The Johannesburg economy must grow at 9% for the country to achieve its economic growth target of 6%, according to economist Michael Schussler, speaking as a representative of the Johannesburg Business Forum at the recent Presidential Imbizo.
During the imbizo, traffic congestion, electricity and telecommunications costs and the country’s skills shortage emerged as some of the constraints to higher economic growth. Other analysts identified supply-chain management and insufficient authority in the hands of the metropolitan government among the particular challenges facing Johannesburg.
Schussler said Johannesburg had outpaced the economy by 47%, growing at an average annual rate of 4,7% between 1996 and 2005. The country had grown by 3,2% during that period. The city also generates 16,5% of the country’s wealth and employs 12% of the national workforce, according to its economic review last year. Over 70% of South African companies choose Johannesburg for their business headquarters.
The Johannesburg Business Forum suggested a number of short- and long-term solutions to reach higher economic growth rates. Short-term solutions to put Jo’burg on the road to 9% economic growth include:
l Better traffic management — the forum noted that, by the end of 2006, Gauteng had more than 2,7-million vehicles on the road. The average commute is 72 minutes, which they say raises costs to business. It emphasised better public transportation, but cautioned that this would not reverse the growth of private-vehicle use and would not affect road-freight movement.
l Make it easier to import scarce skills — the forum argued that more South Africans needed to achieve a matric certificate. Only 3% of the workforce has a degree, down from 3,8% in 1998.
l Allow more broadband players to lower communication costs — high telecommunications costs are one of several constraints to growth, including security costs and above-inflation increase in water and light rates.
l Implement the Development Facilitation Act for land development — the forum said that this act offers a more efficient way to obtain land development rights than the current system, in which it can take two to three years for a township application to be approved.
l Allow extra BEE credits for small, medium and micro-enterprises when implementing broad-based BEE — small businesses are often told by bigger firms and government departments to comply with BEE, even if they do not meet the turnover threshold, and feel they lack support to participate in BEE deals.
Long-term goals identified in the presentation include:
- Get Seta funds to work effectively and allow business more say in what skills it needs;
- More roads should be built within the city and between regions;
- Promote a second airport and consider a third one; and
- Improve communication between business and the government.
Johannesburg spends a lot of money on upgrading and refurbishing infrastructure, which would not be needed if it paid more attention to maintenance, said former president of the South African Institution for Civil Engineering (Saice) Sam Amod. He emphasised that further infrastructure development needed to be sustainable, taking into consideration both the costs of maintenance and the waste created by developing the infrastructure.
He added that another challenge to higher growth levels was the government’s ability to use its existing skills base effectively. He said that the excessive focus on price in procurement systems meant price wars among consultants such as project managers, who might discount up to 60% of their cost to land a contract.
Centre for Development and Enterprise executive director Ann Bernstein said that achieving higher growth rates may require the city to have greater power to deal with problems such as crime. She also suggested a debate as to whether Johannesburg should have an elected mayor or someone deployed through the party-list system.
Bernstein also said national policies in areas such as telecommunications restricted growth. She reported that American telecommunications firm AT&T and global news agency Reuters said that they would not invest further in South Africa because telecommunications are “expensive” and “flaky”.
Moreover, as “Africa’s business city,” Johannesburg needs to make itself an attractive place to live for investors, executives and managers, by addressing crime, the quality of schooling and transportation.
Bernstein emphasised that, although South Africa needs a rural strategy, the future lay in metropolitan and urban economic growth.