PRESENTATION TO THE
NCOP LOCAL GOVERNMENT WEEK
BY
SISONKE DISTRICT MUNICIPALITY
31 July – 3 August 2012
SISONKE DISTRICT MUNICIPALITY
THE GLOBAL CONTEXT
THE ENVELOP WITHIN WHCH WE HAVE
TO RESPOND
Prospects for global growth are being seriously
compromised by the sovereign, banking and
liquidity crises affecting the Eurozone.
The global crisis
Investors have been moving to assets perceived to be
safer, especially US treasuries and German bonds, despite
the miniscule returns.
If effective steps towards a lasting solution are not taken
swiftly, a catastrophic chain of events could be set off by
one or more of the states in crisis, possibly Greece, in the
not too distant future.
The consequential economic costs could be enormous and
widespread.
The global challenge
Serious structural adjustments are absolutely necessary, so
as to enhance the competitiveness of these economies and
restore their financial stability.
However, protracted economic contraction, followed by
stagnation, is likely to result in escalating social unrest.
Growth stimulation is thus essential to take the weaker
states out of crisis mode.
Vulnerability of the global
economy
The vulnerability of the global economy to external
shocks is being increasingly exposed and global growth
rate is becoming rather anaemic.
China, in turn, is again implementing growth stimulating
measures in order to counter the possibility of a worse
than anticipated slowdown.
Weak international demand as well as
insufficient local consumption
Weak international demand as well as insufficient local
consumption, are compromising country’s ability to continue
posting the growth rates required to maintain socio-political
stability.
Countries are using monetary policy to ease global economic
challenges and infrastructure spending again accelerated.
However, the long-term recipe lies in a better balance between
investment activity and household spending, as well as
between external and domestic demand.
South Africa’s very open economy makes it
particularly vulnerable to external shocks.
The sluggish recovery in parts of the advanced world and
stagnation or recessionary conditions in others, are among
the strongest inhibitors of economic activity at home.
Europe accounted for approximately 26% of South
Africa’s merchandise exports in 2011 and weakening
demand in this regional market does not bode well for
export-oriented sectors, particularly manufacturing.
Critical as it is to reduce unemployment levels,
particularly amongst South Africa’s youth, it has
proven extremely difficult to reverse the large job
losses incurred since the onset of the crisis.
Comparing the opening quarter of 2012 with the losing quarter
of 2008,significant net gainers of jobs were:
the government and
community services sector,
financial services,
– whilst manufacturing, which has shed the largest number of jobs at
the broad sector level, is still facing difficult trading conditions and
excess production capacity in several of its sub-sectors.
Implications for RSA
• The very difficult situation in the Eurozone, if prolonged
in an unresolved manner, will continue posing a drag on
South Africa’s economic growth beyond the near-term,
with the adverse impact magnified if the crisis intensifies
or, in a worst case scenario, spirals out of control.
Structural unemployment
South Africa has an acute problem of youth unemployment that
requires a multi-pronged strategy to raise employment and support
inclusion and social cohesion.
High youth unemployment means young people are not acquiring
the skills or experience needed to drive the economy forward.
This inhibits the country’s economic development and imposes a
larger burden on the state to provide social assistance
THE ROLE OF SISONKE DISTRICT
MUNICIPALITY IN STIMULATING
LOCAL ECONOMIC GROWTH AND JOB
CREATION
SISONKE DISTRICT
NATIONAL POLICY CONTEXT
PSEDS-Provincial Spatial Economic Development
Strategy
PGDS-Provincial Growth Development Strategy
NDP-National Development Plan
NGP-New Growth Path
NIPF-National Industrial Policy Framework
Our LED Policy Context
 LED STRATEGY 2012
With clearly identifiable objectives, with outcomes and outputs defined, with times frames
ranging from 3 to 5 years.
 INDUSTRIAL STRATEGY 2012
Focused on agriculture, tourism, trade and social services
 TRADE STRATEGY
identified: soybean, sugar cane, maize, citrus fruit, tomatoes, potatoes, beef, poultry, dairy
and wood products as viable commodities for investment, development and expansion
 BUSINESS RETENTION AND EXPANSION
 Local procurement opportunities and business support
 Tender advise
 SMME STRATEGY AND 2ND ECONOMY INTERVENTIONS
 Focused on Cooperatives, especially financial services cooperatives, social enterprises, youth
enterprises and small business
COORDINATION OF STRATEGIC DEVELOPMENT
INTERVENTIONS
 Coordinated spatial planning and development interventions through
IGR structures such as the Mayor`s forum, the municipal managers
forum, etc.
 Joint Investment Attraction through a “one-stop-shop” as
“information clearing house” on development applications
 A balanced strategy focusing on urban sprawl and rural decay
 Small towns regeneration program focused on primary and secondary
nodal economic hubs
 A functional Geographical Information System which gives spatial
location of our economic development interventions
 Share development planning capacity
Our approach to co-ordination in
achieving economic geography
Effective use of IGR Structures
 Mayors forum, chaired by the
District Mayor
 Municipal managers forum,
chaired by the District MM
 Development Planning and Local
Economic Development, chaired
by one of the local MM’s
 Chief Financial Officers, chaired
by an MM
Building Social partnerships
 Annual LED Summit with
resolutions integrated into the
IDP/LED & SDBIP
 District LED & Tourism Forum
(govt., business, labour and civil
society)
 MOU’s with commodity
organisations such as Milk SA,
Potatoe SA, Forestry SA
 Business Retention and Expansion
Forum
Economic performance and key
economic indicators of the District
Economically Active Population
EAP as % of total population:
Income and Employment
Position: Economically
Active Population
17%
16%
% of residents
The District was the
third highly
economically inactive
in the province after
uMkhanyakude and
uMzinyathi
Only 15 percent of the
total population in the
Sisonke District
Municipality was
considered part of the
EAP with just under
75707 District
Municipality residents
identified as EAP
Men make a far higher
proportion of the EAP
and that economic
activity in the district
is still dominated by
men.
18%
15%
14%
13%
12%
11%
10%
1996 1998 2000 2002 2004 2006 2008 2010
Income and
Employment Position:
Income Inequality
25,000
20,000
No. of households
Inequality is also a
problem with research
evidence suggesting a
wide income gap, one of
widest income gaps in the
province.
Nearly 80 percent of all
Sisonke District
Municipality workers earn
1600 rand per month or
less while over 40 percent
report earnings of 800
rand per month or less
67 percent of households
earned less than R42 000 a
year while more than a
third reported earning less
than R18 000 a year.
Annual household income: Sisonke
District Municipality:
15,000
10,000
5,000
0
The number of district
residents who could be
classified as ‘poor’ was
almost 350 000.
If poverty is considered
as part of a share of
population than the
District municipality has
seen its poverty share
decrease from a 2001
high of 74 percent to 66
percent in 2010.
Limited purchasing
power of district
residents creates
barriers for local
economic expansion and
development
Percentage of residents living in poverty: Sisonke
District Municipality,
76%
74%
72%
% of residents living in poverty
Income and
Employment Position:
Poverty Indicators
70%
68%
2010 (66.6%)
66%
64%
62%
60%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Income and
Employment Position:
Job Creation
50,000
No. of unemployed residents
Unemployment has
declined significantly since
2007 when district
unemployment was
located at 55 percent to
less than 25 percent in
2010
The official definition of
unemployment is failing to
capture a significant
number of district
residents who have exited
the job market out of
fatigue at their failure to
find work but are still
willing to work
Using the expanded
definition of
unemployment –the
unemployment rate for
the district can be more
accurately be represented
at sitting at the 48-50
percent mark
Number of unemployed residents: Sisonke District
Municipality, 1996-2010
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Share of employment by industry: Sisonke District
Municipality: 2010
Income and Employment Position: Where are the jobs?
More than 52 percent of
the employed in Sisonke
District Municipality
worked in low or
unskilled occupations,
22 percent in
elementary occupations.
For those residents who
are employed, the vast
majority worked in the
public sector –
community service
industry – and the
agriculture sector.
Together these two
sectors accounted for
more than 72 percent of
total employment in the
district
Community
services
37%
Agriculture
34%
Trade
13%
Finance
5%
Transport
2%
Mining
0%
Manufacturing
Electricity 7%
Construction 0%
2%
Income and Employment
Position: Where have the
jobs been?
Number of residents employed in the formal sector:
Sisonke District Municipality,
13,000
11,000
In 2010 there were
almost 11000 district
residents employed in
the community service
industry –an increase
of almost 60 percent
since 1996
Agricultural
employment –in the
district has declined in
real terms since 2002
Retail and wholesale
trade industry which
currently employs
more than 3700
residents and has
been steadily growing
since 2005
9,000
7,000
5,000
3,000
1,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1 Agriculture
2 Mining
3 Manufacturing
4 Electricity
5 Construction
6 Trade
7 Transport
8 Finance
9 Community services
Economic Position:
Gross Domestic
Product (GDP) Growth
4,500,000
Constant 2005 prices (R 1000)
4,000,000
2011, R3 453 387
3,500,000
3,000,000
2,500,000
2,000,000
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
The GDP, in real
terms, for the
Sisonke District
Municipality
increased from
R2.578 billion in
1996 to R3.361
billion in 2010 –an
increase of more
than 30 percent
The financial
recession of the
2008/2009 resulted
in a significant
reduction in growth
rates with negative
growth reported for
the period 2009.
Analysts predicted
that, however, in the
period 2010-2015
economic growth in
the district will
slowly return to pre2008 levels.
Gross Domestic Product (GDP): Sisonke District
Municipality, 1996-2015
Economic Position:
Gross Domestic
Product (GDP) per
capita Growth
Real GDP-R per capita for the Sisonke District
Municipality, 1996-2015
8,000
7,000
Projected
2011-2015
Constant 2005 Prines (Rands)
The data shows that
since 2000, average
output per person in the
district has been grown.
The financial recession
2008/2009 in particular
has caused GDP-R per
capita to stagnant
during the period 20082011.
Analysts predict a return
to growth in 2012 and
believe that GDP-R per
capita might reach
R7508 per person in
2015.
6,000
5,000
4,000
3,000
2,000
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Economic Position:
Annual Growth Rates
Trend Analysis
Annual growth rate: Sisonke District Municipality, 1996-2015
10%
8%
Agriculture 2008: 13.8%
6%
4%
2%
-2%
-4%
-6%
-8%
-10%
Agriculture
Manufacturing
Trade
Total Industries
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0%
1997
Constant 2005 prices
District economic
growth rates are linked
to the growth rates of
the district’s agriculture
sector
2008/2009 resulted in a
significant reduction in
growth rates for the
agricultural sector with
negative growth
reported for the period
2009
Manufacturing in the
district has suffered an
even more severe
decline than
manufacturing since
2008/2009 –in 2009 the
manufacturing sector in
the district experienced
a negative growth rate
of more than 8 percent
OUR INDUSTRIAL STRATEGY
AND KEY ECONOMIC
SECTORS
Prime Economic Sector:
Greatest Agricultural Potential
 The District Economy is primarily linked to Agriculture
 The District is particularly fertile and is well known for high agro-ecological potential due to an
abundance of high quality soils, high altitude, and abundant water.
 Diverse climatic conditions make the area suitable for a variety of products including crops and
vegetables, livestock and sugar cane around Ixopo/ Highflats area.
 Environmental constraints/threats
 Intensification of agriculture, afforestation and growing local demand may have potential dangers
for future agribusiness
 Strain put on the local water ecology
 Soil degradation
 Growing demand of urban centres for resources
 The main enterprises for which the District is suitable include:
 Intensive livestock enterprises such as dairy
 Horticulture crops
The key challenges faced by agriculture in the Sisonke District
today include (cont.)
 Poor infrastructural support (logistics, road and rail infrastructure). Infrastructural development
allows for farmers and buyers to link, and in turn, boosts local sales; translating into local
economic development;
 Increasing input costs (animal nutrition, seed, fertiliser, etc.)
 Poorly defined economies of scale leads to poor farm management, and local agricultural
economic planning. The number of commercial farms are decreasing while their farm sizes are
increasing, indicating a consolidation of the commercial farming sector.
 Lack of, or poor agricultural spatial economic planning. Agricultural planning has to be
considered at local, regional, and national levels, to effect market flows, infrastructural
requirements and rural development.
 Poor information and knowledge management for improving farming practices among
smallholder farmers. All farmers require information and knowledge, to improve and address
production challenges. The distribution, collection and storage of required information and
knowledge is pivotal to the success of any agricultural sector.
Prime Economic Sector: Manufacturing
Relatively underdeveloped manufacturing base
Products related to agriculture feature strongly in the mediumsized sectors, and dominate small industry activities
 Competitive advantage in agri-processing
the domestic dairy industry
the domestic poultry industry
District economic development advantages in manufacturing
are strategic location, its fixed transport infrastructure, its lowwage workforce and its abundant natural resources
Share of manufacturing’s contribution to the district
economy: Sisonke District Municipality, 1996-2015
Manufacturing:
Economic contribution
15%
Projected
2011-2015
13%
11%
Sector's share of regional total (%)
The manufacturing sector
contributed no more than
6.3 percent of the district
economy in 2010 which
represents a marked
depreciation from the late
1990s when the
manufacturing constituted
8.5 percent of the district
economy.
The most important
manufacturing industries for
the district economy are
food, beverages and tobacco
products as well as wood
and wood products -in other
words value added
agricultural products.
9%
7%
5%
3%
1%
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
-1%
Prime Economic Sector: The Forestry Sector
The Sisonke District Municipality has a small but vibrant
forestry sector, and the forestry industry is a significant land
user in many of the Local Municipal areas of the District with
proportionate provision of job opportunities.
Forestry stocks largely taken up by SAPPI, Mondi and small
scale independent producers such as NCT.
Biggest challenge is the availability of wood logs and non
compliance to the forestry charter by the forestry companies
This has led to the complete collapse of the sawmilling
industry and the large-scale job losses
The Forestry Sector: The economic contribution –lack of
beneficiation
In 2010 the forestry sector
contributed R 331.329 million to
district GDP and constituted more
than 8 percent of the district
economy.
Forestry sector which contributed
10 % of the district economy in
1996
Analysts predict that the sector will
decline from 8 percent to 6.6
percent in 2015.
Logging has declined as a share of
the district economy from more
than 10.5 percent in 2000 to less
than 8 percent in 2010.
Wood and wood products have
remained stagnant for much of the
period under discussion before
declining in 2005.
Share of forestry’s contribution to the district economy:
Sisonke District Municipality, 1996-2010
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2015
2010
Plantations and logging
2005
2000
Wood and wood products
1995
Agro-Processing: Creating Value Added Chains –where opportunities are:
 Agro-processing is an important segment of the economy and has
significant potential as a driver for future economic growth in the
district.
 Issues impacting on agriculture and agro-processing include:
 Adverse climatic conditions – storms, hail, snow and frost
 Rugged terrain limits crop production
 Distances from access to machinery, plant and raw materials supply
(Durban and Pietermaritzburg)
 Distances from established markets and commercial hubs;
 Economies of scale and volume production inhibit further beneficiation
and production of dairy products like cheese and yoghurt.
Agro-Processing: Creating Value Added Chains
Despite these threats significant opportunities exist for the expansion of
agro-processing in Sisonke District Municipality. These opportunities
include:
Land suitable for deciduous fruits and high value crops
Land reform programmes supported by significant public sector
investment and parastatal bank loans
Arable land and water
Globalisation and access to export markets
Government support and support institutions, funding, technical advice,
research etc
New production techniques, tunnel / hydroponics and shaded production
Processing, packaging and distribution of local produce – canning,
drying, freezing and further product beneficiation
Forestry, milling and production of related product
INSTITUTIONAL FRAMEWORK
FOR LED COORDINATION
OUR DEVELOPMENTAL CHALLENGES AND WHAT WE
WANT TO ADRESS
Market failure
 Low skills base
 Low industrial base
 Reliance on primary agriculture
and low agro-processing
 Informal economy
 Low fixed capital formation
 Industrial migration
Government limitations
 Regulatory burden to small
business
 Turnaround time on development
applications
 Capacity to implement high impact
investment projects
 Economic analysis capacity
 Public sector commitment
 Budget priorities
HOW WE HAVE RESPONDED
DEALING WITH STRUCTURAL PROBLEMS IN THE
LOCAL ECONOMY
Market failure
 Low skills base:
 Building new FET College for agriculture
 Work readiness programme for young people, leverage MIG projects as placement
opportunities
 Training of cooperatives and SMME’s
 Financial support tru bursaries and scholarships
 Low industrial base
 Beneficiation and value addition
 Corridor development and new commercial nodes
 Revival of rail link
Dealing with market failure
Reliance on primary agriculture and low agro-processing
Special economic zones
Agri-parks or agribusiness development zones
Leveraging land reforms for the production of cash crops
Investments in high value crops
Dealing with market failure
Informal economy
Regulation, control and development of street trade
Informal traders regulatory council
Partnership with “muthi” traders for coordinated interventions
in health and hygiene
Our strategic catalytic interventions
Special Economic Zones
 20 hector state land earmarked for:
 Dairy production through share milk
scheme
 Meat production
 Perennial crops, with special focus on
essential oils
 Cash crop productions, focussed on
high value crops
 Greenhouse gasses through hydroponic
farming
 The use of cooperatives model for
packaging
 2000 jobs (both direct and indirect)
Tourism investment
 Game parks
 Accommodation and conferencing
 Events and cultural tourism
 Community owned theme lodges
 Heritage
Building capacity of the state to deliver
local economic development
• Sisonke Economic Development Agency (“the sda”)
– Limited Liability Propriety Municipal Owned Entity with a
mandate to facilitate high impact projects and facilitate trade
and investment between the region and the rest of the world
– Specialist capacities such as: investment advisors, project
managers, agro-economists, industrial development specialists
focused on the implementation of high impact projects.
CONCLUSIONS
Global economic challenges will confine our LED
interventions
Area based approach to LED
Industrial development approach to LED, that integrate
the region to regional and international value chains
High Impact vs small scale poverty eradication approach
Thank You
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