sisonke district municipality
DESCRIPTION
PRESENTATION TO THE NCOP LOCAL GOVERNMENT WEEK BY SISONKE DISTRICT MUNICIPALITY 31 July – 3 August 2012. SISONKE DISTRICT MUNICIPALITY. THE GLOBAL CONTEXT. THE ENVELOP WITHIN WHCH WE HAVE TO RESPOND. - PowerPoint PPT PresentationTRANSCRIPT
SISONKE DISTRICT MUNICIPALITY
PRESENTATION TO THENCOP LOCAL GOVERNMENT WEEK
BYSISONKE DISTRICT MUNICIPALITY
31 July – 3 August 2012
THE GLOBAL CONTEXT
Prospects for global growth are being seriously compromised by the sovereign, banking and liquidity crises affecting the Eurozone.
THE ENVELOP WITHIN WHCH WE HAVE TO RESPOND
Investors have been moving to assets perceived to be safer, especially US treasuries and German bonds, despite the miniscule returns.
If effective steps towards a lasting solution are not taken swiftly, a catastrophic chain of events could be set off by one or more of the states in crisis, possibly Greece, in the not too distant future.
The consequential economic costs could be enormous and widespread.
The global crisis
Serious structural adjustments are absolutely necessary, so as to enhance the competitiveness of these economies and restore their financial stability.
However, protracted economic contraction, followed by stagnation, is likely to result in escalating social unrest.
Growth stimulation is thus essential to take the weaker states out of crisis mode.
The global challenge
The vulnerability of the global economy to external shocks is being increasingly exposed and global growth rate is becoming rather anaemic.
China, in turn, is again implementing growth stimulating measures in order to counter the possibility of a worse than anticipated slowdown.
Vulnerability of the global economy
Weak international demand as well as insufficient local consumption, are compromising country’s ability to continue posting the growth rates required to maintain socio-political stability.
Countries are using monetary policy to ease global economic challenges and infrastructure spending again accelerated.
However, the long-term recipe lies in a better balance between investment activity and household spending, as well as between external and domestic demand.
Weak international demand as well as insufficient local consumption
The sluggish recovery in parts of the advanced world and stagnation or recessionary conditions in others, are among the strongest inhibitors of economic activity at home.
Europe accounted for approximately 26% of South Africa’s merchandise exports in 2011 and weakening demand in this regional market does not bode well for export-oriented sectors, particularly manufacturing.
South Africa’s very open economy makes it particularly vulnerable to
external shocks.
Comparing the opening quarter of 2012 with the losing quarter of 2008,significant net gainers of jobs were:
the government and community services sector, financial services, – whilst manufacturing, which has shed the largest
number of jobs at the broad sector level, is still facing difficult trading conditions and excess production capacity in several of its sub-sectors.
Critical as it is to reduce unemployment levels, particularly amongst South Africa’s youth, it has proven extremely difficult to reverse the large job losses incurred since
the onset of the crisis.
Implications for RSA• The very difficult situation in the
Eurozone, if prolonged in an unresolved manner, will continue posing a drag on South Africa’s economic growth beyond the near-term, with the adverse impact magnified if the crisis intensifies or, in a worst case scenario, spirals out of control.
Structural unemploymentSouth Africa has an acute problem of
youth unemployment that requires a multi-pronged strategy to raise employment and support inclusion and social cohesion.
High youth unemployment means young people are not acquiring the skills or experience needed to drive the economy forward.
This inhibits the country’s economic development and imposes a larger burden on the state to provide social assistance
THE ROLE OF SISONKE DISTRICT MUNICIPALITY IN STIMULATING
LOCAL ECONOMIC GROWTH AND JOB CREATION
SISONKE DISTRICT
PSEDS-Provincial Spatial Economic Development Strategy
PGDS-Provincial Growth Development Strategy
NDP-National Development PlanNGP-New Growth PathNIPF-National Industrial Policy
Framework
NATIONAL POLICY CONTEXT
LED STRATEGY 2012With clearly identifiable objectives, with outcomes and outputs defined, with times frames ranging from 3 to 5 years.
INDUSTRIAL STRATEGY 2012Focused on agriculture, tourism, trade and social services
TRADE STRATEGYidentified: soybean, sugar cane, maize, citrus fruit, tomatoes, potatoes, beef, poultry, dairy and wood products as viable commodities for investment, development and expansion
BUSINESS RETENTION AND EXPANSION Local procurement opportunities and business support Tender advise
SMME STRATEGY AND 2ND ECONOMY INTERVENTIONSFocused on Cooperatives, especially financial services cooperatives, social
enterprises, youth enterprises and small business
Our LED Policy Context
Coordinated spatial planning and development interventions through IGR structures such as the Mayor`s forum, the municipal managers forum, etc.
Joint Investment Attraction through a “one-stop-shop” as “information clearing house” on development applications
A balanced strategy focusing on urban sprawl and rural decay
Small towns regeneration program focused on primary and secondary nodal economic hubs
A functional Geographical Information System which gives spatial location of our economic development interventions
Share development planning capacity
COORDINATION OF STRATEGIC DEVELOPMENT INTERVENTIONS
Mayors forum, chaired by the District Mayor
Municipal managers forum, chaired by the District MM
Development Planning and Local Economic Development, chaired by one of the local MM’s
Chief Financial Officers, chaired by an MM
Annual LED Summit with resolutions integrated into the IDP/LED & SDBIP
District LED & Tourism Forum (govt., business, labour and civil society)
MOU’s with commodity organisations such as Milk SA, Potatoe SA, Forestry SA
Business Retention and Expansion Forum
Effective use of IGR Structures Building Social partnerships
Our approach to co-ordination in achieving economic geography
Economic performance and key economic indicators of the District
Income and Employment Position: Economically Active Population
19961998
20002002
20042006
20082010
10%
11%
12%
13%
14%
15%
16%
17%
18%
Economically Active Population EAP as % of total population:
% o
f res
iden
ts
The District was the third highly economically inactive in the province after uMkhanyakude and uMzinyathiOnly 15 percent of the total population in the Sisonke District Municipality was considered part of the EAP with just under 75707 District Municipality residents identified as EAPMen make a far higher proportion of the EAP and that economic activity in the district is still dominated by men.
Income and Employment Position: Income Inequality
0-240
0
2400
-6000
6000
-1200
0
1200
0-180
00
1800
0-300
00
3000
0-420
00
4200
0-540
00
5400
0-720
00
7200
0-960
00
9600
0-132
000
13200
0-1920
00
19200
0-3600
00
3600
00-60
0000
6000
00-12
0000
0
1200
000-2
4000
00
2400
000+
0
5,000
10,000
15,000
20,000
25,000
Annual household income: Sisonke Dis-trict Municipality:
No.
of h
ouse
hold
s
Inequality is also a problem with research evidence suggesting a wide income gap, one of widest income gaps in the province.Nearly 80 percent of all Sisonke District Municipality workers earn 1600 rand per month or less while over 40 percent report earnings of 800 rand per month or less67 percent of households earned less than R42 000 a year while more than a third reported earning less than R18 000 a year.
Income and Employment Position: Poverty Indicators
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201060%
62%
64%
66%
68%
70%
72%
74%
76%
2010 (66.6%)
Percentage of residents living in poverty: Sisonke District Municipality,
% o
f res
iden
ts li
ving
in p
over
ty
The number of district residents who could be classified as ‘poor’ was almost 350 000.If poverty is considered as part of a share of population than the District municipality has seen its poverty share decrease from a 2001 high of 74 percent to 66 percent in 2010.Limited purchasing power of district residents creates barriers for local economic expansion and development
Income and Employment Position: Job Creation
1996199719981999200020012002200320042005200620072008200920100
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Number of unemployed residents: Sisonke District Municipality, 1996-2010
No.
of u
nem
ploy
ed r
esid
ents
Unemployment has declined significantly since 2007 when district unemployment was located at 55 percent to less than 25 percent in 2010The official definition of unemployment is failing to capture a significant number of district residents who have exited the job market out of fatigue at their failure to find work but are still willing to workUsing the expanded definition of unemployment –the unemployment rate for the district can be more accurately be represented at sitting at the 48-50 percent mark
Income and Employment Position: Where are the jobs?
Agriculture34%
Min-ing0%
Manu-factur-
ing7%
Elec-tricity
0%
Con-struc-tion2%
Trade13%
Transport2%
Fi-nance
5%
Community services37%
Share of employment by industry: Sisonke District Municipality: 2010
More than 52 percent of the employed in Sisonke District Municipality worked in low or unskilled occupations, 22 percent in elementary occupations. For those residents who are employed, the vast majority worked in the public sector –community service industry – and the agriculture sector. Together these two sectors accounted for more than 72 percent of total employment in the district
Income and Employment Position: Where have the jobs been?
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20101,000
3,000
5,000
7,000
9,000
11,000
13,000
Number of residents employed in the formal sector: Sisonke District Municipality,
1 Agriculture 2 Mining 3 Manufacturing4 Electricity 5 Construction 6 Trade7 Transport 8 Finance 9 Community services
In 2010 there were almost 11000 district residents employed in the community service industry –an increase of almost 60 percent since 1996Agricultural employment –in the district has declined in real terms since 2002Retail and wholesale trade industry which currently employs more than 3700 residents and has been steadily growing since 2005
Economic Position: Gross Domestic Product (GDP) Growth
19961997199819992000200120022003200420052006200720082009201020112012201320142015
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2011, R3 453 387
Gross Domestic Product (GDP): Sisonke District Municipality, 1996-2015
Con
stan
t 200
5 pr
ices
(R 1
000)
The GDP, in real terms, for the Sisonke District Municipality increased from R2.578 billion in 1996 to R3.361 billion in 2010 –an increase of more than 30 percentThe financial recession of the 2008/2009 resulted in a significant reduction in growth rates with negative growth reported for the period 2009. Analysts predicted that, however, in the period 2010-2015 economic growth in the district will slowly return to pre-2008 levels.
Economic Position: Gross Domestic Product (GDP) per capita Growth
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Real GDP-R per capita for the Sisonke District Municipality, 1996-2015
Con
stan
t 200
5 Pr
ines
(Ran
ds)
Projected 2011-2015
The data shows that since 2000, average output per person in the district has been grown. The financial recession 2008/2009 in particular has caused GDP-R per capita to stagnant during the period 2008-2011. Analysts predict a return to growth in 2012 and believe that GDP-R per capita might reach R7508 per person in 2015.
Economic Position: Annual Growth Rates Trend Analysis
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Annual growth rate: Sisonke District Municipality, 1996-2015
Agriculture Manufacturing Trade Total Industries
Con
stan
t 200
5 pr
ices
Agriculture 2008: 13.8%
District economic growth rates are linked to the growth rates of the district’s agriculture sector2008/2009 resulted in a significant reduction in growth rates for the agricultural sector with negative growth reported for the period 2009Manufacturing in the district has suffered an even more severe decline than manufacturing since 2008/2009 –in 2009 the manufacturing sector in the district experienced a negative growth rate of more than 8 percent
OUR INDUSTRIAL STRATEGY AND KEY ECONOMIC
SECTORS
The District Economy is primarily linked to Agriculture The District is particularly fertile and is well known for high
agro-ecological potential due to an abundance of high quality soils, high altitude, and abundant water.
Diverse climatic conditions make the area suitable for a variety of products including crops and vegetables, livestock and sugar cane around Ixopo/ Highflats area.
Environmental constraints/threats Intensification of agriculture, afforestation and growing local
demand may have potential dangers for future agribusiness Strain put on the local water ecology Soil degradation Growing demand of urban centres for resources
The main enterprises for which the District is suitable include: Intensive livestock enterprises such as dairy Horticulture crops
Prime Economic Sector: Greatest Agricultural Potential
Poor infrastructural support (logistics, road and rail infrastructure). Infrastructural development allows for farmers and buyers to link, and in turn, boosts local sales; translating into local economic development;
Increasing input costs (animal nutrition, seed, fertiliser, etc.)
Poorly defined economies of scale leads to poor farm management, and local agricultural economic planning. The number of commercial farms are decreasing while their farm sizes are increasing, indicating a consolidation of the commercial farming sector.
Lack of, or poor agricultural spatial economic planning. Agricultural planning has to be considered at local, regional, and national levels, to effect market flows, infrastructural requirements and rural development.
Poor information and knowledge management for improving farming practices among smallholder farmers. All farmers require information and knowledge, to improve and address production challenges. The distribution, collection and storage of required information and knowledge is pivotal to the success of any agricultural sector.
The key challenges faced by agriculture in the Sisonke District today include (cont.)
Relatively underdeveloped manufacturing baseProducts related to agriculture feature strongly
in the medium-sized sectors, and dominate small industry activities
Competitive advantage in agri-processing the domestic dairy industrythe domestic poultry industry
District economic development advantages in manufacturing are strategic location, its fixed transport infrastructure, its low-wage workforce and its abundant natural resources
Prime Economic Sector: Manufacturing
Manufacturing: Economic contribution
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-1%
1%
3%
5%
7%
9%
11%
13%
15%
Share of manufacturing’s contribution to the dis-trict economy: Sisonke District Municipality, 1996-
2015
Sect
or's
shar
e of
regi
onal
tota
l (%
)
Projected 2011-2015
The manufacturing sector contributed no more than 6.3 percent of the district economy in 2010 which represents a marked depreciation from the late 1990s when the manufacturing constituted 8.5 percent of the district economy. The most important manufacturing industries for the district economy are food, beverages and tobacco products as well as wood and wood products -in other words value added agricultural products.
The Sisonke District Municipality has a small but vibrant forestry sector, and the forestry industry is a significant land user in many of the Local Municipal areas of the District with proportionate provision of job opportunities.
Forestry stocks largely taken up by SAPPI, Mondi and small scale independent producers such as NCT.
Biggest challenge is the availability of wood logs and non compliance to the forestry charter by the forestry companies
This has led to the complete collapse of the sawmilling industry and the large-scale job losses
Prime Economic Sector: The Forestry Sector
The Forestry Sector: The economic contribution –lack of beneficiation
2015 2010 2005 2000 19950%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Share of forestry’s contribution to the district economy: Sisonke District Municipality, 1996-2010
Plantations and logging Wood and wood products
In 2010 the forestry sector contributed R 331.329 million to district GDP and constituted more than 8 percent of the district economy. Forestry sector which contributed 10 % of the district economy in 1996 Analysts predict that the sector will decline from 8 percent to 6.6 percent in 2015. Logging has declined as a share of the district economy from more than 10.5 percent in 2000 to less than 8 percent in 2010.Wood and wood products have remained stagnant for much of the period under discussion before declining in 2005.
Agro-processing is an important segment of the economy and has significant potential as a driver for future economic growth in the district.
Issues impacting on agriculture and agro-processing include: Adverse climatic conditions – storms, hail, snow and frost Rugged terrain limits crop production Distances from access to machinery, plant and raw materials
supply (Durban and Pietermaritzburg) Distances from established markets and commercial hubs; Economies of scale and volume production inhibit further
beneficiation and production of dairy products like cheese and yoghurt.
Agro-Processing: Creating Value Added Chains –where opportunities are:
Agro-Processing: Creating Value Added Chains
Despite these threats significant opportunities exist for the expansion of agro-processing in Sisonke District Municipality. These opportunities include:
Land suitable for deciduous fruits and high value crops Land reform programmes supported by significant public
sector investment and parastatal bank loans Arable land and water Globalisation and access to export markets Government support and support institutions, funding,
technical advice, research etc New production techniques, tunnel / hydroponics and
shaded production Processing, packaging and distribution of local produce –
canning, drying, freezing and further product beneficiation Forestry, milling and production of related product
INSTITUTIONAL FRAMEWORK FOR LED COORDINATION
Low skills base Low industrial base Reliance on primary
agriculture and low agro-processing
Informal economy Low fixed capital
formation Industrial migration
Government limitations
Regulatory burden to small business
Turnaround time on development applications
Capacity to implement high impact investment projects
Economic analysis capacity Public sector commitment Budget priorities
OUR DEVELOPMENTAL CHALLENGES AND WHAT WE WANT TO ADRESS
Market failure
HOW WE HAVE RESPONDED
Low skills base: Building new FET College for agriculture Work readiness programme for young people, leverage MIG
projects as placement opportunities Training of cooperatives and SMME’s Financial support tru bursaries and scholarships
Low industrial base Beneficiation and value addition Corridor development and new commercial nodes Revival of rail link
DEALING WITH STRUCTURAL PROBLEMS IN THE LOCAL ECONOMY
Market failure
Dealing with market failureReliance on primary agriculture and
low agro-processingSpecial economic zones Agri-parks or agribusiness development
zonesLeveraging land reforms for the
production of cash cropsInvestments in high value crops
Dealing with market failureInformal economy
Regulation, control and development of street trade
Informal traders regulatory councilPartnership with “muthi” traders for
coordinated interventions in health and hygiene
Our strategic catalytic interventions
Special Economic Zones 20 hector state land earmarked
for: Dairy production through share
milk scheme Meat production Perennial crops, with special focus
on essential oils Cash crop productions, focussed on
high value crops Greenhouse gasses through
hydroponic farming The use of cooperatives model
for packaging 2000 jobs (both direct and
indirect)
Tourism investment Game parks Accommodation and
conferencing Events and cultural
tourism Community owned
theme lodges Heritage
Building capacity of the state to deliver local economic development
• Sisonke Economic Development Agency (“the sda”)– Limited Liability Propriety Municipal Owned
Entity with a mandate to facilitate high impact projects and facilitate trade and investment between the region and the rest of the world
– Specialist capacities such as: investment advisors, project managers, agro-economists, industrial development specialists focused on the implementation of high impact projects.
CONCLUSIONSGlobal economic challenges will
confine our LED interventionsArea based approach to LEDIndustrial development approach to
LED, that integrate the region to regional and international value chains
High Impact vs small scale poverty eradication approach
Thank You
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