Sad state of our municipalities needs urgent intervention

Auditor-General Kimi Makwetu
Auditor-General Kimi Makwetu

The Auditor-General’s report on municipalities is a cause for serious concern, especially in the light of the World Bank’s 2016 assertion that “cities can play a key part in creating jobs for the millions of youth who enter the workforce every year”.

The Daily Maverick on June 27 characterised the Auditor-General’s report on municipalities as a “bleak picture”, while the Business Tech of June 26 said it “reveals shocking state of South Africa’s municipalities”.

What is not explicitly stated is the despair this brings to ordinary folks living in these municipalities.

Knowing that South Africa’s urban population is growing faster and younger, and that nearly 80% of the population will live in urban areas by 2050, the sad state of our municipalities demands urgent and decisive interventions.

Most importantly, there is an urgent need to locate municipalities as agents of economic growth and employment.

Former minister of cooperative governance and traditional affairs, Pravin Gordhan, during his 2017/18 budget speech asserted: “Our transformation will be built through economic participation, partnerships and mobilisation of all our capacities.”

Governments can take control of urbanisation and build more connected and productive cities: cities that open their doors to the world.

At the heart of Gordhan’s proposed strategies to inclusive economic development with the help of the private sector, lies the potential of cities to stop dividing people and instead act as the agents of transformative economic growth.

It is in cities that South Africa has the opportunity to break the patterns that have led to current inequalities, by, for example, rethinking urban planning to address unemployment, economic exclusion and marginalisation.

We must change the way we think about cities.

The National Development Plan also reflects an increasing focus on cities as potential agents for growth.

It is therefore clear the Auditor-General’s report exposes not only the poor financial health of our municipalities but our own ill-suited conceptualisation and imagination of municipalities and the current policy thinking for re-imagining cities as ideal catalysts of inclusive growth.

Urbanisation should be a source of dynamism that can enhance productivity and increase economic integration, according the 2017 World Bank report, Africa’s Cities: Opening Doors to the World.

The report aptly asserts that “if well managed, cities can help countries accelerate growth and open the doors” to global markets.

They can do this in two ways:

. By creating productive environments that attract international investment and increase economic efficiency; and

. By creating liveable environments that prevent urban costs from rising excessively with increased densification. By generating agglomeration economies, cities can enhance productivity and spur innovation and national economic diversification.

We need this kind of thinking to permeate our municipalities.

Look at East Asia, where cities have grown faster than anywhere else in the world.

Between 2000 and 2010 nearly 200 million people moved to urban centres, including eight “megacities” with populations of more than 10 million, and 123 large cities with one to 10 million people.

Singapore stands as a good example of sustainable urban planning and urbanisation-driven growth.

Infrastructure investments were transformed into productive assets for economic expansion and increased prosperity in the city-state, enabling GDP growth to average 7.7% in the last 50 years.

East Asian economic growth is driven by cities, centred on the emergence of dominant economic regions, built on agglomeration economies, such as the Mekong Delta and the Greater Bangkok Metropolitan Area.

The Pearl River Delta in China is an economic powerhouse and the world’s largest urban area in both size and population.

This is not difficult for our own cities and small towns (dorpies) to emulate. But the question is, do we approach this urbanisation as a problem or opportunity?

If we fail to reshape our thinking on urbanisation, will our cities continue to be costly, crowded and disconnected?

While we should not ignore the pertinent issues raised by the Auditor-General, we must concurrently address the three features that constrain urban development and create daily challenges for citizens.

First, our cities are said to be largely crowded and not economically dense.

Second, investments in infrastructure, and industrial and commercial structures have not kept pace with the concentration of people.

Investments in affordable formal housing – especially for the “missing middle” – lag behind while congestion and its costs overwhelm the benefits of urban concentration.

Cities are disconnected as they have developed as collections of small and fragmented neighbourhoods, lacking reliable transportation and limiting workers’ job opportunities while preventing firms from reaping scale and agglomeration benefits.

Knowing that South Africa’s urban population is growing faster and younger, and that nearly 80% of the population will live in urban areas by 2050, the sad state of our municipalities demands urgent and decisive interventions.

Lastly, cities are costly for households and for firms – high nominal wages and transaction costs deter investors and trading partners – especially in regionally and internationally tradable sectors.

Workers’ high food, housing and transport costs increase labour costs of companies and thus reduce expected returns on investment.

Globally, our cities rank in the middle, among the most expensive in the world.

Pretoria is ranked as the most expensive city in South Africa. Johannesburg is ranked second and Cape Town third, with Port Elizabeth fourth on Numbeo’s index and Durban fifth.

In the expat portal Expatistan rankings, Port Elizabeth and Durban are switched around.

Data group Numbeo and Expatistan published their Cost of Living indices for this year, listing the cheapest and most expensive cities to live in across the globe.

As long as municipalities lack functioning land markets and regulations and early, coordinated infrastructure investments, they will remain local cities: closed to regional and global markets, trapped into producing only locally traded goods and services, and limited in their economic growth.

If our municipalities remain crowded, disconnected and costly, they can be neither kind to their residents nor productive.

These municipalities are still being built. Before it is too late, they can ensure that they are not locked into inefficient and unsustainable patterns of urbanisation.

Given the high sunk costs and enduring nature of infrastructure, any approach to urban development that lacks early planning and coordination will burden future generations with cleaning up the mess – a terribly inefficient strategy.

Models of success, from within the country and other regions, may offer illuminating analogies and contrasts with our cities, while exemplifying what leaders can achieve through coordinated and sustained action.

Above all, the citizens must always be at the centre of planning and implementation.

Of course, political economy must be considered in designing and implementing policies.

Leaders need to foresee policy impacts (opportunities, winners, and losers) and anticipate challenges to enforcement.

Municipal growth will be central to development in the country, as it has been elsewhere.

By starting with transformation to land markets, spatial development and regulations, then making early and coordinated infrastructure investments, governments can take control of urbanisation and build more connected and productive cities: cities that open their doors to the world.

Maxon is a social commentator

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