The City of Surreal – Ramaphosa on the banks of the Rubicon

Johannes Wessels | Jul 09, 2019
Cyril Ramaphosa’s vision of ‘a first post-apartheid city with skyscrapers, schools, universities and factories’ has the potential to become a disastrous experiment in social engineering, wasting resources on a massive scale.

The idea of a new city is not wrong, per se, but its being ideologically wedded to state-led development is.

Ramaphosa doesn’t consider the private sector as being more effective than the public sector, despite the fact that state-owned enterprises are mismanaged and bankrupt, and are a drag on economic development.

The creation of a Ramaphosa city does not envisage dynamic economic growth, but an ideologically blinkered perspective of how government alone can improve society. Ramaphosa and the social engineers within the ANC are therefore not far from the approach of Hendrik Verwoerd.

The National Party (NP) pursued transformation through prescription and the limitation of choices.

Individual freedom was never important to the NP, and neither is it to the ANC. They are peas in the same pod, both using race to meddle in non-state entities like schools, universities and businesses. Such interference is pursued in the name of transformation – government knows best.

One of the last attempts to create a new city in the apartheid framework was Botshabelo, between Bloemfontein and Thaba Nchu. In the mid-70s, Connie Mulder announced that they were developing ‘a model city in Africa’. 

First the NP decided to relocate Sesotho speakers from Kromdraai in Thaba Nchu (Bophuthatswana) to Onverwacht, and then it attempted to lure businesses to the area. Factory shells were built and rented out cheaply as part of a range of incentives to lure ‘industrialists’ to the industrial park.

One industry was operated by a Taiwanese man who had 30 industrial washing machines in a 1 400-square metre building. His ‘factory’ stone-washed imported jeans from Taiwan to achieve the popular worn-out effect before exporting them.  

Today the industrial park is about 80% occupied, not by manufacturers but by warehousing. The majority of Botshabelo residents who are employed work in Bloemfontein and commute daily. The illogical location of the town means several thousands spend time and money commuting daily, spending that could have added to the livelihoods of poor and lower middle-income households were they living closer to their places of work. 

Botshabelo contrasts starkly with other new towns of the pre-democratic era – Sasolburg, Vanderbijlpark and Richard’s Bay. These were not attempts at building cities, but were intended to create internationally competitive businesses of substance. 

The development of core businesses spurred the relocation of other enterprises. New businesses sprang up, either in the direct value chain, or to service the local consumer needs of the growing population in these towns. Urbanisation and growing towns in these localities were the result of export industries.  

The government did play a significant role in these developments; Iscor (Vanderbijlpark) and Sasol (Sasolburg) were state-owned enterprises.  The Richards Bay’s harbour development and the dedicated coal railroad were massive public-sector investments in port and rail infrastructure.

However, the Sasol factory was almost immediately supplemented by British investment and other private-sector investments. A similar scenario played out in Richard’s Bay with Triomf fertiliser, the Alusaf smelter, Bell Equipment, and later Mondi and others.

The contrast between Sasolburg, Vanderbijlpark and Richard’s Bay as new economic hubs, and Botshabelo as an ideological ‘dream city’, is clear.

Cities, towns and villages have been defined through the ages by their non-agricultural economic activities. In the Dark and Middle Ages, towns and villages in Europe and England that successfully developed processing and crafts based on local agricultural produce grew quicker and more diversely than those that were only dwelling places close to nearby farms.

Towns that were also market towns attracted income from visiting customers from neighbouring villages and towns that could not obtain these goods closer to home.

Towns that through business acumen and highly skilled craftsmen produced differentiated products – such as the woven tapestries of Bruges in what became Belgium – and not merely commodities, such as yarn, became concentrations of productive knowledge and wealth.

Such cities and towns attracted income from the outside. In the case of Bruges, the tapestries of the weaver guilds were sourced by courts all over the then known world.

The advent of the industrial revolution and the birth of the modern mega-producer conglomerates led to accelerated urbanisation, diversification and denser concentrations of productive knowledge.

Enterprise Observatory of SA (EOSA) research on enterprise data reveals a direct correlation between the abundance or scarcity of enterprises (numbers) and the population size of cities and towns. There is also a correlation between enterprise richness (diversity of business types) and the total household income of a town or city. The statistical analyses that revealed these correlations are so strong that they have predictive potential.

These correlations are not the result of a National Development Plan (NDP), but of an uncoordinated evolutionary process in which millions of individuals and firms, as customers, create markets. This is the phenomenon of a spontaneous order that emerges from trillions of transactions. 

Enterprises are important generators of income, but the largest percentage of enterprises is mainly aimed at servicing local consumer needs, therefore feeding primarily off money already in the locality.  EOSA refers to such enterprises as run-of-the-mill enterprises. The majority of businesses belong in such categories.

Productive knowledge, rather than infrastructure or run-of-the-mill enterprises, determines the well-being of cities and towns. In medieval Bruges, the guilds of the goldsmiths and the tapestry weavers (all with their value chain linkages) produced export products, backed up by a growing network of private financiers for the expansion of production that was required.

The availability of productive knowledge enterprises based on real market demand and not ideological subsidies is what distinguishes Richard's Bay from Botshabelo.

Richard's Bay developed into what it is not only because of the investment in the infrastructure, harbour and factories. Human capital (measured by the percentage of the population over 20 with tertiary qualifications) is the key factor. 

Richard's Bay’s ‘Enterprise Density’ (the number of enterprises per 1 000 of the population) is 21.9; Botshabelo’s is 1.1. The ‘Enterprise Richness‘ (measuring enterprise differentiation) of 24.9 for Richard's Bay is also 6.5 times more diverse than that of Botshabelo.

Both successful and unsuccessful towns can experience population growth. However, successful cities don’t only attract people, they also grow connectivity with external markets and diversify products and services. That requires entrepreneurs who provide products and services of export standard.

Ricardo Hausmann reckons the abundance of ‘productive knowledge’ is the key factor in successful countries; a shortage of it is the main reason why economies fail. Productive knowledge is not in abundance in South Africa; the country has lost a substantial percentage of its productive knowledge since 1990. South Africa is becoming poorer and unable to keep up with the rest of the world’s growth as a result.

Growth depends on cities creating conditions that are enterprise-friendly, otherwise they will not be able to grow or even maintain their pool of productive knowledge.

None of these fundamentals were mentioned in the dreamy SONA address of 20 June, nor in the response to the debate. 

It could be worse; Africa has cities that were developed as dreams … the decaying concrete ruins and cracked marble palaces of Mobutu SeSe Seko’s Gbadolite, a city with a runway where the Concorde landed regularly, or Félix Houphouët-Boigny’s Yamoussoukro with its massive cathedral. 

The South African economy doesn’t need new cities, nor does it need to fine-tune the we-will-manage-the-same-better-than-before approach. We need policy change, today. 

Neither in his surreal SONA speech nor in his response to the debate did the president indicate a willingness to cross the Rubicon. Like P W Botha before him, he chose a prolongation of what exists rather than a bold step for change.

 

Johannes Wessels is the director of Enterprise Observatory of SA, which conducts enterprise research by exploring and analysing the relationship between enterprises and localities. This is a shortened version of the original article, which can be found on https://eosa.org.za

                                                                          

The views of the writer are not necessarily the views of the IRR.

 

If you like what you have just read, become a Friend of the IRR if you aren’t already one by SMSing your name to 32823 or clicking here. Each SMS costs R1.’ Terms & Conditions Apply.

 

 

 


comments powered by Disqus