Local economic development and globalisation : the international competitiveness of certain South African municipalities / Vincent Monti Malebo Mongake

Abstract

In today's global competitive environment, a city or a town more than ever needs a strategy that articulates how its international competitiveness is to be improved. Since 1994, following its first democratic elections, South Africa started processes of significant local government reform, as well as fast integration into the global economy. These processes will place significant challenges in the way of South Africa's local government (municipalities) since they now not only have to transform themselves into more democratic structures, they also need to address the legacies of apartheid such as poverty and unequal access to services as well as raising international competitiveness. This last requirement is important to ensure that economic ground and development in South Africa's cities and towns are sustainable. The competitiveness of South African municipalities is investigated in this study. The various aspects that determine their international competitiveness are studied and the strengths and weaknesses as perceived by the municipal managers of these municipalities, are investigated. Municipal LED strategies must strengthen the competitive platform offered for businesses in their areas of jurisdiction. The competitive platform embraces all aspects relevant to competitiveness that enable firms to compete and industries to develop so as to make cities and towns more competitive. Municipalities must adopt flexible structures to remain competitive in the changing environment. The solutions required might include related and supportive businesses and institutions, good and relevant government policies, quality of human capital, and advanced and latest levels of technology. However, they must include a change in the culture of municipalities, that includes the development of its people, systems and organisational structure, to optimise the response. The study commences with an investigation into the theory of local economic development (LED) stressing the importance of competitiveness in an effort to develop municipalities. Together with the economic and political changes experienced since 1994, there has been an increasing awareness of issues such as a free market economic system, privatisation and global competitiveness. With paradigm shifts such as these, the emphasis on local and regional economy also changed. Renewed interest in local economic development (LED) came to the fore and was considered, together with ways in which it can enhance competitiveness on municipality-level. This was followed by studying Porter's approach to the competitive platform, drivers of competitiveness and the stages of competitive development. The practice of globalisation was also considered and specific attention was given to its policies and the way it can influence competitiveness. The literature undertaken on this subject indicated that globalisation is having a major impact on local authorities worldwide. This has resulted in multinational corporations seeking property in the competing and competitive local authority centres. Local government has an interest in attracting investment based on promoting the comparative advantages of the area for competitive industries, as well as supporting the growth of local enterprises. It will become increasingly important for municipalities to find the right balance between competition and cooperation among themselves. While some competition will improve both efficiency and innovation, cooperation between municipalities is necessary to enhance the performance of the national economy as a whole, and to avoid damaging forms of competition between municipalities. This study also surveys the major literature on locality marketing. The literature notes the changing global economy and political environment and the difficulties faced by localities to mediate these changes. Although some studies are pessimistic about the role of localities to mediate effects of globalisation, especially on issues of distribution, there are those who argue for greater opportunities being created by globalisation processes. It is up to localities to forge "thick" institutional formations in order to have competitive advantage and manage the distribution of wealth. 'Thick" institutional formations refer to the forging of widely representative local coalitions in an attempt to mediate effects of global processes. The amount of success achieved in this respect, in relation to the resources devoted to it, needs continuous monitoring. Through case studies of Durban, Johannesburg, Port Elizabeth, Cape Town and Pretoria, the study attempt to gauge at the "grand plan" of LED in South Africa. Industrial Development in Durban (Ethekwini), Johannesburg including East Rand (Ekurhuleni), Port Elizabeth (Nelson Mandela Metropole), Cape Town and Tradepoint Pretoria in Greater Pretoria(Tshwane) seems well supported. As relatively industrialised cities, it makes sense that industrial development be included in the strategy mix. The concept of Coega IDZ in Port Elizabeth provides a proper example of a mechanism to achieve this goal. However, tourism industry has also been growing in these six large cities, justifying in its inclusion of these cities a "grand plan" for LED. It will be important for these cities to attract, develop and support new and existing large business. Particular efforts must be made to encourage small business development amongst the marginalised communities so that a greater impact is made in terms of reducing poverty and unemployment. An empirical investigation was conducted during 2003 to establish the perceptions on competitiveness of the South African municipalities. The results emanating from this empirical study and the literature study suggest that although most municipalities are not rating themselves as highly competitive, the municipalities' best is more certain with regard to their managerial proficiency, product quality and technological resources and expertise. These results highlight the importance of the reliability and quality of communication services, electrical supply, water and other utilities, which are seen as very important for competitiveness by all respondents. The study reveals much detail, like the need for cold storage facilities that present a problem in many municipalities; the need for more training facilities, especially municipality related training such as workshops and advocacy on new policies. Respondents rated harbour and ocean freight facilities as failing. It was found that distance from the sea present a competitive disadvantages to landlocked provinces and their municipalities. The same applies to the province and municipalities far from large airports. Respondents also perceive civil servants as very co-operative and the government as very competent in the sphere of LED. Laws on environment protection including legislation and guidelines are also seen as very progressive and effective.