ECONOMIC THINK TANK: 18-21 November 2002, Cape Town: Key Themes for Discussion Andrew Boraine, Chairperson, SA Cities Network and Advisor to Minister Mufamadi Location of production in space Distorted spatial economy within South Africa. Overall, only 20% of places (towns and cities) produce 82% of South Africa’s GDP. There is a concentration of more than 80% of the economy’s manufacturing in six metropolitan regions. CITY Populatio n 2001 % Contributio n to SA GDP in 2000 %Contributio n to SA GDP in 1996 % Contributio n to SA in 1990 Coastal City with Port Average Annual Population growth Rate, 19962001 Johannesburg 2962759 14.98% 14.16% 14.22% No 1.02% Cape Town 2858743 14.01% 12.82% 11.90% Yes 1.01% Durban 2981237 7.77% 8.06% 8.18% Yes 0.96% Pretoria 1454290 8.55% 7.88% 9.06% No 1.03% East Rand 2054133 7.78% 8.00% 8.67% No 1.01% Port Elizabeth 1015334 2.46% 2.31% 2.58% Yes 1.02% Total % 13326496 55.6% 53.2% 54.5% 1.5% (in Willem Naude and Waldo Krugell (2002): `An Inquiry into Cities and their role in subnational economic growth in South Africa’, Potchefstroom University, unpublished paper; Source of data: STATSSA, 2001; PIMSS, 2001) Table 1 above shows that South Africa’s six major cities with 31% of South Africa’s total population, contribute, in total, 55% of South Africa’s GDP. Since 1990 the share has increased slightly from 54% to 55%. The ranking of Johannesburg and Cape Town as the two largest cities in economic terms, has remained unchanged since 1990. Indeed, both these cities have enlarged their share of total GDP, in particular Cape Town. In contrast, the share of all other cities declined since 1990, most notably that of Durban (the largest single city) and the East Rand (Naude and Krugell, page 6). Cities and their hinterlands; urban/ rural linkages Distorted spatial economy within our cities. Widening separation between jobs, housing and people within the cities over the past decade, exacerbated by the lack of efficient, affordable and safe public transport systems, growth of polycentric business nodes and decline of CBDs, and location of low-income housing and informal settlements. Economic growth (productive cities) and poverty reduction (inclusive cities) Market-lead approach of business development vs. market-critical approach of community development. Either/ or, or both? How do we tie the two together conceptually and in practice? Contradictory impact of successful global integration (intensification of the underlying dualistic socio-economic structure). Decade-long trend of jobless growth and widening inequality in the cities. Many people now unemployable, and not just unemployed. Need to focus more on skills and human resource development. Historically, relative underperformance in all our cities in these areas: All Cities Standard of Living Index CDI CDI = 56.30 100.00 80.00 60.00 Product = 56.30 Infrastructure = 61.92 40.00 20.00 0.00 Education = Waste = 75.89 56.00 Health = 35.13 Source: SA cities Network Urban Poverty Research Project (2002) Redefining local economic development and the role of municipalities Need to understand the implications of global economic integration and the changing role of cities. The success of communities will depend on their ability to adapt to the changing and increasingly competitive environment. Few businesses look to locate or expand in a community based only on the advantages of a particular town or city. They look wider to what the region has to offer. Whilst communities in a region will compete to attract investment, there are also many opportunities for collaboration between communities and regional institutions. What are competitive cities? How to avoid `race to the bottom’ competition and encourage cooperation based on recognition of comparative advantages, e.g. Gauteng global city-region; port cities; auto sector? Need to focus on roles and responsibilities of all three spheres of government (including state-owned corporations), not just LED strategies. How do we `localise’ of national government’s economic policies, and create an inter-governmental alignment of policies, strategies, budgets and programmes? Which public sector interventions are the most effective? Roles and responsibilities of the private sector: employment (80%), investment, and redistribution? (Structuring the partnership between municipality and city business) Roles and responsibilities of the community sector What interventions should the municipality be concentrating on in the context of national and provincial government policies? (See Appendix One – Three Waves of LED) Municipal strategies and policies Organisation of economic growth and poverty reduction interventions within the municipality. Add-on or mainstream? Economic growth and poverty reduction as the central organising themes of IDP, budget and business plans. Implementation strategies: projects, or mobilisation of all sectors and line functions? Monitoring and assessment of impact of policies, strategies, programmes and projects (government as a whole, municipality in particular). Role of the SA City Development Index. Appendix One Three Waves of Local Economic Development Wave Focus Tools First: During the first wave the focus was on the attraction of: To achieve this cities used: 1960s to early 1980s Second: 1980s to mid 1990s Third : Late 1990s onwards mobile manufacturing investment, attracting outside investment, especially the attraction of foreign direct investment hard infrastructure investments During the second wave the focus moved towards: the retention and growing of existing local businesses still with an emphasis on inward investment attraction, but usually this was becoming more targeted to specific sectors or from certain geographic areas The focus then shifted from individual direct firm financial transfers to making the entire business environment more conducive to business. During this third (and current) wave of LED, more focus is placed on: soft infrastructure investments public/private partnerships highly targeted inward investment attraction to add to the competitive advantages of local areas Source: World Bank networking and the leveraging of private sector investments for the public good massive grants tax breaks expensive "low road" industrial recruitment techniques subsidized loans usually aimed at inward investing manufacturers subsidized hard infrastructure investment To achieve this cities provided: direct payments to individual businesses business incubators/workspace advice and training for smalland medium-sized firms technical support business start-up support some hard and soft infrastructure investment To achieve this cities are: developing a holistic strategy aimed at growing local firms providing a competitive local investment climate supporting and encouraging networking and collaboration encouraging the development of business clusters encouraging workforce development and education closely targeting inward investment to support cluster growth supporting quality of life improvements