Memorandum on Metropolitan Economic Development
Strategies
1.
Background
1.1
In November 2002 the SA Cities Network (SACN) hosted a City Economic
Development Strategy Think-tank to re-conceptualise metropolitan
economic development strategy. Councillors and senior officials from
member municipalities attended the meeting, together with
representatives from national departments of Trade and Industry,
Provincial and Local Government and Foreign Affairs, the Western Cape
Provincial Government, SALGA, as well as economic development
academics and an international expert.
2.
Role of cities in national economy
2.1
Overall, only 20% of places (towns and cities) produces 82% of South
Africa’s GDP. In particular, the 6 major metropolitan areas are key
economic actors in the South African economy contributing 55.6% of GDP
in 2000 (up from 54.5% in 1990), and 80% of the economy’s
manufacturing. Cities play a strategic role in the national economy and in
South Africa’s strategy to become more globally competitive. The
economic prosperity of cities impacts on surrounding towns and rural
hinterlands. There are also strong economic inter-dependencies between
the major cities themselves.
2.2
There is a growing awareness of the critical national economic role of
major cities. However, more data and understanding of this role is
required. In particular, the inter-relationship between the cities and
surrounding towns and rural hinterlands needs investigation.
2.3
There is also recognition that poverty is becoming increasingly urbanised
and that the access of poor people to the urban economy, housing and
other urban amenities has declined. This is exacerbated by the lack of
efficient, affordable and accessible transport. The three major reasons for
the growing urbanisation of poverty are:

Natural growth of poor population within the cities;

Poor people moving to the cities;
1

Cities exposure the competitive global economy.
3.
Strategy support and development
3.1
The workshop highlighted varied approaches to economic development
strategy. A number of good practice examples that could be replicated by
other cities were demonstrated.
3.2
It was recognised that a strategy is more than just a collection of projects
and reflects overarching priorities. While well-developed strategies should
ideally include projects, the over-emphasis on the rolling out of projects
often takes precedence over a strategic programmatic approach. Many
South African cities can cite examples of this.
3.3
Key features for successful economic development that were identified
included:
 Inclusive processes
 Strong leadership
 Leveraging international and national networks
 Flexible framework facilitating crisis response
3.4
Cities need to have detailed economic data on the role and impact of
different sectors and stakeholders. Data collection and management
should form part of strategy development. The need for conducting
impact assessments was highlighted as a necessary part of the strategy
process to inform and assist in planning development.
3.5
The absence of a commonly shared and understood framework for
metropolitan economic development pointed to the need for a common
approach and policy guidelines.
3.6
There was recognition of the need to build economic development
capacity at city level and to explore ways of sharing learning and expertise
in order to maximise resource use.
4.
Need for a holistic, broad-based approach
4.1
The challenge that most cities are grappling with is how to ensure
inclusive economic development that provides both growth and poverty
reduction, based on the dynamic relationship between the two. To date,
many municipalities had parallel and even competing strategies in place,
i.e. a market-led approach of business development and/ or a marketcritical approach of community development. The workshop concluded
that a city would either have growth and poverty reduction, or it would
2
have neither. To achieve this requires more than well-developed
strategies. It requires a fundamental paradigm shift and the mainstreaming
of economic development.
4.2
A related challenge was grappling with the divide between the formal and
informal economies, while recognising that there is only one economy.
Major debate was held on the regulation of the informal economy and the
implications of this.
5.
Need for co-ordinated sector support
5.1
Cities highlighted the importance of differentiated sectoral support
strategies. At city level, there is also a need for a differentiated business
support strategy based on their potential to impact on jobs, the type of
business and national priorities. The need for co-ordination and alignment
between national departments for sector support was highlighted. For
example, support for the ICT sector involves co-ordination between DTI,
DACST, provinces and cities.
5.2
Currently South Africa uses a very limited range of tools and mechanisms
to support its sector strategies. Cities have much to learn from other
experiences. Integration and alignment of sector strategies with local
strategies is key.
6.
Need for inter-governmental and inter-city co-operation and
alignment
6.1
These challenges are national challenges and cannot be addressed at the
city level alone, pointing to the need for a collaborative approach between
cities, and between cities and different spheres of government. National
and provincial governments need to be seen as active stakeholders in
local government processes if meaningful collaboration is to take place.
6.2
The lack of co-ordination and alignment between government
departments, nationally, provincially and locally is particularly challenging.
This has a negative impact on strategy and implementation. There was
agreement on the need for alignment of policies, strategies and budgets
and co-operative relationships between spheres also needs to be
addressed. A particular challenge is to `localise’ national government’s
microeconomic reform strategy, and trade and industrial policies. For
example, DTI needs to play a more pro-active role in supporting local
government economic development initiatives, while cities need to
become more involved.
3
6.3
Numerous examples pointed to the need for inter-government
relationships and relationships with parastatals to be redefined and
developed. For example, Pretoria’s economic development strategy will
be negatively impacted by the current toll road plans, as the bypasses
planned do not coincide with the economic nodes. The need for
coordination with parastatals was particularly apparent. This coordination
assumes a more regional approach on the economy rather than merely a
local one.
6.4
Cape Town’s Joint Marketing Initiative was highlighted as an example of
an innovative development strategy that aims to focus and align the
marketing efforts of a variety of provincial and local agencies in order to
attract more trade and investment to the province and city. Through this
initiative, inefficient duplicate marketing has largely been eliminated.
6.5
An exciting component of the Think Tank is the current cooperation
between cities, and the recognition for the need for increased cooperation.
Cooperation is not limited to the governmental sphere but also includes
building alliances and partnerships with the private sector and civil society
groupings.
6.6
Skills development of the workforce was identified as a key challenge for
city competitiveness where a strong national partnership between relevant
departments, business, SETAs, educational institutions and the cities is
required.
6.7
A full report on the outcomes of the Think Tank will be made available to
the forthcoming SA Cities Network Planning workshop, to be held on 2628 January 2003, and to other stakeholders. Copies of the presentations
made to the Think Tank are available at www.sacities.net under the
Economic Development Programme.
4
Recommendations
The Think-Tank concluded that the SACN needed to undertake a series of
projects focused on:
 Mainstreaming city economic development within municipalities, at an intergovernmental level and across major sectors by demonstrating the
importance of broad-based urban economic development strategies;
 Promoting a holistic approach to economic development that addresses both
urban competitiveness as well as question of inclusion and poverty reduction;
 Supporting implementation by providing general guidance on how to develop
and implement city development strategies;
 Building relationships, networks and partnerships for economic development
across spheres of government, across departments and across sectors.
Project 1: Urban economic development impact research
That a research project be designed and commissioned to collect the primary
data required for a better understanding of the impact of urban economic
development on the country as a whole. This will include an exploration of the
following issues:
 National and local spatial economies (location of production in space);
 The nature of metropolitan-city-town-rural linkages and how these can be
strengthened;
 Other factors aiding and hindering economic development in the country.
Project 2: Co-operative training and support
That a project of capacity building and support to city municipalities regarding
economic development be designed and implemented. The programme should
be designed to maximise the use of municipal resources and expertise and
should cover at least the following components:
 Training and executive education;
 Information and knowledge sharing;
 Peer-to-peer learning and mentoring;
 Sharing of high-level technical expertise.
Project 3: Policy, practice and implementation guidelines
That a project to develop a set of guidelines regarding policy, good practice and,
implementation for metropolitan economic development be established. These
guidelines should include a clear outline of the roles and responsibilities of the
5
major stakeholders in the process. The project should also establish a
coordinated process for piloting new approaches to economic development in
cities/ metropolitan regions with necessary capacity.
Project 4: Informal sector workshop
That a workshop be arranged to explore how the informal sector should be
addressed as part of the city development strategies.
Project 5: Sector support workshop
That a workshop on targeted sectoral/industry cluster support be convened with
a view to:
 Sharing different approaches to identifying key sectors;
 Deepening understanding of how to support key sectors/clusters and to
promote their growth;
 Identifying key sectors where a co-operative approach between cities would
be advised.
Project 6: National key sector support programmes
That a process be initiated, in partnership with DTI, to identify key economic
sectors where a cooperative approach between cities and other spheres of
government would optimise the overall national and provincial economic benefit
with a view to developing a concerted coordinated programme to support such
sectors, particularly in the context of national government’s microeconomic
reform strategy, which has identified and targeted a number of specific sectors.
Project 7: Inter-governmental and multi-sectoral working
That a process be initiated to ensure a common understanding and approach as
well as on-going communication mechanism across all three spheres of
government (inter-governmental) and across all government departments (multisectoral) for supporting city economic development strategies. Examples include
transport and safety and security.
Project 8: Engagement with parastatals
That a process be initiated to develop a common approach to the major
parastatals in order to ensure that their policies and decision-making supports
city development strategies and to ensure that cities respond proactively to
changes in the parastatal policy environment. Key areas would include ports,
airports, roads and telecommunications.
6
Project 9: Workforce skills partnership
That a process be initiated to develop a partnership between the cities and the
relevant national departments to support initiatives for improving workforce skills
for economic development.
7