City poised to tackle obstacles
With a clean audit and good governance, Cape Town is firmly on the world map as a destination for global investors, writes Patricia de Lille
OUR COUNTRY is in a dire economic position with a technical recession and two ratings downgrades. It is clear this economic situation is in large part caused by our national political situation and the severe lack of leadership to drive through economic policy that will be attractive to investors and create the right climate for businesses to flourish.
That is the national context in which the city has to operate. However, internationally cities more than nation states are the drivers of economic growth.
So we in Cape Town can continue to drive economic growth for our residents and for the country. The city’s efforts in attracting investment have been recognised internationally. Cape Town was last year ranked 21st on the list of cities with the best foreign direct investment strategies by fDi Intelligence – a division of the Financial Times.
We are the only African city to appear on this prestigious ranking and we are in the company of cities such as Amsterdam, Miami and Auckland. We have now set our sights on getting into the top 10. Our contribution was to ensure that we deliver on infrastructure investment to create the conditions conducive for economic growth.
We have completed 99% of the projects in our Integrated Development Plan (2011-2016). Investment of R22 billion has been in infrastructure, with R9bn of that funded from the city’s cash flow.
We spent an extra R3bn on repairs and maintenance.
We installed almost 790km of fibre-optic cabling as part of our extensive broadband roll-out as fast reliable internet connectivity is vital for economic activity.
We issued 219 000 purchase orders to vendors who complied with broad-based black economic empowerment legislation to the value of R13.96bn (92% of total purchase orders). We are looking to take Cape Town to the next level and continue with the work started.
Following the overwhelming mandate we received from the electorate on August 29, 2016, we implemented a major change with the adoption of the Organisational Development and Transformation Plan (ODTP).
The ODTP is aimed at making the city a more responsive, proactive, customer-centric and globally competitive business destination.
City governments don’t have all the levers we would like to drive, such as economic policy. But what we do have, we intend to use as aggressively as possible to sustain and grow the city’s economy.
Our administration has a committed focus on clean, corruption-free government and this is evident from our record of four consecutive clean audits, with the auditor-general confirming on Wednesday that Cape Town was the only municipality in the country to receive a clean audit for the 2015/2016 financial year.
This is a key factor investors look for and we will be continuing this trend of sound financial management and clean governance.
In the latest quarterly Labour Force Survey, it was again confirmed that Cape Town has the lowest broad-based unemployment of any metro in the country at 25.1% compared to the national percentage of 36.4%. At 25.1% this is still far too high and it is imperative that we bring this down quickly and that is what we intend to do with our economic growth strategy.
We have undertaken an extensive study to understand what sectors of Cape Town’s economy we can look to for future economic growth and which represents the highest potential for job creation.
The sectors which show the greatest potential are those with the most promising global growth prospects. These are business process outsourcing, the tech sector and the green economy sector, particularly renewable energy. Cape Town is already the leader on the continent when it comes to these industries.
We are also seeing great growth in advanced manufacturing and electronics, with companies in Cape Town producing satellites for the global market. Hisense recently celebrated producing its millionth TV and fridge at its factory in Atlantis.
In terms of the business process outsourcing sector, Business Process Enabling South Africa (BPESA) has facilitated investments that have created around 4 000 jobs in Cape Town in the last year alone and while this sounds like a lot, we believe this is just a small potential of this industry.
The Philippines has over a million jobs in this sector and we believe we have an offering that is as competitive that should be able to pull in far larger numbers of jobs over the next few years.
To promote these industries we are funding various special purpose vehicles such as GreenCape, Citi and BPESA who are attracting inward foreign investment and addressing constraints in the skills arena to ensure these sectors continue to grow.
We have also taken a deliberate decision this year to pilot two skills training programmes for high growth of both the tech and business process outsourcing sectors and we will invest in the region of R7m in these programmes with the hope of upscaling them in subsequent years to ensure a steady pipeline of skills to support what are clearly growing industries.
This is part of the Mayor’s Job Creation R340m programme whereby we are providing the funding to train job-seekers and young people and the onus is on the industry to provide permanent employment.
Last year, we also launched the Invest Cape Town brand initiative in which we are looking to actively promote Cape Town internationally as a forward-looking, globally competitive business city.
We are thankful that people around the world already know Cape Town as an iconic tourist city but this has often overshadowed the huge economic offerings of our city. This initiative aims to change the narrative around Cape Town to let the world know we are open for business.
The city has allocated significant funding to propagate this new investment brand over the next year and we are grateful that a number of partner organisations have agreed to use this brand to further leverage the unique investment offerings of Cape Town.
As stated previously, one of the sectors showing strong growth in the city is the green economy sector, particularly the renewables sector where about 60% of the components manufactured for the national renewable energy programme are supplied from Cape Town.
Unfortunately, however, the national renewable Independent Power Producers (IPP) programme and the refusal of Eskom to sign power-purchase agreements with the successful bidders is placing this industry in jeopardy with a number of companies reporting to us that they might have to close down.
We are determined to do whatever we can to avoid such a situation. This is one of the reasons why we are in the process of taking the energy minister to court to fight for our right to procure energy from the renewable energy IPPs and not be forced to buy all our electricity from the state monopoly utility, Eskom.
If we are successful in this challenge, this will also open up the opportunity for other municipalities in the country to procure power from these IPPs, thereby helping to sustain an industry that is being brought to its knees through the destructive action of our poorly run national utility Eskom.
If Eskom refuses to sign these power-purchase agreements then cities such as Cape Town should be allowed to sign such agreements.
Also in terms of the green sector, a further contribution we are making to the green economy is the issuance of our inaugural green bond to the value of R1bn. I am proud that Moody’s has given us a letter of commendation and awarded our green bond with a GB(1) rating – which means it has been impressed enough with the green credentials and controls around this bond to consider it “Excellent”.
While Moody’s downgraded the country, it commends the work that we are doing to promote investment and sustainable investment and it has maintained our national scale rating of Aaa.za, the highest possible rating for a municipality.
Besides the specific spending directed at different high-growth sectors of our economy, we are also investing in the broader infrastructural needs of Cape Town so as to continue to create an enabling environment for businesses to flourish.
This is evident in the city’s capital budget of R6.8bn allocated for infrastructure spend that we will be spending into the next year on roads, electricity and extending our broadband roll out, among other projects.
It is not just the spending of the money but the way we intend to spend it and the strategy behind it.
A particularly important strategy is the Transit Orientated Development strategy where we are looking to create the crowding in effect by the private sector for investment into public transit corridors with the ultimate goal of reversing the apartheid spatial legacy by building high-density, affordable housing, stopping long distances and urban sprawl and increasing the competitiveness of our economy by driving down transport costs and time for workers.
The city will be the catalyst investor in projects whereby we will either make the land available to the private sector for development or we will invest in upgrading existing public transport networks.
On the issue of transport, we are also proud to be a partner in the Air Access initiative hosted by Wesgro, which is aggressively bringing more flights into Cape Town.
Already over 600 000 seats have been added on flights to Cape Town in the past year and a half. This is important both for our tourism economy and also for establishing Cape Town as a serious business destination where people can easily connect with the rest of the world as well as the fast growing African markets.
We see ourselves as a proudly African city and as a partner in Africa’s development. We also see ourselves as the perfect launching pad for companies wanting to penetrate the African market and take advantage of the fast growing consumer base that is there.
Lastly I wish to point out that the city’s Organisational Development and Transformation Plan has resulted in the consolidation of many economic functions under the new Department of Enterprise and Investment, in the Directorate of the Mayor.
This 50-person department includes a number of dynamic functions such as: an investment facilitation function which works with potential investors to navigate the city’s processes; an enterprise development function which runs our business advisory service and works to reduce red tape; a place marketing function which strategically leverages events and promotes Cape Town as a desirable place to live, work, play, visit and invest in; and an international relations function which supports our strategic partnerships and hosts incoming delegations.
The city takes the creation of an enabling environment for economic growth and investment very seriously, and this is at the top of my agenda.
There is a lot going for Cape Town and as far as possible we will not be dragged down by national politics and ill-informed economic decisions.
Cape Town is a great global brand and increasingly its attractiveness as an investment destination will be recognised everywhere.
We are committed to doing all we can to maintain the momentum and grow the economy even further so that we can alleviate poverty and provide much needed jobs to the people of Cape Town.
Cape Town was the only municipality to receive a clean audit for 2015/2016