V4 13 March 2017
Support the strengthening of the economy to promote inclusive and sustainable growth, employment and resilience.
1. Summary matrix
WHAT / WHY / HOW / WHEN / RECOMMENDATIONSSupport the strengthening of the economy to promote sustainable growth, employment and resilience. / eThekwini Metro (EM), as with South Africa as a whole, must confront deep structural economic challenges that yield low growth, persistent inequality, economic instability and weak employment. / A careful balancing of shorter-medium term activities (removing barriers to business, enhancing services, maintaining infrastructure) is required with a growing focus on medium-to-longer term elements (city infrastructure, skills and broader urban productivity pressures). Because of the limitations faced by both the local state and the local private sector it is essential that partnership activities are formulated to enhance impacts. / Immediate. / Initiate dialogue with potential partnership actors, supported by widelyrespected external facilitators where required, to develop plans and partnership commitments.
1. Enhance thebusiness environment. / Exposure to global competition and changing global economic circumstances have presented major challenges for local businesses. These challenges, exacerbated by negligible growth in local (EM) demand, have revealed shortcomings inthe quality and competitiveness of the local business environment. The conditions are exacerbated in a context of ongoing legacies of apartheid neglect that present considerable challenges for emerging businesses in historically disadvantaged areas and micro and small businesses more generally. / The following strategies are proposed to enhance the business environment for the full spectrum of businesses operating in the city –
•Accessible, reliable and cost-effective public services.
•Well-maintained and managed businesses areas (old and new) with dedicated business district urban management and service teams.
•An efficient, transparent public procurement system responsive to needs and concerns of smaller and emerging businesses.
•Basic business development support (SMMEs), including use of public and private sector tenders, to develop capabilities of emerging and small/medium enterprises.
•Readily available and competitively priced land, infrastructure and business districts/premises – in areas where these businesses want to operate (including non-traditional areas such as townships), supported by efficient regulatory processes.
•Specialist extension type support and services for export oriented existing businesses wanting to expand. / 2017 (programme of action to be agreed by end of 2017) / 5-10 year Programme of Action to be agreed within partnership structures including setting out of priorities, allocation of resources and implementation of institutional and regulatory arrangements.
Quick winscould include clear plans and commitments for One Stop Shop (endorsed within partnership context); identified service departments identifying and training business relationship managers; senior officials appointed to be business environment champions for selected priority services; allocation of business environment capital and operating funds in MTERF; Support for and expansion of ongoing business environment reforms as per World Bank business environment reform process.
2. Building/strengthening priority spatial and infrastructure assets. / Competitive services to business must also be matched by a qualityphysical environment as this is regularly identified as a key factor influencing business confidence and performance. This relates to both the built and natural environment as both contribute to a sustainable context for long term business growth. / Develop partnership-based integrated planning, management, institutional development and investment programmes for priority spatial economic areas and their key infrastructure assets, including:
- Consolidating areas of existing national/international significance.
- Selective development of areas of new/emerging growth and expansion (already underway or proposed) with prospects to secure future regional/national significance.
- Support the development of a joint industry-government led initiative to raise the capacity and skills base of all involved in the construction and civil value chains with a focus on small and medium businesses.
- Develop and implement “inclusivity plans” in priority areas to attend ensure integration of varied needs of marginalised stakeholders in areas of major economic activity.
Quick wins could include review of budget and development of proposals for budget alignment (maintenance, capital, institutional) – to be included in MTERF planning; key service departments to have area-focused business relationship managers to be available to respond to business area queries and to assist with acting on service and/or infrastructure programmes in such areas (UIP programmes to be supported and expanded, support commitments to be made in non UIP areas).
Note – enhance alignment of BEPP, Integration Zones and medium-to-long-term investment plan for city.
3. Strengthening institutional capabilities in key economic sectors and developing specialisations. / Although the City has a relatively well resourced and managed local government and the presence of a range of institutions, it is located in a Province struggling with delivery and with limited exceptional or specialized institutions meeting the specific needs of economic actors and citizens more widely. / It is important that key value-chain and/or sector efforts are crafted in support of the following through partnership structures:
- Attending to the regional education and skills base (see specific comments in 4.)
- Supporting the development of a business-led forum of the leading export businesses (direct and indirect) in the city (large, medium and small), drawing on key players in existing cluster and sector.
- Initiate new industry development forums with emerging or existing actors in nascent sectors (E.g. creative/culture; medical & pharma; design;maritime; green economy and ICT/software).
- Secure support from institutions influencingother factors affecting business climate (e.g. safety and security, education, etc.).
Selected priority actions to include:
Support for development of World Bank support Investment Promotion Strategy and related implementation to support domestic and international investor expansion; Confirmation of appropriate sector plans (in consultation with partnership actors) manufacturing (including enhancement of existing and potential sectoral support processes and area-based mini-IPAPs), construction, tourism development and promotion (including MICE), creative/entertainment & culture, BPO/services/ICT, intensive commercial and small-scale urban agriculture and education and training (linked to 4. Bolstering skills).
4. Bolstering skills. / The local skills base is relatively weak and a barrier to economic development, inclusion and transformation. As a city located in a region with major education and training deficits it is imperative for sustainable economic growth that these are attended to. / Partnership arrangements must again be central – particularly because the municipality has limited direct responsibilities with regard to the educational and training system - and it is recommended that the city actors consider the following:
- Integrate strategies around education upgrading and skills development into the spatial and sectoral focus areas set out in 2 & 3 (above).
- eThekwini in conjunction with local partners needs to play a key role in helping develop intelligence systems to signal what foci might be needed.
- Entrepreneurship development activities.
2. Expanded matrix and supporting notes
2.1. Scene setting comments:
eThekwini Metro (EM) has a lower per capita income than Johannesburg, Pretoria/Tshwane and Cape Town. In fact its per capita income is at around 2/3 that of Johannesburg’s. eThekwini Metro also has a greater share of poor households and a smaller share of higher income households than these three cities. The result is that eThekwini Metro – and more especially the businesses in the city, cannot afford to rely largely on demand from the local population to generate demand for goods and services produced locally to further generate employment and income at the levels which the city needs. Even if one considers possible demand prospects from KwaZulu-Natal Province as a whole, the even lower per capita income levels – much of it supported by social grants - leave little in the way of disposable income to support economic demand. These circumstances lie at the core of why both KZN and EM have struggled to see business and employment growth generated in the manner that has been the case for other centres where higher per capita incomes support a considerable level of demand for locally produced goods and services. Furthermore, being located at the coast at the point at which most of South Africa’s very substantial imported consumer goods arrive, makes EM even more vulnerable than other cities to have this demand met by imported goods. Whilst other large cities with a similar income profile might be able to compensate for this by large public sector employment, this is not the case for EM which is neither a national or a provincial centre of government administration. Under these circumstances, EM has little choice – if indeed it wants to raise employment and incomes – to encourage those activities that are likely to have significant export-type dynamics. These are goods and services where the market it likely to be beyond the borders of eThekwini, KZN and in some cases South Africa. These activities will allow for the earning of a return from sales in other markets, a portion of which can be returned as income (and employment) for those working in the relevant businesses in EM and further as demand from local suppliers. Examples of these activities would be non-EM domestic and international tourism, manufactures with markets elsewhere in SA and internationally and other services exports such as those in the BPO sector andproducer services such as engineering, accountancy, legal, management consultancy, ICT, logistics and design. This by no means entails a abandonment of any interest in those activities directed almost entirely to the local market – or by extension those forms of support aimed at enabling such activities to have a greater reach for their products to markets beyond EM – but it does require a degree of balance when decisions are made. In fact considering the country’s past of race-informed control of economic opportunities there is in fact an imperative to support local enterprise to reach new markets, but caution does need to be exercised that activities are not merely generating more and more enterprises for a slow growing local consumption market. Enterprises generated in the latter context are unlikely to add employment and grow output as they are constrained by growing competition for smaller and smaller shares of the public spending pie.
2.2. Expanded matrix (with additional detail)[GR1]
WHAT / WHY / HOW / WHEN / RECOMMENDATIONSSupport the strengthening of the economy to promote sustainable growth, employment and resilience. / eThekwini Metro (EM), as with South Africa as a whole, must confront deep structural economic challenges that yield low growth, persistent inequality, economic instability and weak employment. Responses must therefore attend to structural factors and not just superficial changes. / A careful balancing of shorter-medium term activities (removing barriers to business, enhancing services, maintaining infrastructure) is required with a growing focus on medium-to-longer term elements (city infrastructure, skills and broader urban productivity pressures). Because of the limitations faced by both the local state and the local private sector it is essential that partnership activities are formulated to enhance impacts. / Immediate. / Initiate dialogue with potential partnership actors, supported by widelyrespected external facilitators where required, to develop plans and partnership commitments.
1. Enhance thebusiness environment to improve the ease of doing business and to support an improved, nationally and globally competitive environment. / Exposure to global competition and changing global economic circumstances have presented major challenges for local businesses. These challenges, exacerbated by negligible growth in local (EM) demand, have revealed shortcomings in the quality and competitiveness of the local business environment. The conditions are exacerbated in a context of ongoing legacies of apartheid neglect that present considerable challenges for emerging businesses in historically disadvantaged areas and micro and small businesses more generally. / The following strategies are proposed to enhance the business environment for the full spectrum of businesses operating in the city –
•Accessible, reliable and cost-effective public services.
•Well-maintained and managed businesses areas (old and new) with dedicated business district urban management and service teams.
•An efficient, transparent public procurement system responsive to needs and concerns of smaller and emerging businesses, particularly those from historically disadvantaged communities as set out in the Mayor’s proposed Radical Economic Transformation plan (Feb 2017).
•Basic business development support (SMMEs), including use of public and private sector tenders to develop capabilities of emerging and small/medium enterprises (including networks and referrals to other support providers (finance, tech etc.)).
•Readily available and competitively priced land,infrastructure and business districts/premises – in areas where these businesses want to operate (including non-traditional areas such as townships), supported by efficient regulatory processes.
•Specialist extension type support and services for export oriented existing businesses wanting to expand and new export-oriented businesses wanting to establish in eThekwini. This should help firms dealing with local regulatory, planning and servicing arrangements (see 3.). / 2017 (programme of action to be agreed by end of 2017) / 5-10 year Programme of Action to be agreed within partnership structures including setting out of priorities, allocation of resources and implementation of institutional and regulatory arrangements.
Quick wins could include clear plans and commitments for One Stop Shop (endorsed within partnership context); identified service departments identifying and training business relationship managers; senior officials appointed to be business environment champions for selected priority services; allocation of business environment capital and operating funds in MTERF; Support for and expansion of ongoing business environment reforms as per World Bank business environment reform process.
2. Building/strengthening priority spatial and infrastructure assets supporting employment, inclusive growth, competitiveness and urban productivity. / Competitive services to business must also be matched by a quality physical environment as this is regularly identified as a key factor influencing business confidence and performance. This relates to both the built and natural environment as both contribute to a sustainable context for long term business growth. / Develop partnership-based integrated planning, management, institutional development and investment programmes for priority spatial economic areas and their key infrastructure assets, including:
- Consolidating areas of existing national/international significance -
- Port and surrounds.
- CBD/greater Berea (incl. western, southern and northern corridors).
- Southern Basin.
- Greater Pinetown/New Germany.
- Umhlanga Town and Umhlanga Ridge, Cornubia, Sibaya.
- Main tourism experience nodes/areas/corridors (Beachfronts (central, Umhlanga, key nodal points), Ushaka Marine World (and Point), key accommodation and entertaintment districts, ICC environs, Port area, Inanda and 1000 hills corridors).
- Full coastline and key green and river basin assets – as public/recreation spaces and as ecological resources.
- Aerotropolis/Dube TradePort.
- Selective development of areas of new/emerging growth and expansion (already underway or proposed) with prospects to secure future regional/national significance:
- Key cultural/historical nodes.
- Outer west growth area.
- Key metropolitan public transport nodes and corridors to receive attention within these contexts for expanded economic opportunities.
- Nodal management and upgrade plans for business nodes (major and secondary) in key townships and smaller urban and peri/urban nodes.
- Support the development of a joint industry-government led initiative to raise the capacity and skills base of all involved in the construction and civil value chains with a focus on small and medium businesses. Partner with the IDC, Ithala and NEF to assist with the creation for improved financing arrangements for emerging firms in these priority areas.
- Develop and implement “inclusivity plans” in priority areas to attend ensure integration of varied needs of marginalised stakeholders in areas of major economic activity.
Quick wins could include review of budget and development of proposals for budget alignment (maintenance, capital, institutional) – to be included in MTERF planning; key service departments to have area-focused business relationship managers to be available to respond to business area queries and to assist with acting on service and/or infrastructure programmes in such areas (UIP programmes to be supported and expanded, support commitments to be made in non UIP areas).