The King Shaka International and Pietermaritzburg Airports: a Provincial
Overview
Introduction
In Dubai they say, "Just BUILD it and they will come".
1. Infrastructure spending for economic growth
History has shown us that infrastructure is the catalyst that unlocks local, provincial and national economies. One of the best examples of the link between infrastructure spending and economic growth is China, who have literally built their way to the top. In the early 1990s, total construction spending in China was less than one percent of total global construction spending.
To keep pace with the industrial and commercial development, as well as the new demands placed on urban infrastructure due to an increase in labour migration, growth in both public and private funding boosted construction spending in China to approximately 10 percent of global construction spending by 2007.
Dubai, a village in the desert, became the second largest and most prosperous city among the world's fastest growing cities. The Dubai government's continued commitment to infrastructure is reflected in the fact that 30 percent of its total 2010 budget has been allocated to infrastructure spending.
KwaZulu-Natal infrastructure spending
The KwaZulu-Natal government has increased infrastructure spending by 20 percent over the 2009/10 to 2012/13 medium term expenditure framework (MTEF). Thus R11.093 billion has been set aside for infrastructure development within the various departments for the 2010/11 financial year, which grows to R12.9 billion in 2012/13.
2. Poverty reduction through integrated economies
One of the main objectives of economic policy is an increase in the welfare of people. When we speak about welfare of people we envisage a decrease in unemployment and poverty. However, jobs cannot be created nor can poverty be decreased unless the economy grows and expands in terms of its output or gross domestic product (GDP). This is equally applicable to the national, provincial and city economies, the principles are the same.
Regional economic integration
One policy for growing the economy is the economic integration of regions or cities, i.e. to create integrated economies. Economic integration refers to the trade and labour unification between different regions by facilitating the movement of goods and services as well as labour between the regions.
Broadly speaking, regional integration aims to improve economic outcomes for all participants involved. There is significant evidence and literature that economic integration can be a very successful and powerful policy to grow and expand the member economies. It is very difficult to dispute the merits of regional economic integration.
Goods and services and labour already move between the four major regions in the province. This is evident in the significant concentration of economic activity and output in the four major economic nodes, i.e. Ethekwini, Msunduzi, Hibiscus Coast and Umhlathuze.
Therefore there has already been some form of economic integration occurring between the four regional economies and especially between Durban and Pietermaritzburg. Observing the vehicle movements at the N3 toll plaza outside Durban confirms the flow of goods and services and labour between Pietermaritzburg and Durban.
There are linkages between the different regions and there must be some benefit to economic integration for it to have occurred. Some of the associated benefits of economic integration include the following:
* Lower prices for distributors and consumers because of the increase in trade
* The balance of money spend from cheaper goods and services can be used to buy more products and services
* Wider selection of goods and services not previously available
* Market expansion, more investment into the region and greater diffusion of technology, creates more employment opportunities for people to move from one region to another to find jobs or to earn higher incomes
* Economies of scale create productivity gains and thus greater national and global competiveness.
A practical limiting factor for regional integration to occur is the current system of municipal boundaries because of their limiting size and "stickiness". For example, the value of land in the Ethekwini region is higher than that of land in the adjoining areas.
Let's say a business or developer wants to buy a portion of land to establish a manufacturing plant. For a number of reasons (closeness to market or harbour, for example) they want to establish their plant in the Ethekwini region and not outside its jurisdiction. However, this will imply that they will have to pay a significantly higher price for the land. This could seriously limit the viability of such investment and development.
However, by integrating the economies the plant does not have to be located within the Ethekwini region and they can thus buy land at much cheaper rates which will in turn force land values in the Ethekwini region to decrease to more normal rates. The lower cost of land makes the establishment of businesses far more viable.
The how
The next question is how can we facilitate the even greater movement of goods and services and labour i.e. how do we facilitate greater economic integration?
The T-bone
The four economic regions form a T-bone. The T-bone follows the N3 from Pietermaritzburg to Durban and the N2 via the KIA to Richards Bay and the N2 to Port Shepstone.
The basic concept or principle associated with this T-bone is for example:
Live in Pietermaritzburg work in Durban, Shop in Port Shepstone
Live in Richards Bay, do business in Pietermaritzburg shop in Durban
This envisages a situation where:
* there is easy movement of goods and services between the four regions
* there is fast movement of goods and services between the four regions
* there is cost effective movement of goods and services between the four regions
* there is reliable movement of goods and services between the four regions
Transport system
To make this a reality we need a transport system that will create easy, fast, cost effective and reliable movement of goods and services between the four regions. The answer is a rapid rail transit system linking Pietermaritzburg, Durban, Richards Bay and Port Shepstone, forming a T-bone system. The link between Durban and Richards Bay will be via the new King Shaka Airport.
A rapid transit, railway system is an electric passenger railway in an urban area with high capacity and frequency and which is grade separated from other traffic. Rapid transit systems are typically either in underground tunnels or elevated above street level. They are typically integrated with other public transport and often operated by the same public transit authorities.
Rapid transit is significantly faster and has a higher capacity. It is unchallenged in its ability to transport large numbers of people quickly over medium distances with little land use. The environmental benefits are significant to say the least.
The T-bone concept could be the trigger for greater regional economic integration between the four regional economies. This could significantly increase the regional multipliers. The "free" movement of goods and services, and labour would significantly increase the level of economic activity within the integrated economy or T-bone economy.
3. Airports as economic engines
It is essential to upgrade our facilities in an increasingly competitive world. Airports, in particular, are regarded as THE economic engines of the 21st century. Passenger numbers across the globe are expected to double by 2020 and a burst of activity in airport expansions is experienced around the world.
Approximately 4.5 million people work on airport sites globally and airports can play a strategic role in the economic development of a local community. In fact there is a new saying that "if it is not happening, they are nowhere near an airport".
King Shaka International Airport
As you all know our new international airport started operating on 1 May 2010. The Dubai to Durban route has proven to be a phenomenal success. It has already established a passenger occupancy rate of 75 percent on average on its daily flights and we expect the rate to grow. More national carriers are in the pipeline which will expand the menu of destinations. Interestingly, the King Shaka Airport has opened new opportunities for Pietermaritzburg and its surroundings.
New life for Oribi Airport
It is about time that we blow new life into Oribi Airport. It has now become critical to take serious decisions about the city's airport. It is problematic when aeroplanes can often not land during summer months because of poor weather conditions.
We need world class infrastructure. For a city to attract and retain companies with national and global ties, as well as talented people to work for them, efficient, functional airports that are easily reached will be increasingly important. We have to be competitive. A city's airport is a first impression and a last impression.
The T-bone system will also benefit Oribi airport in that it will directly increase the demand for air passenger and air freight services within the T-bone because of the growth and expansion of the integrated economy.
KIA will by its mere existence also create opportunities for Oribi in that KIA will focus only on mass passenger and mass freight services and not general aviation services. Oribi can thus position itself as the general aviation airport for the province attracting significant aviation related services and industrial business to it.
However, to increase its economic value the following needs to happen:
* more intensive use of the airport, i.e., the surrounding space or land
* more intensive use of existing facilities
* further expansion of the current facilities would allow passenger arrivals and departures to increase, as well as more airfreight traffic
* the possibility of private sector involvement in development of the airport should be investigated
* the introduction of larger scheduled aircraft on the Johannesburg route is a promising development
* a wider range of destinations at competitive airfares would further stimulate airport activity
* significant marketing and education drives and campaigns to be initiated.
4. Leveraging
James Cherry, chairman of Airports Council International (ACI), alluded to the fact that "airports have become businesses just like any other, with private companies building, operating and owning airports in various parts of the world"
Airports Council International's latest economic survey revealed that more than 200 companies are doing this to varying degrees. Leveraging between government and the private sector to amplify potential gains is becoming a global trend that we should explore.
Let us realise our vision for our region and our city. The time is right to develop the N3 corridor between Durban and Pietermaritzburg as a provincial priority corridor.
I thank you.
Issued by: Provincial Treasury, KwaZulu-Natal Provincial Government
7 May 2010
