The Western Cape has come out tops as South Africa’s most competitive province in a report issued this week on the competitiveness of the nine provinces by the Foundation for Research and Development (FRD).
Gauteng ranked second, followed by KwaZulu/Natal, Free State, Eastern Transvaal, North-West, Eastern Cape, Northern Province and Northern Cape.
The provinces were rated in four categories: physical resources, human resources, economic strengths, and scientific and technological resources.
The report emphasises that each province has its own comparative strengths which need to be exploited for economic success.
While Gauteng rated highest in economic strength and scientific and technological resources, it is handicapped by the small area it occupies and its subsequent lack of physical resources.
Not so the Western Cape which has 12 percent of South Africa’s arable land. Its potential for tourism is vast and it has the country’s highest human development index — a measure of life expectancy, level of education and income.
“It has the most assets for future development which include a manufacturing base with a signficant high- technology component, a large seaport complemented by minor harbours, two major airports, a high tourism potential, productive farmlands, a variety of exploitable mineral resources, a literate workforce and an effective education system,” says FRD policy analyst William Blankley.
The Northern Cape, which scored lowest on the rating, has less than two percent of South Africa’s population and showed a high dependence on mining/quarrying and agricultural production. Its economy shows a declining growth rate.
“It has the potential to expand its transport industry as it already serves as a base for fleets of transport trucks. De Aar is an important central rail junction, but the future of rail development will depend on national transport policies,” says Blankley.
The province also has South Africa’s lowest levels of crime and violence.
But, says Blankley, the best way to examine these rankings is to study the provinces in terms of their stages of general development.
The Western Cape and Gauteng could be classified as developed provinces, while the Free State and KwaZulu/Natal could be called semi-developed. The remaining provinces fall into the category of developing provinces,” he says.
He proposes that the developed provinces could be attractive for growth in high-technology manufacturing.
The semi-developed provinces — KwaZulu/Natal and Free State — might well encourage investment in secondary industries and niche services related to their agriculture and mining industries.
The developing provinces offer the widest range of investment opportunities which may be high risk, but offer better returns. “For example, the provision of services such as electricity and water to areas previously denied these basic necessities could lead to the development of flourishing home industries and small businesses.”
The report is loosely based on Michael Porter’s research on the competitive advantage of nations which suggests four stages of development: factor-driven, investment-driven, innovation-driven and wealth-driven.
“South Africa shows aspects of all four stages although the national economy is predominantly factor-driven, relying heavily on its natural-resource base,” says Blankley.
Projects such as Sasol, Koeberg and Mossgas are investment-driven-stage developments, where technologies and economies of scale are developed.
South Africa’s innovation-driven industries, where locally created technologies are sought after by foreign countries, are largely the result of specialisation, particularly in defence research, by apartheid governments.
Some elements of the wealth-driven stage, where investment in financial assets takes over from investment in real assets, exist but not in the true sense. “The proliferation of shopping centres, new office blocks and townhouse developments has been the major product of recent investments, rather than industrial sites, large manufacturing plants or state- of-the-art factories,” says Blankley.