ECONOMIC DEVELOPMENT FRAMEWORK & STRATEGY FOR CAPE TOWN:

OVERVIEW FOR SA CITIES NETWORK “THINK TANK” ON CITY ECONOMIC

DEVELOPMENT STRATEGIES

by Ms Kim van Deventer

Director: Economic Development & Tourism

City of Cape Town

18 November 2002

CONTENTS• Brief profile of Cape Town

• Some key concepts

• The route we have travelled

• Our “Building Global Competitiveness / Reducing Poverty” Framework

• Fitting the pieces together

• Pro’s & Con’s of our journey

CAPE TOWN: BRIEF PROFILE

Area: 2487 km2

Current population: 3 222 801 (2002) 563 612 (1996) Census)

Population growth rate: 2001-2006 = approx. 2.1% per annum

No. of households (1996): 653 076

CAPE TOWN: BRIEF PROFILE cont.Number of jobs: Formal employment (2001): 867 052

Informal employment (2001): 145 066 – 239 455(range depends on unemployment definition used)

Unemployment (%) 2001: 19.7% of economically active population (official/narrow definition)

27.3% of economically active population (expanded definition). Need 7% annual GGP growth rate to prevent from worsening

Skills level (1996): No schooling: 9% (213 629 out of 2 321 889)Matric: 15% (344 871 out of 2 321 889)

Households living below Household subsistence level (1 708) at 2000: approx 32.8%

Informal housing (% of households): Approx 16% of all shelter units (Census 1996) were classified “informal” in CMA

[See Cape Town’s Economy: “Current Trends & Future Prospects” document 2001 and 2002 update for further details on www.capetown.gov.za/publications/default.asp]

CAPE TOWN: BRIEF PROFILE cont.

Poverty index (1996): Households with no income: 38 436 (5.8%). Households less than R18 000:165 794 (25%)

Municipal Budget: 2003/04: Operating: R7.4 billion. Capital: R1.9 billion (ED&T Opex Budget = 0.82% of total budget!)

Airport: 4.5 m passengers per annum – voted best in Africa

Port: Handles 11m tons of cargo

CAPE TOWN: BRIEF PROFILE cont.

GGP: R93 998 billion (nominal 2001) – 75% of Western Cape’s economy

GGP as a % of GDP: 11%

GGP growth rate: 3% (2001) between 1991-2000 average growth rate = 2.6%

Informal sector: 12% of total output/employs 18% of economically active

SMME’s: 95% of 60 000 formal businesses are SMME’s – contribute 50% total output/40% formal employment

PERCENTAGE NOMINAL GGP PER SECTOR 2001

25%

20%

8% 3%

23%

2%

19%

Manufacturing

Trade& Catering

Finance & Real Estate

Services

Transport &CommunicationConstruction

Other (eg Agric,electricity)

NOTE: Tourism generates ± 10% of GGP

Job creation ratio 1:19 (SA average 1:26)

International tourists spend more than ½ their total time in SA – in Cape Town

Source: City of Cape Town (May 2002)

THREE KEY TRENDS• The Cape metropolitan area has a diverse

and growing economy and the skills-based sectors are growing.

• There is an increasing mismatch between skills supply and demand.

• Unemployment and poverty are increasing, and are concentrated in particular sections of the community

The City and Province offer a rich array of strengths for both to leverage

W C

ape o

f fers the C

it y

• Agricultural / Fishing sector

• Eco-tourism opportunities / experiences

• Deep sea port• Secondary settlements• Access to national

resources / processes• Domestic market• Source of inputs• Cape Wine / Cape Fruit

international brands

• ‘Shop-front’• Infrastructure• Transactional/

service hub• World Class Brand

name• Skilled labour• Global connection

points (eg: airport, port & telecommunications)

• Strengths in global growth sectors

• Population density

…C

T o

ffer

s th

e W

Cap

e

Province

City

KEY CONCEPTS• Vision – expression of the community’s most cherished

hopes for what we think our city could and should become. A vision should convey the ideal towards which we would like to strive and it should begin to give an indication of how that goal could be achieved.

• Framework – Set of guidelines intended to highlight priority action areas and to align actions of multiple ‘players’, avoid duplication, facilitate co-ordination and support operational efficiency. The elements of the Economic Development Framework will remain constant over time, while strategies and actions are likely to change as development occurs. The Framework is not unique to the city.

KEY CONCEPTS cont.• Strategy – Plan of action, reflecting local priorities

and current opportunities, resources and constraints. Needs to have short, medium and long term elements. An overemphasis on the short term may deny long term benefits. Requires choices and trade-offs. Unique to the city.

• Targets/performance indicators – objectives expressed as “outputs” to be achieved in a given time. Identified after strategies. Used to assess the success of strategies and actions.

THE ROUTE WE HAVE TRAVELLED….

1997: No info on the city economy

“Economic Trends & Spatial Patterns Study”• Overview / Summary• Statistical Database• Local Area Studies• Investor Survey Review• Policy Review

1998: Trends info highlighted that we had limited literature on

poverty/economic development links

“Poverty Reduction Framework & Strategy”

• Overview / Proposed Framework

• Poverty Profile of Cape Town

• Methodology for Conducting Poverty Audits in Cape Town

• Poverty Reduction Indicators

1999: Need for framework to i) capture link between growth/poverty and

ii) align stakeholders

“Going Global, Working Local: Economic Development Framework and Local Government Strategy” – to align actions of public, private, NGO & community stakeholders and to clearly define local government’s role/priorities

2000:Time not right for city-wide strategy development process

• Communicated framework, and• Started actioning specific key initiatives (inc:

conscious pro-poor interventions) as identified in the Local Government Strategy

2001/02: Need for input into IDP and an institutional revamp

“Towards an Economic Development Strategy” -

discussion document containing Vision, stretch

targets & key initiatives)

and

“Transformation Programme” -

to ensure the development of partnerships &

institutional arrangements to achieve targets /

implement the initiatives - including addressing

broader transformation challenges

2003: Time right for city-wide Economic Development

strategy process?

Sustainable Economic Development

Poverty reduction

Global competitiveness

Market, Population & Demographic

changes

•Access to national/provincial welfare programmes

•Infrastructure & service delivery

•Urban renewal (inc community development)

•Economic empowerment

•Skills development

•Infrastructure & service delivery (inc Info & Comm Technology)

•Key Sector Development (inc small business dev)

•Branding & Marketing

•Local investment, savings, expenditure

•Foreign investment eg: tourism/exports

NOTE: Content of framework

i) Explicitly designed to enable public, private NGO & community stakeholders to formulate & carry out aligned decision-making and actions

ii) Requires small, medium & long term actions in each of the 10 fields

ECONOMIC DEVELOPMENT FRAMEWORK

OUR GOLDEN THREAD

• It is not a question of choosing “global competitiveness” OR the “reduction of poverty” – Cape Town will achieve both or neither

• Reducing poverty will strengthen global competitiveness and greater global competitiveness will permit reduction of poverty through economic growth & job creation

City-wide Economic Dev Strategy

Remove constraints to competitiveness and

foster enabling environment

Strengthen network/connections

•Sustainable Econ Dev

•Spread the benefits

Community – based Economic Dev (L.E.D.)

Strengthen local potential connections

Get basic services & regulations right

•Sustainable Econ Dev

•Spread the benefits

FITTING THE PIECES TOGETHER

Business Development as key link

Category of business Number Percentage of total

Globally competitive 1,350 2.3%

Growth oriented 3,150 5.4%

Emerging/stable 40,500 69.2%

Survivalist/necessity entrepreneurs

13,500 23.1%

TOTAL 58,500 100%

• There are approx. 1,100 organisations providing general business support services in Cape Town and approx. 840 providing sector, or industry focused support

WHO’S WHO

MAJOR MARKET SEGMENTS FOR BUSINESS DEVELOPMENT SERVICES

Sophistication of business services demanded

Soph

isti

cati

on o

f bu

sine

sses

req

uiri

ng s

ervi

ce

Less

More

Lo Hi

1.Basic economic infrastructure and services

3.Generic business services

2.Specialist business services

• Our “Building Competitiveness/Reducing Poverty” Framework seeks to align those actions so that duplication is minimized, complementary initiatives can benefit from each other, potential partners can be identified and critical gaps can be revealed;

• As development takes place, the 10 essential Fields of Action will remain the same, but the priority actions within each will change. It is essential to periodically review the City’s economic development position to reassess key opportunities, constraints and priority actions;

• The Framework facilitates a process of benchmarking, target setting and performance assessment specific to each Field of Action so that the effectiveness of Local Government and other actors’ initiatives can be evaluated;

More on the Framework ….

• The Framework provides a working tool to guide resource allocation decisions, and to record and monitor expenditure and action;

and• The Framework does not provide guidance on the

relative benefits of investment in one Field over another. Each stakeholder will need to define their priority interventions in terms of issues which they can most effectively influence and support. Local Government business planning will need to build in methods to assist prioritization.

OUR JOURNEYPRO’S

• Over 500 projects being delivered – all of them via partnerships. (covering wide range of constituencies / geographical areas/fields of actions and structured in a variety of ways)

• Enriched the approach• Encouraged us to find ways to

identify impacts/appeal to “strategic IQ” eg:“What’s at stake” Joint Marketing strategy impact assessment – R6 bn by 2007

• Put in place key “ back room platforms” eg: databases

CON’S

• Loose power of overall alignment & impact on decisions

• Loose opportunity for creating city-wide “vibe”

• Loose opportunity to mobiise resources above & beyond project / programme specific

SECTOR SUPPORTCase study theme

The City of Cape Town supports:

• Globally competitive sectors with growth and employment potential (eg: tourism, oil and gas, film, IT and manufacturing);

• Transforming sectors that are currently struggling but which are big employers and contributors to the economy :eg: clothing and textiles (which employ over 170 000 people); and

• Promotes emerging growth sectors eg: biotechnology, boat building and high value crafts

A City internationally respected for developing globally competitive sectors

Vision

• Identify and maximise support for 3-8 key sectors and niches which can individually achieve 5%+ annual economic growth (e.g. information technology, tourism, film, niche agri-industries)

• Assist the transformation of declining industries (e.g. clothing) and areas (e.g. Atlantis) to limit job losses

Key Targets

SECTOR /CLUSTER SUPPORT

SECTOR / CLUSTER SUPPORTKey Initiatives

• Minimise local government input costs for key sectors• Facilitate access to national incentives• Ensure appropriate support infrastructure• Develop a flexible and effective system for:

- identifying niche and sector opportunities

- building collaboration to achieve competitive growth and benefits spread (SMME’s)

- supporting exports

- reviewing success