Industrial Nodes: Bringing Jobs Closer to People in Townships?
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SUPPORT TOWNSHIP ECONOMIES SERIES #3 PROGRAMME What are Industrial Nodes? Nancefeld Industrial Nodes are areas that are zoned for industrial and light manufacturing activity, intended to enable efcient and efective delivery of core services required for business Industrial nodes: – in the process, enhancing their scope for growth. Over the years, many such hubs have been developed – some dating back bringing jobs closer to several decades. In Gauteng, the Centre for Competition, Regulation and Economic Development (CCRED) surveyed 26 such nodes. people in townships? Within Industrial Nodes, there is an expectation that ‘agglomeration Under apartheid, townships were This edition of the Township Economy efects’ will enhance productivity, designed to exist at a distance Series of the Cities Support Programme due to the greater efciencies from economic opportunities, explores these questions, with a focus and economies of scale that arise as dormitory towns for labour. on case studies of Industrial Nodes when many frms operate in As a result, transport costs as adjacent to townships in Gauteng, in close proximity to each other. So, well as the time spent traveling particular, Aeroton, Nancefeld, and for example, such proximity – or add economic and social costs to Devland – all of which are close to agglomeration – of frms is expected the cost of labour: with both these Soweto, Eldorado Park and Orange to create efciencies in the delivery of public costs reducing aggregate productivity. Farm. services such as electricity, water and public ome strategies to address transport. In the process, such hubs also this focus on improved, more create economies of scale for support frms in afordable transport linkages. the services sector – across a spectrum that S In addition to enhancing This is important for moving people includes cleaning, catering and private security to where the jobs are. But is there also as well as more specialised but also generic scope to move jobs to where people productivity – services such as IT support and accounting are? The development of industrial services. nodes adjacent to townships is one especially for small frms These efects can be enhanced when frms approach to trying to do so. – clusters can also create within the same sector or value chain start What factors attract business to such to cluster together – competing but also areas? What obstacles to growth and conditions conducive co-operating in relation to shared needs, such development – and job creation – do as in relation to training, product development they face? to innovation. and specialist maintenance of machinery. Industrial nodes near townships in While larger frms Johannesburg: Creating conditions can invest in solutions – for growth? from generators to in- house transport for their Aeroton, Nancefeld and Devland are all near to Soweto, Eldorado Park and Orange Farm. workers – smaller While most industrial nodes in Gauteng are not adjacent to townships, the location frms are less able of these three nodes means they have the potential to create jobs close to where to do so and are more people live – avoiding long commutes to work. With over 150 frms located in these three nodes, strategies to support them are important both to retain existing jobs – negatively afected by and to support employment growth. service delivery failures: et in practice, frm surveys undertaken by CCRED highlight many obstacles. While Ysome of these relate to the ability of frms to compete efectively, this ability is reinforcing inequality of also afected by a range of challenges in their environment that negatively afect outcomes. their productivity. These challenges were worst in the nodes adjacent to townships, which CCRED classifed as ‘neglected’. Getting the basics right in industrial nodes adjacent to townships is vital to enabling employment growth – which is typically easier to achieve through supporting the growth of existing frms than through the establishment of new ones. An informal settlement adjacent to Kya Sands – an example of an industrial node that was not originally developed near a township – but where people have moved to be nearer to their work, or nearer to where the jobs are believed to be. Unstable electricity supply In Nancefeld, illegal electricity The cost of power outages is not limited connections linking the industrial to production downtimes, however. Unstable electricity supply has had node to a nearby informal settlement Outages also damage equipment which seriously adverse efects on productivity create a spiderweb of wires – including can lead to further disruptions and in all three nodes with signifcant loss uncovered live wires – on the surface costs. A component manufacturer, for of production time. A company in of the road. These create a signifcant example, had to invest over R1 million Nancefeld, for example, says it has been safety hazard that has led to deaths in in equipment to stabilise voltage losing a day of production per week the area. The problem is linked to lack fuctuations. The use of generators as a result of power outages; another of access to electricity in the informal requires upfront investment and high company calculated that it had 160 settlement – an issue that has caused operating costs. hours of downtime in 2017 as a result service delivery protests that further of outages. That is 20 full working days. negatively afect businesses in the area. This alone translates into a massive negative impact on productivity. Nor is load-shedding the prime ‘Firms...would beneft from knowing who to call when there are electricity or water culprit. Instead, power interruptions interruptions or when they have billing queries, having their calls answered in a were attributed to cable theft, illegal timely manner, and having these issues resolved promptly and professionally.’ connections and lack of maintenance of power distribution systems. CCRED 2016 Scope for a furniture cluster in Nancefeld? Although among the smaller of the nodes overall, Nancefeld is the largest and most established of the three industrial nodes considered here, with 56 manufacturing frms and 30 services frms. Some frms have operated in the area for over twenty years. Amongst the manufacturing frms, 25 are involved in furniture manufacturing; some of the service frms – such as in transport and logistics – support this sector also. They are mostly small frms. Illegal electricity connections running from Nancefeld to the adjacent informal settlement In the CCRED frm survey, one of the unanticipated outcomes was that furniture manufacturing proved Connectivity challenges are unable to do so, limiting their ability to be the largest employer in the to operate shift systems. Attempts In Devland and Nancefeld, internet manufacturing sector in the City by frms to co-operate to solve this infrastructure is poor, with Telkom of Johannesburg; it is also one of problem have not yet succeeded; also sufering from cable theft. Lack of the more labour-intensive forms of not least because of resistance to connectivity afects all aspects of the manufacturing. the associated competition from taxi business – but particularly marketing. If operators. This is a problem which n a context of growing urbanisation your customers cannot reach you, they requires intermediation by the City’s Iand housing development – including will contact the next business on the Roads and Transport Department. in adjacent townships – there would list. appear to be scope for market growth. Planning permissions and Basic services matter for A constraint faced by small producers infrastructure development is however their dependence on access productivity to markets via the four big furniture The reasons frms choose to locate in In Nancefeld – the largest of the retailing outlets, who control most these nodes include the availability nodes – roads are poorly maintained of the market. The scope for smaller of cheap serviced land; but these with large potholes. Poor drainage retailers to compete – or even for advantages are undermined where leads to intermittent fooding. Lack of producers to engage in direct sales to basic infrastructure is not rolled out or refuse collection has meant companies end-consumers in adjacent townships well maintained and where planning having to bear the costs of pest control – is constrained by the ability of the permissions are slow. measures. In Devland, street lights have larger retailers to ofer hire-purchase not been working for extended periods. Many of these issues can be resolved and fnancing terms. For ‘bulkier’ items This is exacerbating security concerns, by the Metro Municipality. Making like furniture, such terms are often a as a result of which some frms close jobs a higher priority often also means deal-breaker in the mass market. So early. focusing on getting the basics right in while there may well be a market in industrial nodes adjacent to townships. adjacent townships, the manufacturers All of these factors not only negatively surveyed mostly supply the large impact on productivity for existing retailers or are part of wider value frms – they also act as disincentives for chains that do so. new frms to locate in these nodes. The large number of frms in the Transport linkages furniture sector does, however, appear Despite being adjacent to townships, to create conditions for cluster efects transport services linking residential – not only in Nancefeld but as part of areas to these industrial nodes are not wider approaches in the metro, in a available for shifts ending after 10pm. context in which cluster development While some of the larger companies is local and spatial by nature: which is have set up their own transport services why it lends itself to city-level economic to address this gap, smaller companies development strategies. Potholes in Nancefeld Illegal electricity connections in Kya Sands Supporting Get the basics right The starting point for job creation strategy is to get the basics right in relation to industrial nodes the core public services on which the private sector depends to meet a minimum as part of the level of productivity and efciency.