Efficient Municipalities Hold the Key to South Africa’s Economic Future
South Africa’s municipalities vary tremendously in their physical characteristics, demographics, investment needs, economic bases, and administrative and political capacity
A majority of the world’s population now lives in urban areas
In South Africa, half the nation’s population live in municipalities covering less than six percent of its land area
These urban municipalities will determine South Africa’s economic future
PRETORIA, July 31, 2009 -- Development experts agree that the world is moving inexorably toward an urban future, with a majority of the world’s population already living in cities. South Africa’s ability to effectively invest in urban infrastructure will be a major determinant of the nation’s economic future.
How can we secure our urban future? How can municipalities be made more efficient? What investments are needed, and in which municipalities? How can these be financed? What steps can national and local governments take to accelerate much-needed investments in infrastructure? These were the major topics discussed at a two-day workshop hosted by South Africa’s National Treasury, the South African Cities Network, and the World Bank on June 5.
The conclusions: South Africa’s municipalities vary tremendously in their physical characteristics, demographics, investment needs, economic bases, and administrative and political capacity. A relatively small group of municipalities, occupying less than six percent of the nation’s land area, house more than half the population and produce some 80 percent of the nation’s economic product. This group has huge investment needs estimated at ZAR 271 billion ($33 billion) over ten years, with more than 90 percent of this amount needed to support economic growth and rehabilitation of existing infrastructure.
These ‘urban’ municipalities hold the key to South Africa’s economic future. While these centers of productivity must be nurtured and grown, it is essential that the fruits of their success be shared nationally, and that access to opportunity and services be equalized.
“Cities are an engine of growth,” said Kenneth Brown, Deputy Director General for Intergovernmental Relations at National Treasury. “This workshop is about finding ways to accelerate development in cities, both in South Africa and across the developing world.”
The workshop brought together public policymakers, urban and spatial development specialists, investors, and local government leaders from the most urbanized municipalities in South Africa.
In opening remarks, Ruth Kagia, World Bank Country Director for South Africa, welcomed participants and challenged them to think outside the proverbial box in generating solutions to improve the efficiency and effectiveness of municipalities.
Citing findings from the World Development Report 2009, “Reshaping Economic Geography,” she noted that as countries develop, production becomes more concentrated spatially and some places become more favored by producers. The bedrock of economic integration and inclusion efforts should be institutions that unite, infrastructure that connects, and interventions that target.
Workshop topics discussed included quantification and localization of investment needs, state of municipal and urban finances, rules of borrowing and private sector participation, human resource challenges, and policy options for investment in various types of municipalities.
“Today’s workshop is about improving service delivery across the nation, including urban and rural spaces” said Matthew Glasser, Lead Infrastructure Specialist at the World Bank, and Team Leader of the report discussed at the workshop. “In this time of economic contraction, it is important that we focus on the role of cities because they will provide the foundation for renewed growth and productivity that are needed to finance services for all South Africans.”
Balancing investment priorities is an ongoing process. Some of the most marginalized and under-served areas are in rural spaces, and they must receive better services and more opportunities. Yet these areas also ultimately depend on the success of South Africa’s cities, because that is where most of the tax revenues to fund any national redistribution of investment are derived, and it is where most of the opportunities for the nation’s future will be found.
A key message from the workshop is that, while extending access to basic services remains a critical priority, attention must also be paid to the rehabilitation of existing infrastructure, and to strategic investments in new infrastructure to create capacity for economic growth. A second key message is that while there is substantial scope for expanded borrowing against their own balance sheets by creditworthy municipalities, this borrowing must be strategic, and should be based on long-term physical and financial planning.
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