Tasneem Motara. Photo: Delwyn Verasamy
Quarrels over governance at the Gauteng Growth and Development Agency (GGDA) and the Gauteng Gambling Board stand to hit the province’s economy where it hurts most; its pockets.
At the receiving end of whatever pain the board ructions end up inflicting is an economy — the biggest in South Africa — that has struggled to realise sustainable growth as it grapples with a rapid increase in its population.
Documents seen by the Mail & Guardian create a picture of how the Gauteng MEC for economic development, Tasneem Motara, and the boards of two key entities in her portfolio have butted heads over who is chosen to lead them.
The gambling board — viewed by some as the province’s cash cow — controls gambling in the province by issuing licences. The development agency is the implementation arm of Motara’s department, helping to facilitate sustainable job creation and inclusive economic growth through investment.
Earlier this year, Motara allegedly dissolved the boards of these two entities, which she said were improperly constituted. The gambling board and the development agency are also without permanent chief executives.
Speaking to the M&G this week, former member of the Gauteng provincial legislature Makashule Gana — who is now the campaign organiser for the new political party, Rise Mzansi — explained the role these two entities play in the province’s economy.
He said the gambling board is a big generator of revenue for Gauteng’s department of economic development. According to its annual report, it generated R179 million in revenue during the 2021-22 financial year. The entity spent R13.7 million on its corporate social investment programme.
The development agency is supposed to bring private sector investment into the province but, according to Gana, the entity has tended to underperform in this regard.
Four entities fall under the development agency, namely the Automotive Industry Development Centre, the Innovation Hub Management Company, Constitution Hill and the Gauteng Industrial Development Zone, which was formed to develop and operate the OR Tambo special economic zone.
The development agency is also tasked with overseeing the development of the province’s other special economic zones, which are viewed as a means of boosting manufacturing, employment and exports. The investments the development agency facilitates are directed into special economic zones.
In the 2021-22 financial year, the development agency’s investment facilitation team brought about 23 investment projects to the value of R19.5 billion — R9.3 billion of which was foreign direct investment and R10.18 billion in domestic direct investment. This exceeded the development agency’s target of R13.1 billion.
Despite having more than achieved its investment targets last year, the development agency has fallen behind on its five-year target to facilitate R66 billion in foreign direct investment between 2019‑20 and 2023-24. So far it has only raised R14.8 billion in foreign direct investment, although it is far closer to achieving its five-year domestic direct investment target. This may be attributed to the collapse of global foreign direct investment associated with the Covid-19 pandemic.
During the 2020-21 and 2019-20 financial years, the development agency fell short of its investment targets. In 2020-21, the entity raised R5.5 billion in investments against a target of R7 billion while in 2019-20 it raised R7.5 billion against a target of R11.5 billion. During the latter year, the development agency managed to facilitate only R2.6 billion in foreign direct investment. Its target was R7.5 billion.
“GGDA is falling very short,” Gana said. “They don’t have stable top management. The board and the turmoil around it creates its own challenges.”
When asked whether uncertainty at the development agency and the gambling board would add to Gauteng’s economic crisis, Motara denied that any such uncertainty exists. “I have met with stakeholders as well as staff, communicated the current situation and have given them out time frames in which we envisage we will resolve the matters,” she said.
The underperformance of the development agency has had a knock-on effect on Gauteng’s economy, Gana said.
The province’s unemployment rate is still lower than a number of others, but has accelerated significantly compared to the country’s second- and third-largest economies, KwaZulu-Natal and the Western Cape.
In the fourth quarter of 2008, the unemployment rates in Gauteng and KwaZulu-Natal were more or less the same at 20.4% and 20.5%, respectively. By the fourth quarter of 2022, Gauteng’s unemployment rate was 34% while KwaZulu-Natal’s was 31.4%.
Like KwaZulu-Natal, after the pandemic’s initial hit, Gauteng was dealt a second blow by the unrest which gripped the two provinces in July 2021.
The Democratic Alliance’s Gauteng leader, Solly Msimanga, agreed that the development agency and the gambling board have not been as effective as they should have. The latter’s revenue has suffered in the wake of the pandemic after the gambling sector was squeezed by the lockdown. The gambling board’s revenue is linked to the entity’s economic growth outcomes.
“Gauteng’s economy is not performing how it is supposed to for a number of reasons,” Msimanga said. “The global markets are not where they are supposed to be, so in that instance one can understand why we are not where we are supposed to be. But there is a lot that should have been done in Gauteng to try ensure we are in a better position.”
He pointed to the inadequate efforts to fight crime and cut red tape, as well as there not being enough of a push to lessen Gauteng’s reliance on Eskom’s overburdened electricity grid.
In his state of the province address delivered in February, Gauteng Premier Panyaza Lesufi said the energy crisis was one of the biggest hurdles to its economic recovery. The Gauteng government has established an energy crisis response team and allocated R1.2 billion towards resolving it.
Lesufi also reiterated the administration’s commitment to its Growing Gauteng Together 2030 (GGT2030) strategy, which was established by his predecessor, David Makhura.
In his foreword to the GGT2030 document, Makhura noted: “As the principal economic hub in South Africa, Gauteng province is uniquely positioned to be a beacon or a bellwether for the goal of inclusive growth. It is also the province where the most dramatic possibilities and pitfalls emerge.”
The GGT2030 plan aspires to more than double the size of Gauteng’s economy and to cut the province’s unemployment rate in half to 15%.
Gauteng’s economic growth has been in terminal decline since 2005, according to think tank Trade & Industrial Policy Strategies (Tips). Meanwhile, compared to other provinces, Gauteng has experienced the most rapid increase in its population, with its share in the national population growing 19% in 1994 to 26% in 2021.
The sheer size of Gauteng’s economy — with its more than 34% share in the national GDP — means its economic performance has a strong bearing on the health of the country’s economy.
Tips economist Itumeleng Mokoena said: “If Gauteng fails, the knock-on effect would be quite disastrous for the rest of the economy — because of its size and its contribution to GDP and employment.”
Like other parts of the country, Gauteng’s economy — in which the manufacturing sector is dominant — has buckled amid deindustrialisation. The share of the real economy (manufacturing, mining, agriculture and construction) in the province has declined from 24.4% in 2010 to 20% in 2020, according to Tips.
Gauteng’s economic problems are probably linked to the broader structural constraints in the country, such as the energy crisis, Mokoena said. The province is the biggest consumer of Eskom-generated power. “Gauteng has the largest manufacturing base in the country. If manufacturers can’t, as a result of load-shedding, reach their production targets, production goes down and the overall output of the country declines.”
Fiona Tregenna, a professor of economics at the University of Johannesburg, noted that Gauteng’s share of the South African economy has been fairly stable in recent years. “The factors explaining the disappointing rate of growth in the province are similar to those for the economy as a whole,” she said.
“There are not really strong factors specific to Gauteng, and Gauteng has generally been relatively well governed at the provincial level. The sectoral composition of the economy is different, so where there is a downturn in a sector such as finance that is a larger share of the economy in Gauteng than in other provinces, it will affect Gauteng more strongly than other provinces.”