Business School Armchair Chat
28 March 2006
Thank you for the opportunity to address you on the Gauteng Growth and
Development Strategy.
Gauteng is the country's economic powerhouse, responsible for over one third
of our gross domestic product (GDP) and a key economic player in the sub-region
and the continent. We have consistently achieved sustained positive growth
rates, peaking at a growth rate of 5.6% in the last quarter of 2004.
While our economy has historically been based on the extraction and export
of primary products such as minerals and mining commodities, the tertiary
sector has increasingly become predominant. According to Statistics SA (Stats
SA), in the period 1996 to 2004, primary industries as a percentage of GDP
dropped from 4.6% to 2.3%. Tertiary industries, on the other hand, increased
from 58.4% to 62.3% in the same period. Much of this was attributable to growth
in finance, real estate and business services, which increased from 16.1% to
21.4%.
While I am sure many would argue that the market has played a role, these
shifts in the Gauteng economy are at least in part attributable to government
interventions in the economy. An important part of our strategy was focused on
public investment in strategic economic infrastructure to stimulate further
private sector investment in key economic sectors, such as business tourism,
logistics infrastructure, manufacturing and Information and Communication
Technology (ICT), with a particular focus on increasing the knowledge-intensity
of the economy.
Between 2001 and 2005, we invested over R2.8 billion on various Blue IQ
initiatives which have had a strong impact in boosting the tertiary sector of
the economy. Allow me to elaborate on some of these projects.
We played a major role in developing the Newtown cultural precinct as a
vibrant cultural hub which is contributing to the growth of creative industries
and cultural tourism and has also had a significant impact in the renewal of
the Johannesburg Central Business District (CBD). This has included projects
such as the Mary Fitzgerald Square, the Metro Mall, Nelson Mandela Bridge and
Brickfields housing project. Constitution Hill was another important
infrastructure investment project which has become part of the Gauteng's
cultural tourism routes and has helped regenerate the part of the city where it
is located.
Within the automotive industry, we initiated the Automotive Industry
Development Centre (AIDC), which has been a success story in improving the
efficiency of the sector, by providing services for the auto industry,
providing training and creating employment. Deloitte and the Financial Mail
rated the AIDC among the top 20 companies to work for in South Africa and first
in the automotive industry. The centre was also named as one of South Africa's
Top 300 Companies for the third year in a row and was a finalist in the
Innovation and Sustainability Awards.
The Innovation Hub was launched in April 2005 as Africa's first science park
aimed at nurturing and growing enterprises in the knowledge sector of the
economy. It has become a landmark in Tshwane, boosting the local economy and
exceeding expectations, with over 50 companies and 500 people on site. The Hub
has successfully secured the bid to host the 2008 International Association of
Science Parks (IASP) World Conference, presenting us with the opportunity to
showcase the province, the country and the continent.
Then there is the development of the Cradle of Humankind World Heritage Site
and the Dinokeng Game Reserve as world-class tourism destinations with
considerable socio-economic benefits. Our strategy at the Cradle was to invest
in the development of roads and bulk infrastructure and in a network of visitor
centres in order to crowd in private sector investment in tourism business
activity. In partnership with Wits, we last year opened new facilities at the
Sterkfontein caves and an entirely new tourist attraction about 10 kilometres
away, named Maropeng. Maropeng was last year voted the best new tourism project
worldwide and also won awards for construction and public private
partnerships.
The strategy is already beginning to pay off. Research in 2005 showed that
we are successfully transforming the local economy from its past reliance on
mining and agriculture to high value tourism. Tourism attractions in the area
increased from 68 in 2001 to 275 in 2005, employing about 4500 permanent and
casual workers. More people are visiting the area, over 70 000 per week and
more money is circulating in the area, in excess of R7.5 million per week.
Even though the Dinokeng game reserve is still being completed, our
investment in that area is also showing results, with tourism attractions in
the area having tripled from 90 to 278. The procurement of game for the reserve
will start in May 2006 and the project will be officially opened in December
2006. Employment levels are expected to increase from 300 people to an
estimated 2800 jobs during construction with a sustained level of about 1500
direct jobs within the game reserve.
In Kliptown, where the historic Freedom Charter was adopted, we last year
opened the Walter Sisulu Square of Dedication. This forms part of the Kliptown
urban renewal plan which involves tourist attractions combined with social
infrastructure investment to uplift the area and create sustainable livelihoods
in the area.
The Johannesburg International Airport interchange was completed last year,
contributing to the area's potential as an economic development node. This year
we will through Blue IQ, continue to pursue the further development of the
Johannesburg International Airport (JIA) Industrial Development Zone (IDZ) as a
specialised export-oriented growth centre with significant potential to bolster
investment and high value-add manufacturing linked to the airport as part of
the projects outlined in Accelerated and Shared Growth Initiative for South
Africa (AsgiSA). As a project of national significance, the JIA IDZ has the
potential to create at least 40 000 direct and indirect jobs and provide a
crucial boost to Ekurhuleni's traditional manufacturing activities.
As I announced in February, important groundwork has been laid in unlocking
the country's beneficiation potential through the development of a jewellery
manufacturing project linked to the JIA IDZ. This is another initiative which
will have a positive socio-economic impact in the province, with an expected
investment of over R30 million in the first phase of the project, 500 jobs in
the construction phase and an estimated 4000 permanent quality jobs once the
project has reached full capacity.
One of the biggest projects is the Gautrain rapid rail link, which is to
form the backbone of an integrated, inter-modal transport system in Gauteng.
Gautrain won cabinet's endorsement as a key infrastructure project which will
make a significant contribution to economic growth and job creation. It will
create an estimated 93 000 jobs over the next five years and boost gross
geographical product by up to 1%.
The development of an efficient and integrated transport system is a key
element of our efforts to build Gauteng as a globally competitive city region.
This is based on the understanding that, while we have achieved considerable
successes, these are insufficient to address our significant developmental
challenges and, in particular, to make a contribution to the achievement of our
national goal of halving unemployment and poverty by 2014 in a manner
commensurate with our role as the country's key economic engine.
At its simplest, the global city region perspective makes it imperative for
the three spheres of government and other stakeholders, to work together in a
manner that is mutually beneficial, that improves the efficiency and
performance of the Gauteng economy and enables the region to compete more
effectively in the international arena. It requires a common approach to
dealing with urgent and complex choices needed to build an economically
efficient and social equitable city-region.
Global city regions are becoming increasingly important in the national and
global space economy. We need to move beyond administrative and jurisdictional
demarcations to better understand the functional economic geography of the
city-region, including how the different components relate to each other, their
comparative and competitive advantages and how people, capital flows and
business linkages shape the regional economy.
Our projections are that, by 2015, Gauteng will have a population of around
14,6 million, making it among the largest metropolitan settlements in the
world. To prevent a situation where population pressure overwhelms our
development, we are developing perspectives and strategies which aim to ensure
that we are ahead of these challenges. The global city region perspective is
one such perspective that aims to improve economic efficiency and integrated
planning so that we are able to continue to boost economic growth and economic
opportunities in a manner that is able to address social needs.
Among the priority areas for improved co-ordination, efficiency and planning
include:
* Safety and security
* Transport infrastructure and authorities
* Integrated safety and transport system
* Sustainable human settlements
* Regional branding, investment and tourism promotion
* Infrastructure provision and
* The environment and sustainability
Institutions of higher education have a key role to play in partnering
government to more effectively harness urban social and economic development
research to inform the Gauteng city region's policy, strategy and programme
development and to assist in generating creative solutions to the province's
developmental challenges.
In addition, to sustain and significantly enhance our competitive edge, we
need to address the triple helix relationship between government, institutions
of higher learning and the private sector to ensure that we build and harness
knowledge and innovation within the economy.
The initiatives I have referred to all form part of the Gauteng growth and
development strategy, which we launched in 2005 following extensive research
and consultation with business, trade unions and other stakeholders. The
strategy aims to reach an economic growth rate of 8% by 2014.
Through the Gauteng Economic Development Agency, we will continue to
facilitate private sector investment in the economy. A growing sector is in the
area of business process outsourcing (BPO).
The SA Contact Centre Community (Sacccom) predicts that South Africa will in
the next few years be among the world's top three offshore locations providing
high value call centre services and that, by 2008, we will increase the number
of call centre seats by at least 50%. IBM recently launched a call centre with
900 seats and Vodacom will soon be launching a new call centre in the city
which will eventually create an additional 1500 jobs. The provincial government
will itself soon launch a new call centre.
The GDS provides a framework which includes a focus on sectoral strategies.
Last month we launched a comprehensive provincial agricultural development
strategy to take advantage of the sector's potential for growth, job creation
and economic empowerment. The strategy aims to promote value added production
within agriculture with a focus on agro-processing and bio-technology and
making Gauteng a centre of excellence for smallholder farming with a focus on
high value and niche market crops. The aim is also to bring previously
disadvantaged sections of the population into the entire value chain of
agriculture, with a special focus on women, youth and the unemployed.
Other critical focused strategies under the GDS umbrella include:
* The creative industries sector, whose importance was again highlighted by
the Oscar-winning Tsotsi. Gauteng is home to 40% of the country's creative
industries, which form part of the knowledge economy and form an important
pillar of the sport-leisure-culture economic nexus. It is an important
generator of new enterprises and jobs and also contributes to urban
regeneration. The province recently hosted a creative industries summit and
will soon launch a creative industries strategy. In addition, the Gauteng Film
Office will continue to promote Gauteng as a preferred destination for local
and international film productions.
* Making Gauteng a home of competitive sport. In addition to positioning the
province to prepare to take full advantage of the hosting of FIFA World Cup in
2010, the province has adopted a strategy to host major sporting and other
events to generate economic activity and create jobs.
* An integrated infrastructure development plan for the province
encompassing and co-ordinating infrastructure investment by national,
provincial and local government in Gauteng, as well as with the parastatals and
private sector. For the next three years the provincial government alone will
spend R25.7 billion on infrastructure, including the maintenance and upgrading
of existing infrastructure and provision of new infrastructure. This includes
R3 billion to be spent in 20 identified townships in Gauteng to upgrade key
social and economic infrastructure and stimulate local economic development.
This will include the tarring of roads and creation of local economic hubs.
Local governments will also hold local Growth and Development Summits and
develop local Growth and Development Strategies.
* A Gauteng Human Resource Development strategy to provide not just the
skills required for faster economic growth, but to also provide better access
to economic opportunities for those currently excluded from meaningful economic
participation.
A key thrust of the GDS however, is not just economic growth but inclusive
economic growth which ensures that the fruits of expanded economic activity are
shared by those previously denied participation in the economy. This is in line
with the objectives of AsgiSA. A number of strategies are key in this
regard.
* The provincial government has developed a Broad-Based Black Economic
Empowerment (BBBEE) Strategy which aims to ensure that by 2009, at least 70% of
GPG contract are awarded to enterprises which are BBBEE compliant.
* In April last year we launched the Gauteng Enterprise Propellor (GEP) to
provide financial and non-financial support to small, medium and
micro-enterprises (SMMEs) in Gauteng and unleash their potential as engines for
accelerated economic growth and expanded participation in the economy. A key
focus has been to promote the sustainability of SMMEs and enhance their access
to resources. So far, GEP has assisted over 400 SMMEs in key areas such as
productivity enhancement, quality assurance, business plans, marketing and
human resources development. An additional 1000 aspiring and existing
entrepreneurs have been trained and a new SMME portal has been launched to link
SMMEs to economic opportunities. Of those assisted, 41% are owned by women and
81% by historically disadvantaged individuals.
* In line with our commitment to shared and inclusive growth, we will be
paying particular attention to the economic empowerment of young people and
women. Youth job creation and economic empowerment will be effected through the
Expanded Public Works Programme (EPWP), the community development workers
(CDWs)and the provision of bursaries, learnerships and internships as well as
other skills development and training opportunities, with an important focus on
opportunities for unemployed graduates. Through the GEP, we will ensure that by
the end of the 2007/08 financial year, 20% of funding goes to support youth-led
job creation activities. The GPG has over 6000 learnerships and internships and
we are on course to achieve the set target of 8% of staff by April 2007.
Finally, one of the key constraints to accelerated delivery is the capacity
and organisation of the state. We have conducted a study in this regard and
will in the year ahead be developing an implementation plan that will see a
range of measures to boost the performance of the provincial government, with a
particular focus on better knowledge and innovation management.
Government alone will not succeed in implementing the Gauteng Growth and
Development Strategy and boosting our economic growth to 8% by 2014.
Partnership with the private sector and individuals such as yourselves will
therefore be crucial. I invite all of you to join hands with us in this
endeavour.
I thank you.
Issued by: Office of the Premier, Gauteng Provincial Government
28 March 2006
