IDP Conference 2004 “Developmental Governance in Action”

1. SESSION 1: ‘Economic development in the Western Cape’ -Brendon RobertsHead: Dept of Economic Development & TourismWestern Cape Province4 March 2004 IDP Conference 2004“Developmental Governance in Action”

2. 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

3. 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: President’s call: Social partners work together! => Government, labour, business & community constituency=> To address key economic challenges: = Growth = Investment = Employment = Overcoming poverty and inequalities = People–centred development

4. 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

5. 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 challenges:Selecting 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

6. 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.

7. 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

8. 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

9. 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

10. Growth and Development Summit (GDS) • More Jobs, Better Jobs and Decent work for all • Infrastructure, Investment and the logistics challenge • Economic participation and enterprise development • Human Resource Development • Governance and Local Development • Institutional arrangements for social dialogue and partnership formation 6 themes of GDS

11. Growth and Development Summit (GDS) • A ‘Framework Agreement’ on Growth & Development in the Western Cape Province • Commitment to making the WC a world-class region • Agreement on the need for on-going, institutionalised social dialogue beyondGrowth and Development Summit Key outcomes of Provincial Growth & Dev Summit

12. Growth and Development Summit (GDS) COMMITMENTS (16) • 100 000 nett new jobs by 2008(within priority economic sectors) • 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) • Expanded Public Works Programme(as short term amelioration for high unemployment of low skilled people and for critical economic and community requirements.) • Provincial ‘rapid response unit’ to defend current investments/jobs(comprising the social partners)

13. Growth and Development Summit (GDS) COMMITMENTS (16) • Strengthening the Proudly South Africacampaign(locally, in particular through public and private procurement processes) • 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) • Improveinvestment 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.) • New investment in priority sectors (R5 billion by 2006)

14. Growth and Development Summit (GDS) COMMITMENTS (16) • 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) • Effective SETAs and Provincial Skills Development Forum(to implement HR Dev strategy) • Review regulatory framework for informal trading(conducive to developing micro and small traders) • Comprehensivebroad-based empowerment strategy(access for historically marginalized groups to procurement opportunities in public and private sectors)

15. Growth and Development Summit (GDS) COMMITMENTS (16) • Opportunities for co-operatives(nurtured in key econ. Sectors) • Service delivery to small business(Integrated system) • Incubate 100 emerging entrepreneurs(pilot project to graduate entrepreneurs - 30% women) – through integrated system offering full spectrum of services) • Integrated transport system(linked to urban planning)

16. 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 govt’s 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.”

17. 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.”

18. 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

19. Latest Developments: iKapa elihlumayo • 2004: Six “pillars” being developed simultaneously • Post Provincial Growth Summit process: • Municipalities part of the “Government Sector”& part of post–PGDS talks at PDC • Municipalities to be kept informed of GDS and PGDS process

20. 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)

21. 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, labour–absorbing economy?

22. 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)

23. 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

24. 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

25. Micro-Economic Strategy LOCAL CONTEXT: WESTERN CAPE The story makes depressing reading… • Primary & Secondary sector stagnation • Decreasing employment for unskilled=> 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 !

26. 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

27. 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)

28. 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

29. 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 labour:Hotel & restaurants and/or constructioncombined they are 4.4% of GDPR

30. 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 • What’s to be done?=> Select specific sectors => Develop strategies and shape interventions => Intervene ! NB

31. Micro-Economic StrategyIntegrated Action Plan CROSSCUTTING ISSUES KEY INPUT SECTORS KEY GROWTH SECTORS INTEGRATION Infrastructure Transport Exports SMME Access to Finance Telecom’s Tourism Value Addition HRD Energy Agriculture ICT and Business Services Technology WC: • Nat. R&D Strategy • Biotech Strategy • AnimalHusbandry • Sheep WC: • Harbours ICT Geographic Regions Cultural Industry WC Boat building WC Oil and gas WC: Building social capital

32. Micro-Economic Strategy IMPORTANT FOR MUNICIPALITIES ! • Analyse value chains/clusters: forward/backward links in region • Region-wide & sector specific inventions/ innovations;R&D 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)

33. 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