Resumed, faster, more inclusive economic growth is perhaps our most pressing national development priority. Economic growth is expected to be only 1.5% this year – the same as last year – and to rise marginally to 1.7% in 2016.
The slowdown in economic growth is taking its toll. Unemployment remains persistently high, fluctuating between 25% and 33%. And yet, as Finance Minister Nhlanhla Nene said in his mid-term budget: “Without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase,” possibly compromising our social programmes, which are beginning to show progress over a range of human development indicators.
We have increasingly recognised that without economic leadership from the large metropolitan economies, the national economy will not grow. Cities are increasingly the engine rooms of the national economy.
Cities also provide the surest and quickest route to poverty reduction. Ongoing urbanisation and the growth of our cities should be providing us with economic and social dividends. But this is not the case.
Despite our massive public investments in housing and basic services, and despite ongoing population growth in cities, our inequality is among the highest in the world.
In Buffalo City – which has seen fairly moderate population growth and has made good progress in providing universal access to services – economic growth is among the lowest of all of our metropolitan areas.
If we are to turn around the economy here, local, provincial and national spheres of government need to act as one joined up, focused leadership.
We also need a mind-set shift in planning. Our planning to date has been too short-term, often driven by political expediency linked to individuals in office. Economic restructuring must be consistently implemented over a few terms of government to be effective.
The National Development Plan offers us a long-term vision, but we still have some way to go to end the stop-start way we plan. It cannot be that we sit here and agree on priority projects and partnerships to change the growth path of Buffalo City over the next 15 years, only for these to change after next year’s elections. To put Buffalo City on a new growth path, I suggest focus on these issues.
Unlocking economic potential
The city’s economy is largely driven by finance, government, manufacturing and trade. Most people correctly know it as the heart of government in the Eastern Cape and the home to Mercedes Benz. Employment is similarly generated by government, trade and automotive manufacturing.
The manufacturing sector is already quite well integrated into the world economy. Nearly half the 120 large-scale manufacturers in the province are part of international corporations. More than 50% export more than 25% of their output.
The motor industry is evidence of investor confidence in this region. Mercedes-Benz SA is one of the largest foreign investors in South Africa. Thousands of jobs have been created in the automotive value chain, and R10-billion flows into the province from spin-offs and investments.
That Buffalo City has a world-class export manufacturing capability, is also home to a successful industrial development zone (IDZ) and has a large pool of skilled, trainable workers, suggests the city must position itself as a manufacturing hub underpinned by the necessary logistics system.
Key to achieving this is the expansion of East London Port, as well as better connectivity to the trans-shipment Port of Nqgura and City Deep in Johannesburg, revitalising industrial parks, and successfully transitioning the East London IDZ into a special economic zone.
The city’s leadership must ensure this happens in partnership with state-owned enterprises (SOEs) like Transnet and the Industrial Development Corporation, and departments like the trade and industry department. We must protect our existing manufacturing base and build the competitiveness of firms as we look to attract new investment in the automotive value chain, agro-processing, light manufacturing, ship repair, renewable energy, services and tourism.
To be competitive as a local economy, Buffalo City must focus more on cutting the costs of doing business here. Measured against eight other large urban centres, Buffalo City is not the best performer and, on the indicator of time and cost for enforcing contracts, it is the worst of our metros.
If each metro was to adopt the good practices found across the nine cities for construction permits, getting electricity and enforcing contracts, they would surpass the average performance of high-income members of the Organisation for Economic Cooperation and Development.
Focusing on these results would assist the metro to make practical, measurable improvements to its business climate, and I strongly suggest the city leadership pays close attention to the indicators and to the support offered by National Treasury.
In all our economic partnerships we must also make an extraordinary effort to ensure participation of the growing ranks of unemployed youth. We must radically scale-up efforts around skills training; public employment programmes such as the Community Work Programme; innovation and technology transfer; special support for start-ups; market access support; and targeted financial support from the Department of Finance.
Buffalo City must also ensures it benefits fully from government’s new initiatives such as the black industrialists programme and the ocean economy. To fully benefit from these will require forming active partnerships between BCM and relevant departments and entities.
Transform apartheid city, build township economy
THE most central local constraint to growth is the spatial form of the city itself. South African cities are unique as highly segregated, fragmented environments. This is a direct legacy of apartheid.
Our townships are the most obvious manifestation of this. Almost half the country’s urban population live in townships and informal settlements. These are mostly isolated from urban amenities and are largely characterised by neglected, dormitory environments lacking in good infrastructure, public facilities and commercial investment.
Townships were designed to fail and this is clear to see in Buffalo City. Dimbaza, Bhisho
and Mdantsane, where people were located after being forcefully removed from the West Bank, purposefully far from economic opportunities and resources.
This forces most township
residents to spend over 20% of their
declared household income on transport, and up to 50% or more for those with lower incomes.
Township economies are highly undiversified and a small proportion of earnings is spent in township economies. Economic activity is mostly limited to retail trade, government services and transport. Soweto, for example, contributes only 5% of Joburg’s GGP whilst housing more than 43% of the population
The absence of agglomeration and connectivity locally in townships and in relation to the rest of the city, dilutes our ability to meaningfully change the economic trajectory of townships.
If we are to unlock the potential of our cities to promote inclusive growth we need to act to reverse the spatial legacy of apartheid.
Township residents need better access to goods, services and jobs located in or close to townships and/or affordable, convenient and safe public transport to employment areas.
To build more inclusive, sustainable and productive urban environments we need a programme of integrated, spatially targeted interventions. The most important interventions include:
l Integrating townships into the rest of city fabric by improving connectivity in terms of both land use and transport;
l Creating agglomeration economies by targeting investment in viable nodes and hubs; and
l Removing local constraints in land use management, development control and tenure security and balancing formal and informal economies.
Implementing well-planned interventions demands a strong partnership between public and private spheres.
Infrastructure spending
CONSIDERABLE transformative investment activity is already underway. For instance, Buffalo City’s partnership approach in the tourism sector has led to a 20-year lease for motor racing facilities. Buffalo City is also set to become an alternative energy hub, with developments in the ELIDZ, Berlin and interest shown by foreign investors.
Given BCM’s waste management challenges, we need to look at options around waste-to-energy in line with the city’s vision of a green city. This will have a positive effect on unemployment in Duncan Village, Mdantsane, Zwelitsha and surrounding townships. The city needs to grow from this strength and demonstrate efforts to enable these developments in its governance.
In Mdantsane, where road infrastructure has had little or no maintenance for the past 25 years, the budget for roads has consistently increased over the past three years. Further funding also went to upgrades of waste water treatment works and infrastructure augmentation.
Government must however focus on a results-oriented programme of infrastructure investment prioritisation as well as economic development programmes to share the urban dividend with township residents. Key to achieving this is:
l Better appreciation of local assets and how to make these work for you;
l Engagement with and leveraging of SOEs such as Transnet, Sanral, Prasa, ACSA, among others:
l Public investment and funding must be used creatively to catalyse and attract private and community investment;
l Unlocking land parcels for public and private sector development;
l Taking advantage of National Treasury’s review of infrastructure grants to develop a long term project pipeline around which to draw private investment;
l Putting new regulatory frameworks in place to enable such partnerships;
l Using demographic information and economic analysis for spatially targeted resource allocation in line with long range plans.
City governance
METROS must step up to their leadership role at city level, to lead in both public sector alignment and in forging social partnerships. Critical is good governance and it is here that this metro is particularly vulnerable.
The Department of Cooperative Governance indicates in its Back to Basics report that Buffalo City has experienced serious governance challenges, including political and administrative instability and a weak political-administrative interface. This together with media reports on corruption and supply chain weaknesses has eroded citizen confidence in the metro.
Changing these perceptions needs more than a good communications strategy – it requires a credible, accountable political and administrative leadership that consistently champions clean governance and service delivery. Could we consider, for example, adjudicating tenders in the full public glare as is being done in Cape Town and Johannesburg.
While we welcome efforts made to deal with political instability in the metro, it is necessary to move faster to foster administrative stability. Institutional instability risks the flow of grants in a fiscally constrained environment where other cities compete for the same grant funds. BCM has some way to go to demonstrate the technical and institutional capabilities needed to take forward the catalytic projects that have been agreed on with National Treasury.
Where we have made progress in building such capabilities, for example through the enterprise programme management office, we would like to see such capacity sustained.
Increased focus on the new capabilities Buffalo City must acquire and leverage is necessary if the city is to become a real economic player. In the light of current fiscal constraints, a new approach to infrastructure budgeting – that is long term and able to syndicate municipal revenue, national transfers, SOE allocations and private investment – is necessary. These complex transactions require metros to be far more enterprising than so far.
This is therefore not the time for general ideas or grand schemes, but for urgent action. The metro has come a long way in getting the basics right and putting in place a well-planned programme towards integrating the city. To ensure the best deal for households, firms and government, it is crucial that this momentum is carried forward in partnership with other parts of government, the private sector, universities, communities and citizens.
Mcebisi Jonas is the deputy minister of finance. This is an edited version of his speech from Buffalo City’s Growth Summit.
Continuity and political stability key for growth
The slowdown in economic growth is taking its toll. Unemployment remains persistently high, fluctuating between 25% and 33%. And yet, as Finance Minister Nhlanhla Nene said in his mid-term budget: “Without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase,” possibly compromising our social programmes, which are beginning to show progress over a range of human development indicators.
We have increasingly recognised that without economic leadership from the large metropolitan economies, the national economy will not grow. Cities are increasingly the engine rooms of the national economy.
Cities also provide the surest and quickest route to poverty reduction. Ongoing urbanisation and the growth of our cities should be providing us with economic and social dividends. But this is not the case.
Despite our massive public investments in housing and basic services, and despite ongoing population growth in cities, our inequality is among the highest in the world.
In Buffalo City – which has seen fairly moderate population growth and has made good progress in providing universal access to services – economic growth is among the lowest of all of our metropolitan areas.
If we are to turn around the economy here, local, provincial and national spheres of government need to act as one joined up, focused leadership.
We also need a mind-set shift in planning. Our planning to date has been too short-term, often driven by political expediency linked to individuals in office. Economic restructuring must be consistently implemented over a few terms of government to be effective.
The National Development Plan offers us a long-term vision, but we still have some way to go to end the stop-start way we plan. It cannot be that we sit here and agree on priority projects and partnerships to change the growth path of Buffalo City over the next 15 years, only for these to change after next year’s elections. To put Buffalo City on a new growth path, I suggest focus on these issues.
Unlocking economic potential
The city’s economy is largely driven by finance, government, manufacturing and trade. Most people correctly know it as the heart of government in the Eastern Cape and the home to Mercedes Benz. Employment is similarly generated by government, trade and automotive manufacturing.
The manufacturing sector is already quite well integrated into the world economy. Nearly half the 120 large-scale manufacturers in the province are part of international corporations. More than 50% export more than 25% of their output.
The motor industry is evidence of investor confidence in this region. Mercedes-Benz SA is one of the largest foreign investors in South Africa. Thousands of jobs have been created in the automotive value chain, and R10-billion flows into the province from spin-offs and investments.
That Buffalo City has a world-class export manufacturing capability, is also home to a successful industrial development zone (IDZ) and has a large pool of skilled, trainable workers, suggests the city must position itself as a manufacturing hub underpinned by the necessary logistics system.
Key to achieving this is the expansion of East London Port, as well as better connectivity to the trans-shipment Port of Nqgura and City Deep in Johannesburg, revitalising industrial parks, and successfully transitioning the East London IDZ into a special economic zone.
The city’s leadership must ensure this happens in partnership with state-owned enterprises (SOEs) like Transnet and the Industrial Development Corporation, and departments like the trade and industry department. We must protect our existing manufacturing base and build the competitiveness of firms as we look to attract new investment in the automotive value chain, agro-processing, light manufacturing, ship repair, renewable energy, services and tourism.
To be competitive as a local economy, Buffalo City must focus more on cutting the costs of doing business here. Measured against eight other large urban centres, Buffalo City is not the best performer and, on the indicator of time and cost for enforcing contracts, it is the worst of our metros.
If each metro was to adopt the good practices found across the nine cities for construction permits, getting electricity and enforcing contracts, they would surpass the average performance of high-income members of the Organisation for Economic Cooperation and Development.
Focusing on these results would assist the metro to make practical, measurable improvements to its business climate, and I strongly suggest the city leadership pays close attention to the indicators and to the support offered by National Treasury.
In all our economic partnerships we must also make an extraordinary effort to ensure participation of the growing ranks of unemployed youth. We must radically scale-up efforts around skills training; public employment programmes such as the Community Work Programme; innovation and technology transfer; special support for start-ups; market access support; and targeted financial support from the Department of Finance.
Buffalo City must also ensures it benefits fully from government’s new initiatives such as the black industrialists programme and the ocean economy. To fully benefit from these will require forming active partnerships between BCM and relevant departments and entities.
Transform apartheid city, build township economy
THE most central local constraint to growth is the spatial form of the city itself. South African cities are unique as highly segregated, fragmented environments. This is a direct legacy of apartheid.
Our townships are the most obvious manifestation of this. Almost half the country’s urban population live in townships and informal settlements. These are mostly isolated from urban amenities and are largely characterised by neglected, dormitory environments lacking in good infrastructure, public facilities and commercial investment.
Townships were designed to fail and this is clear to see in Buffalo City. Dimbaza, Bhisho
and Mdantsane, where people were located after being forcefully removed from the West Bank, purposefully far from economic opportunities and resources.
This forces most township
residents to spend over 20% of their
declared household income on transport, and up to 50% or more for those with lower incomes.
Township economies are highly undiversified and a small proportion of earnings is spent in township economies. Economic activity is mostly limited to retail trade, government services and transport. Soweto, for example, contributes only 5% of Joburg’s GGP whilst housing more than 43% of the population
The absence of agglomeration and connectivity locally in townships and in relation to the rest of the city, dilutes our ability to meaningfully change the economic trajectory of townships.
If we are to unlock the potential of our cities to promote inclusive growth we need to act to reverse the spatial legacy of apartheid.
Township residents need better access to goods, services and jobs located in or close to townships and/or affordable, convenient and safe public transport to employment areas.
To build more inclusive, sustainable and productive urban environments we need a programme of integrated, spatially targeted interventions. The most important interventions include:
l Integrating townships into the rest of city fabric by improving connectivity in terms of both land use and transport;
l Creating agglomeration economies by targeting investment in viable nodes and hubs; and
l Removing local constraints in land use management, development control and tenure security and balancing formal and informal economies.
Implementing well-planned interventions demands a strong partnership between public and private spheres.
Infrastructure spending
CONSIDERABLE transformative investment activity is already underway. For instance, Buffalo City’s partnership approach in the tourism sector has led to a 20-year lease for motor racing facilities. Buffalo City is also set to become an alternative energy hub, with developments in the ELIDZ, Berlin and interest shown by foreign investors.
Given BCM’s waste management challenges, we need to look at options around waste-to-energy in line with the city’s vision of a green city. This will have a positive effect on unemployment in Duncan Village, Mdantsane, Zwelitsha and surrounding townships. The city needs to grow from this strength and demonstrate efforts to enable these developments in its governance.
In Mdantsane, where road infrastructure has had little or no maintenance for the past 25 years, the budget for roads has consistently increased over the past three years. Further funding also went to upgrades of waste water treatment works and infrastructure augmentation.
Government must however focus on a results-oriented programme of infrastructure investment prioritisation as well as economic development programmes to share the urban dividend with township residents. Key to achieving this is:
l Better appreciation of local assets and how to make these work for you;
l Engagement with and leveraging of SOEs such as Transnet, Sanral, Prasa, ACSA, among others:
l Public investment and funding must be used creatively to catalyse and attract private and community investment;
l Unlocking land parcels for public and private sector development;
l Taking advantage of National Treasury’s review of infrastructure grants to develop a long term project pipeline around which to draw private investment;
l Putting new regulatory frameworks in place to enable such partnerships;
l Using demographic information and economic analysis for spatially targeted resource allocation in line with long range plans.
City governance
METROS must step up to their leadership role at city level, to lead in both public sector alignment and in forging social partnerships. Critical is good governance and it is here that this metro is particularly vulnerable.
The Department of Cooperative Governance indicates in its Back to Basics report that Buffalo City has experienced serious governance challenges, including political and administrative instability and a weak political-administrative interface. This together with media reports on corruption and supply chain weaknesses has eroded citizen confidence in the metro.
Changing these perceptions needs more than a good communications strategy – it requires a credible, accountable political and administrative leadership that consistently champions clean governance and service delivery. Could we consider, for example, adjudicating tenders in the full public glare as is being done in Cape Town and Johannesburg.
While we welcome efforts made to deal with political instability in the metro, it is necessary to move faster to foster administrative stability. Institutional instability risks the flow of grants in a fiscally constrained environment where other cities compete for the same grant funds. BCM has some way to go to demonstrate the technical and institutional capabilities needed to take forward the catalytic projects that have been agreed on with National Treasury.
Where we have made progress in building such capabilities, for example through the enterprise programme management office, we would like to see such capacity sustained.
Increased focus on the new capabilities Buffalo City must acquire and leverage is necessary if the city is to become a real economic player. In the light of current fiscal constraints, a new approach to infrastructure budgeting – that is long term and able to syndicate municipal revenue, national transfers, SOE allocations and private investment – is necessary. These complex transactions require metros to be far more enterprising than so far.
This is therefore not the time for general ideas or grand schemes, but for urgent action. The metro has come a long way in getting the basics right and putting in place a well-planned programme towards integrating the city. To ensure the best deal for households, firms and government, it is crucial that this momentum is carried forward in partnership with other parts of government, the private sector, universities, communities and citizens.
Mcebisi Jonas is the deputy minister of finance. This is an edited version of his speech from Buffalo City’s Growth Summit.
Would you like to comment on this article?
Register (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Trending Now
Latest Videos