Upgrading for Growth Pilot Project Plans

Upgrading for Growth Pilot Project Plans

First Draft

31 January 2008

1Introduction

The U4G Pilot Project Plans set out activities across three sub-programmes – Local Economic Development, Micro and Small Enterprise Support and Community-Based Planning. These will run in tandem with the Physical and Shelter Upgrade Programme, and be coordinated with the regular stages of the implementation process: Feasibility, Pre-Planning, Detailed Planning and Design, Implementation and Beneficiary Administration. The initial quantitative household survey has been completed for each community and focus group discussions have been held. The project plans take the findings from each into account, and also include activities involving more detailed research on specific sectors and issues.

2Local Economic Development across the three pilot communities

The Local Economic Development (LED) sub-programme focuses mainly on activities to build a more robust general economy in EMM and in the specific settlements, and to generate formal employment opportunities. It runs in concert with the Micro & Small Enterprise (MSE) sub-programme, which largely concentrates on ways to encourage micro and small enterprise development, or self-employment. The most logical and promising point of overlap between these related plans arises in the area of MSE procurement, outsourcing, and linkage approaches, wherein medium to larger scale businesses would reach out to micro and small enterprises in the area for sustainable and mutually beneficial business relationships.

Sustainable LED requires scale, which provides a conundrum when tasked with planning for individual, small communities. So, this plan puts forth various recommendations that should apply across most, if not all, of the upgraded settlements – thereby creating the prospects for efficiency through a consistent approach to delivery, even if it must be replicated several times among many communities. Nonetheless, where particularly acute differences in individual settlement characteristics warrant unique approaches, these are highlighted and explained

Community Description

Each of the three communities targeted under the pilot has its own socio-economic nuances, and in some cases distinct differences. Nonetheless, several key characteristics across all of the settlements generally inform and shape the overall approach to economic development, namely:

• An overwhelming majority of inhabitants moved to and want to stay in the area because they want to find formal jobs – no fewer than 90% and on average, 95% of people moved to EMM for “better work prospects”, and two-thirds of all respondents (85% in Bapsfontein) said, ‘the main reason why they came to a particular informal settlement’ was to be ‘close to work’.
• In all three areas, at least 50% of people reported that they were ‘employed / self-employed’, with that figure at 70% in Bapsfontein and 63% in Gugulethu Everest, which, considering abysmal levels of self-employment (94% of households report no self-employment or home business), represents a proportion of gainfully employed people that is below National trends, and in very low wage jobs.
• Very low levels (in quantity and quality) of self-employment and micro-enterprise activity point to a confluence of strong desire for formal wage employment, limited market access and opportunities, and extremely poor skill and education levels.
• With the vast majority willing to earn monthly incomes below R2 000 per month, and fully half willing to earn below R1 500 per month, the willingness to accept low-skilled jobs and earn modestly from micro-enterprise activity should be high.
• Nonetheless, the large income disparity (an average of R500 or 63% lower wages for self-employment vs. wage employment – see Diagram XX below) between self-employment and a formal job heavily influences people’s desires to continue seeking wage employment (This finding correlates very closely with national research by the Global Entrepreneurship Monitor, which reports South Africans as having among the lowest entrepreneurial inclinations of any internationally surveyed countries).
• Relatively very small household sizes (about 3 people per household) and the opportunity to build new spaces with good infrastructure (especially electricity) that optimise the trade offs between personal accommodation and business premises may increase basic micro and small enterprise viability, but perceptions that formal wage employment is better are likely to persist.
• Subject to more detailed investigation, EMM, as the country’s industrial hub and centre of substantial manufacturing, transport, and other core industries, should offer better than average prospects for formal job creation.

Diagram XX: Income Statistics from Household Survey, 2007

Q55.2 Monthly household income from Income from business/self employment

INFORMAL SETTLEMENT / N / Mean / Median
John Dube / 57 / 847.12 / 500.00
Bapsfontein / 88 / 1322.05 / 1000.00
Payneville (Gugulethu/Everest) / 180 / 1102.33 / 800.00
Total / 325 / 1117.06 / 800.00

Q55.1 Monthly household income from Salary/earnings

INFORMAL SETTLEMENT / N / Mean / Median
John Dube / 679 / 3258.38 / 1374.00
Bapsfontein / 1524 / 1625.95 / 1400.00
Payneville (Gugulethu/Everest) / 2472 / 3264.42 / 1280.00
Total / 4675 / 2729.42 / 1300.00

Diagram XX below, derived from the household survey, neatly summarises some key comparative issues about the levels and nature of income across the three settlements. It looks at the monthly income derived from formal employment (“Salary”), monthly income derived from self-employment (“Self Inc”), the income received in the four weeks prior to the conduct of the survey (“4 Wk Inc”), and the amount of money received from inbound remittances (“R Rcvd”).

In addition, the following aspects should be noted:

• The relatively low level of income from formal employment in Bapsfontein probably reflects the typical nature of farm, versus non-farm income seen nationally and internationally; and
• The fairly consistent levels of income received in the past four weeks may indicate evolution of good coping strategies, regardless of income source, which may indicate good household mixing of formal and informal income sources.

Diagram XX: Income profile comparison across Pilot Project Communities

LED Sub-programme

There are two aspects to the sub-programme – programmatic support and creation of facilities to access work opportunities.

Programmatic support includes firstly, those aspects that relate to the generation of the overall LED process, including

• Processes of market analysis from the MMW4P approach;
• Convening, management, facilitation and guidance functions in the realms of economic governance, enabling enterprise development, locality development, and enabling social development; and

Secondly, it responds directly to specific economic development needs of the selected informal settlements, including:

• Targeted interventions at one or any combination of the three market layers described in the MMW4P approach, based on the market analysis;
• Opportunistically discovered, highly targeted, local level projects that show the best prospects for short-term delivery and longer-term impact (such as community-based housing and infrastructure development).

By design, the first set of actions supports the second, and vice versa. Nonetheless, the former tend to involve longer-term processes, while the latter tend to take the shape of short to medium term activities, projects, and programmes with distinct outputs.

Specific activities include:

• Application and extension of the Exapanded Public Works Programme
• Creation of linkages between the U4G programme and local employers, with the possible co-funding of training
• Targeting the agricultural sector and links with local farmers, particularly around John Dube Village and Bapsfontein

• Work seeking programmes that enable unemployed people to access the Internet, newspapers, job banks, labour brokers, recruitment agencies, and other avenues through which they can learn about and apply for job opportunities;
• Re-skilling and further skilling for people with work experience, but particularly tailored to the demands of medium to larger sized employers in the area;
• Orientation to work programmes for qualified young people who cannot find work – such interventions include interviewing skills, office skills and etiquette, CV and resume writing workshops, self-assessment techniques, and so on;
• Open days at FET colleges for young people from informal settlements
• Scholarships for young people to attend programmes at FET level

Creation of facilities through which to access work opportunities: These facilities may be public (e.g. community centres or libraries), or private (e.g. internet cafés). In general the programme may lean towards facilitation of private facilities for such activities to encourage the development of home-based enterprises. At this stage, possible facilities identified are:

• Home-based ‘business and office support’ enterprises, which typically comprise communication services (internet, public telephone calls, faxing, etc.), plus copying, postal services, and stationery.

• Waste management and recycling facilities (e.g. collection, sorting, and cleaning points) which hold promise as both micro-enterprise generators and connectors to larger firms. Ancillary benefits include improved health and environmental management, and an opportunity to develop value-added skills. By the nature of the business, larger firms must collect, aggregate, and further process the waste, thereby creating a natural value-chain linkage.

• Multi-purpose small to moderately sized industrial hives, with training facilities included, could be incorporated into physical infrastructure plans. This idea emanates from two key assumptions. One, with the focus of much of U4G on home-building and physical infrastructure provision, there should be ample opportunity and demand for construction-related works (whether by self-building or by small contractors), wherein access to good tools and appropriate training should be welcome in carpentry, plumbing, masonry, metal works and welding, and so on. Two, larger industrial and manufacturing businesses in the area may be enticed to not only contribute to the costs of establishing and running the hive, but also should derive direct benefit from it by getting priority access to people trained in the disciplines the businesses know they will require

These potential projects will be assessed in the context of each community, and subject to feasibility studies before proceeding. The National Treasury’s Neighbourhood Development Partnership Grant is a potential source of capital for the construction of these facilities.

3Micro and Small Enterprise Development

Community Description

There is a great deal of similarity in small businesses in the pilot project communities. The main features can be summarised as:

• There was very little discernable difference across businesses in all three areas. Among the spaza shops and shebeens which dominate, men and women are evenly distributed. The only difference was that women seemed to run ‘women’s’ businesses, i.e. food preparation and running crèches, and men’s businesses were more diverse, i.e. repairs, chicken rearing and hairdressing.
• In each settlement there were a good handful of owners whose shacks showed their success, four rooms with battery operated TV’s and sound systems. The majority of businesses were 3-4 square metre spaza shops selling a mix of snacks, fruit and vegetables.
• All traders were aware of the excessive competition they faced but claimed this was the only way they knew how to survive. That’workers’ among them purchased most supplies in larger retail stores and relied on the spaza shops for emergency supplies, limited the market but price is the operative factor. Spaza shops cannot compete with large retailers
• They claimed that the low purchasing power of their neighbours further constrained growth.
• Most of those in discussion felt that services, skills, space and finance were their biggest needs. In a few cases there were qualified people who would set up businesses if finance was available, e.g. electrical, coal yards, farming of different types
• Although they had difficulty identifying business opportunities for diversification, they were clear about learning needs especially for technical and management skills
• Other support which they felt would improve their prospects included:
• Technical skills to diversify the types of businesses
• Information about registration and licensing
• Marketing support and visibility of business premises
• Customer care
• Access to equipment
• Land for cultivation and animal rearing
• Seeds and equipment for planting.

MSE Sub-programme

The physical component of this sub-programme will include ensuring the provision of sites, services and basic facilities for the establishment of daily or periodic markets, especially in close proximity to transport facilities (taxi ranks, bus stops, main cross-roads and train stations) The National Treasury’s Neighbourhood Development Partnership Grant is a potential source of capital for the construction of these facilities.

Programmatic aspects focus on:

• The provision of business skills and entrepreneurship training

• Crowding in and creating linkages with financial services, with a range of products that suits the types and stages of development of businesses

• Access to learning towards enhanced competitiveness and business performance
• Linkage programmes that support opportunity identification, marketing and sourcing of inputs

3John Dube Village (Duduza Extension 4)

3.1Community Description

The social survey undertaken in 2007 showed that there are 3 253 persons living in John Dube Village, living in 1 077 houses. The average number of rooms in the house is 1.8, and the average household size is 3.02 persons. 24.5% are single person households, and 47.6% consist of only one or two persons.

The ratio between people of working age, and dependants (over 60 and under 20) is 1.36.

Only 15% of the households have a member in full-time employment, and 6% were self-employed. This may partly be explained by the fact that 75% of the adults had no skills.

The mean household income at the time of the survey was R979, and mean household expenditure was R1287. This points to an under-declaration of income. A very significant proportion of the households (45%) received a grant from the state.

49% of the households said they wanted to stay in the settlement, and an additional 17% indicated they would like to stay somewhere close to their present location, making a total of 66% who would object to being relocated far from their present house.

3.2Community-Based Planning

Development plan and layout

A layout has been prepared and approved for the settlement. The original layout consisted of 1381 stands of between 180 and 360 m2. This has since been revised to increase the density. It will now accommodate about 1660 stands.

In relation to the housing solution, the following priorities were expressed by a focus group of residents:

• Some residents are willing to use VIP toilets as a means of having additional funds to make the house larger.
• Electricity in the house is a priority, but security lighting is not.
• They are willing to have small plots (e.g. 8m x 16m), also in order to save funds on infrastructure, which can be put into a larger top structure.
• They are also willing to have gravel narrow roads or footpath access to the majority of the stands, in order to save money.

The municipality should examine the existing layout to determine the extent to which these priorities can be met.

In order not to delay the project, it is hoped that the stand and street pattern of the approved plans can be largely retained.

Infrastructure

As noted above, in principle the majority of the residents may be willing to reduce infrastructure standards substantially in order to maximise the available funds for the top structure, for example VIP latrines and gravel roads. They are also aware that monthly tariffs for non-sewered plots will be much lower due to reduced water consumption and the lack of sewage treatment charges (though a VIP maintenance charge would be included).

It is recommended that further interaction with the residents be undertaken in order to determine how many wish to have which type of service. The site can then be divided into water-borne and non-waterborne sewerage zones.

Housing

Residents participating in focus groups expressed a strong interest in building houses for themselves. It is strongly recommended that a support system be established to assist in this process. It is expected that there will be a strong preference for conventional construction, but alternative construction methods, such as mortarless interlocking blocks, should be explored.

Energy conservation and retention should be explored in detail. In order of cost, starting with the least cost, options are:

• Orientation of the unit for maximum solar gain in winter
• Fitting low energy light fittings
• Installing ceiling for heat insulation
• Installing solar water heaters

It is considered that all these might be feasible within the budget, and that carbon credits could be used to offset the cost.

In the case of solar water heaters, these will only be required by residents with waterborne sanitation. It is suggested that a cost-sharing formula be used for such installations, which would be an optional extra.

Economic infrastructure

Among the crucial elements in the planning layout and regulations applicable to the scheme, are the following:

• Small scale trading from residential stands should be permitted, provided that there is no nuisance created by it.
• Provision should be made for a limited number of trading sites for larger enterprises, such as welders, mechanics, carpenters, furniture manufacturers, block makers etc.

The location of trading sites and retail outlets should be linked to pedestrian movement patterns and transport routes, such as taxi and bus stops.

Social infrastructure

The plan makes provision for churches, crèche and businesses. It is proposed that the location of the business site be reviewed in light of transport routes and pedestrian traffic flows.

Transport planning, connectivity and mobility

No special activities are to be undertaken in this respect in relation to this project.

Community development workers