of the
Germiston CBD, and a portion to the west.
The Wadeville, Alrode and Roodekop industrial areas are situated to the
south and provide in a range of heavy, noxious and light industrial activities.
In the central part of the EMM the Boksburg East, Anderbolt, Benoni South
and Apex industrial areas occur. These are fairly old industrial areas focusing
predominantly on heavy and noxious industrial activities.
The manufacturing activities in the far eastern area of the metro, is mainly
concentrated in Vulcania, Witpoort, Fulcrum, Labore, New Era, Enstra,
Nuffield, Vorsterskroon, Pretoriusstad and Propsperita. The manufacturing
activities in these areas include a wide array of different products, such as
manufacturing of food, beverage and tobacco products, manufacturing of
non-metalic mineral products, manufacturing of transport equipment,
manufacturing of furniture, etc.
b) Finance and Business GVA

From Map 3.3 it is clear that the majority of the finance and business services activities
take place within central/western parts of the EMM.
 The finance and business sector GVA is however only representative of the office nodes,
which include areas such as Kempton Park, Bedfordview, Edenvale, Germiston, Benoni.
c) Trade GVA

With respect to the wholesale and retail trade (Map 3.4) it is clear that the majority of the
activities takes place within the central and western part of the EMM.
 The areas with the highest activities in terms of the wholesale and retail trade sector
correlate with the Central Business District’s (CBDs) as identified in the EMM SDF, they
include:
o
o
o
Alberton
Boksburg
Germiston
o
o
o
Bedfordview
Brakpan
Kempton Park
o
o
o
Benoni
Edenvale
Nigel
d) Top five highest overall contributing areas:
Map 3.5 illustrates the compounded economic activities as depicted in Map 3.2 to 3.4. This
map Cleary indicates the areas with the highest concentration of economic activity based on
the manufacturing; wholesale and retail trade as well as the business and finance services
sector GVA contribution.
The top five highest overall contributing areas within the metro area:
1. Greater Kempton Park and O.R Tambo area
2. Wadeville and Alberton area
3. Germiston and Edenvale area
4. Greater Boksburg area
5. Brakpan and Springs area
22
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 3.2: Location of Manufacturing Activity in the EMM and Priority Areas, 2014
23
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 3.3: Location of Finance and Business Services in the EMM and Priority Areas, 2014
24
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 3.4: Location of Trade Services in EMM and Priority Areas, 2014
25
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 3.5: Compounded GVA Activity within Ekurhuleni, 2014
26
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 3.2 indicates the contribution of the ten major economic sectors to the total economic
production of the six planning regions’ economies.
27
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 3.2: Sectoral Profile of Ekurhuleni Regions – GVA, 2011
Economic Sector (R/million)
Agriculture
Region A Region B Region C Region D Region E
Region F
R 27
R 111
R 127
R 71
R 93
R 78
R 306
R 635
R 676
R 926
R 460
R 57
R 17,566
R 18,654
R 2,089
R 4,311
R 3,326
R 7,554
R 686
R 485
R 494
R 755
R 292
R 386
Trade
R 9,281
R 7,720
R 1,490
R 2,654
R 1,019
R 3,287
Transport & Communications
R 6,588
R 2,866
R 675
R 2,035
R 1,246
R 2,816
Finance & Business Services
R 13,938
R 6,130
R 3,682
R 2,648
R 1,769
R 4,161
R 6,483
R 4,915
R 2,602
R 3,402
R 4,051
R 6,106
R 53,556
R 41,517
R 11,834
R 16,801
R 12,256
R 24,445
Mining
Manufacturing
Electricity& Water
Government & Social Services
Total (R Million)
Source: Demacon ex Quantec, 2014
Figure 3.2 illustrates the contribution of the regions towards each of the different economic
sectors, indicating which region contributes the largest towards a specific sector.
Figure 3.2: Sectoral Contribution of the EMM Regions - GVA, 2011
Source: Demacon ex Quantec, 2014
 The following regions are the most dominant in the:

Agricultural Sector – Region C (25%)
28
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015







Mining – Region D (30%)
Manufacturing – Region A (32%) and Region B (35%)
Electricity and Water – Region D (25%)
Trade – Region A (36%)
Transport and Communications – Region A (40%)
Finance and Business Services – Region A (43%)
Government and Social Services – Region A (23%) and Region F (22%)
 From the figure it is evident that in many of the economic sectors, Region A contributes
the largest percentage to the EMM.
3.2.4
Economic Growth
Figure 3.3 provides detail on the growth performance of the EMM since 1996 and the degree
of correlation in economic up- and downturns between the provincial and national business
cycle.
Figure 3.3: Economic Growth Performance, 1996 – 2011 (constant 2005 prices) – GVA
NDP Target = Annual growth of 5.4% by 2030
Average Annual Growth:
South Africa = 3.2%
Gauteng = 3.6%
Ekurhuleni = 3.7%
Source: Demacon ex Quantec, 2014

The average annual growth rate of the EMM over the time period of 1996 to 2011,
amounted to 3.7% per annum. The average annual growth rate over the last five years
(2006 to 2011) was 2.7%.
 The average annual growth rate of the different regions for the period 1996 to 2011 was:
o Region A: 4.5%
o Region B: 3.8%
o Region C: 3.1%
o Region D: 3.5%
o Region E: 2.7%
o Region F: 3.8%
3.2.5 Economic Growth per Sector
29
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
The ten economic sectors, as analysed in the previous sections can be classified in three
major sectors, namely the primary sector, secondary sector and the tertiary sector.
Figure 3.4 illustrates the economic growth of the agricultural and mining sectors within the
EMM for a 15 year period (1996 to 2011), which form part of the primary sector.
Figure 3.4: Economic Primary Sector Growth Performance, 1996 – 2011
Source: Demacon ex Quantec, 2014
Figure 3.5 illustrates the economic growth of the three main sectors comprising the
secondary sector. Figure 3.6 illustrates the sub-sector growth of the Manufacturing sector.
Figure 3.5: Economic Secondary Sector Growth Performance, 1996 – 2011
Source:
Demacon
ex
30
Quantec,
2014
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 3.6: Manufacturing Sector Growth Performance, 1996 – 2011
Source: Demacon ex Quantec, 2014
31
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 3.7 illustrates the economic growth of the five economic sectors comprising the
tertiary sector.
Figure 3.7: Economic Tertiary Sector Growth Performance, 1996 – 2011
Source: Demacon ex Quantec, 2014
Table 3.3 summarises the growth rates of each of the 10 economic sectors and their subsectors, together with the average annual economic growth rate for the past 10 years.
32
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
33
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 3.3: EMM Economic Growth Trends per Sector and sub-sectors, 1996-2011
19961997
0.3%
19971998
9.5%
19981999
-4.5%
19992000
3.3%
20002001
-11.1%
20012002
2.4%
20022003
-6.9%
20032004
0.1%
20042005
11.5%
20052006
-7.8%
20062007
-1.3%
20072008
-5.3%
20082009
-7.9%
20092010
5.9%
20102011
-0.6%
%
Growth3
-1.2%
-1.6%
1.6%
19.4%
7.4%
-4.7%
13.1%
1.1%
2.8%
16.8%
-14.1%
3.2%
12.7%
0.1%
-1.1%
0.7%
3.2%
0.4%
10.2%
-6.2%
3.0%
-11.8%
1.3%
-7.8%
-0.2%
10.9%
-7.0%
-1.8%
-7.7%
-9.2%
7.2%
-0.8%
-1.7%
Secondary Sector
3.7%
-0.9%
0.7%
8.1%
2.9%
5.9%
-0.5%
5.2%
7.1%
6.2%
5.7%
2.9%
-11.1%
4.9%
2.7%
2.8%
3. Manufacturing
4.0%
0.5%
0.8%
8.3%
3.7%
5.9%
-1.9%
4.8%
7.0%
6.2%
5.0%
3.0%
-13.8%
5.7%
3.0%
2.3%
3.7%
-3.5%
-2.5%
7.1%
2.7%
-2.0%
-3.7%
2.3%
4.7%
4.1%
3.6%
0.2%
-10.5%
8.1%
6.5%
1.2%
6.3%
-6.2%
-4.5%
2.9%
-2.8%
11.7%
4.9%
25.0%
-1.0%
4.6%
10.1%
12.5%
-3.2%
6.7%
-16.1%
5.0%
5.0%
4.4%
-1.2%
6.9%
-0.8%
2.0%
-3.8%
4.4%
4.4%
2.0%
3.5%
1.7%
-14.2%
10.4%
-1.0%
0.7%
2.7%
12.4%
8.3%
14.4%
5.3%
1.8%
-2.8%
5.0%
8.6%
6.7%
4.0%
-0.6%
-6.7%
4.8%
1.2%
2.1%
0.4%
-5.4%
-9.2%
1.0%
3.0%
13.0%
-4.1%
0.1%
4.5%
4.4%
4.1%
0.9%
-25.1%
7.3%
9.5%
0.9%
5.6%
-6.5%
-0.7%
4.7%
2.6%
14.2%
0.5%
6.8%
5.7%
7.0%
7.0%
6.8%
-21.8%
8.4%
4.9%
3.5%
11.8%
5.7%
4.6%
8.4%
-0.7%
0.5%
-4.0%
1.4%
16.8%
10.7%
5.3%
5.5%
-6.3%
3.7%
0.1%
3.2%
10.8%
-3.2%
-4.7%
4.4%
-13.0%
14.8%
3.2%
8.3%
8.1%
10.8%
4.0%
3.8%
-7.4%
3.5%
6.1%
5.4%
-1.1%
-1.7%
-3.6%
9.3%
15.8%
13.1%
-3.4%
4.8%
12.8%
8.9%
6.5%
1.4%
-14.4%
-2.8%
4.7%
2.8%
4.4%
0.9%
0.0%
7.9%
4.2%
0.7%
-0.2%
1.1%
4.7%
4.0%
2.6%
6.5%
-11.7%
0.9%
1.5%
0.9%
2.2%
-7.8%
1.6%
0.2%
-3.1%
1.1%
2.9%
5.3%
4.1%
1.3%
2.8%
-5.5%
-4.8%
1.5%
1.0%
0.9%
2.4%
-6.9%
1.2%
0.8%
-4.0%
2.9%
2.0%
6.7%
4.8%
1.9%
0.8%
-4.3%
-6.2%
1.0%
1.4%
1.0%
Economic Sectors
Primary Sector
1. Agriculture,
forestry &fishing
2. Mining & quarrying
3.1 Food, beverages
and tobacco
3.2 Textiles, clothing
and leather goods
3.3 Wood, paper,
publishing and printing
3.4 Petroleum
products, chemicals,
rubber and plastic
3.5 Other non-metal
mineral products
3.6 Metals, metal
products, machinery
and equipment
3.7 Electrical
machinery and
apparatus
3.8Radio, TV,
instruments, watches
and clocks
3.9 Transport
equipment
3.10 Furniture and
other manufacturing
4. Electricity, gas and
water
4.1 Electricity
3
Average Annual Growth for 10 years (2001 to 2011)
34
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Economic Sectors
19961997
19971998
19981999
19992000
20002001
20012002
20022003
20032004
20042005
20052006
20062007
20072008
20082009
20092010
20102011
%
Growth3
4.2 Water
1.0%
-14.2%
4.9%
-3.6%
4.1%
-11.6%
9.4%
-5.1%
-1.0%
-3.8%
21.6%
-15.2%
7.1%
5.9%
-2.1%
0.0%
5. Construction
1.7%
-9.2%
-1.9%
15.6%
-0.3%
12.1%
13.0%
9.7%
11.3%
10.2%
14.5%
8.4%
7.8%
1.8%
1.2%
8.9%
Tertiary Sector
3.7%
2.9%
6. Wholesale and
retail trade, catering
0.6%
0.9%
and accommodation
6.1 Wholesale and
0.7%
1.2%
retail trade
6.2 Catering and
accommodation
-1.4%
-3.3%
services
7. Transport, storage
7.0%
2.9%
and communication
7.1 Transport and
5.1%
0.3%
storage
7.2 Communication
14.3%
11.9%
8. Finance,
insurance, real estate
6.0%
4.9%
and business
services
8.1 Finance and
4.7%
0.8%
insurance
8.2 Business services
6.7%
7.2%
9. Community, social
and personal
2.2%
8.4%
services
10.General
3.2%
1.3%
government
Source: Demacon ex Quantec, 2014
5.0%
6.7%
3.9%
7.1%
3.5%
4.8%
4.3%
5.8%
5.9%
5.3%
1.2%
2.4%
4.5%
4.5%
8.4%
8.5%
1.6%
4.0%
2.5%
5.2%
7.0%
5.4%
5.2%
1.3%
-1.4%
3.6%
4.2%
3.7%
8.9%
8.8%
1.7%
3.7%
2.5%
5.3%
7.1%
5.7%
5.2%
1.4%
-1.3%
3.3%
3.6%
3.6%
1.4%
3.8%
0.4%
8.9%
3.9%
3.8%
5.4%
1.5%
5.2%
-0.6%
-3.8%
9.9%
15.6%
4.8%
4.7%
11.8%
6.5%
9.0%
5.0%
6.3%
2.7%
3.9%
4.8%
3.1%
1.3%
0.3%
7.6%
4.4%
2.4%
10.8%
2.0%
5.1%
5.4%
6.8%
0.8%
2.5%
3.9%
1.6%
0.5%
-2.4%
16.8%
4.0%
11.8%
14.9%
18.7%
18.2%
4.2%
5.1%
6.9%
6.9%
6.4%
6.1%
2.7%
5.1%
-7.5%
5.2%
5.8%
8.5%
7.7%
13.0%
2.8%
6.1%
3.0%
10.0%
8.8%
9.1%
2.1%
2.3%
3.6%
6.0%
10.5%
10.2%
14.1%
6.0%
2.4%
8.8%
3.1%
16.8%
10.3%
11.6%
-3.9%
0.9%
4.5%
5.9%
3.3%
7.5%
4.0%
17.5%
3.1%
4.6%
3.0%
6.1%
7.9%
7.4%
6.1%
3.1%
3.1%
6.1%
5.9%
6.2%
3.5%
5.0%
5.2%
2.0%
4.5%
3.9%
5.2%
4.6%
-1.1%
1.3%
3.6%
3.4%
1.2%
0.3%
0.4%
2.5%
3.9%
2.2%
4.2%
2.4%
3.4%
5.8%
3.5%
3.0%
4.3%
3.5%
35
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
36
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3.3 Labour Profile
Labour and employment also impacts on the effectiveness of a region’s economy. In general
the labour force refers to those people who are available for employment in a certain areas.
There are a number of components linked to the labour force – refer to Diagram 3.3.
Diagram 3.3: Composition of the Labour Force
Source: Demacon Ex. DBSA, 2001
3.3.1
Employment Contribution
Figure 3.8 indicates the percentage employment distribution across the six municipalities within
Gauteng.
Figure 3.8: Employment Contribution (formally and informally employed segment), 2011
Source: Demacon ex Quantec, 2014
Figure 3.9 indicates the percentage employment (formal and informal) contribution of each of the
six planning regions to the total employment within the EMM.
37
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 3.9: Employment Contribution (formally and informally employed segment), 2011
Source: Demacon ex Quantec, 2014
3.3.2
Nature of Employment
Figure 3.10: Nature of Employment for the Gauteng Province, 2001-2011
Source: Demacon ex Quantec, 2014
Figure 3.11: Nature of Employment, 2001-2011
Source: Demacon ex Quantec, 2014
38
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3.3.3
Sectoral Employment
Table 3.4: Formal Employment Structure and Performance
South Africa
Gauteng
Ekurhuleni
Employment
Sectoral
Distribution
 Contributes 29.5% to the national
Dominant
Sectors
 Trade, finance and business services, and
general government are the largest
employers in the country.
Agriculture
Mining
Manufacturing
Utilities
Construction
Trade
Transport
Finance
Community
Government
Sectoral
Contribution
to the
National
Economies
Source:
employment
 Somewhat similar to that of the national
employment trend
 Finance and business services is the
most dominant contributor to employment
Demacon
ex
39
5.5%
7.2%
35.0%
41.3%
27.2%
29.5%
36.0%
43.3%
28.6%
26.5%
 Contributes 24.5% to the provincial
employment
 The trade sector, followed by the finance
and business services sectors are the two
most dominant contributors to
employment.
 Manufacturing is third largest contributor
Agriculture
Mining
Manufacturing
Utilities
Construction
Trade
Transport
Finance
Community
Government
Quantec,
1.2%
1.8%
12.2%
10.3%
6.4%
7.3%
10.9%
9.7%
6.8%
5.4%
2014
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 3.5: Number of Employment Opportunities created in each Sector, 2011
Economic Sector
Agriculture
Region A Region B Region C Region D Region E
Region F
397
1,695
1,934
1,083
1,408
1,190
1,043
2,291
2,438
3,339
1,660
204
62,836
67,825
7,595
15,674
12,092
27,467
1,312
953
970
1,485
574
759
Trade
54,675
47,076
9,084
16,185
6,216
20,046
Transport & Communications
18,524
8,184
1,926
5,810
3,559
8,041
Finance & Business Services
76,026
34,164
20,522
14,755
9,858
23,189
Government & Social Services
49,033
38,894
20,589
26,920
32,061
48,323
263,846
201,083
65,058
85,251
67,427
129,218
Mining
Manufacturing
Electricity& Water
Total
Source: Demacon ex Quantec, 2014
Figure 3.12: Sectoral Contribution of the EMM Regions – Employment, 2011
Source: Demacon ex Quantec, 2014
40
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3.3.4

Employment Growth
The average annual employment growth rate and economic growth rate of the regions for
the period 1996-2011 amounted to:
Region
Region A
Region B
Region C
Region D
Region E
Region F

Employment Growth Rate
2.9%
2.4%
1.4%
2.1%
1.2%
2.1%
Economic
Growth
Rate
4.5%
3.8%
3.1%
3.5%
2.7%
3.8%
This implies that economic growth is higher than employment growth, which in essence
implies that the EMM’s economy should be able to absorb additional employment, and as
such the unemployment rate should start to decrease in future. However to ensure this
desired situation it is important that the employment opportunities be created within the
optimum economic sectors.
3.3.5
Employment versus Economic Profile
Figure 3.13 illustrates the comparison between economic growth rate and employment growth
rate for each of the ten economic sectors.
Figure 3.13: Employment versus Economic Profile EMM, 1996 to 2011
Source: Demacon ex Quantec, 2014
41
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 3.14: Employment versus Economic Profile per Region, 1996 to 2011
Source: Demacon ex Quantec, 2014
42
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
3.3.6
Skills Base
The subsequent figures reflect the skill segments of the employed market and their underlying
growth trends.
Figure 3.15: Skills Base, 2011
Source: Demacon ex Quantec, 2014
Figure 3.16: Ekurhuleni Skills Base, 2001 to 2011
Source: Demacon ex Quantec, 2014
3.3.7
Labour Absorption Rate
According to Stats SA the labour absorption rate is calculated as the percentage of the working
age population which is employed.
43
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 3.17 illustrates the widening gap between the expanding population (economically active
segment) and the total employment from 1995 to 2011. The widening gap between the
economically active and the total employment numbers indicate the unemployed population
within the EMM, and therefore indicates that the metro is currently not able to absorb its
economically active population, i.e. provide employment to those still seeking to be employed.
Therefore the unemployed segment of the population will need to seek work elsewhere, which
leads to the migration of these individuals to other surrounding metros.
Figure 3.17: Ekurhuleni Labour Absorption
Source: Demacon ex Quantec, 2014
3.4 Synthesis
Table 3.6: Economic Summary
Variable
Market Characteristics

EMM contributes 24.8% towards economy of
the Gauteng Province

Growth in the EMM economy has averaged
3.7% per annum since 1996




Manufacturing – 27.6%
Finance and Business Services – 21.5%
Trade – 14.7%
General Government – 13.5%

EMM contributes 24.5% to the total
employment within the district
Employment Sectoral Distribution (Dominant
Sectors)



Trade – 21.4%
Finance and Business Services – 21.0%
Manufacturing – 18.0%
Employment Growth
 Long term period (1996 – 2011) = 2.1%
 Short to medium term (2006 – 2011) = 0.5%
Size of the Economy (2011)
Economic Growth Performance – Time Period
1996 – 2011
Dominant Economic Contributions (2011)
Percentage (%) of Employment to Gauteng
44
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
4. DEMOGRAPHIC OVERVIEW
The demographics and socio-economic situation have significant bearing on the economic
growth, as aspects such as age, education, employment, etc. may influence the ability of an area
to achieve economic growth. The demographic profile also acts as indicators of the general
standard of living of an area’s citizens. It is therefore important to understand the demographics
of the market area when assessing the economy.
4.1 Population, Households and Household size
The EMM has a total population of approximately 3,297,456, which amounts to 1,037,888
households in 2014.
Table 4.1: Population and Household Dynamics of EMM, 2014
Market Characteristics
Variable
2011
2014
Population Total
3,178,470
3,297,456
Household Total
1,015,467
1,037,888
Household Size
3.1
3.2
Source: Demacon ex. Stats SA, 2014
Table 4.2 indicates the population and household dynamics of the six planning regions within the
EMM.
Table 4.2: Population and Household Dynamics of the Six Regions, 2014
Variable
Region A
Region B
Region C
Region D
Region E
Region F
Population Total (2011)
395,174
688,669
398,719
237,677
485,748
972,484
Population Total (2014)
412,005
714,619
413,957
246,632
502,029
1,008,214
Household Total (2011)
145,666
238,369
117,228
72,727
143,899
297,577
Household Total (2014)
151,566
246,371
119,120
74,998
145,800
300,033
Household Size (2014)
2.7
2.9
3.5
3.3
3.4
3.4
Source: Demacon ex. Stats SA, 2014
45
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 4.1: Ekurhuleni Population Density, 2014
46
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
4.2 Population and Household Growth
Population growth and household growth within the EMM has decreased over time. Average
annual population growth between 1996 and 2011 is 2.2% and average annual household growth
between 1996 and 2011 is 2.7%.
Figure 4.1: Population and Household Growth, 1996 to 2011
Source: Demacon ex. Stats SA, 2014
Note: This represents net growth – new household formation includes deaths, births, migration, etc.
Development Implications
Demographic characteristics have a direct influence on the socio-economic conditions in an area and
should be taken into account for future planning. Aspects that are directly affected include for
instance the number of hospitals and clinics, educational facilities, office space, retail facilities,
housing, services infrastructure, housing and civil institutions.
From the preceding paragraphs it is evident that the growth rate of the population as well as the
number of households within the EMM has been slowing down. An important contributor to this trend
is the out-migration of people in search of better economic and employment opportunities. Therefore
employment and similar development initiatives needs to focus on employment creation for the lowincome groups as well as aiming to retain skilled labour force and thus focussing on the creation of
employment that meets the needs of the skilled labourers as well.
47
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 4.2: Ekurhuleni Residential Growth and Priority Areas, 2014
48
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 4.2 illustrates the residential growth within the EMM for formal residential units for 2001
compared to 2011, and also indicates the current location of the informal residential units. It is
clear to see that the largest concentration of households are located in Region A, B and F.
Furthermore it is clear to see a number of second economy areas such as Kathlehong, Tembisa,
Kwa-Thema, Etwatwa, etc. experienced an increase in formal residential units in the past 10
years (2001 to 2011). The map clearly indicates the key growth areas in terms of formal
residential units, which can be used as guidelines in terms of the key growth areas in need of
social facilities and engineering services. This aspect will be further investigated in Task 3 and 5
of the study, in terms of identifying the level of future services required within the EMM as a result
of the expected population and household growth.
4.3 Employment Profile
The following figures shows the labour force segments and employment status of the six
planning regions within the EMM. It describes the labour force from the official definition
perspective, where the unemployed are those people who:

Did not work during the seven days prior the interview
 Want to work and are available to start work within a week of the interview, and
 Have taken active steps to look for work or to start some form of self-employment in the
four weeks prior to the interview
The working age population represents the population aged between 15 and 64. However it
does not mean that this entire portion of the population is prepared, willing or able to be
employed, i.e. some prefer to stay at home as housekeepers, others are disabled and some are
full-time students. This portion of the population is referred to the not economically active
population, although they do form part of the potential labour pool, and include:
 Individuals who choose not to work
 Retired or pensioners (younger than 64)
 Home-makers
 Scholars or students (older than 15)
 People with an illness or disability
 Seasonal Workers
The economically active population are those people prepared, able and willing to work.
Therefore the economically active population presents both the employed (formal and informal)
as well as the unemployed (defined above) individuals.
49
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 5.7: Economically Active Population per Region, 2014
Source: Demacon ex. Stats SA, 2014
Figure 5.8: Employed Population per Region, 2014
Source: Demacon ex. Stats SA, 2014
4.4 Synthesis

Population growth and household growth within the EMM has decreased over time. Average
annual population growth between 1996 and 2011 is 2.2% and average annual household
growth between 1996 and 2011 is 2.7%.
50
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015

Based on the concept of demographic dividend it is evident that the EMM has a favourable
age profile, with a large working age population, and fewer very young and very old. However
if the unemployment rate of the EMM is analysed, it is evident that the advantage of this
age profile, and consequently the demographic dividend, is currently not being utilised. The
unemployment rate of the EMM is approximately 28.8%, which is fairly higher than the
provincial unemployment rate of 26.2%. With respect to the educational and skills levels of
the EMM, it is evident that this is also one of the biggest challenges leading to
unemployment. Only 15% of the total population in the EMM has a higher educational level
and 36.1% of the population can be classified as semi- to unskilled labour. Therefore
investment in education and skills development is a key factor to ensure an increased level of
employment in the EMM and as a result ensure economic development and growth.

Change in the population structure can significantly affect national performance because
individual economic behaviour varies with age. The young and the old tend to consume more
than they produce, and areas with high ratio of dependents to workers, devote a relatively
high proportion of resources to these groups, often limiting growth. In contrast, areas with a
relatively large share of working-age-population can experience an increase in income and
savings, due to the fact that the working-age-population tends to produce more than they
consume. However, the demographic dividend can only stimulate substantial economic
growth, if appropriate economic and labour programmes, policies, strategies etc. are in place
that promotes sustainable employment creation for the youth, especially in areas with high
unemployment rates. Therefore the key is to identify and promote developments and
investments that have the ability to harness the benefits of a larger working-age-population,
and ensure they are gainfully employed.

72% of the population is economically active within the EMM. Therefore the area is
characterised by a relatively large supply of labour.
 The not economically active population (28%) represents children, the youth, the elderly and
the disabled that are not able to be employed.
 Of the economically active segment of the population in the market area, 71.2% are currently
employed, whereas 28.8% are unemployed, which is slightly higher that the provincial
unemployment rate (26.2%), however lower that the national unemployment rate (29.7%)

This section indicated that unemployment is the highest within township areas / second
economies. It is also clear that the priority areas are mainly aligned with these areas of high
unemployment rates, which implies that the priority areas are strategically located in order to
assist in decreasing unemployment in the EMM.

The demographic profile will further assist in identifying the social facilities and engineering
services required within the EMM in terms of the future expected population and household
growth. The population and household growth within the EMM will also clearly indicate the
future space required to accommodate this growth, i.e. residential units needed as well as
space required for retail, office, medical and educational facilities. This will be analysed in
depth during Task 3 and 5 of the study.
51
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
5. BACKLOG ERADICATION
The purpose of this section is to identify the current backlog situation within the EMM and to
present the modelling scenarios for extreme budgeting towards backlog eradication. It is
important to note that for the purpose of the CIF modelling for Task 1 and 2 a brief overview is
given in terms of the current backlog and cost implications thereof. Tasks 3 and 5 will provide for
an in-depth analysis of the social services and engineering services required for future growth
and development in the metro, as well as a depiction of the estimated costs thereof.
Based on the CSIR Guidelines for the Provision of Social Facilities in South African Settlements,
the following backlog for the social amenities were determined based on the average annual
population growth of 1.2% (short term growth over the period 2006 to 2011).
The facilities required is based on the increase in population of the EMM over the next five years.
Table 5.1 illustrates the actual facilities required, as well as the costs of these facilities. It is
important to note that the municipality will only be responsible for some of these facilities as
indicated in the table below.
Table 5.1: Social Amenities / Services Backlog for the EMM, 2014 - 2019
Actual Number of
Municipal
Public Amenities
Total Costs
Facilities Required
Responsibility
Crèche
81
R 77,781,023
Primary School
28
R 1,081,051,365
Secondary
16
School
R 1,319,297,922
Clinic
2
2
R 65,273,725
Day-Hospital
2
R 165,703,535
Community
2
Hospital
R 497,110,604
Library
10
10
R 10,782,276
Community
3
3
Centre
R 138,234,310
Sports Stadium
1
1
R 1,595,146,993
Post Office
18
R 505,254,038
Police Station
3
R 92,629,907
Fire Station
3
3
R 370,519,628
Municipal Offices
4
4
R 488,341,769
Sport Fields
13
13
R 430,980,990
TOTAL
186
36
R 6,838,108,084
Total Cost to
Municipality
R 65,273,725
R 10,782,276
R 138,234,310
R 1,595,146,993
R 370,519,628
R 488,341,769
R 430,980,990
R 3,099,279,691
Source: Demacon ex CSIR, 2014
Aside from the social amenities required as a result of the increased population over the next five
years, there are other infrastructure services backlogs that need to be addressed.
Table 5.2 illustrates the infrastructure services backlog for the next five years as determined by
Aurecon’s Infrastructure Management Report for the EMM.
52
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 5.2: Infrastructure Services Backlog for the EMM, 2014 – 2019
Other Infrastructure Services Backlogs
Total Cost to Municipality
Electricity
R 2,327,666,667
Information and Communication Networks
R 78,475,702
Roads and Stormwater
R 9,088,000,000
Solid Waste
R 241,333,333
Water
R 534,155,818
Sanitation
R 1,507,914,601
TOTAL
R 13,777,546,121
Source: Demacon ex Aurecon, 2014
Table 5.3: Total Services Backlog, 2014 - 2019
EMM Services Backlog
Total Social Amenities Backlog
Total Infrastructure Services Backlog
GRAND TOTAL
Total Cost to Municipality
R 3,099,279,691
R 13,777,546,121
R 16,876,825,812
From the above tables it is clear that the infrastructure services backlog account for the majority
of the services backlogs in terms of Rand value. A total of R16.9 billion will be required to
accommodate for the services backlogs that will be created in the next five years based on the
increase in the EMM’s population.
Table 5.4 summarises the annual services backlogs within the EMM and indicates the
percentage distribution between each backlog category.
Table 5.4: EMM Services Backlog per Annum and Distribution, 2014
Services Backlogs
Total Annual Cost to
Municipality
Percentage
Distribution
Social Amenities
R 3,099,279,691
18.4%
Electricity
R 2,327,666,667
13.8%
R 78,475,702
0.5%
R 9,088,000,000
53.8%
Solid Waste
R 241,333,333
1.4%
Water
R 534,155,818
3.2%
Information and Communication Networks
Roads and Stormwater
Sanitation
TOTAL
R 1,507,914,601
8.9%
R 16,876,825,812
100.0%
From Table 5.4 it is clear that the Roads and Stormwater (53.8%) backlogs account for the
largest percentage of the total backlogs within the EMM, in terms of Rand value. This is followed
by the Social Amenities backlogs (18.4%)
It is important to determine where these backlogs are located within the EMM, especially in terms
of the hard-core infrastructure backlogs, such as roads, electricity, and water and sanitation
capacity. Two key components should be considered in terms of the municipality’s capital
expenditure, the magnitude of the expenditure as well as the location, as these two components
will play a major role in determining the impact that the expenditure item will have in terms of
contributing to the economic growth of the EMM. This relationship will be discussed in more
detail in the following section.
53
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Based on the definition of backlog eradication / urban restructuring, it can be assumed that the
majority of the backlogs will be located within the second economy areas.
Map 5.1 illustrates the backlog concentration within the EMM, which in turn illustrates the areas
within the metro that will require the majority of these facilities. It is clear that the highest
concentration are located within the second economy areas, i.e. the township areas, where
population growth continues and the need for services increases, mainly due to migration the
metro of opportunistic employment seekers.
The following section will take an in-depth look at the modelling scenarios for backlog eradication
and economic growth, to determine the optimum split between addressing the backlogs however
the same time contributing to economic growth.
Map 5.1: Backlog Concentration within the EMM, 2014
54
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
6. SCENARIO MODELLING
The purpose of this section is to illustrate the modelling scenarios with respect to Backlog
Eradication and Economic growth within the EMM, so as to identify the optimum split between
the Capital Investment Framework categories (i.e. economic development, urban restructuring
and upgrading and renewal).
6.1 Growth Modules
Three modules have been identified to serve as input in determining the ideal economic growth
for the EMM namely, economic growth module, population growth module and the labour
absorption / employment module. The following paragraphs summarises the key findings of the
scenario modelling based on the three growth modules.
Key Findings

At an average economic growth rate of 3.7%, the EMM's economy creates, on average,
16 132 employment opportunities per annum.
 On the other hand, the economically active population increased by 35,163 per annum.
 This leaves a net oversupply of labour of 19,032 people per annum – not able to find
work in the local, mainstream economy.
 Thus the EMM’s economic growth needs to increase in order to absorb the entire
economically active population within the Metro.
Table 6.1: Relationship between Economic Growth and Labour Absorption
Labour Absorption and Economic Growth
Average Economic Growth (Past 10 Years – 2001 to 2011)
3.70%
Average Annual Economically Active Population Growth (Past 10 Years – 2001 to
2011)
35,163
Average Annual Employment Growth (Past 10 Years – 2001 to 2011)
16,132
Net Labour Absorption (Average per annum)
(19,032)
Based on Table 6.1 and the historical growth trends, the EMM’s economic growth needs to
increase from 3.7% to 8.1% in order to create an additional 19,032 employment opportunities
per annum so as to absorb the total economically active population.
In order to increase economic growth an increase in infrastructure investment is required.
Therefore a ratio between infrastructure investment and economic growth should be determined
in order to calculate the additional infrastructure investment needed within the EMM economy to
facilitate an 8.1% economic growth.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Diagram 6.1: Relationship between Infrastructure Investment and Economic Growth
Certain international studies on developing economies suggest there is a (simple) direct, positive
1 : 1 ratio between infrastructure spend and economic growth. Research on the SA economy
suggests a more modest (and realistic) ratio of 1 : 0.19 between infrastructure spend and
economic growth.
South African
Standards
International Standards
Diagram 6.2: Ratios between Infrastructure Spend and Economic Growth, 2014
1% increase in
infrastructure
spend results in
1% increase in
economic growth
1% increase in
infrastructure
spend results in
0.19% increase in
economic growth
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Based on the above ratio of 1 : 0.19, an increase of 23% in infrastructure spend is required in
order to create the additional economic growth within the EMM of 4.4% per annum in order to
reach the ideal 8.1% needed to absorb the economically active population within the EMM.
However it should be noted that to reach the ideal 8.1% economic growth, the increase in
investment infrastructure will need to be applied strategically, i.e. the majority of the infrastructure
investment will need be allocated to hard-core infrastructure, specifically new roads, electricity
capacity as well as water and sanitation capacity in high priority economic zones.
In seeking to optimise the Sustained Economic Benefits of government spend, one must not
only ask HOW MUCH is being spent, but in particular:
1. WHERE?
2. ON WHAT?
Therefore based on the above, two principles of budgeting and leveraging can be identified:
Principle #1 – The same Rand spent (on the same type of asset) has a different impact in one
area versus another.
Principle #2 – The same Rand spent has a different impact in the same area, depending on the
type of asset created.
Diagram 6.3 illustrates these two principles of budgeting and leveraging by means of an example
of R100 million investment in different types of assets and in different locations, so as to illustrate
the leveraging effect of the investment.
Diagram 6.3: Practical Example of Budgeting and Leveraging
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
An increase of 4.4% in economic growth in real terms is illustrated in Table 7.8. The table
illustrates the average actual GVA increase per annum (R4.4 billion) generated within the EMM
based on the current 3.7% economic growth. However in order to generate an economic growth
of 8.1% per annum, the average increase in GVA per annum should amount to R5.2 billion
(based on the additional 4.4% required in economic growth). The R5.2 additional GVA requires a
total private capital investment of R5.4 billion be unlocked annually in the EMM’s economy. Given
the area’s population growth it is possible from a demand side perspective for the market to
absorb this type of increased investment.
Table 6.2: Private Capital Investment Required per Annum, Constant 2014 Prices
EMM Gross value Added at Basic Prices
GVA Average Growth per annum at 3.7% (2001-2011)
GVA Average Growth per annum at 8.1% (2001-2011) - Ideal growth
Difference between current growth and Ideal growth (GVA)
TOTAL CAPITAL INVESTMENT NEEDED FOR IDEAL GROWTH (GDP)
R 4,391,320,170
R 9,623,682,004
R 5,232,361,834
R 5,403,791,789
Source: Demacon ex Quantec, 214
Based on principles of budgeting and leveraging as discussed in the preceding paragraphs it is
important that the private capital investment of R5.4 billion occur within high priority economic
zones / high economic commercial nodes compared to lower impact areas. These high impact
nodes and low impact areas can be defined as follows:
High Impact Nodes
 Retail
 Office
 Industrial / warehousing / distribution
Low Impact Areas
 Residential
 Agricultural
 Social Services / Amenities
Map 6.1 illustrates some of the major developments within the EMM, together with their capital
investment. The map also indicates the CIF priority areas, indicating these major investments
relation to the priority areas. From the map it can be concluded that the areas located in the
vicinity of these major developments / investments are considered as high economic commercial
nodes.
It should be noted that these development are not the only major development identified for the
EMM. In Task 10 of the project the major developments identified for the EMM will be further
investigated in terms of their capital investment and their impact it will have on the economy of
the EMM.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 6.1: EMM Major Developments
59
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
60
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
A major constraint in South Africa in general and the EMM economy is infrastructure capacity,
therefore in order to create the additional economic growth of 4.4% (R5.4 billion) an additional
increase of 23% is required in hard-core infrastructure investment, specifically new roads,
additional electricity capacity, additional water and sanitation capacity, etc. It should be noted that
this increase is over and above the natural budget increase of the EMM, which is illustrated in the
following section.
Furthermore in the EMM, such as in the rest of the country, the labour supply far exceeds the
labour demand as illustrated in Table 6.1. Therefore the increase in private consumption
expenditure, increased skills levels and skills development, private capital investment, together
with the increased government spend, as well as increased exports and decreased imports will
result in increased final demand, resulting in labour demand meeting labour supply. This can be
easily illustrated by the following economic formula:
Y = C + I + G + (X - Z) where:
Y:
Final demand
C:
Private consumption expenditure (which relates to employment and unemployment and therefore
further relates to skills development
Gross domestic fixed investment (which relates to the private capital investment)
Government consumption expenditure (which relates to the infrastructure spend)
Exports (increase)
Imports (decrease)
I:
G:
X:
Z:
Therefore the EMM needs to increase its total current budget with 23% per annum in order
to ensure a sustained 8.1% growth in the economy of the metro so as to ensure that
labour demand meets labour supply. This increase should occur over and above the
internal restructuring of the EMM’s budget, which will be outlined in the following section.
Table 6.3 illustrates the 23% increase on the current EMM’s multi-year capital budget. However it
should be noted (based on Diagram 6.3) that 80% of the 23% increase of total capital budget
should occur within the economic development category (Table 6.3).
Table 6.3: Increased Infrastructure Spend Required for a Sustained 8.1% Economic Growth
CIF Budget
2014/15
2015/16
2016/17
Total EMM Current Capital Budget
23% Increase on Total Capital Budget
80% of Total Increase on Capital Budget
(Increase in Economic Development)
R 3,119,798,979
R 3,368,826,121
R 4,252,041,688
R 717,553,765
R 774,830,008
R 977,969,588
R 574,043,012
R 619,864,006
R 782,375,671
Seeing that a 23% overall increase in the total budget expenditure of the EMM is
somewhat difficult to sustain, an internal restructuring coupled with a modest annual
budget increase will be the most plausible option.
Based on the preceding results, the following section summarises the optimum split for the
EMM’s budget and CIF categories. The internal restructuring indicated in the following section
will need to be implicated together with an increase in the total budget, as outlined in the
preceding paragraphs.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
6.2 The CIF Optimum Budget Split
Table 6.4 illustrates the current percentage split between the CIF budgets categories (2012/13
expenditure) compared to the national treasuries ideal percentage split. From the table it is
evident that the ideal split requires a significant increase in economic development, whereas a
decrease in the budgets of the Upgrading and Renewal category as well as the Urban
Restructuring category.
Table 6.4: Current vs. Ideal Budget Split
CIF Budget Categories
Current % Split (As
at December 2013)
Economic Development
Upgrading and Renewal
Urban Restructuring
Local Interventions
Grand Total
Ideal % Split
(National
treasury)
29%
40%
30%
1%
100%
18%
47%
35%
100%
Current
Difference
-11%
+7%
+5%
-1%
It is evident that in order to reach the ideal budget split, certain internal restructuring is required
for the EMM’s capital budget:

High first year increase in Economic Development; and
 Marginal first year decrease in Upgrading & Renewal
The following figures illustrate the EMM’s multi-year approved budget for the 2014/15, 2015/16
and 2016/17 financial years, divided between the CIF categories A comparison is made between
the current approved budget split and the ideal national treasury budget split.
In addition to the internal budget restructuring as identified in the following figures, a 23%
increase is required in bulk infrastructure investment in order to ensure a sustained increase of
4.4% in the EMM’s average annual economic growth – so as to generate an 8.1% economic
growth per annum. This increase is required over and above the natural budget increase from
each financial year, in real terms.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Figure 6.1: Economic Development Current Budget vs. Ideal Budget
Figure 6.2: Upgrading & Renewal Current Budget vs. Ideal Budget
Source: Demacon ex EMM Approved Multi-Year Capital Budget 2014/15 to 2016/17
Source: Demacon ex EMM Approved Multi-Year Capital Budget 2014/15 to 2016/17
Figure 6.3: Urban Restructuring Current Budget vs. Ideal Budget




Source: Demacon ex EMM Approved Multi-Year Capital Budget 2014/15 to 2016/17
63
From the figures it is clear that certain internal adjustments will
need to be made with respect to each of the budget categories.
As previously indicated the internal restructuring will result in
marginal decreases for the upgrading and renewal category,
however what is evident form Figure 6.2 is that in 2016/17 the
ideal budget will still have increased from the current 2014/15
budget.
Therefore it is imperative to understand that the marginal
decrease will not result in a significant year to year decrease
from the current budget, and in 2016/17 the restructuring will
have started to normalise, and an increase from year to year will
still be experienced within this category.
From Figure 6.1 and Figure 6.2, it is evident that an internal
restructuring will result in an increase in the budget of these two
categories, and they will also experience and annual increase.
Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
6.3 Synthesis
The purpose of this section was to outline the current CIF budget split for the EMM, and
determine what the optimum split should be in order to create a desired economic growth for the
EMM, and at the same time address backlog eradication.
Three growth modules were developed in order to understand the historical growth with respect
to the EMM’s population, economy and employment. Based on the historical growth trends two
scenarios were developed for each module, baseline and high road, in order to determine the
future estimated growth for each module for the next five years (2014 to 2019). From the analysis
it was determined that the EMM’s economy is currently unable to absorb the current labour force
based on the current 3.7% annual economic growth, and in terms of future growth the gap
between available employment and supply of labour force will continue to grow if the problem is
not addressed.
To ensure that the EMM is able to absorb the increasing labour force it was determined that an
increase of 4.4% is required in the average annual economic growth of 3.7%, thus resulting in an
8.1% average annual economic growth rate. To achieve the average annual economic growth
rate of 8.1% an investment in hard-core infrastructure, such as new roads, electricity capacity
and water and sanitation capacity is required. Based on South Africa best practices it was
determined that for every 1% increase in investment a 0.19% increase in economic growth can
be generated. Based on this principle, it was determined that in order for the EMM to sustain an
average annual economic growth of 8.1% an increase of 23% in hard-core infrastructure
investment is required.
However seeing that a 23% overall increase in the total budget expenditure across all three CIF
categories is somewhat difficult to sustain, an internal restructuring coupled with a modest annual
budget increase will be the most plausible option. The internal restructuring of the EMM budget
was based on the National Treasury guidelines budget split between the three CIF categories.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
7. TASK 1 AND 2 CONCLUSION
The purpose of this section is to synthesise on the key findings of Task 1 and Task 2 of the
Capital Investment Framework. Firstly an overview of the significant economic and demographic
findings is provided, followed by a summary of the key findings with respect to the growth
scenarios for the CIF.
7.1 Key Findings of the EMM Landscape
7.1.1
Significant Economic Findings

From the Economic profile of the EMM it is evident to conclude that the majority of the
economic activities take place within the western parts of the metro, more specifically Region
A and B. Regions F and D is also considered to be a fairly important contributors to the
metro’s economy.
 Region C is the smallest contributor to the EMM’s economy.
 Based on the economic activity and the three priority areas identified by the CIF, it is clear
that the areas of economic significance is strategically aligned with the priority areas.

The EMM is based on the following dominant economic pillars:
o Manufacturing (27.6%)
o Finance and Business Services (21.5%)
o Wholesale & Retail Trade; Catering & Accommodation (14.7%)
o General Government (13.8%)

The EMM has experienced positive economic growth over the past 15 years with an
average annual growth rate of 3.7% (for the period 1996 to 2011). This is higher than the
national growth rate of 3.2% over the corresponding period. The growth in the region can be
attributed to the strengthening of the manufacturing sector and other tertiary sectors (trade,
transport and communication services and social & government services).

The top five highest overall contributing areas within the metro area:
o Greater Kempton Park and O.R Tambo area
o Wadeville and Alberton area
o Germiston and Edenvale area
o Greater Boksburg area
o Brakpan and Springs area

The employment figures correlate with the economic data and show a positive growth of
2.1% over a 15 year period. The growth in employment is mainly driven by the increase in the
number of people employed in highly skilled and skilled occupations. The semi-and unskilled
segment lost jobs which resulted in an increase in the number of people working in the
informal segment.

When comparing employment growth with the economic growth for the same periods, it is
clear that employment followed a very similar trend than that of the economic growth trend.
However what is important to note is that the employment growth after the 2008 financial
crises, was at a much slower rate than that of the economic growth. Therefore the
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
average annual economic growth rate is higher than the average annual employment
growth rate in all of the regions.

This implies that economic growth is higher than employment growth, which in essence
implies that the EMM’s economy should be able to absorb additional employment, and as
such the unemployment rate should start to decrease in future. However to ensure this
desired situation it is important that the employment opportunities be created within the
optimum economic sectors.
7.1.2
Significant Demographics Findings

Population growth and household growth within the EMM has decreased over time. Average
annual population growth between 1996 and 2011 is 2.2% and average annual household
growth between 1996 and 2011 is 2.7%.
 Based on the concept of demographic dividend it is evident that the EMM has a favourable
age profile, with a large working age population, and fewer very young and very old. However
if the unemployment rate of the EMM is analysed, it is evident that the advantage of this
age profile, and consequently the demographic dividend, is currently not being utilised. The
unemployment rate of the EMM is approximately 28.8%, which is fairly higher than the
provincial unemployment rate of 26.2%. With respect to the educational and skills levels of
the EMM, it is evident that this is also one of the biggest challenges leading to
unemployment. Only 15% of the total population in the EMM has a higher educational level
and 36.1% of the population can be classified as semi- to unskilled labour. Therefore
investment in education and skills development is a key factor to ensure an increased level of
employment in the EMM and as a result ensure economic development and growth.

Change in the population structure can significantly affect national performance because
individual economic behaviour varies with age. The young and the old tend to consume more
than they produce, and areas with high ratio of dependents to workers, devote a relatively
high proportion of resources to these groups, often limiting growth. In contrast, areas with a
relatively large share of working-age-population can experience an increase in income and
savings, due to the fact that the working-age-population tends to produce more than they
consume. However, the demographic dividend can only stimulate substantial economic
growth, if appropriate economic and labour programmes, policies, strategies etc. are in place
that promotes sustainable employment creation for the youth, especially in areas with high
unemployment rates. Therefore the key is to identify and promote developments and
investments that have the ability to harness the benefits of a larger working-age-population,
and ensure they are gainfully employed.

72% of the population is economically active within the EMM. Therefore the area is
characterised by a relatively large supply of labour.
 The not economically active population (28%) represents children, the youth, the elderly and
the disabled that are not able to be employed.
 Of the economically active segment of the population in the market area, 71.2% are currently
employed, whereas 28.8% are unemployed, which is slightly higher that the provincial
unemployment rate (26.2%), however lower that the national unemployment rate (29.7%)

This section indicated that unemployment is the highest within township areas / second
economies. It is also clear that the priority areas are mainly aligned with these areas of high
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
unemployment rates, which implies that the priority areas are strategically located in order to
assist in decreasing unemployment in the EMM.

The demographic profile will further assist in identifying the social facilities and engineering
services required within the EMM in terms of the future expected population and household
growth. The population and household growth within the EMM will also clearly indicate the
future space required to accommodate this growth, i.e. residential units needed as well as
space required for retail, office, medical and educational facilities. This will be analysed in
depth during Task 3 and 5 of the study.
7.2 Significant findings with respect to the CIF Growth Scenarios
In determining the optimum split between the CIF categories in term of the EMM budget, to
create a desired economic growth for the EMM, and at the same time address backlog
eradication, three growth modules were developed.
The growth modules were developed in order to understand the historical growth with respect to
the EMM’s population, economy and employment. Based on the historical growth trends two
scenarios were developed for each module, baseline and high road, in order to determine the
future estimated growth for each module for the next five years (2014 to 2019). From the analysis
it was determined that the EMM’s economy is currently unable to absorb the current labour force
based on the current 3.7% annual economic growth, and in terms of future growth the gap
between available employment and supply of labour force will continue to grow if the problem is
not addressed.
To ensure that the EMM is able to absorb the increasing labour force it was determined that an
increase of 4.4% is required in the average annual economic growth of 3.7%, thus resulting in an
8.1% average annual economic growth rate. To achieve the average annual economic growth
rate of 8.1% an investment in hard-core infrastructure, such as new roads, electricity capacity
and water and sanitation capacity is required. Based on South Africa best practices it was
determined that for every 1% increase in investment a 0.19% increase in economic growth can
be generated. Based on this principle, it was determined that in order for the EMM to sustain an
average annual economic growth of 8.1% an increase of 23% in hard-core infrastructure
investment is required.
However seeing that a 23% overall increase in the total budget expenditure across all three CIF
categories is somewhat difficult to sustain, an internal restructuring coupled with a modest annual
budget increase will be the most plausible option. The internal restructuring of the EMM budget
was based on the National Treasury guidelines budget split between the three CIF categories.
7.3 Appraisal and Pointers
It’s the first year (2013) that the departments make use of the CIF budget categories to organise
their budget expenditure items. Therefore there are some issues and discrepancies that need to
be clarified in order to ensure that the CIF categories are applied in the desired manner in future.
These issues include among other:
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
1. Departments understanding of the definitions of the CIF categories, and as a result they
struggle to categorise their expenditure items/ projects in the correct CIF categories.
Especially considering some of the non-core departments.
2. There are also numerous issues when it comes to allocating these budget items/projects
to the relevant erf numbers and therefore it becomes difficult to present the EMM’s
budget spatially and then determine whether the expenditure takes place within the
priority areas or not.
3. Each department might define their specific projects differently than the other
departments when it comes to the CIF categories, which then raises issues in terms of
alignment and consistency across the departments.
In order to ensure the successful implementation of the CIF and as such contribute to economic
growth as well as urban restructuring within the EMM, it is important the all the departments
understand the CPM categories, update their budgets accordingly and also allocate their budget
to specific geographic areas where possible. This will ensure that the budget allocations can be
geographically presented with confidence and therefore determine whether these budget
allocations are aligned with the CIF priority areas This will in future ensure that the EMM
expenditure is strategically and spatially allocated to contribute to economic development and
growth within the EMM.
7.4 Future Tasks
The following Tasks are set out for completion as input to the EMM’s Capital Investment
Framework (Diagram 7.1).
Diagram 7.1: Future Task for the CIF, 2014
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
8. ECONOMIC IMPACT OF LAND DEVELOPMENT PROJECTS (TASK 10)
8.1 Introduction
Task 10 must be read and understood as a breakdown of information required that will feed into
Task 1 and 6 with reference to the scoring system of the Capital Prioritisation Model, and the
impact that internal and external investments will have on revenue generation, economic growth,
GVA contribution, job creation and pressure for future space demands.
A summary of findings, followed by the impact of the major developments on secondary
economies is presented in this section.
The development recommendations are subsequently addressed under the following headings.
 Economic Impact Assessment
 Impact on Secondary Economies
 Advantages of the Proposed Developments
 Conclusion
8.2 Economic Impact Assessment
This section summarises the findings of the Economic Impact Assessment for the proposed
major developments located within the EMM.
The following projects have been identified as some of the major development projects within the
EMM, required for the economic impact assessment:














Badenhorst Estate Development
Chief Albert Luthuli Mixed Use Development
Dunnottar Residential and Ancillary Services Development
Dunnottar Ext. 7 and 8 Development (Gibela)
Glengory Mixed Use Development
Leeuwpoort Mixed Use Development
Lords View Industrial Estate
M & T Mixed Use Development
Midstream Estate Development
Rhodesfield Urban Development Framework
Riverfields Mixed Use Development
Serengeti Estates Development
Tambo Springs Industrial Development
ORTIA Western Precinct
The following tables illustrates the direct impacts / benefits that the project will induce largely on
the metro’s economy followed by the total impacts / benefits and lastly a summary of the future
additional municipal property tax and the ratio between the capital investment and the future
property tax. (Table 8.1 to Table 8.7)
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 8.1 illustrates the location of the proposed major developments within Ekurhuleni, and is
overlapped
with
the
geographic
priority
areas
of
the
metro.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 8.1: Location of the Major Developments in the Context of Ekurhuleni
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 8.1: Economic Input Data used for the Impact Assessment
Total Size of
Developments (m²)
Capital Investment
Badenhorst Estate
200,073
R 3.05 billion
R4.8 billion
2015
10
Chief Albert Luthuli Mixed Use
283,967
R 2.2 billion
R 0.9 billion
Ongoing
15
Dunnottar Residential and Ancillary Facilities
924,085
R 7,8 billion
R 6,2 billion
2015
10
Dunnottar Ext 7 and 8 (Grootfontein) – Gibela
492,477
R 4.1 billion
R 3.1 billion
2015
10
Glengory Mixed Use
682,937
R 7.9 billion
R 11.1 billion
2019
20
1,380,068
R 9.0 billion
R 1.3 billion
2017
20
753,348
R 9.8 billion
R 13.6 billion
Ongoing
10 / 15
M & T Mixed Use
11,485,645
R 133.9 billion
R 154.6 billion
2018+
40 / 50
Midstream Estate
1,366,000
R 13.8 billion
R 0.5 billion
Ongoing
20
790,293
R 11.3 billion
R 20.1 billion
Ongoing
20
4 719 514
R 35.0 billion
R 72.5 billion
2015
20
943,890
R 10.7 billion
R 5.6 billion
Ongoing
10
4,030,238
R 52.4 billion
R 48.4 billion
2018
15 / 20
194,557
R 3.5 billion
R 4.2 billion
2018+
20
Projects
Leeuwpoort Mixed use
Lords View Industrial Estate
Rhodesfield Urban Development Framework
Riverfields Mixed Use
Serengeti Estate
Tambo Springs
ORTIA Western Precinct
Operational
Expenditure
Point of Market
Entry
Implementation
Time Frame (Years)
Table 8.1 provides a summary of the major developments within the EMM in terms of the total development size (actual floor area to be
developed), the expected capital investment, estimated operational expenditure, point of market entry and the implementation time frame. It is
important to note that the estimated Capital Investment includes the cost of appropriate building services, e.g. air-conditioning, electrical, etc.
however excludes costs of site infrastructure development, parking, any future escalation, professional fees and VAT.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 8.2: Direct Impact Experienced during the Construction Phase
Projects
Additional Business Sales
Additional GGP
Additional Employment
Opportunities
Badenhorst Estate
R 4,454,970,000
R 1,386,805,000
10,100
Chief Albert Luthuli Mixed Use
R 3,233,701,000
R 1,006,631,000
7,300
Dunnottar Residential and Ancillary Facilities
R 11,310,883,000
R 3,521,008,000
25,300
Dunnottar Ext 7 and 8 (Grootfontein) - Gibela
R 6,037,706,000
R 1,879,500,000
13,500
Glengory Mixed Use
R 11,552,241,000
R 3,596,141,000
26,100
Leeuwpoort Mixed use
R 13,201,955,000
R 4,109,688,000
29,700
Lords View Industrial Estate
R 14,292,331,000
R 4,449,115,000
32,200
R 195,371,465,000
R 60,817,936,000
439,600
Midstream Estate
R 20,066,276,000
R 6,246,509,000
45,200
Rhodesfield Urban Development Framework
R 16,470,597,000
R 5,127,195,000
37,100
Riverfields Mixed Use
R 45,208,938,200
R 15,928,561,000
115,200
Serengeti Estate
R 15,561,331,000
R 4,844,147,000
35,000
Tambo Springs
R 76,430,126,000
R 23,792,228,000
172,100
R 5,061,318,000
R 1,575,557,000
11,400
M&T Mixed Use
ORTIA Western Precinct
Table 8.2 summaries the DIRECT economic impact expected during construction of the major development projects. The construction phase
impacts are temporary in nature, and is expected to end once the construction phase is completed. The direct impact can be considered as the
impact directly created at the development site and close surroundings, approximately 60% of the direct impact will be created at the development
site itself.
It is very important to note that the additional employment opportunities created refer to paid work created for an individual on a specific project for
any period of time. The same individual can be employed on different projects during the construction phase of the entire development and each
period of employment will be counted as an employment opportunity. Therefore it should be understood that the additional employment
opportunities created does not relate to actual number of people employed for the entire period of the development.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 8.3: Total Impact Experienced during the Construction Phase
Projects
Additional Business Sales
Additional GGP
Additional Employment
Opportunities
Badenhorst Estate
R 7,035,164,000
R 2,486,755,000
16,700
Chief Albert Luthuli Mixed Use
R 5,106,570,000
R 1,805,045,000
12,100
Dunnottar Residential and Ancillary Facilities
R 17,861,829,000
R 6,313,710,000
41,800
Dunnottar Ext 7 and 8 (Grootfontein) - Gibela
R 9,534,573,000
R 3,370,235,000
22,300
Glengory Mixed Use
R 18,242,975,000
R 6,448,436,000
42,900
Leeuwpoort Mixed use
R 20,848,157,000
R 7,369,304,000
48,800
Lords View Industrial Estate
R 2,257,0048,000
R 7,977,949,000
53,000
R 308,525,130,000
R 109,055,938,000
725,000
Midstream Estate
R 31,688,100,000
R 11,200,953,000
74,500
Rhodesfield Urban Development Framework
R 26,009,905,000
R 9,193,851,000
61,200
Riverfields Mixed Use
R 80,804,479,000
R 28,562,368,000
189,900
Serengeti Estate
R 24,574,018,000
R 8,686,301,000
57,500
Tambo Springs
R 120,696,308,000
R 42,663,135,000
283,700
R 7,992,691,000
R 2,825,216,000
18,800
M&T Mixed Use
ORTIA Western Precinct
Table 8.3 illustrates the TOTAL economic impact created during the construction phase of the major developments. Similar to that of the direct
impact, the total impact during construction is of a temporary nature. The total impact includes the direct, indirect and induced impact created as a
result of the construction of the major developments.
The total economic impact can be measured in terms of three effects:
 Direct effects: those economic effects caused by the new investment or proposed project.
 Indirect effects: occurs to industries in the backward linked industries that supply goods and services to the proposed development.
Economic activity triggered by the purchase made as a result of the initial round of project expenditure.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
 Induced effects: result from households spending some of the additional income they receive on goods and services within the local,
regional and provincial economies.
Table 8.4: Direct Impact Experienced during the Operational Phase
Projects
Additional Business Sales
Additional GGP
Additional Employment
Opportunities
Badenhorst Estate
R 6,756,983,000
R 3,428,567,000
7,170
Chief Albert Luthuli Mixed Use
R 1,274,958,000
R 664,175,000
1,430
Dunnottar Residential and Ancillary Facilities
R 8,689,224,000
R 3,961,188,000
10,370
Dunnottar Ext 7 and 8 (Grootfontein) - Gibela
R 3,898,251,000
R 1,756,495,000
2,870
R 15,613,123,000
R 7,979,318,000
16,890
R 1,896,336,000
R 957,310,000
2,070
R 15,510,573,000
R 6,091,550,000
6,630
R 201,631,160,000
R 93,171,120,000
189,980
R 776,142,000
R 346,188,000
640
Rhodesfield Urban Development Framework
R 26,186,816,000
R 12,228,952,000
22,460
Riverfields Mixed Use
R 97,988,459,000
R 52,213,610,000
112,260
Serengeti Estate
R 6,742,347,000
R 2,867,984,000
4,210
Tambo Springs
R 55,955,126,000
R 22,184,78,000
24,590
R 5,895,332,000
R 3,117,413,000
6,700
Glengory Mixed Use
Leeuwpoort Mixed use
Lords View Industrial Estate
M&T Mixed Use
Midstream Estate
ORTIA Western Precinct
Table 8.4 summaries the anticipated sustained DIRECT economic impact expected during the operational phase of the major developments
once these developments are fully operational / at maturity. The impact created during the operational phase is more permanent in nature and is
sustained annually.
Similar to that of the construction phase impact, the additional employment opportunities created do not relate to actual number of people
employed for the entire period of the development, but rather the opportunities created.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 8.5: Total Impact Experienced during the Operational Phase
Projects
Additional Business Sales
Badenhorst Estate
Additional GGP
Additional Employment
Opportunities
R 11,814,235,000
R 5,694,844,000
20,120
R 2,228,394,000
R 1,091,695,000
3,870
Dunnottar Residential and Ancillary Facilities
R 14,700,641,000
R 6,647,171,000
25,800
Dunnottar Ext 7 and 8 (Grootfontein) - Gibela
R 6,265,969,000
R 2,807,421,000
8,990
R 27,247,224,000
R 13,195,128,000
46,690
R 3,263,439,000
R 1,571,394,000
5,560
R 23,151,441,000
R 9,442,262,000
26,630
R 329,511,334,000
R 150,257,565,000
518,880
R 1,337,944,000
R 597,845,000
2,070
R 43,027,887,000
R 19,742,859,000
65,790
R 173,214,432,000
R 85,903,675,000
305,510
Serengeti Estate
R 10,515,444,000
R 4,538,501,000
13,980
Tambo Springs
R 83,915,248,000
R 34,464,918,000
97,650
Western Precinct
R 10,381,237,000
R 5,127,254,000
18,220
Chief Albert Luthuli Mixed Use
Glengory Mixed Use
Leeuwpoort Mixed use
Lords View Industrial Estate
M&T Mixed Use
Midstream Estate
Rhodesfield Urban Development Framework
Riverfields Mixed Use
Table 8.5 illustrates the anticipated sustained TOTAL economic impact expected during the operational phase of the major developments once
these developments are fully operational / at maturity (i.e. sustained annual impacts). Therefore including the direct, indirect and induced
economic impacts created during the operational phase of the major developments.
If the proposed major developments were not to occur, the above benefits in terms of additional business sales, GGP, employment, as well
as additional property taxes, would be lost to the local, metropolitan and provincial economies.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Table 8.6: Forecast Future Additional Municipal Property Tax
Projects
Property Tax Income per Annum
Badenhorst Estate
R 45,484,880
Chief Albert Luthuli Mixed Use
R 20,968,471
Dunnottar Residential and Ancillary Facilities
R 85,872,582
Dunnottar Ext 7 and 8 (Grootfontein) - Gibela
R 50,489,744
Glengory Mixed Use
R 106,112,309
Leeuwpoort Mixed use
R 69,059,798
Lords View Industrial Estate
R 183,138,899
M&T Mixed Use
R 1,940,440,447
Midstream Estate
R 103,625,000
Rhodesfield Urban Development Framework
R 189,677,112
Riverfields Mixed Use
R 1,020,800,000
Serengeti Estate
R 122,751,342
Tambo Springs
R 979,39,394
ORTIA Western Precinct
R51,675,633
Table 8.7: Ratio between Capital Investment and Property Tax
Projects
Capital Investment
Municipal Property Tax Income
Ratio
(CAPEX : TAX)
Badenhorst Estate
R 3,052,676,500
R 45,484,880
1.5%
Chief Albert Luthuli Mixed Use
R 2,215,826,500
R 20,968,471
0.9%
R 7,750,548,000
R 85,872,582
1.1%
R 4,137,213,000
R 50,489,744
1.2%
Glengory Mixed Use
R 7,915,934,000
R 106,112,309
1.3%
Leeuwpoort Mixed use
R 9,046,366,000
R 69,059,798
0.8%
Lords View Industrial Estate
R 9,793,524,000
R 183,138,899
1.9%
R 133,874,248,320
R 1,940,440,447
1.4%
R 13,750,000,000
R 103,625,000
0.8%
R 9,478,420,000
R 126,603,458
1.3%
Dunnottar Residential and
Ancillary Facilities
Dunnottar Ext 7 and 8
(Grootfontein) - Gibela
M&T Mixed Use
Midstream Estate
Reading Junxion Mixed Use
Rhodesfield
R 11,286,135,000
R 189,677,112
1.7%
Riverfields Mixed Use
R 35,000,000,000
R 1,020,800,000
2.9%
Serengeti Estate
R 10,663,080,000
R 122,751,342
1.2%
Tambo Springs
R 52,372,160,100
R 979,359,394
1.9%
R 3,468,163,270
R 51,675,633
1.5%
ORTIA Western Precicnt
From Table 8.7 it is clear that the Riverfields Mixed Use development will result in the highest
Municipal Property Tax Income per rand Capital Investment (0.029 ratio). This is followed by the
Tambo Springs Industrial development (0.019) and Rhodesfield development. Map 8.2 indicates
the existing GVA Landscape compared to the medium to long-term impact that the proposed
Major Developments will have on the GVA within the market area once fully operational.
Therefore the expected additional GVA forecast is indicated for the year 2050+.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Map 8.2: Comparison between existing GVA and the Medium to Long Term Impacts (GVA) – Forecast 2050+
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
8.3 Advantages of the Proposed Major Developments
The key outcomes of these major developments should be to:







Create sustainable job opportunities
Increase employment stability
Ensure sustainable income source – income in rateable real estate
Training and skills development of workers
Increase the economy base in the region
Create positive spill-over effects
Increase and expand the product and service range within the market and improve the
overall quality thereof.
 Attract higher volumes of consumers to the area and reduce leakage of purchase power
to the market.
The proposed major developments also resonates with various objectives of the National
Development Plan: Vision 2030 and the National New Growth Path in terms of the following:






Economic growth
Job creation
Sustainability
Spatial & sectoral integration
Investment confidence
Infrastructure development






Economic Infrastructure
Revenue Generation
Improving education, training and innovation
Spatial & sectoral prioritization
Area based interventions
Etc.
The developments should have the following three main objectives:
1 To be a powerful stimulus in the local area and to unlock latent development potential,
create sustainable job opportunities; contribute to the regeneration of the whole area as
well as skills development and capacity building of the local labour force.
2 To unlock local resources; attract higher skill levels to the area; strengthen economic
linkages; and ultimately lead to economic growth of the whole area.
3 To guide and inform future land use of the proposed development area to the highest and
best use option considerations and to facilitate optimum land use potential. This should
be done in order to optimise the value of the land to ultimately contribute to the
municipal and district economy and to align the proposed development with the
objectives of the National Development Plan and the SDF.
8.4 Impact of Major Developments on Secondary Economies
8.4.1
Locational and Employment Advantages
The proposed developments are anticipated to have the following economic impacts on
surrounding second economy areas:

The developments will create new employment opportunities in close proximity to
second economy areas (local opportunities to be enhanced by means of preferential
procurement & local labour promotion). This would reduce the cost of travel to and from
employment opportunities located elsewhere.
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015






The developments would improve accessibility for individuals to the surrounding urban
area, by means of i.e. improved road infrastructure.
The development & expansion of various land uses would provide additional tax
revenue to the Ekurhuleni Metropolitan Municipality, which could assist in financing the
improvement of living standards in second economy areas.
Residents of second economy areas will have access to a greater variety of mixed
housing typologies as well as commercial, social and medical amenities, serving the
needs of especially the so-called “aspirational consumer” – i.e. materialisticallyoriented consumers who, at the same time, aspire to be sustainable in their purchases
and beliefs.
The development will create new employment opportunities in close proximity to these
second economy areas where unemployment rates are currently significantly high.
During the construction phase the majority of people to be employed will comprise
unskilled and semi-skilled individuals working as builders. Due to the various
development sites’ proximity to second economy areas it is anticipated that the majority of
the people that will benefit from this phase could potentially originate from there. As much
as 70% of the employment created could comprise the unskilled and semi-skilled
workforce, throughout the lifespan of the development.
During the operational phase the following skill levels could be required:
o Industrial (distribution industry): 50% unskilled & semi-skilled, 40% skilled and
10% highly skilled.
o High Tech & Mixed Use: 30% unskilled & semi-skilled, 50% skilled and 20% highly
skilled.
o Office: 10% unskilled & semi-skilled, 70% skilled and 20% highly skilled.
o Social & Institutional: 50% unskilled & semi-skilled, 30% skilled and 20% highly
skilled.
8.4.2
New Approach to Development of Secondary Economies
The Conventional Approach
The conventional approach to develop and uplift areas such as these second economy areas can
be considered as the approach generally taken in the Local Economic Development (LED) Plans
of numerous municipalities. This approach tends to make use of public spending to enhance
infrastructure, service delivery, etc. with the aim of stimulating economic growth in an area that is
currently characterised by high unemployment rates, and poverty.
This approach, however, relies heavily on public spending, but has a limited sustained impact
and is coupled with isolated private investment, i.e. location for development and investment are
based on ad hoc availability of land, instead of a structured, macro planning approach with an
emphasis on creating productive areas.
This conational approach gradually diminishes urban public finance and places enormous strain
on public sectors’ ability to provide services. It furthermore leads to an over-spent of public funds
on unproductive assets (low revenue generating assets) for government which places strain on
future government funds. Other implications of the conventional approach:
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015

Short-term visible impacts on area appeal (i.e. aesthetic implications)
 Job creation issues, i.e. sustainable job creation and skills development objectives are not
met
 Access to free services fuels in-migration, which attracts people with similar demographic
profiles, strengthening downward pressure and further declining growth within an area.
This pattern of in-migration also further places pressure on services delivery, which
requires additional public spend, however on low revenue generating assets, without
seeing any or little economic growth
The Contemporary/New Approach
The contemporary approach to development and ensuring economic growth in secondary
economies includes infrastructure investments, but the emphasis is on large private sector
investments in various market opportunities. Therefore attract private sector investments to
strategically identified places, by identifying corridors and nodes that will be highly attractive to
investors, and therefore ensuring sustainable economic growth.
Therefore a pro-active approach towards development should be followed in order to attract both
large mainstream investors as well as local entrepreneurial investment to the area in order for
new development to take place, in the form housing, retail, offices and ancillary community
facilities funded by government. This is an important stage which ripens the market for further
investment and diversification. The local economy will have the capability to gain momentum and
continue to grow and diversify – attracting a multitude of private sector based investments from
healthcare through to tourism, catering, accommodation and industry.
Therefore many of the proposed major developments are aimed at creating an attractive node,
which includes a wide array of land uses, and as such will have a far larger regional catchment
and greater probability to affect regional integration.
The following strategies are provided for the contemporary approach to development in
secondary economies:







There is a need to move away from a housing-only or retail-only approach to a more
holistic development of human settlements, including the provision of social and
economic infrastructure.
Provide diverse housing typologies
Enhancing settlement design by including contemporary lifestyle design concepts
Diverse social amenities to be incorporated in the lay-out
Multi-purpose cluster concept should be applied to incorporate the provision of primary
municipal facilities, such as parks, playgrounds, sports fields, crèches, community halls,
taxi ranks, satellite police stations, municipal clinics, and informal trading facilities to boost
disposable income and consumer activity
Mix use commercial node with inter alia retail and trader facilities – to address medium
to short term needs, as well as long-term growth in demand. Provision should be made to
accommodate future nodal expansion.
Residents should be able to live in a safe and secure environment, and have adequate
access to economic opportunities, a mix of safe and secure housing, and tenure types,
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015






reliable and affordable basic services, educational, entertainment and cultural activities,
and health, welfare and police services.
Ensure the development of compact, mixed land use, diverse, life-enhancing
environments with maximum possibilities for pedestrian movement and transit via safe
and efficient public transport in cases where motorised means of movement is imperative.
Ensure that low-income housing is provided in close proximity to areas of opportunity.
Ensure the development of more integrated, functional and environmentally
sustainable human settlements, towns and cities. Facilitate densification around
nodes.
Emphasise housing quality.
Retail centres represent critical building blocks of nodal development – serving as a
catalytic anchor. It should however, be developed at the right location with sufficient
space to develop into a mature mixed use node over time. Local trade and related
business activities tend to gravitate towards these nodes.
The proposed development nodes therefore needs to proactively provide for opportunities
to accommodate local business enterprises.
8.4.3
Enhancing/increasing the benefits for the Secondary Economies
The following steps/programmes are some aspects to consider, in ensuring the maximum benefit
of the proposed developments within Ekurhuleni and the secondary economies.
Expanding and Strengthening Educational Programmes and Opportunities
Education remains one of the key challenges within South Africa, especially in second economy
areas, which leads to skills shortages and therefore hinders job-seekers to be gainfully employed
and as a result be able to contribute to economic development and growth.
The key, and starting point in creating sustainable job opportunities, lies with investment in
education and skills development. Investments in education foster opportunities for developing
a skilled labour force. Education allows the youth to acquire the necessary skills to take on higher
quality jobs, and those jobs in turn promote economic development and growth. Therefore
educational programmes and opportunities should be strengthened and expanded, so as to
increase educational levels within the region to meet the high demands for higher skills levels.
Although education is necessary to take advantage of a youthful population, it is not the only
aspect to consider. According to the NDP expanding opportunities for higher education, without a
concomitant increase in employment among educated youth can potentially lead to political
upheaval and social unrest. Creating economic and employment opportunities is therefore
crucial. The following paragraphs describe some programmes and initiatives that can be
implemented to increase economic and employment opportunities for the secondary economies.
Local Labour Promotion
Unemployment rate within the secondary economies are very high. Therefore it is important that
the proposed developments promote local labour opportunities. The secondary economies is
identified by high percentage of skilled and semi-skilled to unskilled labourers, therefore
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
employment opportunities in these segments should be given preference to the local people in
these secondary economies,.
Skills and Education Training
Skills development and training is one of the more important requirements for people to get
employed. Throughout South Africa the need for skills in the market place is one of the obstacles
preventing higher economic growth. The provision of skills and training to the unemployed would
assist in enabling people to apply for jobs and to be able to execute their responsibilities.
SMME Development
It is important to involve and uplift the SMME sector through enhancing the capacity of local
entrepreneurs by establishing support measures and incentives to promote participation.
SMME’s is one of the biggest job creators within the South African market. The development of
this sector should aim at creating an environment where small enterprises can function and be
competitive in the local market. The identification and implementation of projects to assist current
SMME’s in the community is essential.
Diversifying the Economic Base
An economy that is dependent on only one or two sector face the risk of continued fluctuations in
economic growth and employment. A diversified economic base ensures that the economy is
stable and a downturn in one or two sectors would not have such a dramatic impact when there
are other sectors that also drive the local economy. The aim is to diversify the local economy of
secondary economies, to ensure sustained growth and development irrespective of fluctuations
in the economy.
Apart from a general higher level of output, the broadening of the economic base also implies the
following:

Introducing new activities, which are not currently operational in the area. This means an
extension of the production capacity in terms of new products and services.
 Development of SMME’s to have a broader representation base on the size of
establishments. Size can be expressed in terms of either employment or production.
 Ownership should be broadened to include all members of the community.
 Larger representation of women in all levels of the labour market.
Creating an Enabling Environment
The focus of this programme is to develop the basic infrastructure that is needed to attract
investments to the area. Additionally the provision of basic social services to the public is
essential as this would improve their living standards and as a result increase demand for higher
order goods and services.
10 Basic Principles to Development and Growth of a Society
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Financial and Projection Modelling of the Ekurhuleni Metro CIF: Executive Summary – March, 2015
Aside from the abovementioned initiatives and programmes, it is crucial to consider the following
aspects in terms of economic development. What do most successful; societies have in common:
1.
2.
3.
4.
5.
6.
7.
Sound religious base
Advocate, uncompromising educational system
Limited reliance on industrial action to resolve wage disputes
Basic honouring of dept-repayment principles
Limited reliance on government grants
Basic realization that the home is a capital asset with leverage potential
Associated with 6 above – basic adherence to and respect for the home (and ultimately
neighbourhood) maintenance and improvement principles
8. Work and the ability to work is regarded as a privilege
9. Respect for life and property / ownership
10. Respect for the most basic unit of society: the family
These basic principles should be kept in mind, when considering new investments and how these
investments can contribute to the development and economic growth of the surrounding areas,
especially secondary economic areas.
8.5 Conclusion
It can therefore be concluded that the proposed major developments are bound to have a
positive and far-reaching economic impact on the local, regional, metropolitan and provincial
economies, including secondary economies.
It would however be important to maximise the potential economic benefits to second
economy areas by means of, inter alia, increasing linkages and reducing leakages in the local
economy, skills development programmes, preferential procurement, local labour promotion, etc.
The assessment of the potential impacts in the municipal area shows that there are a multitude of
opportunities, which over the medium to long term, can bring about growth and development in
the surrounding areas and the metro’s economy. The pace of these developments will, however,
be reliant on external intervention and the development could bring further investment to the
area.
The proposed major developments will inevitably lead to the fulfilment of the objectives of job
creation, economic growth and investment confidence.
SUMMARY – TASK 10
85