NONDUMISO SITHOLE: Challenges and solutions for local economic development in Ekurhuleni

Local economic development (LED) is a grassroots-based approach that encourages people to work together towards improved quality of life for all. At the heart of a successful LED policy is a partnership between the business sector, community interests and local government.  

The SA constitution recognises and endorses the importance of local government as a crucial instrument to pursue economic development. Sections 152 and 153 (a) state that “a municipality must structure and manage its administration, and budgeting and planning processes to give priority to the basic needs of the community, and to promote the social and economic development of the community”.

To pursue LED municipalities are legally required to have integrated development plans (IDPs). For instance, the Spatial Planning and Land Use Management Act has the primary aim of providing all spheres of government with a framework relating to the establishment of policies and systems for planning and land use management.

The mammoth task to promote LED and provide basic services as required by the constitution has not only put local governments under severe pressure, but also under scrutiny by the communities they are meant to serve. And few more so than the Ekurhuleni metro.

This is one of six metros in SA and one of the most densely populated and youthful regions in Gauteng with a population of more than 3.3-million. Ekurhuleni’s economy makes up 21% of the total economic output of the province, and 7.7% of national production. Manufacturing in the municipality accounts for just below 20% of Gauteng’s GDP and 28% of total production. 

Due to this large concentration of industry Ekurhuleni is often referred to as “Africa’s Workshop”. The OR Tambo International Airport, which is a vital national asset, positions the municipality as an international aviation node. Furthermore, it has sophisticated logistics and distribution infrastructure within its jurisdiction. With much going for it, the municipality has a bold vision for social and economic transformation.

The above would lead one to think that the municipality is a thriving economic hub. Unfortunately, the reality is that Ekurhuleni is filled with poverty-stricken communities and a low education rate has led to a skills shortage. The IDP of the municipality demonstrates that the unemployment rate in Ekurhuleni increased from 26.6% in 2006 to 29.7% by 2015, consistently higher than the provincial and national figures. This all points to a lack of vigorous LED, which continues to be a key factor in the region’s underperformance.

The city’s informal sector — including businesses such as the car washes, shisa-nyamas and salon stalls — does not have adequate support to ensure survival, let alone for sustainable businesses to thrive and contribute to economic growth. A key challenge has been to uplift small informal businesses in townships and register them as formal private businesses. In addition, there are serious material and economic inequalities within the municipality, including the disparity in investment between the informal business sectors in the townships versus the businesses in the formal sector.

 The disturbing phenomenon of buildings in town CBDs being “hijacked” and operated by criminal characters is a grievous obstacle to attracting investors. Ekurhuleni loses millions in revenue as a result of illegal occupations and the misuse of municipal infrastructure by consumers who do not pay for services.

Ekurhuleni was never planned as a single functioning unit. It was formed as nine separate and independent local authorities with different needs, resulting in a metro that is fragmented. Crucially, apartheid settlement patterns persist, with poorer residential areas situated on the periphery, often far from job opportunities and social amenities.

Then there is the continued inward migration of people in search of employment, which has led to increased informal trading, much of which remains unregulated. Rapid urbanisation has complicated planning, budgets and service delivery, and competition for overstretched resources has unpalatable social and economic implications for citizens, its institutions, and its ability to respond timeously and adequately.

Despite the challenges, strategic thinking and a co-ordinated response might see a new dawn in the region. The city needs to engage big industrial players to obtain an understanding of how they have been able to navigate challenges such as the pandemic. Such interaction would help Ekurhuleni ascertain how to assist them, thus ensuring their continued existence in the LED region and secure existing jobs. 

Untapped resources should be explored. For instance, agriculture is an undervalued sector within the metro that ought to be re-evaluated. Like other SA municipalities, the city is lagging in strategically repositioning agriculture as a sector that can provide viable economic and growth opportunities rather than merely being a subsistence sector. On the plus side, there has been steady progress in making land available for farming purposes, with 11 farms handed over to successful bidders in August 2021.

Another major tool for development is the newly drafted Gauteng Township Economic Development Bill, which aims to redraft how townships are regulated and governed to transform them into zones of widespread job-creating commercial activity. Elements of the bill include setting up procurement rules and programmatic support that will allow the government and its main contractors to buy from large groups of township-based firms, together with the establishment of a Small and Medium-Sized Enterprises Fund.

Ekurhuleni is still a major economic and social roleplayer in SA due to its industrial characteristics and contribution to the national economy, and the size of its population. The municipality’s GDP is projected to grow at an average annual rate of 1.75% from 2018 to 2023. To continue — but more importantly, to strengthen — its development, Ekurhuleni must develop robust economic development policies and provide sustainable support for building technical abilities, capacity in terms of appropriate skills, resources and infrastructure.

A co-ordinated approach is required to ensure both the formal and informal sectors in the city reap the benefits of successful local economic development.

• Sithole is an academic contributor to the Inclusive Society Institute's Journal for Inclusive Public Policy.