NATIONAL TREASURY
Economic Development Strategy
For
Greater TzaneenMunicipality
4 November 2004
PHASE 3 REPORT
Prepared for:
National Treasury / Greater TzaneenMunicipalityGlen Steyn & Associates
TABLE OF CONTENTS
1.INTRODUCTION5
1.1Terms of Reference5
1.2The StrategicDevelopment Management Process5
1.2.1Recognizing the Need for Change5
1.2.2Policy and Situation Assessment5
1.2.3Vision, Goals and Targets7
1.2.4Development Opportunity Identification7
1.2.5Project and Programme Conceptualization7
1.2.6Preparation of Feasibility Studies and Business Plans7
1.2.7Approval and Implementation8
1.2.8Monitoring and Evaluation8
1.2.9Stakeholder Consultation8
1.2.10 Repeat the Cycle towards the Realization of the Vision8
2.POLICY AND SITUATION ASSESSMENT9
2.1Economic Development Policies9
2.1.1Limpopo Growth and Development Strategy9
2.1.2Mopani District Municipality IDP9
2.1.3Greater Tzaneen Municipality IDP10
2.2Status Quo Assessment11
2.2.1Demographics11
2.2.2Economic Production12
2.2.3SWOT Analysis14
2.2.4Financial Assessment: Greater TzaneenMunicipality16
2.2.5Economic Infrastructure18
3.VISION, GOALS AND TARGETS20
3.1GTM Vision 201520
3.2Economic Development Goals20
3.3Economic Development Targets20
3.3.1Job Creation Targets21
3.3.2Economic Growth Targets21
3.3.3Illiteracy Eradication Targets22
3.3.4Institutional Efficiency Targets22
3.3.5Cross-Cutting Issues22
3.3.6Regional Integration23
4.DEVELOPMENT OPPORTUNITIES24
4.1Agriculture24
4.1.1Subtropical Fruit and Nut Cluster Development24
4.1.2Livestock Improvement24
4.2Tourism24
4.2.1GTM Tourism Development Framework24
4.2.2LetabaRiver Mile24
4.3Business Development24
4.3.1New Shopping Centers24
4.3.2Local Buying and Business Service Improvement24
4.3.3Informal Sector Promotion25
4.4Business Retention25
4.4.1Sapekoe Tea Estates25
4.5Special LED25
4.6Skills Development25
4.7Economic Infrastructure 25
5.PROJECT CONCEPTUALISATION27
5.1Agriculture27
5.1.1Subtropical Fruit and Nut Cluster Development27
5.1.2Livestock Improvement28
5.2Tourism31
5.2.1GTM Tourism Development Framework31
5.2.2LetabaRiver Mile32
5.3Business Development34
5.3.1New Shopping Centers34
5.3.2Local Buying and Business Services Improvement35
5.3.3Informal Sector Promotion35
5.4Business Retention37
5.4.1Sapekoe Tea Estates37
5.5Special LED Projects38
5.6Skills Development39
5.7Economic Infrastructure40
5.7.1Development of Additional Water Sources40
5.7.2Critical Upgrading of Existing Water Supply Scheme41
5.7.3Critical Upgrading of Access roads and Storm Water Systems42
5.7.4Preventative Maintenance Programme for Electro-Technical Development 43
5.7.5River Mile44
5.7.6Solid Waste Management44
5.7.7Employment-Intensive Construction45
6.FEASIBILITY STUDIES AND BUSINESS PLANS46
6.1Introduction46
6.2Subtropical Fruit and Nut Cluster Development Proposal46
6.3Livestock Improvement47
6.4Implementation of the Tourism Development Framework47
6.5LetabaRiver Mile47
6.6New Shopping Center Development48
6.7Local Buying and Business Service Improvement48
6.8Informal Sector Promotion48
6.9Retention of Sapekoe Tea Estate48
6.10Special LED Projects48
6.11Skills Development48
6.12Economic Infrastructure49
6.12.1 Development of Additional Water Sources49
6.12.2 Critical Upgrading of Existing Water Supply Schemes49
6.12.3 Critical Upgrading of Access Roads and Storm Water Systems49
6.12.4 Preventative Maintenance Programme for Electro-Technical Development 50
6.12.5River Mile50
6.12.6Solid Waste Management50
6.12.7 Employment-Intensive Construction51
7.IMPLEMENTATION52
7.1Stakeholder Consultation52
7.1.1Introduction52
7.1.2Consultation Process52
7.2Council Approval58
7.3Communicating and Marketing the Economic Development Strategy59
7.4Strategic Financial Considerations59
7.4.1Government Subsidies and Grants60
7.4.2Assessment Rates60
7.4.3Electricity61
7.4.4Water61
7.4.5Conclusion61
7.5Managing the Economic Development Strategy62
7.5.1Managing the Process62
7.5.2Managing Each Development Project Proposal63
7.5.3EDS Project Management Schedule63
8.MONITORING AND EVALUATION68
9.SUMMARY OF RECOMMENDATIONS69
ANNEXURES
ANNEXURE ONE:PROJECT TEAMS
ANNEXURE TWO:PROPERTY RATES BILL
ANNEXURE THREE:MAP OF PROPOSED PROJECTS
1.INTRODUCTION
1.1TERMS OF REFERENCE
The terms of reference for this assignment was to assist Greater Tzaneen Municipality to prepare and implement an Economic Development Strategy that is aligned to the Integrated Development Programme and presents the priority projects that will support the economic development process.
The Bigen Africa/Glen Steyn Consortium was appointed on 1 July 2004 to execute the terms of reference. The first report, which was presented on 19 August, was an assessment of the current situation and the second report, dated 16 September, contained development project proposals.
This third report is the culmination of the initial appointment. It consolidates all the findings and recommendations into a strategy format, but within the context of a broader strategic management process that is yet to be completed. This broader strategic management process is described below.
1.2THE STRATEGIC DEVELOPMENT MANAGEMENT PROCESS
Development is a process of change and if this process is to be accelerated, then it has to be effectively managed. Development (change) management implies the planning, implementation and evaluation of interventions that have sufficient impact to change a status quo situation towards a more desirable outcome. This process would normally have the following generic components, which are also illustrated in the attached figure one:
1.2.1Recognizing the Need for Change
The need for change is one of the strongest drivers of the change management process. The extent to which this need is recognized, determines the level of motivation and commitment to the change-management process. This recognition should also be shared among a coalition that represents a sufficient majority for stakeholder support to be mobilized and sustained.
1.2.2Policy and Situation Assessment
The existing policy environment and the current situation assessment describe the departure point for the change management process. The need for change will normally be confirmed by the results of the assessment.
FIGURE ONE: ECONOMIC DEVELOPMENT STRATEGY MANAGEMENT PROCESS
GTM Vision 2015
The proposed vision for GTM for the ten-year period to 2015 is to understand and realize the full Human and Natural Development Potential of Greater Tzaneen Municipality for the benefit of its Residents and the Province.
Note:Stakeholder Consultation is essential throughout the process.
1.2.3Vision, Goals and Targets
The vision is an expression of the future situation that is desired by a sufficient majority of stakeholders for that preferred situation to be legitimate. The future situation could reflect a decade ahead or longer. Goals describe the high-level interventions that are required to realize the vision and targets provide time-lines for the achievement of every goal.
This section describes the destination of the change management process.
1.2.4Development Opportunity Identification
Development opportunities are interventions that are capable of accelerating the process of change. They are identified from the local natural and human resource base, as well as from political, economic, social and technological trends that are occurring in the environment.
1.2.5Project and Programme Conceptualization
Project conceptualization forms the bridge between observations regarding development opportunities and feasibility studies during which these observations are rigorously tested. It should include the formulation of the project purpose, a summary of the project history and a list of the project stakeholders. Available project statistics and preliminary project action plans should also be compiled.
It is normally after this stage that a mandate should be obtained to proceed, because the costs associated with the change management process could escalate from this point onwards.
1.2.6Preparation of Feasibility Studies and Business Plans
The purpose of the feasibility study is to enable a decision to be taken regarding the commitment of funds for project implementation. Feasibility studies can be expensive, but if conducted with care, will reduce the likelihood of unexpected problems emerging during implementation. A typical feasibility study will include the following components:
Market analysis
Financial and risk analysis
Technical analysis
Economic analysis
Social analysis
Institutional analysis, and
Environmental analysis.
The integrated results of the analyses should indicate whether the project should proceed to implementation. The business plan contains all the actions required for implementation.
1.2.7Approval and Implementation
Positive feasibility studies require formal approval before implementation can proceed. The business plan should indicate the role of all stakeholders in the implementation process, the mechanism for raising the required capital and the institutional structure to manage the implementation process.
The development change management process normally contains several simultaneous project interventions. This requires a separate institutional structure to manage, because the development process is bigger than each individual project.
1.2.8Monitoring and Evaluation
The monitoring function is aimed at ensuring that each project intervention makes the required contribution to annual development targets, because this is essential for the achievement of goals and ultimately for the realization of the vision.
1.2.9Stakeholder Consultation
Throughout the change management process, it is essential that all stakeholders, formal and informal, should be consulted. Without consultation, it is unlikely that community commitment towards the development process will be mobilized and sustained.
1.2.10Repeat the Cycle towards the Realization of the Vision
The first wave of development project interventions is unlikely to realize the vision in full and is likely to be implemented before the vision period expires. Repetition of the cycle again and again will bring the community closer to its vision and will ultimately contribute towards the reformulation of the vision itself.
2.POLICY AND SITUATION ASSESSMENT
2.1ECONOMIC DEVELOPMENT POLICIES
2.1.1Limpopo Growth and Development Strategy
The five primary objectives of the Limpopo Growth and Development Strategy (LGDS) are to:
Improve the Quality of Life of the Provincial Population
Promote Sustainable Job Creation and Economic Growth
Raise the Institutional Efficiency of the Provincial Government
Address Unique Priorities as they arise, including Black Economic Empowerment, HIV/AIDS-TB and poverty reduction, and
Facilitate regional integration towards achieving the objectives of NEPAD.
Three strategies are proposed to achieve the economic growth and job creation objective. These three are the promotion of competitive cluster value chains, a science and technology strategy for improved competitiveness and new product development, as well as additional job creation by way of the expanded public works programme.
The proposed objectives of the Tzaneen Economic Development Strategy should be informed by the objectives of the LGDS. Cluster development proposals that are of particular interest to Greater Tzaneen Municipality are fruit production (horticulture) and tourism (Upper Letaba, special interest groups and family recreation).
From the analysis of current fruit and nut production in the Greater Tzaneen area in the first report, it became evident that the potential for competitive cluster development already exists. Climate and soil conditions, as well as local farming expertise in the Greater Tzaneen area, present opportunities for highly productive and competitive cluster formation in fruit and nut production, with a value chain that extends across sectors. Similarly, biodiversity, topography and a wonderful climate conspire to create the platform for world-class tourism clusters to be established.
The other four objectives cut across the sustainable job creation and economic development and should therefore be kept in focus as well.
2.1.2Mopani District Municipality IDP
The IDP for MopaniDistrictMunicipality reflects economic development as one of five strategic programmes to accelerate development. The specific issues contained in the economic development programme include tourism, agriculture and forestry. With regard to tourism development, Greater Tzaneen Municipality is considered to be the special focus area for new opportunities, although agriculture is also identified as an area of opportunity.
The three economic constraints that are mentioned for GTM are:
Lack of a marketing slogan and brand for tourism promotion
Land reform and traditional systems of tenure, and
Previous failures in promoting small-scale farming.
The cluster value chain approach is supported as a mechanism to promote accelerated economic growth and job creation.
2.1.3Greater Tzaneen Municipality IDP
The proposed vision statement for GTM that is contained in the IDP is "To be the fastest growing economy in Limpopo that ensures a quality of life for our community".
The formulation and implementation of an economic growth strategy is one of five strategic thrusts contained in the IDP and aimed at realizing the vision statement reflected above. The strategy phase of the IDP has the following objectives with regard to local economic development (LED):
To facilitate economic development within GTM communities including sustainable community projects for women, men, youth and the disabled by 2007.
To lobby resources for SMME development and promotion of 20 emerging and 10 existing SMMEs by 2007.
To develop and promote tourism without compromising indigenous and cultural values within the GTM area.
To develop an effective Monitoring and Evaluation system for Local Economic Projects that has been implemented.
A wide range of strategies is proposed to achieve these objectives, including the compilation of an economic development study as a basis to refine the LED strategy formulation process. Among others, it is this purpose that the current economic development study seeks to fulfill.
2.2STATUS QUO ASSESSMENT
2.2.1Demographics
Accurate population figures remain a controversial issue. Although the 2001 population census is the official source of statistics on demography, there are many stakeholders, including Greater Tzaneen Municipality who do not accept the census results. The table below reflects the official figure.
Table 2.2.1: Census result for MopaniDistrictMunicipality
Municipality / Male / Female / TotalNP331: Greater Giyani / 105118 / 132315 / 237433
NP332: Greater Letaba / 98119 / 122007 / 220126
NP333: Greater Tzaneen / 171111 / 204474 / 375584
NP334: Ba-Phalaborwa / 64164 / 66932 / 131096
Total / 438511 / 525728 / 964239
Source: Statistics SA; Census 2001
According to the census, Greater Tzaneen is by far the largest municipality in the Mopani District, with almost 40% of the population. Females are in a considerable majority (almost 55%), reflecting the impact of the migrant labour system.
A population estimate that was made for the Department of Water Affairs for the municipality for 2001 on the basis of house counts came to 395121. (Refer to the Mopani Water Services Development Plan of 2002). It is therefore concluded that the census 2001 figure could be an undercount.
Greater TzaneenMunicipality conducted a Status Quo Survey in 2003. It reflects a total number of 93 815 families, from which it projects the population at 489,974. This is a significant deviation from the census projections, (see table 3.1.3 below) and the survey methodology is not provided to substantiate the estimate.
The real figure is likely to lie between the census and the survey population estimates. This controversy needs to be resolved with Statistics SA and will require an explanation of the methodology that was used for the GTM survey. Census figures will have to be used until the controversy is resolved.
Almost 47% of the population is still at school or younger (18 years and below), whereas the proportion of aged persons is less than 5%. Small reductions in the proportion of population at school and equal increases in the population of working age and older are indicative of a shift in age distribution that is likely to reduce population growth rates in future.
Population growth rates are expected to decline from the current 1.4% per year (2004), to 1.06% in 2008, mainly as a result of the HIV/AIDS epidemic, where after it will stabilize and gradually increase again. It should be noted that these are natural population growth projections only and do not provide for in or out-migration.
The fact that almost 26% of adults in Mopani and 25% in Greater Tzaneen have no schooling is a limiting factor on the local skills pool and ultimately on economic development. This is reinforced by the fact that only four percent of adults in both areas have attained educational qualifications beyond secondary school.
The census of 1996 indicated that 28% of GTM population had no schooling, which means that the situation is improving. The rate of improvement may have to be accelerated so as to raise the trainability of the workforce.
Almost 29% of households indicated that they have no formal source of income. The R9600 level and lower is below the minimum living level and almost 70% of households fall into this category. Conventional economic growth initiatives are unlikely to reach this entire group and will have to be augmented with special programmes that are aimed at poverty alleviation.
The Integrated Development Plan and the Integrated Spatial Framework for GTM indicates that HIV prevalence among persons who underwent voluntary testing during 2002 was as high as 45. All the employers that were interviewed for the Tzaneen Economic Development strategy have indicated that HIV/AIDS is a major threat to business productivity and to household income.
2.2.2Economic Production
A comprehensive analysis of Gross Geographic Product per sector is not available for TzaneenMunicipality and could not be done within the budget that was available for the compilation of this draft Economic Development Strategy.
However, it is evident from the status quo assessment that agriculture, and sub-tropical fruit production in particular, is the main driver of the local economy. A summary of agricultural production per commodity is provided below. Other important sectors are trade and tourism. There is substantial potential for expansion in all three of these sectors. Government services and manufacturing are of intermediate importance. The impact of government services on the local economy is mostly through the purchasing power of public servants and through pension payments. Manufacturing activities are largely confined to timber and fruit processing and to packaging.
Mining is not a significant economic activity in Greater Tzaneen Municipality.
Table 2.2.2: Local Value of Agricultural Production (2004)
Commodity / Pack House Sales R’m / EmploymentCitrus / 500 / 11 000
Avocado / 100 / 1 070
Macadamia / 60 / 600
Banana / 50 / 810
Timber / 40 / 1 600
Mango / 30 / 850
Other / 120 / 1 000
Total / 900 / 16 930
The revenue figure above includes packaging of approximately R100 million. The net sales figure for agriculture is therefore estimated as R800 million. The GGP co-efficient for the agriculture sector in Limpopo is 0.498, which implies that the contribution from the agriculture sector to gross geographic product in Greater Tzaneen Municipality could be R400 million. According to Census 2001, thirty percent of the Municipal labour force is employed in agriculture, hunting, forestry or fishing. (Note that hunting is excluded from the table above).
It is estimated that the gross value of sales from manufacturing in Greater Tzaneen Municipality is approximately R750 million at 2004 prices. The GGP co-efficient for the manufacturing sector in Limpopo is 0.244, implying that the contribution to gross geographic product from this sector could be R183 million. According to Census 2001, 11.7% of the municipal labour force or 7650 people were employed in the manufacturing sector in that year.
The Tourism Development Framework estimated turnover in the local tourism industry to be R75 million (adjusted to 2004 prices). This translates to R60 million in GGP at a conversion rate of 0.773.
Annual expenditure by the Department of Education in the Mopani District area (Region 5) will be approximately R780 million in 2004. Population distribution (40% of Mopani District residents live in GTM) can be used as a proxy to estimate the GTM share of this expenditure at R312 million. This translates to a contribution of R240 million to GGP (at a conversion rate of 0.773). Education alone could represent 40% of total government activity, implying that government probably contributes R600 million in the local economy.
On the assumption that government represents 20% of economic activity in GTM, the size of the municipal economy at 2004 prices is in the order of R3 billion, with agriculture representing 13.3% of that.