EKURHULENI: TOWARDS A LOCAL INDUSTRIAL POLICY FOR DRIVING PRO-POOR GROWTH AND A PEOPLE-CENTRED ECONOMY

EKURHULENI: TOWARDS A LOCAL INDUSTRIAL POLICY FOR DRIVING PRO-POOR GROWTH AND A PEOPLE-CENTRED ECONOMY

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 1 EKURHULENI: TOWARDS A LOCAL INDUSTRIAL POLICY FOR DRIVING PRO-POOR GROWTH AND A PEOPLE-CENTRED ECONOMY Christian M. Rogerson 1. Introduction The metropolitan municipality of Ekurhuleni is based upon what historically has been known as the East and/or Far East Rand. Unlike other metropolitan municipalities it does not represent the extension of an existing city but instead represents the amalgamation of several long-established towns (Machaka and Roberts, 2004).

The five East Rand towns of Alberton, Benoni, Boksburg Germiston and Kempton Park have been merged with the three Far East Rand towns of Brakpan, Nigel and Springs. According to SACN data (2004) the combined Ekurhuleni currently is the fourth most populace of South Africa’s six metropolitan municipalities. Although a separate municipality, Ekurhuleni is functionally part of a much larger urban-economic system that spans nearly all of Gauteng and beyond. Together with Johannesburg, Tshwane (Pretoria), Mogale City (Krugersdorp) and Emfuleni (Vanderbijlpark-Vereeniging), Ekurhuleni is an integral part of a “virtually continuous urban ‘extent’ of 8.6 million people” (SACN, 2004, p.

24). Ekurhuleni is distinguished by the fact that within its boundaries, population growth has been expanding at an annual average rate of 4.12 percent which is the highest growth rate recorded of all the six South African metropolitan municipalities (SACN, 2004). Equally significant is that Ekurhuleni is marked by higher unemployment rates than those recorded in other major urban centres; based upon 2000 census data the unemployment rate in Ekurhuleni was 40 percent (ANC Gauteng Province, 2004, p. 58).

Ekurhuleni encompasses what is claimed to be “the largest concentration of industrial activity in South Africa, and in sub-Saharan Africa” (Machaka and Roberts, 2004, p. 2). Indeed, the former East Rand has been described variously

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 2 as South Africa’s ‘national industrial workshop’, ‘the workshop of Africa’ or as ‘South Africa’s Ruhr’ (Bloch, 1993; Centre for Development and Enterprise, 1997; Machaka and Roberts, 2004).

Historically, the region existed as “a bastion of the mining industry” prior its emergence during the 1970s as the national industrial heartland (Nieftagodien, 2004, p. 2). The industrial base of the region benefited enormously from the apartheid economic boom period of the 1960s, including the growth of military production which was heavily concentrated in the East Rand. From the mid-1970s, however, the manufacturing economy entered a phase of protracted decline. Triggered by decline in mining, a major downtown in the local manufacturing economy occurred from the mid-1980s with a hollowing out of the industrial base resulting in the loss of a total almost 100 000 jobs between 1989- 99 (Rogerson and Rogerson, 1997, 1999; Rogerson, 2000, 2004).

Despite this bleeding of manufacturing employment, the SACN (2004) study confirms that manufacturing still remains the core of Ekurhuleni’s formal sector economic activity. Indeed, there is evidence that since 1996 there has been a turnaround in the fortunes of the local manufacturing economy with a recorded increase of 30 000 new manufacturing jobs between 1996-2001, an increase of 26 percent (ANC Gauteng Province, 2004, p. 7) As indexed by the total gross value added by key economic sectors, the three leading drivers of the Ekurhuleni economy are manufacturing (28.8 percent), financial, insurance, real estate and business services (20.9 percent), and community, social and personal services (13.5 percent).

Three large sub-sectors account for nearly two-thirds of value- added (2002) in the critical local manufacturing sector (Pogue and Maharajh, 2004, p. 13). These three essential sub-sectors of Ekurhuleni’s manufacturing economic base are metal products, machinery and household appliances (34.2 percent), fuel, petroleum, chemicals and rubber products (20.2 percent), and food, beverages and tobacco products (10.5 percent). Of significance is that gold-mining, which Nieftagodien (2004, p. 3) observes “contributed hugely to the initial transformation of the East Rand from a sparsely populated and

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 3 undeveloped region into one of the country’s leading economic zones”, has been reduced to the point that by 2002 it contributes only 1.8 percent to total gross value added. Against this brief background portrait of the historical economic development of Ekurhuleni, the objective in this paper is to present an analysis of the current state of local economic development practice and policy. Methodologically, this is a desk-top study which draws necessarily upon both primary and secondary sources relating to LED in Ekurhuleni1 .

In the first section of this report, an attempt is made to provide a picture of the broad LED vision and strategy as put forth in official LED statements approved by the Ekurhuleni municipality. It is argued that this ‘people-centred’ approach is viewed in policy rhetoric as embodying a strong pro-poor focus. The absence is noted, however, of a clear and focussed economic strategy for driving the agreed LED vision of creating “an inclusive wealth generating local economy” (Ekurhuleni Municipality, 2003a). Accordingly, in the second section, attention shifts to review the key dimensions of an analysis of the competitiveness of the Ekurhuleni local economy.

This strategic economic analysis offers an alternative “local economic development model to effectively implement an industrial policy for broad-based industrial development and employment creation” (Machaka and Roberts, 2004, p. 2). It will be argued that within this second stream of writings on LED in Ekurhuleni there are embodied several potentially important ‘lessons’ or ‘best practices’ for evolving local pro-poor growth strategies in South Africa.

2. Towards a People-Centred Economy 1 As of end-2004 the Ekurhuleni municipality had not responded to and completed the survey questionnaire for the World Bank-Netherlands Partnership Program. It was the only one of the six metropolitan municipalities that failed to respond.

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 4 The Ekurhuleni official policy, strategy and implementation framework for LED was presented for adoption to the Council in 2003.

There are three components to the documentation. The first is the Ekurhuleni Local Economic Development Policy (Ekurhuleni Municipality 2003b), the second is the Ekurhuleni Economic Strategy (Ekhuruleni Municipality, 2003c) and, the third is the LED Policy and Strategy Implementation Framework (Ekhuruleni Municipality 2003a). In this section the key themes as represented in these official policy statements are reviewed and analysed. The overriding theme is developing ‘a people-centred economy’, a theme which derives from the title of the earlier documentation on LED policy that was drafted in 2002 (COPAC, 2002) As stated earlier, the LED vision for Ekurhuleni is viewed as that of creating an “inclusive wealth-generating economy” with the LED mission statement given as “To facilitate a conducive environment where all can participate in a wealth generating local economy by focusing on economic growth, empowerment and transformation” (Ekurhuleni Municipality 2003a).

The municipal local economic development policy reflects the strong imprint of the Reconstruction and Development Policy with several long quotations presented from the RDP document to justify the directions offered for LED. The LED policy framework for economic empowerment and transformation is explicitly pro-poor in every respect. Ten policy thrusts are identified which are based upon eight so-termed ‘development principles’. These are listed in Tables 1 and Table 2. Together Tables 1 and 2 encapsulate the key components of Ekurhuleni’s LED Policy.

Table 1: Key Features of Ekurhuleni’s LED Policy (Source: Ekurhuleni Municipality, 2003b)

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 5 POLICY THRUST KEY OBJECTIVES INTERVENTIONS Local Production for Local Need *Create and facilitate an environment within which people are able to achieve sustainable livelihoods *Assist individuals and communities to increase income and wealth * Facilitate production projects to eradicate poverty * Increase local production to meet local needs and eradicate food security * Facilitate conditions at local level to ensure sustainable LED * Set up industrial hives *Promote SMMEs and micro-enterprises *Facilitate the participation of women in local production and services *Stimulate and encourage beneficiation of local mineral and manufactured products *Develop and sustain all economic sectors A Cooperative Movement to Represent Community- Based Interventions in the Local Economy *Create and facilitate mechanisms for sustainable livelihoods to be achieved * Promote Asset formation and asset management amongst the poor and marginalized *Realise BEE *Provide the environment for skills development, skills acquisition and diversification of skills *Provide a voice to organised groups in the policy process * Link the marginalised with the mainstream economy *Develop the socialised third sector * Set up ongoing linkages with community organisations involved in economic activity *Facilitate the involvement of communities in all economic programmes of the metro *Encourage the initiation and continued development of coops *Investigate the potential to set up municipal worker coops on key service delivery channels *Develop linkages with national and provincial programmes to facilitate access to financed, information and marketing

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 6 POLICY THRUST KEY OBJECTIVES INTERVENTIONS of products *Review local legislation to include coops. A Skills Development Network *Enhance the access of local people (employed and unemployed) to acquire skills development and increase the skills base through diversification of skills *Provide training, mentoring and support for the developing economic enterprises *Create a system that can respond to plant closures and industrial decline such that workers are given the option of training to enable self- employment or a smooth transition into new employment *Organise the supply side of the labour market to meet demand.

*Facilitate the linkages between the local skills development needs and the national and provincial programmes *Develop a skills development network comprising all training institutions to consolidate the capacity at local level and to align vocational training and skills development to the needs of the local economy * Facilitate the supply of labour for projects and service delivery programmes of the metro through organizing the unemployed into skills and technology coops.

Develop and sustain urban and commercial agriculture to build food security *Eradicate food insecurity and poverty *Ensure sustainable land use *Promote sustainable livelihoods *Ensure that land in the Metro is accessible to residents interested in carrying out agricultural activity *Facilitate urban agricultural friendly legislation *Facilitate linkages to finance, information and

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005.

7 POLICY THRUST KEY OBJECTIVES INTERVENTIONS production methods with national and provincial government. *Encourage organic farming *Support the development of fresh produce markets in local communities to ensure that agricultural produce can be sold cheaply *Facilitate linkages to export markets *Increase the efficiency and broaden the base of access and ownership of the municipal market Promote Waste Recycling and Reusable Energy *Create Sustainable communities *Assist poor households bring down energy consumption costs *Provide alternative sources of energy *Create sustainable livelihoods *Contribute to local production for local need *Stimulate approaches to value added waste processing *Encourage the use of renewable energy through establishing coops *Encourage the establishment of renewable energy coops Build Local Development Capital *Increase the savings base of local communities *Provide safe and secure institutions in which people can save and borrow money to meet their development needs *Build a pool of finance to support self-reliant development in local *Encourage local savings in communities *Facilitate access to finance *Set up a co-operative bank for development projects to save and access small loans

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 8 POLICY THRUST KEY OBJECTIVES INTERVENTIONS communities *Create institutions that can house technical experts for co- operative development and expansion. *Set up a local LED fund with local businesses to support local development Ensure Participatory and Integrated Planning * Mainstream the IDP process in local governance * Limit the technocratic and top down approach to development *Develop a system of participatory budgeting *Give communities control over development *Decentralise resources and power in the development process *Strengthen the public/Community partnership for development *Develop a sound base of information on the regional economy and data on the impact of LED projects and policies * Design and foster an IDP process that plans LED and fosters participatory budgeting * Ensure that needs, priorities and resources are planned for * Empower and capacitate participants in the process Maintain linkages with the industrial base *Contribute to the formation of development capital in ‘township economies’ *Assist and enable skills transfer and reskilling *Foster local entrepreneurship *Reduce factor costs for industries *Promote job retention within existing industries.

*Facilitate, engage and negotiate with local businesses about their role and contribution to overall LED strategy *Devise strategies for each sector of the economy *Ensure that local businesses are lead (sic) and positioned within the

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 9 POLICY THRUST KEY OBJECTIVES INTERVENTIONS LED development strategy to make commitments to a common vision for the regional economy *Facilitate the implementation of national government trade incentives *Create opportunities for local businesses to make contributions to loan guarantee funds, venture capital for SMMEs, skills development programs, mentoring programs and incubation facilities for grassroots entrepreneurs.

Facilitate and Grow SMMEs *Promote black economic empowerment *Develop a support environment for SMMEs * Establish linkages between existing big businesses and emergent enterprises *Create jobs *Contribute to poverty eradication *Provide women, youth and disabled with entrepreneurial skills *Develop linkages wit national programmes of DTI, Ntsika and Khula on finance and information. *Facilitate a local SMME council *Supply information about business opportunities *Provide one-stop centres to deal with technical advice and support *Set up incubators to assist emergent entrepreneurs to establish their enterprises *Support the growth of informal traders into small

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 10 POLICY THRUST KEY OBJECTIVES INTERVENTIONS businesses *Provide infrastructure, technical support and business advice and access to finance to informal traders Affirm Local Procurement * Promote BEE * Support SMEs and other forms of collective enterprise *Contribute to state-led economic transformation *Allocate resources to the township economy *Build resources and capacities in previously disadvantaged communities.

*Promote a local buy ethic *Ensure transparency in the Metro procurement process *Establish and implement a percentage quota for start-up businesses *Ensure that procurement procedures are friendly and accessible to locals, coops and SMMEs The above ten policy thrusts are underpinned by the eight development principles which are shown on Table 2.

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 11 Table 2: Development Principles of Ekurhuleni’s LED Policy (Source: Ekurhuleni Municipality 2003b).

DEVELOPMENT PRINCIPLE 1. A People Focus – Putting the Poor First 2. Recognition of the Differences Between Communities 3.Recognition of the holistic nature of people’s lives 4. Linking the micro with the macro 5. Accessible Institutions and processes 6. Mainstreaming the environment within the holistic approach 7. State-led partnership approaches between communities, labour and the private sector.

8. Learning to listen Overall, it is evident from Tables 1 and 2 that there is an over-riding pro-poor focus in the LED Policy of Ekurhuleni. The key underpinning development principle of “putting the poor first” is reflected directly in many of the policy thrusts for creating a people-centred economy, not least the heavy emphasis accorded to self-reliance, BEE, disadvantaged groups, the empowerment of women, youth, the development of co-ops and the socialised third sector. The Ekurhuleni Economic Strategy represents the second component of the local economic development framework. It is argued that whilst the LED framework “addresses interventions to close the poverty gap, the economic strategy “points to how the Metro could organize itself and all its services to realize improved service delivery and capacitation in the economy” (Ekurhuleni Municipality 2003c).

This focus derives from the belief that “the local government’s ability to act in the economic arena is limited” (Ekurhuleni Municipality 2003c) and that the “principal role of the Municipality in sustaining

Case Study prepared for the World Bank-Netherlands Partnership Program Evaluating and Disseminating Experiences in Local Economic Development (LED) Investigation of Pro-Poor LED in South Africa, 2005. 12 the economy is to provide core infrastructure for day-to-day economic activity”. More specifically, the core infrastructure in terms of provision of electricity, water management and waste disposal is viewed as “the backbone of the economy” (Ekurhuleni Municipality 2003c) and it is re-stated that “the municipality’s core business is the provision of services” (Ekurhuleni Municipality 2003c).

Beyond infrastructure, it is asserted that another key dimension to growing the local economy is “developing an integrated approach where the Metropolitan area is consolidated into one economic region, taking into account all the imbalances and inequities in wealth, skills and access to infrastructure” (Ekurhuleni Municipality 2003c). The absence of any economic analysis in the economic strategy is brushed side in the sweeping belief that “the market-led economy will continue to grow” and re-assertion that local government’s role is to “restructure itself to play the leading role in facilitating the implementation of national programs on economic development, in particular Black Economic Empowerment, Co-operative forms of ownership, and the economic empowerment of women”.

A number of strategic interventions are proposed in order to realise the economic strategy with the major targets of interventions being “to create jobs in small and micro enterprises and in cooperatives”; to diversify the economy by providing for local needs and to attempt to increase export revenue, as well as to provide ownership opportunities for black people and women and the poor”. Nine sets of strategic interventions are outlined. 1. A focus on administered pricing and tariffs to ensure wider affordability of services 2. Ring-fencing of revenue from electricity, water, sewage and refuse removal to ensure that surpluses improve the reach and range of these services

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