Zululand Nodal Economic Development Profile

KwaZulu Natal

Table of Contents

Section 1: Introduction ...... 3

Section 2: An Overview of Zululand ...... 5

Section 3: The Economy of Zululand ...... 7

Section 4: Enabling Environment ...... 10

Section 5: Economic Growth and Investment Opportunities ...... 13

Section 6: Summary...... 17

2 Section 1: Introduction

1.1 Purpose

The intention of this paper is to serve as a succinct narrative report on the Zululand Nodal Economic Development Profile.1 The profile report is structured to give digestible, user-friendly and easily readable pieces of information on the economic character of the Zululand Integrated Sustainable Urban Development (UDP) node.

1.2 The Nodal Economic Profiling Project

In August 2005, in a meeting with the Urban and Rural Development (URD) Branch,2 the minister of Provincial and Local Government raised the importance of the dplg programmes playing a crucial role in contributing to the new economic growth targets as set out in the Accelerated and Shared Growth Initiative of South Africa (ASGISA). He indicated the need to develop an economic development programme of action for the urban and rural poverty nodes.

In response, the URD Branch developed a Programme of Action for Building Productive and Sustainable Nodal Economies in September 2005. The programme of action (PoA) is intended to stimulate economic growth and development in the poverty nodes. It is important to understand the economic potential of the nodes; identify opportunities for public and private sector investment; identify barriers and constraints to economic activity within the nodes; and acknowledge recommendations on strategic interventions for improving the nodal business climate, and the institutional recommendations for implementation.

Three high-level deliverables form the core of the programme of action. These are: (a) Nodal Economic Profiles (in which information such as demographics, institutional capacity, potential economic interventions, space economy, competitiveness profiles and so on, is contained). (b) the Nodal Investment Atlas (a compendium of public and private sector investment opportunities). (c) the Nodal Economic Development Support Agency (recommendations and proposals).

1 Information is sourced from a detailed PowerPoint profile of Zululand. 2 The Urban and Rural Development Branch is one of the deputy director-general divisions within the dplg.

3 In order to fund the PoA deliverables, various development partners were approached. The Business Trust believed in the credibility of this initiative, and funded it through the Community Investment Programme (CIP). Nonetheless, it needs to be pointed out that the Nodal Economic Profiling Project is a government-based project intended to raise the importance of productive and sustainable nodal economies.

4 Section 2: An Overview of Zululand

2.1 Administration

Zululand is one of 10 district municipalities in KwaZulu Natal. The district comprises five local municipalities of eDumbe, uPhongolo, Abaqulusi, Nongoma and Ulundi Local Municipality.

2.2 Spatial information

Zululand was defined as part of the KwaZulu “homeland” by the apartheid government in 1972 and was subsequently deprived of basic infrastructure and service delivery for many years. The “homeland” was made up of isolated tracts of land, forming only part of the historical Zululand made famous by legendary Zulu kings such as Shaka and Dingaan. In 1994, the region was given autonomy under King Goodwill Zwelithini, with Mangosuthu Buthelezi as his prime minister, while at the same time being incorporated into the new KwaZulu Natal province. The district contains the seat of the Zulu monarchy in Nongoma. Historically, the district’s economy depended heavily on coal mining, however, due to the effects of open market policy in the late 1990s, all but one of the area’s mines have been forced to close.

2.3 Socio-economic information

The socio-economic character of Umzinyathi can be described as follows

Population • The population is about 964 000 people in an area that covers 15 607km2. Approximately 88% of the population are rural and 12% are urban. The population in the local municipalities is as follows: eDumbe (68 565), uPhongolo (102 416), Abaqulusi (218 798), Nongoma (231 868) and Ulundi (342 353). The population density is 63 persons/km2. • Households without basic services are as follows: 62% are without electricity; 64% are without piped water; 79% are without municipal waste removal services and 74% are without a telephone. The majority of households comprise four to seven people. • Approximately 71% of the population are younger than 29 years of age, which points to the need for youth-development programmes in stimulating nodal development. • Over 82% of the population live below the poverty line, earning less than R19 200 per annum. Only 16% of the residents are employed. • Approximately 39% of the residents have no education, while 61% of the residents have some education. Attendance at tertiary education institutions is very low in the Zululand District Municipality, accounting for just 1%.

5 • There are 51 clinics, 10 hospitals and 197 mobile clinics in Zululand. The per capita expenditure is R151 and the average number of patients per nurse per day is 38. There is strong prevalence of HIV/AIDS in Zululand, accounting for some 27% of the population.

6 Section 3: The Economy of Zululand

The description of the economy of Zululand is provided for under this section.

3.1 Growth rate of GDP

Zululand's real GDP has shown growth over the past decade, although it has lagged significantly behind provincial economic growth of close to 6% p.a.

5 4.28 4.36 4.09 4 3.84 3.81 3.45

3

2

1

0 1995 1997 1999 2001 2003 2004

Figure 3.1.1: GDP (Constant 2000 prices): 1995-2004

3.2 GDP by sector

General government services is the largest contributor to the GDP, contributing 23%, followed by finance and business services. Catering and accommodation are the smallest contributors to the GDP, contributing 1%.

7 GDP by Sector

Catering and Accomodation

Electricty and Water Construction

s

r Mining o t c

e Community, Social and Personal Services S

c

i Transport and Communication m

o Manufacturing n o

c Wholesale and Retail Trade E Agriculture, Fishing and Forestry Finance and Business Services

General Government Services

0 5 10 15 20 25 Percentage

Figure 3.2.1: Contribution to GDP by economic sector

3.3 The decline in the mining sector

Historically, the mining sector was a key employer and primary contributor to Zululand's economy; however, the industry has declined sharply within the node and in the province as a whole. By 2000, all but one of the large-scale mining operations had closed in the district, due to the depletion of coal reserves, low marketability and export opportunities, and the inability to match global competition in terms of price and quality. The Zululand Anthracite Colliery is the only large-scale coal mine still operating in the district. The decline of the sector has had a knock-on effect in terms of employment and disposable income in the district, especially in Vryheid and the surrounding areas. There has been discussion about reviving some of the mines for small- scale use, but no action has been taken.

3.4 Sectoral prioritisation

The average index for the GDP indicates that general government services; wholesale and retail trade, community services; agriculture, forestry and fishing; and finance and business services offer a relatively higher potential for economic growth and job creation.

However, a qualitative assessment of the potential of the top five sectors points to the following economic growth and development options:

Sectors GDP Employment Average 2004 GDP in Number of GDP Employment index constant employees: Index index 2000 prices 2004 1 General government 1,015,555,351 100 14,619 100 100 services 2 Agriculture, forestry 565,375,534 56 9,105 62 59 and fishing

8 Sectors GDP Employment Average 2004 GDP in Number of GDP Employment index constant employees: Index index 2000 prices 2004 3 Finance and business 662,209,886 65 5,259 36 51 Services 4 Community, social and other personal 305,691,029 30 10,292 70 50 services 5 Wholesale and retail trade, catering and 503,523,328 50 6,762 46 48 accommodation 6 Manufacturing 445,974,933 44 4,263 29 37 7 Transport and 409,457,605 40 1,037 7 24 communication 8 Mining 279,681,445 28 2,375 16 22 9 Construction 125,990,677 12 2,309 16 14 10 Electricity and water 50,247,669 5 170 1 3

General government services The public sector is the largest employer in the district and makes an important contribution to nodal GDP. However, the public sector is funded by taxation, and therefore is itself dependent on growth in the private sector.

Agriculture, forestry and fishing The agricultural sector is an important employer in Zululand. A significant proportion of nodal GDP and jobs are generated from commercial farming and forestry. Furthermore, the sector is the largest source of informal employment and is important for food security. There is good potential for the commercialising of ªemergingº black farmers (including livestock, sugarcane, fruit and vegetables), provided that the right skills can be gained and inputs and markets are secured.

Finance and business services The sector is a relatively significant contributor to GDP and is seeing good growth. However, it is a consumption sector, and its strength is dependent on other sectors that generate wealth.

Community, social and other personal services This is also part of the public sector, and includes teachers and health care professionals. Therefore, the same assessment applies as for general government services.

Wholesale and retail trade, catering and accommodation This sector includes tourism, which has good potential for growth, as the area boasts many cultural, historical and ecotourism attractions that have not yet been adequately leveraged.

9 Section 4: Enabling Environment

This section will be broken down into three sections focusing on governance, IDP assessment and development projects.

4.1 Governance

The Zululand District Municipality comprises five local municipalities, namely eDumbe LM, uPhongolo LM, Abaqulusi LM, Nongoma LM and Ulundi LM. The district municipality has a municipal manager; an honorary mayor; an executive secretary; heads of department for planning and community development, technical services, corporate services and financial services; a deputy director; a project coordinator; a public relations officer and a secretary.

The head of planning in Zululand DM holds a large portfolio of responsibilities covering all development planning-related issues (including water, transport, IDP, ISRDP, etc.), and is highly skilled, competent and dedicated.

Interviewees noted a large capabilities gap due to the influx of several new, relatively inexperienced government employees, coupled the departure of experienced ones. It was suggested that a mentorship programme be developed to transfer skills from outgoing employees to incoming employees. Furthermore, the district finds it extremely difficult to recruit people with the necessary skills and educational background, and there is high turnover among existing staff. A key capability gap that emerged was the ability to interact with the private sector in order to understand investor needs and react accordingly.

The Zululand DM noted a lack of support from the ISRDP programme and claims not to have received funding linked to its poverty node status. There is a strong planning link between the DM and the LMs by way of the IDP process; however, there was a sentiment that the LMs could do more in the way of identifying key projects within their own municipalities. The Department of Agriculture and Land Affairs was repeatedly criticised for its lack of activity in the area. This was largely a result of frustration around unresolved land claims and the failure of promised agriculture programmes to materialise.

4.2 IDP assessment

The 2006/2007 IDP review is being managed by the Zululand DM Department of Planning and Community Development. The document highlights key development issues and guides deployment of municipal resources. The Zululand IDP serves as a high-level planning and co-ordination document. The DM has developed a number of detailed sector plans based on the IDP, including plans addressing water, housing, health, education, tourism, agriculture and other sectors.

10 The key actions for the IDP are as follows: • To focus on the tourism and agriculture sectors for future economic growth. • To expand services within the budget framework and focus on effective use of current resources. • To promote investment and planning in the disadvantaged areas and market the district to tourists and potential investors. • To create vigorous awareness of the HIV/AIDS pandemic.

The proposed support for and implementation of the IDP is as follows: • The actions proposed in the IDP are backed by detailed sector plans (water, energy, roads, health care, education, etc.), which provide the additional detail and recommendations required to move towards implementation. • Similarly, economic development plans have been created for the key economic sectors (agriculture, tourism and business). • In most cases, responsible parties have been identified, although clear performance indicators are not always set.

Overall, the Zululand IDP is a strong, comprehensive and high-quality document.

4.3 Development projects

There are 17 anchor projects. The focus of most of these is on infrastructure development. Seventy percent of the projects are in implementation stage, 12% have been completed and 18% are in the planning stage. The projects will create 536 permanent and 670 temporary jobs. Nine of the most important anchor projects are listed below:

Project Description Status Value Rural water projects aimed at Six regional water scheme Planning the provision of sustainable R92m projects stage potable water for the community Establishment of a taxi rank, Altona Cluster community garden and market Completed R5,8m Development Project stalls Establishment of market stalls, Buxedeni Cluster community gardens and access Completed R1,6m roads Establishment of community Mkhazana Cluster Completed R1,35m gardens, a crèche and a nursery Establishment of community Babanango Cluster gardens, a crèche and market Completed R1,35m stalls Establishment of a craft centre, market stalls, access road, Mongosuthu Cluster Completed R2,82m crèche, poultry project and sports field

11 Project Description Status Value Establishment of a crèche, Umzamo Cluster poultry project and a community Completed R1,8m garden The objective of the project is to provide clean water, and promote temporary employment 90% Nongoma water reticulation and skills transfer; includes the R3,3m completed upgrading of existing reticulation and water works and the installation of water meters Aims to improve access to trade P700 Road and Nongoma opportunities, promote skills Phase R25m Link Road upgrade transfer and provide temporary completed employment

12 Section 5: Economic Growth and Investment Opportunities

5.1 Introduction

The Zululand District Municipality has identified agriculture/agro-processing and tourism as the main areas of economic growth and investment opportunity.

Agriculture/Agro-processing Opportunities in this sector include the following: • Commercial cattle farming • Commercial soya bean farming for biodiesel production • BioSuisse organic vegetables production • Revitalisation of the Nongoma Tea Estate.

Tourism Opportunities in this sector include the following: • Infrastructure upgrades/airport upgrade • Poverty/tourism development on Pongolapoort Dam • Lodge(s) in the eMakhosini (Valley of the Kings) • A tour operator business.

5.2 Agriculture/Agro-processing

Commercial cattle farming This requires the aggregation of cattle herders and provision of the support required to raise high quality cattle and bring them to market. Vryheid already has an established cattle industry, and thus the required structures (stockyards, auctions, etc.) exist in the area. Furthermore, existing commercial livestock farmers could serve as mentors for the emerging farmer population. Meat would be sold at local urban markets and nationally.

Cattle herding is an age-old practice that is ingrained in the Zulu heritage (i.e. good herding skills already exist). There is much land available that is suitable only for grazing. Beef is in high demand in the country and is fetching a good price. The Nguni breed is indigenous to the area and is highly disease resistant, which means medicinal and veterinary costs are low.

It is difficult to estimate employment numbers associated with cattle farming, however, most rural families raise cattle for subsistence and for traditional reasons. The commercialisation of some of their stock could present a significant income-earning opportunity for many families.

Commercial soya bean farming for biodiesel production A plant that would process biodiesel from soya has been proposed for construction in Newcastle (Amajuba DM). The lead investor is Siyanda

13 Biodiesel, and Sasol has come on board with a 25% stake in the plant. The plant would need a supply of 600,000 tons of soya per annum, which at an average yield of 3 tons per ha, will require some 200 000 ha of land. While the plant would be built in Amjuba, the massive supply of soya required could be a lucrative opportunity for farmers in the Zululand DM.

Demand for biodiesel (and therefore soya) is increasing as the price of petroleum continues to rise. Zululand has ample land and suitable conditions for growing soya. The plant would buy all the soya that farmers could grow. Soya is an easy crop to grow and would provide a good starting point for emerging farmers. Success depends on the number of farmers who opt to grow soya.

BioSuisse organic vegetables production BioSuisse is a privately owned organic vegetable producing and processing company with origins in Switzerland. In 2003, it constructed an organic vegetable processing plant in Coronation (near Vryheid). The company rents communal land and employs its own farm managers to grow green beans and broccoli according to international organic standards. Currently, there are three farms of some 100 hectares, with potential for greater scale and diversification into sweetcorn and other vegetables. The produce is washed, cut, frozen and packed in the nearby plant and then exported to North America and Europe.

The Abaqulusi area has an abundance of land, the right temperatures and adequate precipitation to support large-scale vegetable growth. Organic produce is expensive to grow, but draws a high profit margin, particularly in Europe and North America where ªeating organicº is a growing trend.

Running at the targeted full capacity (11 months per year, 20 hours per day), the plant would require 90 to 100 workers. The farming operations currently employ 800 to 900 seasonal pickers, with an estimated potential of up to 3 000.

Revitalisation of the Nongoma Tea Estate A 500-hectare tea farm was established in Nongoma in 1964 by Sapekoe, a state-owned subsidiary of the IDC, and once employed 1 000 workers. The estate closed down in 2003, with Sapekoe blaming its uncompetitiveness on the world tea market, minimum wage laws and a strong rand. The infrastructure and tea garden are still in place and the land remains state- owned. The plantation could be revitalised and used to produce a premium or otherwise differentiated product for the domestic market. Additionally, the estate could be positioned as a tourist attraction, complete with accommodation and restaurant facilities. The effort to revitalise the Nongoma Tea Estate could be combined with the resuscitation of other Sapekoe plantations, such as the Limpopo estate that closed in 2005, resulting in the loss of some 5 000 jobs.

Nongoma is one of the most impoverished areas in the district, and the re- opening of the tea estate would create a much-needed source of employment

14 for the community. It could also serve as a tourist drawcard to the area if packaged with visits to other attractions. In 1994, the tea estate employed a labour force of 1 000. If just half of that number of workers could be recovered, it would provide major economic growth for the area.

5.3 Tourism

Infrastructure upgrades to improve area’s accessibility The following have been identified as areas that require upgrading: • Border posts – The Golela and Salitje border posts must be upgraded to accommodate more people and provide tourists with information about Zululand. • The road to Ithala Game Reserve – A small section of the road linking the N2 to the Ithala Game Reserve remains untarred, and the lengthy detour required to access the reserve is a strong deterrent for tourists. • The road to Nongoma – A portion of the R66 linking Pongola to Nongoma remains untarred, preventing tourist traffic from reaching the interior of the node. • Ulundi Airport – Regular flights were once scheduled into Ulundi, so much of the required infrastructure exists. Minor upgrades are required, but most importantly, airline service needs to be drawn back to the airport. • Signage – There is a lack of clear signage marking tourist attractions and key routes throughout the district.

Property/Tourism development on Pongolapoort Dam A large-scale property/tourism development situated along the Pongolapoort Dam is proposed. Key developments would include 500 houses and 200 luxury flats along the dam, a professional golf course, a seven-star hotel and a game reserve. Other related developments in the area would include an arts and crafts centre, a filling station and a R30-million upgrade of the local airstrip. The total investment is expected to be around R3,2 billion, which would be covered by a joint venture between three parties: Senekal Farming (land owner); Moreland Developments (a leading South African developer and wholly owned subsidiary of the Tongaat-Hulett Group); and IFA Hotels and Resorts (a Kuwaiti group that has already undertaken major investments with Moreland Developments in Zimbali).

The project could have massive transformation potential for the area, serving as a major employer and a tourist drawcard. The dam is the second largest in South Africa, is surrounded by beautiful landscapes and offers water sports and fishing. The site is ideally positioned between Johannesburg and Durban and is adjacent to the Swazi border. In addition, the developers bring a wealth of experience from similar developments.

Early-stage employment projections estimate that as many as 10 000 jobs could be created in the construction phase of the project, as well as approximately 1 500 permanent jobs in maintenance and hospitality services.

15 The proposed development area is currently under land claim. The claims process has forced the potential investors to put the project on hold; therefore, the claim needs to be resolved in order for the project to go ahead.

Lodges in the eMakhosini (Valley of the Kings) The eMakhosini (or Valley of the Kings) is a large, scenic area with immense cultural and historical importance. Although it has strong tourism potential, the eMakhosini has not yet been adequately developed for tourism purposes, and little exists to draw visitors to the area. The area is currently administered by AMAFA, the KwaZulu Natal heritage society, which has earmarked a number of sites for accommodation to be development. The site with the greatest potential is a colonial farmhouse situated along the Umfolozi River. AMAFA has developed plans for an upscale lodge complete with 10 cabins and a dining room/bar. At one point, Gooderson Leisure Corporation was interested in making the investment of approximately R3 million. However, the parcel of land remains under the ownership of the Department of Land Affairs, and AMALFA has attempted unsuccessfully to purchase the land for two years. AMALFA has compelled the premier of KZN to open up a dialogue on the issue with the director-general of the Department of Land Affairs, but a resolution has not yet been reached.

The area has the potential to attract domestic tourists tracing their heritage and international tourists seeking a true Zulu cultural experience. If developed well, the eMakhosini could serve as a key drawcard for the area, with spill- over benefits for other attractions in the district. The construction of the lodges would use local labour and each lodge would create permanent employment for approximately 15 people.

Tour businesses linking area attractions Zululand's tourism potential lies in the range of attractions and activities the area offers, rather than in any single attraction. To date, no tour operator has made a significant effort to package the top attractions together and offer a complete Zululand experience. The operation would be most successful if it combined the best attractions in Zululand with the internationally renowned attractions near the node (e.g. the St Lucia Wetlands, the North Coast beaches, the Drakensberg Mountains, etc.) Within the node, the operator could offer a mix of cultural, historical and outdoor activities. This could include, but is not limited to, a stay at the White Elephant Lodge in Pongola, game drives or hikes in the Ithala Game Reserve, a visit to the house of the Zulu king and the craft market in Nongoma, a historical tour of the eMakhosini, a visit to a Zulu village, and a day at the Thangami or Natal Hot Springs.

In terms of stand-alone attractions, the Zululand area is lacking. However, it has a unique collection of attractions, which, if pooled together, could create a highly valued experience. Direct employment would be very low (amounting to a few tour guides and drivers), but the operation would boost revenues and sustain employment in associated business (hotels, game parks, restaurants, etc.).

16 Section 6: Summary

Zululand is an area with a high population (1 million people). It is rural in nature and undeveloped. This district municipality represents the heart of the Zulu culture and has a rich and colourful history. The area has a large commercial agricultural sector and a good base for tourism assets, which presents various untapped opportunities.

The short-term goals in the node are the following: • Commercialising emerging farmers. • Becoming self sufficient in those products the area can produce. • Improving agricultural skills, which is the key to unlocking the sector. • Increasing the quality of tourist assets to attract more tourists to the area. • Decreasing the cost of inputs (seeds, machinery, etc.) and transport for emerging farmers. • Building appropriate infrastructure so that tourists and tour operators are compelled to visit the area.

The long-term goals are as follows: • The focus should be on producing a surplus for export in order to bring funds into the node. • Durban, Richards Bay and Pietermaritzburg are logical markets to target, in addition to international markets. • Development of agro-processing industries to extract the highest economic and employment value from products grown in the node. • To focus on education, which is the key to transforming the node over the long term. • Development of markets and securing of partnerships with agricultural buyers. • Collaboration to achieve scale, as well as making investments in infrastructure and technology to increase competitiveness nationally and globally to ensure long-term sustainability.

The initiatives that are currently occurring in Zululand include the following: • Infrastructure provision and service delivery (particularly regarding water) continues to be the primary focus of development efforts in the node. • Several studies have identified tourism, agriculture and business development as the most important sources of future economic growth. • High-level strategies have been created for each of these sectors. • A long list of LED projects has been identified and several projects have been allocated funding.

Zululand desperately needs to move beyond the planning phase and towards implementation with respect to local economic development (i.e. there needs to be less talk and more action). The node needs to create a more attractive investment environment by completing key infrastructure projects, cutting down on bureaucracy, and resolving land claims issues. The private sector must be aggressively targeted, and the node should focus on attracting major

17 investments where operators will help to address the constraints preventing economic growth (e.g. providing inputs for farmers, marketing the area for tourism, etc.).

The solutions to the constraints/investment opportunities that have been identified are as follows: • Creating incentives for tourists and operators to come to the area: complete roads, build accommodation in eMakhosini, create attractions, develop products, etc. • Working with tour operators and tourism businesses within and near the node to create and market attractive packages that link multiple destinations. • Supporting key investment opportunities, including the Pongolapoort Dam development and the construction of lodges in eMakhosini Valley. • Creating structures to aggregate emerging farmers and decrease input and transport costs. • Attracting private investment. A key place to start is the proposal for a sugar mill on the Makhathini Flats, which would be a great economic boost to emerging sugar farmers in Zululand.

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