The death of Cape Town?

One of Cape Town’s largest and best-known companies has decided to up sticks and move to Johannesburg, in the surest sign yet that the Cape metropole has become little more than the visdorp its detractors make it out to be.

Paul Hanratty, the new managing director of Old Mutual, explains that with both the company’s business partners, Nedbank and Mutual & Federal, already in Johannesburg, it makes sense to move the OM head office to Gauteng. A further incentive was that a large proportion of the company’s potential and current client base already lives in the region.

‘It would therefore make sense for Old Mutual executives who interface with the market and who need to cooperate with the rest of the group in SA to be based in Johannesburg,” he said in a press release.

The company has been at pains to point out that just 200 of its 7 000 employees will relocate by the end of the year, but among them will be its top decision-makers.

While a City of Cape Town representative was not available to comment, Albert Schuitmaker, chief executive of the Cape Regional Chamber of Commerce, said the move indicates the need for Cape Town to look at strategies to ensure that companies want to stay in the region. ‘We are saddened by this development. Old Mutual has been a Cape-based company since the 1800s and had a very close relationship with the chamber.”

Bulelwa Ngewana of the Cape Town Partnership, which focuses on urban renewal in the CBD, said Old Mutual’s decision was a cause for concern. She said the partnership, together with the City of Cape Town and the private sector, was developing a strategy to attract and retain businesses which would be finalised some time this year. But for Old Mutual, she conceded, ‘the attraction is Johannesburg”.

There’s only so much Cape Town can do in the face of the juggernaut that Gauteng is becoming. About 50 large corporates have chosen to base themselves in the Western Cape, including Pick ‘n Pay and Remgro. These numbers are dwarfed by the 600 or so large corporates, including multinationals, who choose to base their South African or even African operations in Johannesburg.

With a third of South Africa’s GDP and 10% of Africa’s GDP produced by the province, Gauteng’s importance as an investment destination is steadily increasing. Businesses need to be where their major clients are, and a large city region makes for easier networking, greater choice and more services. It may also be easier to recruit skilled professionals in Gauteng, where salaries are traditionally higher.

‘With the dropping of apartheid and the advent of democracy, Africa opened up,” said Keith Brebnor, chief executive of the Johannesburg Chamber, giving another reason why businesses want to be headquartered in Johannesburg.

The province is a communications hub not just for the country, but for Southern Africa. Executives in Johannesburg are close to interests in Angola, Botswana or Mozambique, with about 80% of airlines flying into Johannesburg, compared to 20% flying into Cape Town.

Gauteng’s business dominance hasn’t happened by accident. The province is actively marketing a mega-city region made up of Johannesburg, Ekhuruleni, and Tshwane. Barba Gaoganediwe, a spokesperson for the Gauteng Economic Development Agency, said the agency is trying to promote the province as a competitive global city region.

The idea is that in the future the mega-city will be able to compete with business centres such as New York, London, Paris and Amsterdam.

‘One of those requirements is a strong financial sector, with banks operating 24 hours a day,” Gaoganediwe said, adding that more than 70 foreign banks already have offices in Gauteng. The 24-hour shifts are necessary to do business effectively with other time zones.

Then there’s the much-touted buzz of a city where money — lots of money — is being made. Business functions become easier and cheaper to organise, with top clients more likely to attend, as they’re already based in the city.

Brebnor used to organise a major tennis tournament in Johannesburg, sponsored by a listed company. ‘One year, I said to them that the players are really struggling with the altitude and maybe we should move it to Cape Town. And they said ‘yes, we agree that it would be better. But we run 157 companies, and the problem is, we only have branch offices in Cape Town.’ Flying down 157 MDs and clients just didn’t make economic sense.”

He points out: ‘As a tennis professional, you’re part of the world. You can go from New York to London to Johannesburg. I’d imagine that being in Cape Town or Durban, you’d feel out of that international loop.

‘Cape Town and Durban are basically villages.”