On the eve of the investors’ conference, Paul Jourdan puts the case for the government’s development initiatives
Spatial development initiatives (SDIs) are a proven means of giving government more job-creating bang for its very limited bucks. It is too important and successful a strategy to be derailed by vested interests and narrow agendas.
The furore around the deceased Wild Coast toll road – which was only a small part of the Fish River and Wild Coast initiatives – shows that, in some quarters, there is very little understanding of the concept. Or the need for trade-offs between political, ideological, environmental and even government interests, in order to create jobs.
While the Department of Trade and Industry, where the programme is based, consults interested parties as an integral part of the initiative’s development, if it moves away from sound economic principles – because of narrow agendas – initiatives will lose their attraction to investors. And South Africa will lose jobs. Simply put, spatial development initiatives are a package of measures that aim to attract investors into a bundle of economically sustainable projects in a region with the potential for growth.
The initiative approach to economic development outlined below is not a leap of theory on the part of the department. The programme flowed out of the success of the Maputo Development Corridor. That initiative realised $5-billion and has taken on a life of its own in terms of drawing in more investment.
The Fish River and Wild Coast initiatives have about R3-billion worth of investment projects lined up – which could result in about 30 000 jobs – even before the entire package is presented to the investors’ conference.
There are eight other initiatives being worked on presently, all based on infrastructure already in place and existing and planned high-value projects.
Many in both the environmental lobby and the labour movement have pointed out the inherent dangers for their constituencies. I agree.
The initiative approach to economic development is new and is developing through practice. The urgency to attract investment into the country and provide jobs can tempt the government to ride roughshod over concerns seen to be less of a priority. However, besides a commitment to consultation with interested parties to try to sort out their concerns, the department is bound by its own belief in progressive environmental and labour practices. Initiatives will not be places where the government will tune down workers’ rights to attract capital. Neither will they be places where the environment is sacrificed for industrial development.
While many of the developments, once they are up and running, will be managed by local companies, environmental and labour standards will still be set by the national government in negotiated regulatory frameworks. In any event, environmental and labour practices that fail to meet international norms will count against companies trying to compete globally. If not because of action by the South African government, then because international regulatory bodies will penalise them.
Tourism is a key job creator in all the programmes and every care is taken to ensure that the industrial projects do not unnecessarily compromise the natural environment on which the industry is based.
Basically, the initiatives package bankable investment projects, with state-of-the-art infrastructure and an internationally competitive bundle of supply-side measures (tax-breaks and the like).
Where possible, the infrastructure will be financed through a variety of acronyms: such as BOT (build, operate, transfer) and ROT (rehabilitate, operate, transfer). These are essentially public-private partnerships through which investors can invest with the government in hard infrastructure projects, such as roads, water supply and ports.
The postponement of the West Coast toll road underlines a basic principle of every project – if it cannot support itself, it dies. This ensures the government’s money is used to facilitate the kind of investment that will create sustainable jobs.
By bringing large amounts of capital into sustainable projects in a region, the programme provides a quick, sharp kick- start to economic development. Getting private sector investment to the initiatives is vital because the government has no money and what little finances it has are being soaked up by social and other development demands. Government’s financial investment in an initiative is limited to less than 10% of the total amount.
Given that the private sector is also very risk-averse, the government can be reasonably sure that any projects the private sector joins stand a much better than average chance of success. Joint projects also allow the government to tap project management and other skills that reside largely in the private sector.
By sharing some of cost, the government departments involved in the initiatives can spend their money on key infrastructural projects which will make the targeted areas more attractive investment destinations. The departments are also involved in cutting back the national, provincial and local bureaucracy that deters potential investors.
Areas where initiatives are set up identify themselves. They must have a proven economic base because the programme simply aims to loosen constraints and allow them to grow to their maximum potential. Given that most initiative industries are aiming for the global market, they are likely to be located near the infrastructure that will determine their international competitiveness, like ports, cheap power supplies and so forth.
Setting up an initiative is a quick process and it should only take about a year from projects being identified to investors beginning to buy into them.
The department accepts that there are many real concerns about initiatives which have to be worked through. However, it must be kept in mind that the programme is here to create jobs, and the deciding factor when balancing the trade-offs between various interest groups must be: how many more people will have work because of spatial development initiatives?
Paul Jourdan is co-ordinator of special projects at the Department of Trade and Industry