IDP Conference 2004

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SESSION 1 Economic development in the
Western Cape - Brendon Roberts Head
Dept of Economic Development Tourism
Western Cape Province 4 March 2004
IDP Conference 2004Developmental Governance in
Action
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CONTENT

• Economic Development WC Context
• iKapa elihlumayo
• Growth and Development Summit
• Latest developments iKapa elihlumayo
• Progress with Micro-economic Strategy
• Drafting process
• Preliminary picture
• Provincial response
• Closing remarks

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1. Economic Development WC Context

• Our Reference Points
• Within national policy framework - i.e. RDP and
  GEAR
• Social Dialogue through NEDLAC over many years
• Nat. GDS Presidents call Social partners work
  together!
• gt Government, labour, business community
  constituencygt To address key economic
  challenges
• Growth
• Investment
• Employment
• Overcoming poverty and inequalities
• Peoplecentred development

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1. Economic Development WC Context
Common Plan of Action by Social Partners

• Promoting and mobilising investment and creating
  decent work for all
• Ensuring economic empowerment for all, especially
  for black people, workers, people with
  disabilities, women and youth
• Eradicating poverty and addressing the legacy of
  under-development
• Strategically engaging globalisation to the best
  advantage of the country

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1. Economic Development WC Context
Common Plan of Action by Social Partners

• To give effect to this vision, the constituencies
  commit to
• a) Building an enduring partnership through a
  shared vision.
• b) Addressing urgent challengesSelecting from
  many possible interventions those which hold the
  promise of the greatest possible impact in the
  shortest possible time for accelerated
  investment, job creation, improved efficiency and
  productivity, greater social equity, and a fairer
  distribution of economic opportunities and
  rewards, while undertaking serious social
  dialogue on broad policy frameworks.
• c) Lending a hand through active participation

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1. Economic Development WC Context

• National GDS vision
• Making South Africa
• The leading emerging market - destination of
  first choice for investors -whilst retaining and
  expanding social equity and fair labour
  standards.
• A productive economy with high levels of service,
  highly skilled workforce modern systems of work
  organisation and management.
• A society in which there are economic
  opportunities for all, poverty is eradicated,
  income inequalities are reduced and basic
  services are available to all.
• A society in which our people, our most precious
  resource, are given opportunity/support to
  develop to full potential.
• A society that promotes the values of social
  equity, fairness and human dignity in the global
  economy.

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2. iKapa elihlumayo
iKapa Elihlumayo Growing Sharing the Cape

• The Provincial Growth Development Strategy
• Goals
• promoting economic growth
• creating empowerment
• reducing inequality
• broadening ownership
• providing a sustainable social safety net
• fight poverty, reduce disparity improve living
  standards

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2. iKapa elihlumayo
iKapa Elihlumayo Growing Sharing the Cape

• Shift in paradigm from welfare dependence to
  participation in the economy
• Reorganization of Government budgets pro-poor
• Reorganization of service delivery integrated
  cooperative
• Recognition that Government cannot do it alone
  we need our social partners to join us to achieve
  our goals

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• Growth and Development Summit (GDS)

• An effort of provincialising the National
  Growth and Development Summit
• Invitation to social partners to participate in a
  Provincial Growth and Development Summit
• - Preparation National GDS as point of
  departure
• - Negotiation on 6 themes
• - Provincial G D Summit on 14 November
  2003

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• Growth and Development Summit (GDS)

6 themes of GDS

1. More Jobs, Better Jobs and Decent work for all
2. Infrastructure, Investment and the logistics
   challenge
3. Economic participation and enterprise development
4. Human Resource Development
5. Governance and Local Development
6. Institutional arrangements for social dialogue
   and partnership formation

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• Growth and Development Summit (GDS)

Key outcomes of Provincial Growth Dev Summit

1. A Framework Agreement on Growth Development
   in the Western Cape Province
2. Commitment to making the WC a world-class region
3. Agreement on the need for on-going,
   institutionalised social dialogue beyondGrowth
   and Development Summit

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• Growth and Development Summit (GDS)

COMMITMENTS (16)

1. 100 000 nett new jobs by 2008(within priority
   economic sectors)
2. Investment in priority economic sectors(through
   supply-side support measures, co-ordinated
   marketing campaigns focused on key global markets
   and public-private investments in collaborative
   sector platforms and projects)
3. Expanded Public Works Programme(as short term
   amelioration for high unemployment of low skilled
   people and for critical economic and community
   requirements.)
4. Provincial rapid response unit to defend
   current investments/jobs(comprising the social
   partners)

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• Growth and Development Summit (GDS)

COMMITMENTS (16)

1. Strengthening the Proudly South Africa
   campaign(locally, in particular through public
   and private procurement processes)
2. Investment in economic and social
   infrastructure(from the current 1.1 of GRP to
   2.5 of the GRP by the year 2008 guided by our
   Provincial Strategic Infrastructure Plan
   (informed by a Provincial Spatial Development
   Framework) and the integrated development
   planning process, aligned to the National Spatial
   Development Perspective)
3. Improve investment environment(by increasing
   capacities and efficiencies and by co-ordinating
   policies and processes across and between
   different spheres of government, with respect to
   safety and security, and the regulatory
   environment for planning and environmental
   impact.)
4. New investment in priority sectors (R5 billion by
   2006)

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• Growth and Development Summit (GDS)

COMMITMENTS (16)

1. Human Resource Development Strategy(preparing
   youth for employment through 10 000 new
   learnerships, and alignment of Further Education
   and Training priorities with economic reality
   prioritise HIV/Aids, TB and fetal alcohol
   syndrome treatment)
2. Effective SETAs and Provincial Skills Development
   Forum (to implement HR Dev strategy)
3. Review regulatory framework for informal
   trading(conducive to developing micro and small
   traders)
4. Comprehensive broad-based empowerment
   strategy(access for historically marginalized
   groups to procurement opportunities in public and
   private sectors)

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• Growth and Development Summit (GDS)

COMMITMENTS (16)

1. Opportunities for co-operatives (nurtured in
   key econ. Sectors)
2. Service delivery to small business (Integrated
   system)
3. Incubate 100 emerging entrepreneurs (pilot
   project to graduate entrepreneurs - 30 women)
   through integrated system offering full spectrum
   of services)
4. Integrated transport system (linked to urban
   planning)

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• Growth and Development Summit (GDS)

Extract GDS Framework Agreement

• 6. GOVERNANCE AND LOCAL DEVELOPMENT
• 6.1 Planning and Resource Allocation
• 6.1.1 In the first instance, it is govts role to
  ensure effective provincial-municipal
  co-operative planning and budgeting through a
  provincial growth and development strategy (PGDS)
  that is aligned with the annual municipal
  integrated development plans (IDPs), which
  specifically support sector development
  strategies at the local level and include the
  Integrated Rural Development Strategy and Urban
  Renewal Programme.

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• Growth and Development Summit (GDS)

Extract GDS Framework Agreement

• In this work government will ensure that the
  national spatial development perspective (NSDP)
  pervades the planning perspective throughout the
  province, that it guides sectoral and investment
  development spending and that there is an
  alignment of parastatal and state-owned
  enterprises delivery in support of PGDS.

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• Latest Developments iKapa elihlumayo

• Effectively, iKapa Elihlumayo became the
  Provincial Development Strategy
• It is informing the provincial budget
• Six pillars of the IE strategy
• A human resource development strategy
• A strategic infrastructure and Logistics plan
• A micro-economic strategy
• plan for building social capital
• A co-ordination/communication strategy, and
• A spatial development framework

NB
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• Latest Developments iKapa elihlumayo

• 2004 Six pillars being developed
  simultaneously
• Post Provincial Growth Summit process
• Municipalities part of the Government Sector
  part of postPGDS talks at PDC
• Municipalities to be kept informed of GDS and
  PGDS process

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3. Progress with Micro-economic Strategy

• Province developing a micro-economic strategy
• Goal?
• To guide and direct Provincial involvement in
  the private sector
• .. and the public sector for the purpose of
  achieving a growing sustainable (globally
  competitive) labour-absorbing Economy
  (see MTBPS 2003)

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Micro-Economic Strategy (MES)

• INTRODUCTION
• Key Questions
• Is there meaning in a provincial MES?
• If so What are the most appropriate actions
  that a provincial government can take to achieve
  a sustainable, growing, labourabsorbing economy?

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Micro-Economic Strategy (MES)

• APPROACH
• Look at global context
• Look at economic trajectory without intervention
• Look at SWOT to determine outlook for industry
  over 5 years and labour absorption (i.e
  unskilled)
• Framework National strategy
• Micro-Economic Reform Strategy (MERS)
• National Research Development Strategy (NRDS)
• Integrated Manufacturing Strategy (IMS)
• SMME development (empowerment creator in response
  to market failure govt intervention)

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Micro-Economic Strategy

• EIGHT PHASES OF DRAFTING (8)
• Phase 1 quick dirty exercise (team
  academics, prov. depts, officials ) not
  comprehensive - threats/ opportunities
• Phase 2 Comprehensive first draft MES
• Phase 3 Cabinet engagement 1st draft prepare
  2nd draft
• Phase 4 Consultations with social partners on
  2nd draft
• Phase 5 Cabinet engagement key inputs into 3rd
  draft, - Action plan and consider
  budgetary implications
• Phase 6 Public launch across province
• Phase 7 Incorporate into provincial MTEF
• Phase 8 Implement interventions in action
  plan/budget

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Micro-Economic Strategy

• GLOBAL CONTEXT
• GLOBAL Powerful forces at work in global
  economy. Division of labour Currency
  manipulation Oil price trade agreements
  proximity to ports job shedding
• CONTINENTAL Afro-pessimism African Renaissance
• REGIONAL SADC Free Trade Agreement
• NATIONAL Macro-Economic Policy Currency
  fluctuation production move to coast

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Micro-Economic Strategy

• LOCAL CONTEXT WESTERN CAPE
• The story makes depressing reading
• Primary Secondary sector stagnation
• Decreasing employment for unskilledgt Skills
  mismatch(e.g. tourism booming, but part-time
  labour used to meet skills requirements)
• Very few sectors in the Western Cape offer
  significant employment possibilities to the
  unskilled and semi-skilled !

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Micro-Economic Strategy

• Economic trajectory
• Growth Industries (if nothing is done)
• Post Telecoms (cell phones, 2nd fixed line
  operator)
• Wine grapes
• Indigenous flowers (fynbos)
• Beverages (wine)
• Transport equipment (boats autos)
• Hotels Restaurants (tourism)
• Other business activities (film industry)
• Food
• Construction (driven by foreign property
  purchase)
• Retail
• Land transport

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Micro-Economic Strategy

• Economic trajectory
• Shrinking industries (if nothing is done)
• Citrus
• Table grapes (water shortages)
• Dairy poultry (foreign competition)
• Aquaculture (long lead time for abalone)
• Fishing (pressure on fish stocks)
• Textiles (foreign competition)
• Leather footwear (foreign competition)
• Paper Publishing (foreign competition)
• Chemicals (environmental concerns at the
  refinery)
• Clothing (foreign competition)

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Micro-Economic Strategy

• Economic trajectory
• Stable sectors (if nothing is done)
• Everything else ( 30 sectors)
• Vulnerability to global forces beyond our control
• Deciduous fruit as an example Fashion
  varies demand New plantings in China
  New cold storage technology
• Prevailing paradigm Start from what we have
• Complacency
• Lack of global business knowledge

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Micro-Economic Strategy

• Economic trajectory
• Consequences for labour (if nothing is done)
• Very few industries (9 out of 50) in WC use
  significant numbers of unskilled labour
• Only 3 out of the 9 are expected to grow
  significantly in the next 5 years
• 1 out of the 3 is expected to become more
  mechanized
• This leaves 2 sectors to absorb unskilled
  labourHotel restaurants and/or
  constructioncombined they are 4.4 of GDPR

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Micro-Economic Strategy

• Economic trajectory
• CONCLUSIONS (if nothing is done)
• Based on analysis, GDPR in constant 2004 Rands
  would be 10 lower in 5 years time (all else
  being equal)
• The outlook for the poor and marginalized looks
  very bleak, if nothing is done
• Whats to be done? gt Select specific sectors
  gt Develop strategies and shape interventions
  gt Intervene !

NB
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Micro-Economic StrategyIntegrated Action Plan
INTEGRATION
KEY GROWTH SECTORS
KEY INPUT SECTORS
CROSSCUTTING ISSUES
SMME
Exports
Transport
Infrastructure
Value Addition
Tourism
Telecoms
Access to Finance
ICT and Business Services
Agriculture
Energy
HRD
Geographic Regions
ICT

• WC
• Harbours

• Technology
• WC
• Nat. RD Strategy
• Biotech Strategy
• AnimalHusbandry
• Sheep

WC Building social capital
Cultural Industry WC Boat building WC Oil and gas
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Micro-Economic Strategy

• IMPORTANT FOR MUNICIPALITIES !
• Analyse value chains/clusters forward/backward
  links in region
• Region-wide sector specific inventions/
  innovationsRD for new products and services
• A facility to identify major new areas of
  economic activity
• MES to guide municipal align IDPs with MES.
• MES to address municipal economic development
  challenges
• Strengthen Provincial local coordination
  budget alignment
• Establish municipal level economic database
• Address capacity shortage in municipalities
• Building relations of trust (social capital)

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4. Closing remarks

• BIG QUESTIONS
• Can government pick sector winners?
• Should government pick sector winners?
• Should government not focus on market failures
  (like HRD) and generic support (SMMEs)?
• INITIAL ANSWERS
• Intervene in both areas as growing sectors are
  where SMMEs will develop
• Government should influence the trajectory by
  encouraging the emergence of new areas of
  economic activity
• Government intervention may mean financing
  initiatives and/or brining its influence to bear