Focus of inclusive growth should centre on cities
Since his state of the nation address, President Cyril Ramaphosa has been working hard to demonstrate a determination to place SA on a more sustainable growth path. He has been at pains to make the case that this is not growth for the sake of growth, but a qualitatively different growth that can yield better opportunities for most South Africans.
However, his February address had a glaring omission: he made little or no mention of how important the transformation and development of cities will be to this vision of a brighter, more inclusive future.
A few days later, erstwhile finance minister Malusi Gigaba articulated in his budget speech that “cities are the heart of the national economy and hold the potential to drive our economic renewal”. But urban observers would note there was little substance behind this sentence. It was only in 2017 that the cabinet agreed to an Integrated Urban Development Framework, more than two decades after the first attempts to secure cabinet endorsement of prior versions.
The framework echoes the global consensus that countries have to grasp the opportunity to meet wider development goals through supporting city growth.
In its 2016 World Cities Report, UN Habitat notes that “globally, urban centres are expanding due to their capacity to generate income, contribute to national wealth, attract investments and create jobs. Cities are places of mass production, consumption and service provision….
“This draws sharp focus to the galvanising power of proximity for innovation, including the economies of urbanisation and agglomeration — which together establish the foundation of the transformative power of urbanisation.”
In its 2017 Poverty Trends report, Statistics SA made the powerful finding that “generally, while poverty decreased between 2006 and 2015 in both settlement types [rural and urban], urban areas benefited more substantially”.
For some in the governing party and the state bureaucracy this is all the more reason to focus attention on rural areas rather than the cities. However, under circumstances in which the Integrated Urban Development Framework reports that two-thirds of the population are living in urban areas, up from just more than 50% in 1994, and more than 50% of national GDP has its origins in the four largest metropolitan areas, it is clear that cities have to be at the heart of thinking about plans for developing an inclusive and growing economy.
An examination of a range of other middle-income countries, including some in the Brics stable, will show that the South African model of financing ambitious urban development transformations needs reform. Most budgets of the largest metropolitan areas in SA are funded by own revenue, supplemented by a range of nationally derived grants.
Equitable share grants in support of free basic services continue to come in at a significantly lower per-capita sum for the metros than they do for largely rural districts. Capital allocations, such as those for transportation or other infrastructure, have been modest in international terms.
Conditional grants to municipalities under the present medium-term expenditure framework will furthermore be cut in real terms (5.8% in 2018-19 alone) at the same time as the cities face own-revenue shortfalls.
To grow the economy and create jobs, SA not only needs better-run cities, but also needs the state and provincial governments to recognise the critical role of cities and invest appropriately.
SA’s cities continue to reproduce many of the elements of dysfunction that were born out of apartheid. People live far from work opportunities and business areas are either remote islands with grand edifices or places of decay and disinvestment.
The array of institutions that need to function at their optimum to support productive and life-affirming denser settlements — hospitals, schools, colleges — often fall short of even the least ambitious of targets.
There has been impressive delivery across a range of urban services such as housing. However, the reality is starker than before: the whole increasingly appears to be something less than the sum of the parts.
Ramaphosa would do well to listen to the assertions of those who understand the role of cities. To succeed in his ambitious goals, he will have to find a way, with other stakeholders, to weave the dynamic of urban spaces into the programmes he is championing. Core to this is an imperative that economic and investment policies explicitly recognise not only that cities are of growing importance because of their scale, but also appreciate that they offer unique combinations of interactions or networks that support growth and employment activity that is almost impossible to replicate in small towns or rural areas.
Without these elevated commitments in this country, the warning of UN Habitat should be heeded that “poorly planned urbanisation can potentially generate economic disorder, congestion, pollution and civil unrest”.
This is a future that has appeared all too familiar to South Africans in recent years.
Robbins is honorary research fellow at Durban University of Technology’s Urban Futures Centre and policy research associate in international services and manufacturing at the University of Cape Town.