Cities go global to promote themselves, prosper
AS THE global marketplace has become more cosmopolitan, to compete in the increasingly intertwined world economy, provincial governments, cities and towns are developing new ways of promoting themselves by going global.
Whether a provincial government, city or town competes for a factory, a major convention, tourism rands, or export markets for its own businesses, the way it reaches abroad can mean the difference between success and failure or domestic or foreign direct investment (FDI).
South Africa remained the largest recipient of foreign direct investment (FDI) in Africa, according to an annual report released by the UN Conference on Trade and Development (Unctad).
I believe that activities in the global arena, including maintaining sister-city relationships with foreign towns, promoting exports, working with foreign trade offices, helping local businesses to secure new foreign markets and promoting a variety of cultural activities, could help promote the inflow of government-togovernment, country-to-country and nation-to-nation FDI.
Our province has demonstrated seriousness about the formation of strategic partnerships with foreign governments, business, non-governmental organisations, academics, civil society and others, to drive service delivery.
Here is the example how the twinning between local and international provincial governments can help boost FDI.
For us, the twinning between the Province of the Eastern Cape and the State of Lower Saxony in Germany offers opportunities to big business, as well as a wide and invaluable range of social and economic benefits to partner communities. It has led to the sharing of ideas and expertise, the creation of trade links, environmental action and the improvement of language skills.
My government colleagues just returned from the State of Lower Saxony. During our period of co-operation to date, the Lower Saxony State Institute for Teacher Education and School Development was involved in an e-learning project and other partnerships to enhance learning in the Eastern Cape. As a result, servers were installed in Further Education and Training colleges.
Health workers were also trained and community workers were empowered with technical and business skills. Provincial government departments also benefited through human resource development by an international non-profit organisation, Internationale Weiterbildung und Entwicklung.
Our co-operation with the State of Lower Saxony should provide opportunities for professionals, school children, civil servants and others. Our people will be able to make new friends, gain experience and confidence and, to a greater extent, broaden their horizons.
The relationship the Province of the Eastern Cape and Lower Saxony have built is about scratching backs, holding hands and generally embracing every opportunity presented by thriving global partnerships.
Twinning can offer a wide and invaluable range of social and economic benefits to partner communities, thus boost global FDI inflows, which Unctad said fell by 16 percent last year to $1.23 trillion (R17.13trln), influenced mainly by the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks.
According to an EY survey in 2015, capital investment into Africa surged to $128bn, up 136 percent. FDI created 188 400 new African jobs, a 68 percent increase. Spurred by a few megadeals, the average investment increased to $174.5 million per project, from $67.8m in 2013.
Fortunately, South Africa has attracted the lion’s share of FDI, accounting for 24 percent of all FDI projects in Africa. Nigeria, Angola and Kenya were next best, attracting 9 percent, 8 percent and 7 percent, respectively.
The World Investment Report 2015 said South Africa received $5.7bn in FDI last year, down 31 percent from $8.3bn in 2013.
The fact of South Africa capturing the highest market share of FDI inflows is consistent with the country’s healthy macroeconomic policy frameworks that the government has cemented.
I certainly believe that South Africa’s nine provinces could boost FDI through co-operation with cities and regions and go beyond twinning, to focus especially on the development of economic and territorial projects.
To boost FDI, we should strive to share ideas and expertise, create trade links, environmental action and the improvement of language skills.
Overall, twinning should enrich the life of the whole community by promoting international understanding – and respect for others.
We are working hard to make sure that the twinning between our province and Lower Saxony is designed to be a real indepth work on economic development projects, to forge more co-operative relationships in terms of territorial development and not just the overall relations between the two states. Lower Saxony is also home to the globally competitive manufacturing plant of Mercedes-Benz.
My vision is that we continue on a journey with a special emphasis on youth development and entrepreneurship; optimising the development potential in agriculture; and renewable energy.
Our vision is to be the food basket for the southern Africa region. We have identified agriculture as a key driver. We would like to have a special focus on agricultural development as a backbone of our economic development.
To boost FDI, our provincial governments should look for more formal or semi-formal relationships with foreign provincial governments. Such a relationship might be the product of a formal technical twinning agreement by which a more developed city or county lends support to a partner locality facing similar management, environmental or public service challenges.
It also might have its roots in a peer relationship that blossomed through a broad, cultural city-to-city exchange or a donor-funded technical assistance programme.
What are the benefits that come with FDI? As developing countries, we need capital when we are short of or starved of savings, because of underdevelopment. FDI brings in long-term capital.
Economic benefits FDI brings in technology and know-how. With FDI host countries benefit from the exports of foreign enterprises and access to overseas markets, just as the Lower State of Saxony does in the Eastern Cape.
For many years economists have taught us that FDI inflows provide economic benefits such as increased competition, technological spillovers and innovations and increased employment.
Yet the impact of foreign investment extends far beyond economic growth. At times FDI can be a catalyst for change to society as a whole, therefore one must think in terms of economic, political, social, technological, cultural and environmental factors and examine all the effects of FDI in order to decipher the true longterm impact.
Building national capabilities on our own steam is possible but it can also be done by collaborating with foreign interests through FDI and twinning our cities and towns.
While our interests may be local, development in distant places can help make our own cities prosper or languish, depending on what they do.
Phumulo Masualle is Premier of the Province of the Eastern Cape