Blueprint full report

A BUSINESS VISION
FOR THE ECONOMIC DEVELOPMENT
OF DURBAN
Local Economic Development is about competitiveness – it is about
companies thriving in competitive markets and locations thriving in a
competitive, globalised world.
(Meyer-Stamer)
June 2013
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Contents
Contents................................................................................................................................................2
INTRODUCTION..............................................................................................................................5
EXECUTIVE SUMMARY...................................................................................................................7
THE VISION IN SUMMARY .............................................................................................................9
GOAL 1: INCREASED INVESTMENT IN THE CITY’S ECONOMY ............................................................9
GOAL 2: INSTITUTIONAL PARTNERSHIP AND COLLABORATION ......................................................10
GOAL 3: CREATION OF MEANINGFUL EMPLOYMENT .....................................................................11
GOAL 4: THE ALIGNMENT OF SKILLS DEVELOPMENT AND EDUCATION TO THE REQUIREMENTS OF
ECONOMIC GROWTH AND JOB CREATION IN THE CITY...................................................................11
GOAL 5: THE PROMOTION AND DEVELOPMENT OF A VIBRANT SMALL BUSINESS SECTOR AND
SUSTAINABLE ENTERPRISES WITHIN IT............................................................................................12
GOAL 6: THE PROVISION AND MAINTENANCE OF ADEQUATE INFRASTRUCTURE...........................12
GOAL 7: BUILDING AN ICONIC REPUTATION AS A GREEN CITY .......................................................13
GOAL 8: THE ACHIEVEMENT OF ‘INTERNATIONAL DESTINATION’ STATUS FOR LEISURE, BUSINESS
AND OTHER TOURISTS ....................................................................................................................13
GOAL 9: THE REJUVANATION OF THE INNER-CITY ..........................................................................14
GOAL 10: A CRIME AND GRIME-FREE CITY ......................................................................................14
THE STATUS QUO.........................................................................................................................15
GOAL 1.........................................................................................................................................16
INCREASED INVESTMENT IN THE CITY’S ECONOMY.....................................................................16
Foreign Direct Investment...........................................................................................................16
Local Expansion and Economic Growth.......................................................................................19
Manufacturing.............................................................................................................................19
Business Retention and Expansion..............................................................................................20
Economic Clusters........................................................................................................................21
Maritime......................................................................................................................................21
Incentives.....................................................................................................................................22
Certainty......................................................................................................................................22
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Land Use......................................................................................................................................23
GOAL 2.........................................................................................................................................23
INSTITUTIONAL PARTNERSHIP AND COLLABORATION.................................................................23
Consultation.................................................................................................................................23
Public/Private Partnerships..........................................................................................................24
GOAL 3.........................................................................................................................................26
CREATION OF MEANINGFUL EMPLOYMENT................................................................................26
Job Creation.................................................................................................................................26
‘Town and Gown’.........................................................................................................................27
Employment Promotion Agency..................................................................................................28
Migration.....................................................................................................................................28
GOAL 4.........................................................................................................................................30
THE ALIGNMENT OF SKILLS DEVELOPMENT AND EDUCATION TO THE REQUIREMENTS OF
ECONOMIC GROWTH AND JOB CREATION IN THE CITY...............................................................30
Education and Training................................................................................................................31
Appropriate Skills.........................................................................................................................33
Jobs Centre..................................................................................................................................34
GOAL 5.........................................................................................................................................35
THE PROMOTION AND DEVELOPMENT OF A VIBRANT SMALL BUSINESS SECTOR AND
SUSTAINABLE ENTERPRISES WITHIN IT........................................................................................35
Enterprise Development..............................................................................................................36
Policy and Strategy Development................................................................................................37
Small Industry..............................................................................................................................37
Procurement................................................................................................................................38
Supplier Development.................................................................................................................38
Linkage Platforms........................................................................................................................39
GOAL 6.........................................................................................................................................40
THE PROVISION AND MAINTENANCE OF ADEQUATE INFRASTRUCTURE ....................................40
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Infrastructure .............................................................................................................................40
Infrastructure Challenges.............................................................................................................42
Development Champion..............................................................................................................44
Roads...........................................................................................................................................44
Dube Tradeport ...........................................................................................................................44
The Port.......................................................................................................................................45
GOAL 7.........................................................................................................................................48
BUILDING AN ICONIC REPUTATION AS A GREEN CITY..................................................................48
Green Buildings............................................................................................................................49
GOAL 8.........................................................................................................................................51
THE ACHIEVEMENT OF ‘INTERNATIONAL DESTINATION’ STATUS FOR LEISURE, BUSINESS AND
OTHER TOURISTS.........................................................................................................................51
Tourism .......................................................................................................................................52
The Beachfront............................................................................................................................52
Events..........................................................................................................................................53
Leisure Nodes..............................................................................................................................53
City-wide Tourism........................................................................................................................54
Holiday Packages.........................................................................................................................54
Durban Tourism...........................................................................................................................54
Cultural Hubs...............................................................................................................................54
Skills in Hospitality.......................................................................................................................55
GOAL 9.........................................................................................................................................55
THE REJUVENATION OF THE INNER-CITY.....................................................................................55
Urban Rejuvenation.....................................................................................................................56
Urban Improvement Precincts.....................................................................................................56
Informal Trading..........................................................................................................................57
Derelict Buildings.........................................................................................................................58
Public Transport...........................................................................................................................59
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The Point......................................................................................................................................60
GOAL 10.......................................................................................................................................60
A CRIME AND GRIME-FREE CITY...................................................................................................60
Crime...........................................................................................................................................62
Grime...........................................................................................................................................64
CONCLUSION...............................................................................................................................64
REFERENCES.................................................................................................................................64
APPENDIX 1..................................................................................................................................68
What is Local Economic Development (LED)?..................................................................................68
INTRODUCTION
The Durban Chamber embarked on this initiative for two main reasons. Firstly, it wished to
challenge the Business community in eThekwini, which the Chamber represents, to apply its
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collective mind to what is required in the City if local economic development of a satisfactory
nature is to occur over the next decade or more. Keeping pace with the economic development
of the country as a whole is considered less than satisfactory because the City, its Municipality
and the private sector, must identify and nurture those things that lie here and have the ability
to set the City apart and ensure that it fares better than the country as a whole.
Secondly, the Chamber itself felt that the definition of a vision for economic development would
chart its own journey into the future as an important stakeholder in the City’s economic growth.
This vision, therefore, must direct the Chamber’s strategy in the years ahead as it seeks to
enhance its relevance in the context of local economic growth.
Since local economic growth is a simple concept at heart, despite the fact that it is complicated
by a plethora of definitions and various opinions as to how it is to be achieved, there is little in
this vision that may be considered “new”. Indeed, many of the aspects of the vision are already
part and parcel of the City’s planning and execution. A great deal of what is thought to be
fundamental has been, or is being, done. Some things might need to be done better or,
particularly, with greater urgency. The pervasive weakness, however, is the lack of real synergy
between the public and private sectors and their inability to work together unceasingly to
achieve a common goal.
Throughout this document, the word “City” is not used as a synonym for “Municipality”. The
Chamber recognises that the City comprises public and private sectors as well as civil society, all
of which are role-players in economic (and social) progress. A great deal more could have been
written about the necessity for poverty alleviation, the upliftment of disadvantaged
communities, social cohesion and many other aspects which are implied by the vision of the
Municipality which is “By 2030 the eThekwini Municipality will enjoy the reputation of being
Africa's most liveable City, where all citizens live in harmony.” This ultimate vision of a successful
City which is attractive to those that live in it because of the quality of collective life, is not
compromised because the Chamber has chosen to focus on the particular aspect of economic
development without which this all-encompassing vision cannot be attained.
In the preparation of this Vision, representatives of member companies and individuals within
the Chamber’s leadership have had a hand. None, however, has devoted as much time and effort
as Shivani Singh, MCom Economics, an intern on the staff of the Chamber who engaged with
members, collated their contributions, did most of the requisite research and drafted much of
the text.
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EXECUTIVE SUMMARY
Economic development is arguably better understood by the private rather than the public
sector. The reason is clear: the private sector harbours businesses which are the engines for
economic growth. The public sector, while contributing significantly to the economy itself, has
the role of ensuring that the environment is conducive to Business development. Therefore, the
strategic discourse by which the most appropriate plans can be adopted requires both the
public and private sectors to contribute according to their respective roles; the public sector to
set out how it can create a better Business environment, and the private sector to determine
how this environment may be used as the fertile ground for economic growth. A sound strategy
cannot separate one from the other and their interdependence is the very reason that any
strategy needs to reflect strong co-operation and collaboration throughout the process of
formulation.
The best ambassadors in the promotion of an investment destination are Business people who
are able to testify to the hospitability, or otherwise, of the City. In particular, the costs of
investing are critical, while a concerted investment strategy is also required. This should take
careful account of the fact that investment from within, that is the growth of existing and
established businesses, is no less important than the attraction of foreign investment. The
continuous implementation of Business retention and expansion strategies is considered
essential, while every effort needs to be made to promote clustering, which is recognised as an
effective means of accelerating economic growth. The rapid pace of migration into the City
requires, among other foci, a particular responsiveness within manufacturing where jobs must
be preserved and even created.
It is trite to suggest that the private sector must do more to create jobs in order to give relief in a
sphere where the country is so severely under threat, not least because of the proportionately
high number of younger people who cannot find employment (70,66% of the unemployed
population of South Africa is younger than 35 years old1
). The importance of meaningful
occupation, even without significant remuneration, is highlighted, while the City must ensure
that pro-active measures are taken to assist those who are jobless. Sustainable job creation will
result from Business and economic growth, and not simply from the exercise of intent, although
Business people identify many disincentives when it comes to employment.
While these reflect the perceived rigidity inherent in labour legislation and the pre-eminence of
unions within the labour market framework, the shortage of appropriate skills among those
1
Stats SA. 2013. Quarterly Labour Force Survey, Quarter 1, 2013.
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seeking employment remains an acute problem. Particular attention given recently to the
advancement of the maritime sector in Durban, presents opportunities for the development of
skills which have real value in the local economic context. In order to ensure the best outcome,
Business and academic institutions, especially the universities, must seek to derive optimal
mutual benefit from ongoing engagement. Experiential learning is the best means for the
acquisition of technical skills and there is a critical part for businesses to play in providing
internships and apprenticeships.
At the same time, entrepreneurial activity, especially among young people, needs stimulation.
Notwithstanding the inadequacy of national policies and strategies as regards the development
of the SMME sector, the City must make this a priority by building on the work done by the
Business Support unit of the Municipality and, ideally, introducing a strategic plan for the
particular growth of small industry.
Among the most daunting challenges facing the City is that of ensuring that infrastructure
becomes the facilitation partner to development, but in such a way that the costs are not
prohibitive, either to the Municipality, or developers. Delays in the implementation of
developments, or the requisite infrastructure, must be reduced significantly to minimise costs
and encourage investment. So-called ‘catalytic projects’, which are those offering the best
economic yields in terms of growth, must be expedited by accelerated procedures. The Dube
Trade Port and the conceived aerotropolis, together with the dig-out port and the Municipality’s
back-of-port local area plan, require particular attention as stimulators of economic growth.
The eThekwini Municipality has earned notable recognition for projects which have aligned the
City with contemporary expectations relating to the protection of the environment in the
interests of sustainability. With the greater co-operation of the private sector and some greater
intensity, the City could achieve iconic status in this regard.
In the sphere of tourism, a similar aspiration is desirable. While there is reason to be
encouraged by the major events which have been staged very successfully in the City, the
number of international visitors for leisure and other purposes is disappointing. The City needs
to revise its image of itself in order to dispel negative impressions of apathy, social divisiveness
and laissez faire. The attractive elements of a ‘laid back’ lifestyle must be complemented by a
dynamic vibrancy which caters equally for movers and shakers and fun-seekers.
Among other corrective actions, special attention must be given to the inner City and the urgent
necessity for rejuvenation. Partnership with property owners through the mechanism of Special
Rating Areas (or Urban Improvement Precincts) requires encouragement, for this is a means
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whereby municipal services may be augmented with the objective of enhancing property values.
It is necessary to dispel the perception that development in the northern part of the City has
shifted its heart; it has created a new development node which should not detract from the
appeal of the traditional CBD.
Much of the appeal has been lost, not directly because of development elsewhere, but because of
neglect and increased crime and grime. Increasingly, the City exhibits a character of non-
compliance and poor enforcement.
The Chamber’s vision of the City which it serves, and has done for a century and a half, includes
international recognition by tourists and investors; a citizenry active in its contribution to the
life of a residential and Business location of choice; smart, efficient and green ways of doing
things; a vibrant and developing Business community and, above all, such economic growth that
may be distributed to provide jobs, improve social cohesion and uplift the poor.
THE VISION IN SUMMARY
GOAL 1: INCREASED INVESTMENT IN THE CITY’S ECONOMY
This will be achieved by
• active engagement in investment promotion activities to attract FDI;
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• an adequately-resourced investment promotion agency with a strong contribution in its
activities by the private sector;
• affording leading local Business people a title such as “Business Ambassador”;
• focus on the fundamentals of the economy, viz. employment, adequate infrastructure
development and the creation and maintenance of an environment conducive to the
successful conduct of Business in as many sectors as possible, and notably in
manufacturing;
• the promotion of investment in the manufacturing sector;
• a cohesive and dynamic Business Retention and Expansion Programme;
• the promotion of economic clusters;
• more pro-activity in advocacy to release land for economic development.
GOAL 2: INSTITUTIONAL PARTNERSHIP AND COLLABORATION
• the facilitation of fair competition and allowing for the markets to function efficiently
and competitively;
• more facilitation of meaningful discussions between Business and the City, particularly
on issues such as the municipal budget;
• regular bilateral consultation on the part of the Municipality with Business within an
orderly framework which prescribes regular meetings, formal records of agreements
and accountability to the agreements reached;
• the conscious promotion of public-private partnerships and the identification of
opportunities for these to be set up.
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GOAL 3: CREATION OF MEANINGFUL EMPLOYMENT
• the City ensuring that job creation is a policy priority in the development of economic
development strategies;
• extending the scope of short-term job creation programmes, such as the Expanded
Public Works Programme;
• the introduction of a Civic Service programme which offers young people occupation in
an orderly and planned environment;
• the facilitation of a co-operative learning relationship between educational and training
institutions and Business;
• the establishment of an Employment Promotion Agency;
• ensuring that obstacles to self-employment are removed.
GOAL 4: THE ALIGNMENT OF SKILLS DEVELOPMENT AND EDUCATION TO THE
REQUIREMENTS OF ECONOMIC GROWTH AND JOB CREATION IN THE CITY
• exploring and undertaking ways by which the pool of hard, especially technical, skills
could be expanded;
• engaging in awareness campaigns which target young people, their parents and the
private sector, and which encourage active participation in learnerships and
apprenticeship opportunities;
• the establishment of a credible trade test centre in the City;
• the establishment of a Jobs Centre;
• introducing meaningful incentives for businesses to take-on interns and trainees;
• formal Business becoming engaged in curriculum development at academic institutions
to help them keep abreast of recent developments.
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GOAL 5: THE PROMOTION AND DEVELOPMENT OF A VIBRANT SMALL BUSINESS
SECTOR AND SUSTAINABLE ENTERPRISES WITHIN IT
• the provision of accessible Business counselling, supported by mentorship programmes,
including peer mentorship, at a substantial level of expertise based on experience;
• the development of a small industry hub which could also be registered as a Special
Economic Zone;
• leveraging procurement policies to support local small businesses;
• encouraging procurement from local suppliers;
• increased attention to supplier development.
GOAL 6: THE PROVISION AND MAINTENANCE OF ADEQUATE INFRASTRUCTURE
• the identification of constructive solutions, in the case of development projects, to the
questions of who should bear the cost and when;
• the Municipality over-riding departmentalism by the facilitation of a senior official who
has the authority to get things done;
• focussing on projects which will yield the greatest economic returns;
• regarding the Aerotropolis as a keynote feature in the local economy and investment
promotion initiatives, and making every effort to ensure that it and the Dube Tradeport
are well-served by strong logistical linkages;
• ensuring that as far as access to the port is concerned, a much higher degree of harmony
between the parties, including the private sector, will be attained;
• the implementation of the Municipality’s “Back of Port Local Area Plan” as soon as
possible;
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• ensuring that communities understand the benefits that will accrue to them by the dig-
out port and associated developments;
• the Municipality establishing a truck stop hub in the Back of Port area.
GOAL 7: BUILDING AN ICONIC REPUTATION AS A GREEN CITY
• designing and implementing effective plans to encourage a ‘greener’ building sector;
• establishing an environmental awareness campaign which, more specifically, will
counsel businesses and residents about the advantages of adopting environmentally-
sound practices.
GOAL 8: THE ACHIEVEMENT OF ‘INTERNATIONAL DESTINATION’ STATUS FOR
LEISURE, BUSINESS AND OTHER TOURISTS
• enhancing beachfront experiences in order to attract more people more often;
• the appointment of a dedicated precinct manager for the beachfront;
• identifying and nurturing other significant attractions (notwithstanding the prominence
of the beach among the City’s hospitality and tourism products) which have the
potential to complement one another and together constitute a rewarding and enjoyable
experience for visitors;
• the urgent registration of Durban Tourism as a separate entity governed by an
independent board;
• ensuring that reliable public transport is available at all times;
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• establishing meaningful skills development and work placement programmes within the
tourism sector.
GOAL 9: THE REJUVANATION OF THE INNER-CITY
• the Municipality providing sufficient funding for the optimal operation and maintenance
of the CCTV system, as well as the upgrading of the equipment to keep pace with
modern developments;
• the active promotion of the establishment of Urban Improvement Precincts (or Special
Rating Areas, as they are referred to in the legislation);
• a review of the policy in respect of informal trading and much more relevant and
effective municipal policy to regulate the matter;
• the provision of mentorship programmes to encourage informal traders enter the
formal economy;
• an acceleration of the Municipality’s Better Buildings through the addition of resources.
• the provision of an affordable, accessible and efficient public transport system;
• the aggressive implementation of development at the Point.
GOAL 10: A CRIME AND GRIME-FREE CITY
• improving the efficiency and effectiveness of the enforcement of municipal laws and by-
laws;
• full coverage for the City’s geographical space through visibility, timely responses and
decisiveness from enforcement agencies;
• engagement of ‘zero tolerance’ policing strategies;
• the mobilisation of community support and the instilling of trust in the capabilities and
integrity of enforcement agencies;
• proactive reporting of infrastructure breakdown and urban decay.
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THE STATUS QUO
In many ways the City is one which deserves plaudits, and it has received many in recent years.
In particular, the Municipality’s financial management is exemplary at a time when most
municipalities, including metropolitans, are not financially healthy. But this comes at a cost, and
it is a fairly common perception (borne out by some research, but disputed by other
investigations), that Durban is an expensive locality for Business. The relevant financial
indicators and statistics show that the City is not exceptional in terms of its economic
development profile and at best its economy is influenced by exogenous factors. Durban’s
economy is now outstripped by three other metropolitan economies and is under pressure from
a fourth, Ekhurhuleni. It will be the pre-eminent goal of those who direct and participate in
economic development that the City should benefit more from endogenous influences
which show that there is dynamism within the local economy itself. It is not sufficient to
match the country’s Gross Domestic Product (GDP); we should outstrip it, and the Chamber
believes that the City has the inherent potential to do so. Among the reasons for this optimism is
the presence of a number of flagship companies; the existence of the port and its planned
developments; traffic which moves freely except in certain areas notable for congestion;
generally sound infrastructure; a fibre optic network which constitutes the basis of a ‘smart’
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City, but which has not been exploited to an optimal extent; and a climate and amenities which
should attract tourists in droves.
This is by no means a low base for future development, but neither has the City been able to
raise the bar. It lags behind Cape Town in popular appeal and behind Johannesburg in economic
liveliness. The danger is that Durban residents accept these as the natural state of things and do
not actively aspire to competing, and overtaking. If we are to do so, we require a clear vision, a
vibrant strategy to achieve it, public/private sector commitment to common goals and a much
more dynamic and participative Business community.
GOAL 1
INCREASED INVESTMENT IN THE CITY’S ECONOMY
Foreign Direct Investment
Foreign Direct Investment (FDI) plays a significant role in a country’s pursuit of economic growth.
This is equally true of local economies where there may be even less potential for growth and
investment on the part of businesses that are already contributing to the local economy.
Developing countries believe that FDI inflows have the potential to boost their level of economic
growth. This belief is based primarily upon neoclassical growth theories which recognise outside
forces as pre-eminent in economic growth. Policymakers believe that low levels of domestic savings
limit levels of economic growth by constraining the available resources for investment purposes.
As FDI appears to enhance growth, many developing countries view FDI as the solution to
restricted growth, as it provides vital external, or new, capital. FDI is also believed to facilitate a
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Vision
An investment environment which is attractive and hospitable to investors both local and
foreign and which reflects an optimally constructive balance between the two.

transfer of technology, as well as knowledge and skills, in addition to the mobilisation of foreign
savings and allowing access to foreign markets. Due to these advantages of FDI, developing
countries choose to enact policies which have the goal of attracting FDI. South Africa has
acknowledged the potential for FDI to bridge the gap between domestic savings and investment
demand. Former president, Nelson Mandela explicitly cited FDI inflows as an important means by
which to boost South African economic growth (Clark and Bogran, 2003:337).
The City will actively engage in investment promotion activities to attract FDI.
Together, the Municipality and the Business sector will use all means to promote Durban as a
safe, stable, secure and desirable investment destination and to ensure that this is so. Of these
elements, it is important to recognise that many alternative destinations may be safe, stable and
secure. It is the level of desirability, therefore, which is critical. Investors will seek a profitable
outlook; less risk; hospitability on the part of local government; easy and affordable access to
services; minimal red tape; promptness of official response in terms of the regulatory
requirements and a good quality of life; all-in-all, a notably receptive welcome. A key element of
successful investment promotion is the development of a “one-stop” service which is well-
publicised and has the status to be able to address any issues raised by potential investors.
People wishing to invest in development projects, no matter how large or small, have little
tolerance and patience for delays occasioned by the involvement of different departments
which do not display any urgency. An investment champion is required to ensure that things are
done seamlessly.
While it will be necessary to create and manage appropriate perceptions of hospitability and
benefit through international advertising campaigns, participation in trade missions and
exhibitions, and by attractive ‘spin’, by far the most important challenge is to back these up with
reality on the ground. This will be done by the provision of evidential information and data to
prove the investment potential of the City. For this reason, an adequately-resourced
investment promotion agency is necessary, and its credibility will be enhanced by a
strong contribution in its activities by the private sector. It will also be done by constant
living up to the promises made so that no foreign investor is disappointed by his decision to
enter the Durban economy.
Among the best ambassadors for the hospitability of a local economy are the Business people
who have intimate experience of it. Their word-of-mouth testimonials, either good or bad, are
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influential among the global Business company that they keep. Such influence will be
harnessed by affording leading local Business people a title such as “Durban Business
Ambassador”.
Many aspects of the investment environment are outside of the ambit of local government,
however, yet our City, in common with all metropolitans except Cape Town, is governed by the
political party which rules the country. Since the economies of the country’s major cities are
critical to the national economy (with the eThekwini Metropolitan Municipality contributing
10,7% to national GDP, and the City of Cape Town Metropolitan Municipality and the City of
Johannesburg Metropolitan Municipality contributing 11,2% and 16,8% respectively2
), they
have an obligation to influence national decisions which have the effect of either constraining
the attraction of FDI or encouraging it. Foreign investors often seek meaningful incentives in the
form of competitive corporate and individual income tax rates; tax holidays; investment and
financial subsidies; soft loan or loan guarantees; electricity tariff concessions in the greenfield
phase; financial expatriation guarantees and Research and Development (R&D) support.
Particularly in the South African context, the labour regimen should not make employment an
undesirable risk, while education and training should ensure that adequate skills will be
available at hand. These are all matters within the purview of the national government which
require attention if there is to be economic progress and job creation at local levels. Then the
City would be in a position to host and manage meaningful special economic and free trade
zones.
While the benefits of economic growth as a result of FDI inflows must be acknowledged, the
Keynesian ‘Accelerator’ theory finds that it is not FDI inflows which ‘cause’ economic growth, but
rather, it is economic expansion which attracts FDI inflows.
Thus, notwithstanding the urgency of attracting FDI, the City will focus on the fundamentals
of the economy, viz. employment, adequate infrastructure development and the creation
and maintenance of an environment conducive to the successful conduct of Business in as
many sectors as possible, and notably in manufacturing. Foreign investors will perceive
economic expansion as an opportunity for long-run profitability and choose to invest in Durban.
2
Constant 2005 prices. Source: IHS Global Insight (2012)
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Local Expansion and Economic Growth
Investment of foreign capital is not sufficient for the economic growth to which the City should
aspire. Every encouragement will be given to local companies to expand, while companies head-
quartered in other parts of the country, which may be considering expansion, will be drawn to
Durban. This requires a conscious strategy of intervention, for it will not happen if the normal
course of events is allowed to prevail. The reason is that, by virtue of existing advantages and
the momentum sustained by these, companies will tend build on what they have rather than
look elsewhere for a new, and perhaps more advantageous, start. The partnership initiative in
Leeds (see Goal 3) was able to attract head offices, and a similar strategy in Durban would assist
in strengthening the City as a source of growth and profit. It is noted, too, that companies based
in other provinces, mainly Gauteng, but operate in, or at least benefit from, Durban and its
economy, are less inclined to make contributions to enterprise development or corporate social
investment outside of their bases. Relative to Gauteng in particular, therefore, the economies of
Kwa-Zulu Natal (KZN) and Durban, in particular, are disadvantaged.
Manufacturing
Given that the New Growth Path has identified manufacturing as an economic sector that
requires particular development, and that manufacturing offers more job creation opportunities
than most other sectors, efforts in promoting investment should be concentrated within
this sector. The City’s manufacturing base is sound, but not growing conspicuously and the
facilitation of such growth requires attention if jobs are to be created and the City’s economic
growth assured. There are several particular factors which may be impediments to such growth.
It is likely that many manufacturers would identify the labour regimen as one of them. The
reality, however, is that productivity is low and it is this, more than wage levels perhaps, that
inhibit investment in new products or greater volumes to service new markets. It is recognised,
too, that market intelligence in the industrial sphere may be limited, especially insofar as
emerging African markets are concerned. The point is made elsewhere in this document that it
is lack of market knowledge that constrains the development of small industry, but this might
be equally applicable to larger companies. From the City’s point of view, some or all of the
following strategies would encourage industrial growth:
• An enabling regulatory environment in which industrial expansion and greenfield
development is easy to achieve;
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• Smart incentives and the availability of other facilities which assist in the initiation
costs of such expansion and which will yield returns to the City later;
• More attention to the physical attractiveness of industrial areas;
• Reliable delivery of services, notably electricity, water and waste;
• Facilitative, rather than punitive tariffs associated with the above;
• An attitude on the part of the Municipality, and particularly among officials, which
conveys the message of a level of care and concern and a recognition of the value of
manufacturers as employers and significant contributors to the City’s economic
welfare.
Business Retention and Expansion
Within a business-friendly environment, local companies, as well as other South African
businesses, may be encouraged to invest in growth and expansion. Aside from ensuring that the
Business environment is indeed optimally hospitable, two other means of encouragement are
advanced. One is the implementation of a cohesive and dynamic Business Retention and
Expansion Programme (BR and E). At the most sophisticated level, this involves careful
recording and analysis of data that emerges from businesses when asked to make input on
those elements of the local Business environment which they find enabling or inhibitive, and
what they would like local government to do in order to make the prospect of further
investment attractive. The programme may also include an interventionist mechanism through
which new product development, export opportunities and large/small linkages, for example,
may be advanced. Such a programme depends for its success on a high level of cooperation
between public and private sectors, both in the philosophical as well as the practical,
implementational realms.
At the most basic level, however, BR and E is on-going, face-to-face engagement between
Business people and local government officials which may be done in a less formal, but no less
frequent, way. It is a way to ensure that the former better understand the priorities of City
administration and the constraints which cannot permit free rein, while the latter become more
intimately acquainted with the elements of Business and, more specifically, the people who
constitute the engines of the existing local economy.
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Economic Clusters
A second strategy is the promotion of economic clusters.
Pyke and Sengenberger (1992) find that in an ideal cluster, a small firm may reap economies of
scale and scope much like those afforded to larger corporations. This is because a cluster
facilitates an inter-firm division of labour, as well as vertical specialisation. This allows firms to
enhance their efficiency and reduce their operational costs. Economic clusters also pose the
obvious advantage of physical nearness. Therefore, clusters are operative in terms of economic
transactions, as well as in the exchange of ideas and diffusion of Business and technical knowledge.
From a theoretical perspective, firms in a cluster have superior capacity to cope with radical
change, such as competitive pressure, as they reap numerous positive externalities from the
cluster, and therefore have to deal with fewer challenges than an isolated firm. Firms in a cluster
also have the capacity to organise collective action to cope with mounting pressure, for example,
through the re-organising or founding of cluster-level institutions with the purpose of supporting
cluster-firms in fields such as training, technology and information. Local government may
contribute to the establishment and improved performance of industrial clusters through the
provision of infrastructure, real estate, training and Business incubators. Development agencies
may contribute through the provision of finance and technical assistance. It will be the role of
national government to create an appropriate economic and regulatory framework, which will
stimulate co-operation and action at the local level.
In a well-ordered local economy these clusters will develop with a degree of inevitability.
Durban is able to show several examples of successful clustering. The process may be
accelerated by the provision of particular incentives, for example, or through planning and
zoning techniques. The essence of the Back of Port plan is clustering by these means, while the
success of the Durban Automotive Cluster is well known. The City will continue to encourage
clustering, particularly within the maritime sector and those related activities which service
it, or derive benefit from it. The legislation governing the establishment of Special Economic
Zones (SEZs) provides a framework which should be exploited as an appropriate vehicle for the
promotion of clustering, which should be viewed as a process of inclusivity rather than
exclusivity.
Maritime
The maritime sector is considered to offer particular benefit to the City and its economy in the
future. Together, the Municipality and the Chamber, as the representative of the Business
community, will do all that is possible to promote commercial and employment opportunities
Page | 21

within the maritime industry. It will require the availability of people, especially young people,
with appropriate skills; the existence of a strong community of practice within maritime law;
the development of technologies; the development of repair and ship-building and fitting
services and the full cooperation of the academic sector which should ensure that a range of
courses are offered in Durban, some of which may enjoy international approbation.
Incentives
In common with many cities and towns, the Municipality commissioned a study preparatory to
the adoption of an incentive policy to encourage investment. This has not yet been
implemented. Incentives are controversial. There are those who maintain that a location which
offers what investors want most, does not need to offer incentives, and that when they are
offered, they are a signal that the location is not so attractive after all. This is a view held by
Professor Marcel De Meirleir, for example, who is an international consultant on Business
location. On the other hand, the offering of incentives is common throughout the world, and
appears to work, particularly in association with such structures as special economic zones and
industrial development zones. The costs of providing services, for example, have to be met, and
if some companies are receiving concessions, others might have to pay more. This element of
cross-subsidisation should not be overlooked if incentives are being contemplated.
The Chamber proposes that any policy regarding incentives should be borne of proper
consultation processes with the Business community. In developing a policy, certain conditions
should be included. These include:
• A recognition that local investment leading to economic growth is no less important
than greenfield FDI;
• The setting of a time limit for the application of the incentive;
• The assurance that the incentive constitutes an investment which will yield dividend
after its expiry;
• A transparent framework of incentives to avoid ad hoc, and possibly inequitable,
decisions.
Certainty
A fundamental requirement is also around the need for certainty – this is something that South
Africa as a whole is hugely constrained by and Durban would do well to provide a more
“certain” Business environment. This would include being able to implement existing municipal
Page | 22

spatial plans, municipal departmental alignment, leadership in decision making and decisive
action on bulk infrastructural requirements.
Land Use
The Municipality has been very proactive insofar as the preparation and adoption of strategic
spatial plans for the whole City are concerned. This is to be lauded and utilised to drive
investment and development – provided the bulk infrastructure is aligned. However, a
fundamental issue relates to the release of land from agriculture. This is a strategic issue which
needs to be dealt with ‘head on’ with the Provincial and National Departments of Agriculture.
The City will have to be a great deal more pro-active in its advocacy to release land for
economic development.
GOAL 2
INSTITUTIONAL PARTNERSHIP AND COLLABORATION
Consultation
Planning process regulations, together with the Constitution, require Government to consult
with communities and stakeholders in the formulation and development of its plans. However,
it usually transpires that such consultation occurs after policies and plans have already been
formulated, and sometimes even after they have already been approved within municipal
structures, giving rise to the perception that stakeholder consultation is done for the sake of
statutory compliance.
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Vision
The City engages in participative, facilitative and accountable governance, which is
characterised by the development of a meaningful and co-operative relationship between
the private and public sectors.

In the pursuit of good public governance, the City will facilitate fair competition and allow
for the markets to function efficiently and competitively. Under these conditions, the
private sector can be innovative and effective in ensuring economic growth and development.
Good public governance is not the sole responsibility of the Municipality, however, and the
private sector has to ‘come to the party’ by making suggestions and proposals, providing quality
feedback and influencing laws, regulations and practices. This creates an environment in which
markets can function effectively.
The Chamber feels that co-operation between the public and private sectors is non-negotiable,
and both parties will do more to facilitate meaningful discussion between Business and
the Municipality, particularly on issues such as the municipal budget. The City will go
about creating this facilitative environment in a number of ways. Firstly, the consultation
process will be clearly understood prior to the commencement of policy planning. Secondly,
stakeholders will be offered the opportunity to engage at an early stage in the process of policy
or strategy formulation. Thirdly, when comment is required, a reasonable time will be allowed
for this, bearing in mind that bodies such as the Durban Chamber need to consult members, and
fourthly, and most importantly, the submissions of Business as a key stakeholder will be
thoroughly considered.
The Chamber welcomes the re-activation of the Best City Practice Commission which was
established some years ago, and then abandoned. This will complement a Planning Commission
for the City, which is also warmly welcomed in imitation of the national and provincial models.
It is not sufficient, however, and should not preclude regular bilateral consultation on the
part of the Municipality with Business within an orderly framework which prescribes
regular meetings, formal records of agreements and accountability to the agreements
reached.
The Chamber recognises that it will do all it can to ensure that the participation of Business in
any consultation process is appropriately representative of the Business community, especially
as far as the major drivers of the local economy are concerned. Contributions must be of
suitable quality, characterised by insights, foresight and a broad recognition of the ambit of the
City’s economy.
Public/Private Partnerships
Once there is good pubic governance and co-operation between the private and public sectors,
there is an opportunity for the development of Public-Private Partnerships (PPP). The
Chamber believes that there must be conscious promotion of PPPs and the identification
of opportunities for these to be set up. They are unlikely to occur without deliberate strategy.
Page | 24

PPPs have two distinct advantages for the economy at large:
1. Mobilisation of private capital (either to supplement public resources or release them for
other public needs).
Governments face an increasing strain on public resources, with pressure stemming from rapid
urbanisation; the rehabilitation of aging and outdated infrastructure; the provision of services
to previously unserved or under-served areas; as well as the need to expand networks to new
populations. The private sector has an advantage over the public sector as it possesses skills
and assets to which government does not have access. By entering a PPP, with the goal of
maximising profits, the private sector’s particular capabilities are available for what are
essentially public projects. Thus, if the PPP is structured correctly, it may mobilise previously
untapped resources.
2. Improvement of efficiency and the use available resources in a more effective manner.
A critical challenge for government is the efficient use of scarce resources due to bureaucratic
procedural constraints and limited skills in project management. The private sector enters a
project with the clear goal of profit maximisation, which is generated by increasing efficiency
in investment and operations. If the PPP is structured to allow the private sector to maximise
profits and thus cost-effectiveness and efficiency, projects may be implemented a good deal
quicker and at lower cost. This will increase the chances of services etc. being economically
sustainable and provided at affordable rates (even after satisfying the profit requirements of
the private operator).
PPPs allow government to pass operational roles to efficient private sector operators while
retaining and improving focus on core public sector responsibilities, such as regulation and
supervision. In the long run, this approach should result in a lower aggregate cash outlay for
government, and better/cheaper services for the consumer.
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GOAL 3
CREATION OF MEANINGFUL EMPLOYMENT
Job Creation
In 2011, the unemployment rate in eThekwini was the third highest amongst South Africa’s seven
largest metropolitan areas. Although there was a decrease in the number of unemployed
individuals, between 2001 and 2011, from 43 percent to 30, 2 percent, the implication is that one
in three individuals in eThekwini is unemployed (EDGE, 2012). As far as the province of KZN is
concerned, there was a 2, 7% decline in employment from the last quarter of 2011 to the last
quarter of 2012. It is likely that our city suffered commensurately. Moreover, the Census 2011
revealed that Kwa-Zulu Natal’s outward migration (281 568 individuals) exceeded its inward
migration (250 884 individuals). It also found that 58 percent of eThekwini’s inhabitants
possessed less than a matric qualification (EDGE, 2012). This combination of a large number of
unemployed individuals, with a lack of skills and a propensity to migrate out of the province, does
not bode well for the City’s economic growth path.
There are several interventions which are required to create meaningful employment
opportunities in Durban. Firstly, the City will ensure that job creation is a policy priority in
the development of its economic development strategy. This should not preclude promotion
of, and support for, other Business growth and expansion initiatives. Some potential growth
Page | 26
Vision
The City drives programmes and adopts economic development policies and strategies that
lead to the creation of meaningful, sustainable jobs in both the public and private sectors.

sectors are not labour-intensive, yet still offer excellent prospects for economic growth, while
still others do not provide opportunities for un- or semi-skilled employees. They are no less
important in the context of the local economy for this reason.
If incentives for investment and expansion are considered appropriate (see page 15), there
would be merit in linking the availability of these to some index of labour-intensiveness which
would enable discrimination in favour of companies that employ more people. Similarly,
incentives such as tax and rate holiday schemes, land concessions and subsidised service
provision, could be tailored to favour youth employment initiatives and the wider economic
policy objectives of the City. In this way, national government innovations could be augmented.
Secondly, there is greater scope for short-term job creation programmes, such as the
Expanded Public Works Programme (EPWP). In this programme, skills training will be a
priority to ensure that once an individual has completed this programme, he or she is readily
employable. There is potential for growth in the EPWP. With the active support of the private
sector, which currently knows very little about the EPWP and how it operates in the City, the
work could be expanded.
The value of productive occupation should not be under-estimated. Projects in the NGO sector have
shown that those young people whose time is organised and who spend time in constructive
activity benefit enormously. Not only do they learn new skills, they develop self-confidence and lose
the sense of hopelessness that accompanies unproductive idleness. They become more employable
over time. In some cases, the work experience develops entrepreneurship which may result in the
establishment of subsistence micro businesses which offer self-employment in the first instance.
Thus, and thirdly, the City will consider the introduction of a Civic Service programme
offering young people occupation in an orderly and planned environment. Such
programmes will be utilised to act as a safety net for unemployed individuals. There is plenty of
work that may be done by teams of people whose work is planned, are well-led and given
encouragement to see the value in the civic services that they are able to perform.
Remuneration is not thought to be essential for success. The provision of some suitable clothing
and food may suffice. If programmes of this nature draw more generous financial support, the
payment of modest stipends would be advantageous.
‘Town and Gown’
The City will participate in the facilitation of a co-operative learning relationship
between educational and training institutions and Business. Internships and similar
experiential learning initiatives are considered essential in ensuring that education and training
Page | 27

are aligned to work-place expectations. While this is essentially a matter for individual
institutions and companies to develop relationships, some thought on the part of the parties in
joint discussion may identify a constructive role for the City.
Employment Promotion Agency
The establishment of an Employment Promotion Agency within the City is proposed. In
collaboration with the Chamber, this will promote employment by highlighting for the benefit of
potential employers as much information as possible to expedite the creation of jobs. The
agency could launch flagship projects for work experience and internships, especially for
graduates, and, generally, encourage in the public domain an interest in, and commitment to,
proper and productive employment. All too frequently, people are unaware of such
inducements as tax incentives and other programmes which mitigate some of the perceived
difficulties of employing people
Obstacles to self-employment must be removed and the City will work to achieve this.
Collaboration will promote youth entrepreneurship, engage in entrepreneurship training and
mentorship, and promote participation in the formal economy.
Migration
The migration of potential employees from the province is a matter of concern. Anecdotally, it
would appear that many of these migrants are either students (many in the top bracket) who
choose universities in other provinces, or young qualified professionals who find far better
career prospects in Johannesburg, for example. Thus, in addition to the creation of jobs, the
quality of the jobs including their remuneration and career advancement prospects needs
attention. This problem would be addressed by a significant economic growth in the local
economy and if national company head offices were located here.
In Leeds, a sister City, a conscious decision was taken to attract head offices of companies in the
financial sector to the City. This was done effectively by a partnership organisation which
managed the project and succeeded in drawing new corporate headquarters to the CBD of
Leeds. Umhlanga Ridge and neighbouring areas constitute a particularly hospitable
environment for the location of head offices and the City would do well to add a plan of
attraction to the work of an Investment Promotions Agency. Indeed, the Leeds Initiative is
worthy of imitation for its achievements addressed many of the problems that mirror those in
our City.
Page | 28

The Leeds successes were achieved by so-called ‘place marketing’, ie the marketing of a locality’s
competitive advantages. This usually encompasses a two-fold approach: the targeting of
particular firms for which the potential host region possesses clear advantages and where there is
a cogent value proposition; and a reduction in ‘hassle factors’ which include travelling convenience
among others.
Headquartering in Gauteng is part of the economic evolution of the country, but with the advent of
electronic communication and the technological advances which have followed, there is less of a
case for headquarters to be based in Gauteng. This is a generalisation which does not apply to all
companies equally: it depends on the nature of their products/services and the markets to which
they need to be close. Currently, there appear to be disincentives or ‘push factors’ for location in
Gauteng. These include travelling distances, traffic congestion, crime, high staff and rental costs,
and, in some cases, a pace of life which is stressful. At the same time, Durban has ‘pull factors’
which need to be exploited more aggressively. These include a road network which allows traffic
to flow more easily, significant and proximities (in the case of the airport or the port, for example),
good schools and a superior quality of life. In reality, the ‘pull factors’ need considerable force if
they are to prevail because of the costs and the human capital disturbances of relocation.
In 2006, even before a great deal of the development in the Umhlanga area, a survey3
of
commercial and industrial estate agents in KZN sought to investigate factors which deter firms
from choosing to relocate to KZN. It revealed that 52 percent of respondents believed that there
was no land available for property development, 19 percent believed that planning controls were
not only too lengthy, but also extremely onerous and another 19 percent believed that the prices of
property and buildings were too high. The survey also revealed that large corporates often
encounter a shortage of appropriate, large, greenfield sites, although this inhibition must be a
diminished factor currently.
It is evident that in KZN, the eThekwini area is endowed with sufficient capacity, appropriate
infrastructure and comparative agglomeration economies to make relocation a viable proposition
for some, if not all, corporates.
The strategic challenge for the private and public sectors will be to drive Durban into an optimal
configuration of push and pull factors, i.e. a reduction in local deterrents and an augmentation of
pull factors. The short-term objective will be to secure the relocation of at least one top 100
South African firm or major multinational branch headquarter to Durban. This firm will be able
to reap first-mover advantages, while also attracting other firms to the region. The externalities
from this agglomeration could prove extremely constructive for the local economy.
3
McCarthy, J. 2007. DoED: Draft Strategy for Firm Relocations to KZN. August 2007.
Page | 29

GOAL 4
THE ALIGNMENT OF SKILLS DEVELOPMENT AND EDUCATION TO THE
REQUIREMENTS OF ECONOMIC GROWTH AND JOB CREATION IN THE
CITY
Page | 30

Education and Training
The severe drawbacks inherent in the South African education system are well-documented.
Despite the high proportion of public money spent on school education, which way exceeds that
spent by many other African countries, the outcomes are very disappointing, especially in the
spheres by which employability in a modern economy may be measured. Literacy, numeracy and,
particularly, the standards of proficiency in mathematics and science are well below almost all
other countries in the world. Generally, schools, especially those severely handicapped by the
absence of suitable facilities, discourage enterprise by virtue of their low aspirations, questionable
commitment to the welfare of learners and poor teaching. Adequate preparation for the world of
work, as opposed to a particular career, is in very short supply.
The expectation that Further Education and Training (FET) colleges should fill this role is often
not met. Despite the costly re-capitalisation of FET colleges which was undertaken in 2006/2007,
this failed to address some of the fundamental problems which continue to undermine Business
confidence in the work and effectiveness of the colleges. The National Certificate Vocational (NCV)
courses generally failed to produce technicians with adequate practical knowledge for the
production line. The concept of a learnership, quite prominent in the thinking that led to the
introduction of NCV courses, failed to attract Business which continued to regret the demise of
apprentice and artisanships. FET colleges have limited capacity to meet these expectations. Not
only is their equipment likely to lag behind that of companies as technology advances, but
lecturers are often ill-equipped to do practical training in workshops. The FET college which was
intended to be one type of FET institution in parallel with high schools suffers a crisis of identity.
Its courses, such as the NCV, for example, have the status of NQF4, which is precisely that of grade
12. The intention that FET colleges should provide a vocational alternative to traditional high
school education appears to have been abandoned, and the FET college has become de facto a
post-school place of study.
For the reason, perhaps, that training and education institutions have been unable to find suitable
workplace contexts for their courses, workplace training has assumed much greater importance in
Page | 31
Vision
As far as possible within the ambit of its powers, the City will promote the development of
skills and capacities to ensure that its economy is well-served, especially in sectors which
are identified as being of particular significance to the City’s economic growth.

recent times. Indeed the New Growth Path asserted that that the growth and development of the
South African economy will stem from increased workplace training of workers. This will not only
improve the skill-set of the South African workforce, but also contribute to an increase in its
productivity. Almost all institutions have introduced mandatory workplace experience into their
courses. Apart from the enhancement given to the training curricula, internships and similar
programmes provide opportunities for young people to learn how to apply the theories they have
learnt and grow in confidence in their ability to fulfill the demands of a particular job.
That this does not happen in every case is attributable to several factors, including:
• Young people, exiting secondary and tertiary institutions to join the world of work, often
lack the adequate skills for workplace readiness. This problem is worsened by inadequate
linkages between institutions and workplace learning. The qualifications that these young
people often obtain, do not always meet the demands of the labour market;
• The most dire skills shortage appears evident in the artisan, technological and
professional fields;
• Individuals which have been unemployed for long periods of time lack sufficient numeracy
and literacy skills, reducing their propensity to enter the workforce. Due to the long-term
nature of their unemployment, they also fail to obtain vital new skills required by the
dynamic economic environment.
• The inability of many young learners to deal with mathematics, and numeracy generally, is
a deep-seated problem for which no solution has yet been found;
• Policymakers have tended to over-emphasise the importance of NQF level 1 to 4
learnerships, with insufficient attention being devoted to more appropriate (intermediate
and higher) skills which are required for individuals to become competitive in the
knowledge economy. In this regard, the processes leading to the development and
accreditation of NQF standards tended to concentrate on lower levels to the detriment of
higher ones which would challenge more capable individuals.
Above all considerations is the pace at which technological advances occur. Redundancy of
knowledge is a feature of the modern Business world which requires new insights and
understandings. Continuous retraining of workers is essential in a company which seeks to
progress successfully.
Page | 32

There is a significant ‘mismatch’ between the skills young people obtain at local tertiary
institutions and the skills requirements of Business. “The skills appropriateness and inadequacy of
the South African workforce has been one of the factors hindering its economic success in the
global economy” (Barnes, 2009:39). However, even though the appropriateness of the skills can
come into question, it may be as simple as a saturated labour market. Dias (2005) highlights that
by up-skilling the youth, the unemployment issue may not be resolved, as the labour market may
be unable to absorb new entrants.
Although local government has very limited responsibilities as far as education and training is
concerned, the successful development of the local economy makes its involvement, together
with that of Business, imperative. In this sphere, more perhaps than many others, close
collaboration between public and private sectors will be essential. By various interventions, the
appellation “smart” could be validly applied to the City of Durban.
Appropriate Skills
Through such partnership, the following projects will be undertaken:
• A comprehensive survey to ascertain the current workplace skills needs, as well as
those likely to be needed in the future as, for example, within a developing maritime
industry;
• The conduct of a City-wide and comprehensive skills audit to ascertain the extent to
which supply and demand are aligned;
• Engagement with secondary and tertiary education and training providers in order
to bring these institutions in closer touch with market demands;
• The establishment of an institutional mechanism to monitor the appropriate
development of suitable skills in the City and to identify ways of building the City’s
reputation as a centre for particular skills, such as those required in the maritime
industry.
At the same time, ways in which the City, with the active support of the Business
community, could enhance the pool of hard, especially technical, skills should be
explored. This will involve the extension of the scale and scope of learnership and traditional
apprenticeship programmes to offer alternative skills development trajectories to a larger
segment of the youth. There will also be the promotion of a shift away from learnership
programmes which offer basic and intermediate skills toward those which offer opportunities
geared at an intermediate and high skill-level. There will also be effective alignment of
Page | 33

apprenticeship and learnership programmes with the trade test system. This will improve
artisan pass rates and ensure that the skills and capabilities developed are relevant to labour
market demand. A credible trade test centre in the City is thought to be an attainable goal.
The City will also engage in awareness campaigns which target young people, their
parents and the private sector and which encourage active participation in learnerships
and apprenticeship opportunities. The stigma attached to technical education needs to be
removed and this can be done through public awareness campaigns, the profiling of technical
high schools and raising the reputation of FET colleges.
Jobs Centre
The establishment of a Jobs Centre will provide valuable post-school vocational education
and training options. Once individuals have completed their training, the Centre will invest in
mechanisms which facilitate employment and aid the transition of qualified apprentices into
stable, meaningful labour market opportunities. Career and vocational guidance will be made
available to all school-leavers and the unemployed, to guide them into fields which not only
have vacant positions, but those which meet their skills capability. Developers of large projects
where many people live and/or work should be encouraged to include centres for skills and
citizenship development, including career guidance and other services of benefit to young
people, in particular. These developments could also include facilities which create local
opportunities for future maintenance and construction.
The particular role of the Chamber is to encourage businesses to access SETA funding, which
implies, inter alia, that closer relationships with SETAs need to be developed, and host interns
and trainees. The City will create meaningful incentives for businesses to take-on interns
and trainees. Exactly what form such incentives should take is not clear, for the Municipality
has limited scope to offer incentives. However, if they prove possible within the framework of
labour-intensivity, suggested previously, firms may be encouraged to engage more
constructively in internship programmes. Private enterprise development of skills and
employment opportunities within rural or City fringe environments, should also be given due
credit.
Many businesses feel that SETAs have multiple shortcomings, which include bureaucratic, rigid
and inefficient management and low standards of training. Pauw et al (2006) find that businesses
tend to hire and train learners based on their recruitment strategies rather than the need to
engage in skills development training.
Page | 34

There is a potential for Business to become engaged in curriculum development at
academic institutions to help them keep abreast of recent industry developments.
Business will also be able to provide insight into which skills are in high demand and those
which are over-supplied. This data should be updated regularly and recorded by the
Municipality as part of a dynamic skills audit process.
GOAL 5
THE PROMOTION AND DEVELOPMENT OF A VIBRANT SMALL BUSINESS
SECTOR AND SUSTAINABLE ENTERPRISES WITHIN IT
Page | 35
Vision
Having considered carefully the factors that determine either success or failure of micro and
small businesses, the City will implement strategies to enable the growth of the small
Business sector and the sustainability and growth of the enterprises within it.

Enterprise Development
The small Business sector, often confusingly referred to as the SMME sector, requires segmentation
and the development of different approaches to each segment. The needs of start-up micro
businesses, which require stimulation and encouragement, are very different from those that are
functional and already have some place in the market. The challenges of unemployment and the
need to economically liberate Black people, especially within the youth, have led to undue
attention being given to the start-up segment. Many of these enterprises never get off the ground
or fail within a short time. At best, they offer relief to unemployment through self-employment. On
the other hand, micro and small businesses, which are functional in that they earn income and
have clients, have the potential to grow and thence, employ other people. Encouragement for this
segment is scant by comparison with the start-ups, particularly in the financial sense. These
businesses need growth, both horizontally, by increasing their client base, and vertically, by
improving their productivity, their Business practices and the quality of their products.
Many agencies engaged in what is commonly called SMME development, including SEDA,
Tradepoint and the Chamber’s SMME Desk, have become so exclusively associated with start-up
development that they have lost credibility with the small businesses that have progressed well
beyond this level. Consequently, there is little sustainability in these organisations because the
income that is generated from their services is very limited. These are provided gratuitously in
order to meet the socio-political needs referred to earlier. Some enterprises that have received
support from Tradepoint to exhibit at overseas trade fairs, for example, have not had the capacity
to provide their own marketing material. If that is the case, it is a mystery how they would be able
to fulfil a decent-sized export order. The reality is that the small Business sector will not be
stimulated by throwing money at it; the critical facilitating factors are capacity-building and
market access.
Neither the Municipality nor the Chamber, nor any other agency for that matter, should abandon
its programmes for new enterprise creation. They should find more successful ways for doing this,
however. Reliance on training courses and other information-giving means is palpably inadequate.
The translation of the theories of Business into practice is extremely difficult and beyond many
who start their own businesses. The need for new enterprise creation is based essentially on the
need for some people to employ themselves and, in doing so find a regimen of sustenance for
themselves and their dependents. When the new enterprise creator has an inherent spirit of
entrepreneurship, this micro-enterprise might grow and then contribute directly to the local
economy.
Page | 36

The challenge for functioning businesses is to understand the dynamics of Business expansion
and growth. These include aspiration and the conscious desire to raise the performance of
companies in order to generate more profit and increase their value. It also involves a
transition on the part of the operator, by nature a “doer” in the context of small enterprises, to
the role of “manager”. These processes require more expert guidance than is readily available at
present and it is for this reason that the public and private sectors together should seek ways of
providing it. Accessible Business counselling, supported by mentorship programmes,
including peer mentorship, needs to be provided at a substantial level of expertise based
on experience.
Policy and Strategy Development
The small Business sector suffers from the absence of cohesive and integrated planning as to
how best it may be advanced to achieve the expectations of it in relation to the national and
local economies and job creation. Countless initiatives, managed by a variety of different
agencies and invariably involving the expenditure of large sums of money, have similar
objectives but limited success in promoting a dynamic small Business sector. Fundamental
issues that relate to the facilitation of small Business functionality are not dealt with and require
the development of comprehensive plans and strategies to ensure that the talk about the
importance of small enterprises is translated into reality. This is a challenge for government,
and the private sector, at all levels and would be better met if there were a dedicated ministry to
lead Small Business development.
Small Industry
If the small Business sector is generally weak in South Africa, the small industry sector is even
less capable of creating jobs. The barriers to entry into small industry are more daunting than in
any other sector. Not only is the capital outlay likely to be inhibitive, but knowledge of the
market and what it offers is even more critical. It is one thing to identify, perhaps by observation
rather than research, what manufactured product might sell to consumers, but people without
an intimate knowledge of industry have little idea of what component widgets would be
procured by other manufacturers. As a start, it would be valuable to know what components,
which could be manufactured here, are imported. The development of a database of information
accessible to entrepreneurs wishing to establish and conduct small industries would serve to
facilitate the creation of a small industry sector, especially if incentives of one type or another
were available. The City will have among its goals the development of a small industry hub
which could also be registered as a Special Economic Zone.
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Procurement
The City will leverage procurement policies to support local small businesses. This will
add stability to the demand for goods and/or services from these enterprises. The local
government tendering policies and processes will be reviewed and adapted, not just to allow for
the awarding of more contracts to small businesses, but to encourage their development.
Contracts could be broken into smaller parts which could be within the capacity of small
businesses to manage, or larger contracts could be awarded to companies that undertook
outsourcing to acceptably capable enterprises and/or adopted programmes to ensure that the
transfer of skills takes place. It is acceptable, even desirable, that the City will prioritise
procurement from local companies. Procurement by the public sector is a powerful means of
facilitating black economic empowerment, but it has to be used effectively. This is not always
the case at present.
Supplier Development
More resources will be invested in a specialised supplier development programme which aims
to assist suppliers to grow vertically by improving their Business practices and their delivery.
This may include financial support for quality assurance achievements, such as ISO certification.
The task of improving small Business to enhance its potential for growth requires the support of
the Municipality, but it could be a private sector project.
Although the above paragraphs have had references to small businesses, the points made apply
equally to co-operatives. The formation of co-operatives has been largely haphazard without the
necessary intervention that would encourage the right people to collaborate, for the right
reasons, within the co-operative model. If the calibre of co-operatives as viable businesses were
raised through concerted guidance, a minimum quota of municipal tenders for execution by co-
operatives could be contemplated.
In order to promote the success and growth of local businesses, especially those in the small
Business sector, companies will be encouraged to procure from local suppliers if and where
possible. As far as the Municipality is concerned, local procurement should be a matter of policy.
Among the information that a BR and E programme will reveal is instances where procurement
has to take place outside of the City because the product or service is not available here. This
may provide an interventionist opportunity whereby a local company may be persuaded to
develop the required service or product.
In response to amendments to the Code of Good Conduct relating to the B-BBEE policy,
increasing attention will be given to supplier development. The move towards this type of
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active mentorship offers the potential of meaningful development of small enterprises and goes
beyond procurement alone. In particular, supplier development involves skills transfer and,
very importantly, the raising of quality of product and service. By these means, small
enterprises will become more competitive and more capable of fulfilling additional orders or
tenders. In the sphere of small Business growth, and thus job creation, ‘horizontal’ growth by
the accessing of more orders must be complemented by ‘vertical’ growth – the improvement of
product/service, Business practices and productivity. The Chamber, through its members and
its own programmes, believes that it is able to provide constructive assistance in the
advancement of small enterprises and favours an arrangement with the Municipality to support
the growth of its small Business vendors.
Linkage Platforms
Despite some justified skepticism regarding electronic linkage platforms, there is value in
providing small supplier enterprises and large procuring companies with the opportunity to
find one another. As part of its programme of support for micro and small businesses, the
Chamber will promote the use of the Supply Chain Network which is thought to be a powerful
platform for linkage. This is a country-wide initiative promoted by Absa which arose from the
procurement challenges of large corporate such as Group 5. It is a feature of the platform that
suppliers earn “points” based on the information they provide when registering. This allows
procuring companies to assess the quality of the provision they are likely to receive. The
Chamber is also a partner in a similar venture which is being driven by Market Square with
some support from the World Bank. The process of encouraging small and large companies to
register is underway. The Municipality will take note of these initiatives, even if regulations
preclude their use. They deserve encouragement because they aim to promote the development
of the small Business sector.
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GOAL 6
THE PROVISION AND MAINTENANCE OF ADEQUATE INFRASTRUCTURE
Infrastructure
An effective infrastructure development policy is the cornerstone of any economic growth and
development strategy. The upgrading of infrastructure contributes significantly to increasing
future economic competitiveness and improving the quality of life of an increasing number of
urban inhabitants, as they migrate away from rural areas. The South African government has
chosen to invest heavily in infrastructure projects as part of the New Growth Path’s stimulatory
fiscal package, with infrastructure investment amounting to roughly 8% of GDP for the 2012/2013
fiscal year (DBSA, 2012).
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Vision
The City will provide and maintain a safe, secure, reliable, effective, efficient and fully
integrated infrastructure network which meets the needs of individuals and businesses,
while simultaneously facilitating local economic development and supporting government
strategies and plans.

Infrastructure is a fundamental component of the macroeconomy. It can be termed an ‘economic
enabler’, as in isolation it has no potential to create economic benefits. However, when it is
integrated and appropriately matched by a complimentary Business environment, it may
contribute significantly to economic growth and development. Thus, when a well-managed
infrastructure system is available to businesses, it facilitates regional specialisation (and hence
growth), due to the efficient and effective allocation of resources, inputs and outputs. There are
numerous examples in the empirical literature which support this view:
- The United Nations (2002:22) found that the competitiveness of a country’s industrial and
commercial sectors is significantly improved by efficient national infrastructure.
- Lakshmanan and Anderson (2002:3) found that the productivity of the macroeconomy is
enhanced by a productive freight transport sector.
- Ravn and Mazzenga (2004:657) found that a reduction in transport costs from 20% to
15% of GDP would be equivalent to a permanent increase in domestic consumption by 1,
5%.
It is clear that the success of an infrastructure project is highly dependent upon the capacity of the
public institution which is designated with the implementation of the project. Levy (2007) finds
that the positive economic impacts of a particular infrastructure project are severely hampered by
governance failures (even if the project is carefully planned, implemented and completed without
corruption).
Kessides (1993) highlights three key findings about the relationship between infrastructure
development and economic growth. Firstly, infrastructure investment contributes positively to
economic growth by: decreasing the costs of production; stream-lining supply and demand
channels; promoting economic diversification and the provision of access to the application of
modern technology which in turn will increase returns to labour. Secondly, investment in
infrastructure raises the quality of life for citizens through: the creation of amenities; the provision
of consumption goods (communication and transport); and contributing to macroeconomic
stability. Lastly, infrastructure investment does not create economic potential; rather it develops
only when appropriate conditions (such as applicable labour and private capital) exist.
The sheer availability of infrastructure is insufficient; the infrastructure must be of the highest
quality. Reinikka and Svensson (1999) find that where the infrastructure is of poor quality or is
unreliable, new firms will be unlikely to invest, while established firms may be tempted to invest in
‘complementary’ capital (i.e. the provision of their own infrastructure services) as opposed to
Page | 41

investment in ‘productive’ capital, which would have the effect of dramatically reducing the rate of
return on private investment.
The quality and reliability of infrastructure are key concerns for the economic growth and
development of Durban. Foreign investors, when seeking an investment destination, place much
emphasis on the state of infrastructure in the host country. Infrastructure availability promotes
FDI as it reduces operational costs. Khadaroo and Seetanah (2008) find that gains from
infrastructure growth and development are correlated with greater accessibility and a reduction
in transport costs. Also, the availability of public goods will decrease the cost of doing Business for
foreign enterprises, which will contribute to profit maximisation. Erenberg (1993) finds that when
infrastructure is not extended to local and multinational enterprises in a timely fashion, the
efficiency of these enterprises is reduced as they have to build their own infrastructure, which
results in a duplication and wastage of resources. Poor infrastructure can cause transaction costs
to increase and thus reduce access to both local and global markets which can reduce FDI inflows
into developing countries. The quality of infrastructure has a role to play in export facilitation.
Iwanow and Kirkpatrick (2006) find that a 10 percent improvement in infrastructure will
contribute to an eight percent improvement in the quantity of exports, in a developing or
transitional economy.
The capacity for the Municipality to deliver and effectively maintain infrastructure is dependent
on its ability to:
• collect rates and user-charge revenue and to make an adequate portion available for
these purposes;
• raise loans in order to fund the capital expenditure;
• access other funding from internal or external sources;
• successfully plan projects timeously to ensure that government’s Municipal
Infrastructure Grant Programme funding is spent within the prescribed timeframes;
• accurately forecast future needs and expectations within the local economy.
Infrastructure Challenges
These have become critical challenges. The limited size of the rates base; loss of revenue
resulting from the high percentages of water and electricity that are consumed, or wasted, and
not paid for; the cost of borrowing; the socio-political imperatives and increasing urbanisation
which strain resources; bureaucratic tendering procedures which cause delays and increased
costs and the difficulty of long-term planning within a political regimen of five-year cycles are
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all factors that militate against the provision of satisfactory infrastructure. The eThekwini
Municipality is known to show a good deal more responsibility in terms of its management of
assets than many municipalities, but when budgets require pruning, it is inevitable that
allocations for maintenance will suffer.
The City has also experienced unprecedented development in its more peripheral areas. The
costs of delivering bulk services and other infrastructural assets such as roads so far from the
City centre are inhibitive and have given rise to controversy as to who should bear the costs.
Levies, development charges and mobility tariffs, all of which have been under discussion, are
unpopular solutions as far as the Business community is concerned. A study commissioned by
the South African Property Owners Association (SAPOA) finds that eThekwini’s unique
development surcharge makes it the most expensive Municipality in which to develop
industrial, commercial, retail and residential properties (Urban Econ, 2012). This surcharge
thus renders Durban uncompetitive as a development destination4
. Indeed, many feel that the
City is already a more expensive investment venue than competing metropolitans.
The challenges mentioned will not get easier over time. Fundamentally, when a balance is being
sought between socio-economic imperatives and the need for infrastructure development, the
leveraging of economic growth and thus enhanced municipal revenue, needs to be considered.
In the case of large developments, the outlay of capital which will be received later through
property rates is required to stimulate such developments. Account also needs to be taken of
the necessity sometimes for developers to bear the cost of infrastructural developments
themselves. They cannot afford delays when there are financial commitments that must be met.
In these instances, the Municipality should recognise the contribution to the City’s
infrastructure base and provide retrospective concessions. Thus, constructive solutions will
need to be found sooner rather than later, and the solution, it is believed, lies in
public/private partnership. In a smart City, a framework for such partnership will be
developed after intensive discussion. It is believed that there are unexplored options as to
how such collaborations may be forged. A framework will obviate the necessity for each
development project to be approached in an ad hoc fashion and will also avoid the unhappy
situation where the Municipality imposes charges which, although considered necessary in
4
If the development surcharge were to be removed, eThekwini’s retail developer costs would be brought
in-line with Cape Town and would also be cheaper than those in KwaDukuza (whose developer cost tariff
structure still excludes the cost of water connection). A removal of eThekwini’s development surcharge
would also see eThekwini becoming the lowest cost major metro for commercial property development
(Urban Econ, 2012).
Page | 43

terms of the requirements of the fiscus, inhibit development and the attraction of property
development.
Development Champion
In the context of development, and often associated with infrastructural considerations, it is the
slow-moving public sector that determines the pace. An acceptable and constructive framework
will ensure that delays are avoided as much as possible. Delays are unnecessarily costly and
cause considerable frustration among developers, not only for the reason that their costs rise. In
many ways, infrastructure developments become obstructed by procedures. The identification
of a “champion”, a person with the authority to keep things moving, is advisable.
Departmentalism within the Municipality needs to be over-ridden by the facilitation of a
senior official who has the authority to get things done.
Roads
In respect of roads, the relationship between City and province needs attention. In some cases,
the transfer of “provincial” roads to the Municipality would be welcomed. Where delays result
from bureaucratic procedure, the Municipality in common with its sister metropolitan cities (all
of whom suffer from the same malady) will lobby for regulatory changes. The Municipal Finance
Management Act need not be cast in stone; the national government, and the Treasury in
particular, must be prepared to sacrifice some aspects of a control mentality in recognition of
practicality, and financial good sense, on the ground.
The key to economic progress and job creation in Durban is ensuring that there is a sound
balance between the provision of adequate infrastructure to rural and other disadvantaged
communities, on the one hand, and the extension of infrastructure to facilitate, and even
encourage, economic development on the other. Financial constraints imply all too often that it
is a case of “either, or”, but this leads to compromise and the real satisfaction of neither. The
City will focus on projects which will yield the greatest economic return; for it is only
through the growth of the rates base and the number of paying service consumers that the
Municipality will improve its financial circumstances. “Growth”, and not “increase”, must be the
watchword.
Dube Tradeport
Among the particular focus areas in the future must be the precinct of the Dube Trade Port and
the King Shaka International Airport. Hitherto, these have been recognised as provincial rather
than municipal initiatives, but they lie within the City and the participation of the City in their
development is essential. In particular, the proposed Aerotropolis must be a keynote
Page | 44

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