Driving Inclusive Growth Through Targeted Investment: the Location Attractiveness 1 Index

DRIVING INCLUSIVE GROWTH THROUGH TARGETED INVESTMENT: THE LOCATION ATTRACTIVENESS 1 INDEX

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DRIVING INCLUSIVE GROWTH THROUGH TARGETED INVESTMENT: THE LOCATION ATTRACTIVENESS INDEX

South Africa faces a large degree of spatial inequality, as economic activity is concentrated in a few places. Many other parts of the country have inherent economic potential but they need targeted investment if such potential is to be unlocked. A key benefit of investing in regions with potential is that it leads to positive socio-economic spillovers in surrounding areas.

While the four major city-regions (Johannesburg, Development Plan (NDP), sees inclusive growth Durban, Cape Town and Pretoria) are magnets for as one of the cornerstones of socio-economic Marianne Matthee investment in South Africa because they are centres stability and well-being in the country. Yet, over the Professor of intense economic activity, this chapter reveals years, inequality has intensified and this has made GIBS/North-West University certain secondary cities which could become inclusive growth increasingly elusive. A healthy rate investment drawcards and development hubs. of growth is necessary to reduce inequality, but when inequality is so pronounced, it simply adds It does this in two ways: by using a theoretical to social costs and puts a strain on productivity, framework of spatial agglomeration and spillovers which in turn suppresses economic activity.1 A to analyse spatial development and inequality in relentless cycle of rising inequality and declining the country; and by using an index of location growth becomes the norm. attractiveness to pinpoint the most deserving investment prospects from among the country’s Where to start? Addressing more than 200 municipalities. Whoever is bringing the investment to a particular region – government skewed spatial development or business, or both – the chances of it bearing through targeted investment fruit are greatly enhanced if there are cooperation Waldo Krugell and trust among all relevant stakeholders, Many places are not growing economically Professor including the communities that directly and because of a lack of infrastructure, North-West University indirectly benefit from such investment. inadequate skills, poor innovation capacity Any discussion of South Africa’s current and and weak governance. The locked-in potential Additional contributor: future economic prospects would be incomplete of these areas could be released through Lesiba Mothata if attention were not paid to how entrenched targeted investment in economic and social the problem of inequality has become. South infrastructure and institutional support.2 Africa’s official economic blueprint, the National

1 Benner, C, Pike, A & Mackinnon, D. 2018. ‘Inclusive Growth’ and ‘Inclusive Economies’ – Concepts and Theories Description (online). 84 2 National Planning Commission. 2012. National Development Plan 2030: Our Future – Make It Work, p. 277 (online).

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This extract from the NDP calls for a systematic It will do this in two ways: firstly, by using a response to South Africa’s spatial inequality theoretical framework of spatial agglomeration and What exacerbates social problem, bearing in mind that different parts of spillovers with an analysis of spatial developments inequality and economic the country have different levels of potential and and inequality in the country, and secondly, by inefficiency in South Africa underlying requirements. using a specially constructed index of location are the skewed spatial attractiveness for the country’s 205 municipalities. patterns in the country that While it is widely acknowledged that tackling This index will rank the top 40 municipalities originated in colonial times the inequality challenge in South Africa calls for according to their investment potential and show and were reinforced during the enormous effort and commitment, it also requires the spillovers that would likely be generated within apartheid era. a different way of looking at and doing things. each municipality. What exacerbates social inequality and economic inefficiency in South Africa are the skewed spatial Some theoretical concepts: patterns in the country that originated in colonial times and were reinforced during the apartheid locations and agglomerations era.3 For example, as much as 65% of economic In his seminal 1991 work, Paul Krugman5 activity in the country is generated in just three of developed the theory of new economic geography its nine provinces.4 (NEG), which provides insight into the spatial nature Many of South Africa’s municipalities – often of an economy and how the physical concentration the target of criticism for perceived inefficiency of economic activity is shaped by economic forces. and underperformance – have a great deal of These forces can either pull economic activity inherent investment potential which, if unlocked, together (for example, market-size effects, thick could stimulate growth and jobs. For this to labour markets, and pure external economies such happen, government, business and civil society as knowledge spillovers) or pull it apart (for example, Targeted investment in regions – stakeholders that would benefit from more immobile factors of production, land rents, and 6 with potential will generate productive and efficient economic activity – need pure external economies such as congestion). growth through spillovers, to form active partnerships rather than maintain The former are called centripetal forces; the latter, which will ultimately enhance typically adversarial positions towards one another. centrifugal forces. In essence, the NEG provides a modelling approach to illustrate the role of the potential and productivity of Targeted investment in regions with potential will centripetal and centrifugal forces in shaping the surrounding areas. generate growth through spillovers, which will spatial structure of an economy.7 ultimately enhance the potential and productivity of surrounding areas. The aim of this chapter is to answer the ‘where to start?’ question by identifying places in South Africa that have strong investment potential. In other words, where will the investment deliver the best returns?

3 National Planning Commission (2012). 4 Greyling, L & Mothata, L. 2017. Ramaphosa’s New Deal is Incomplete, Alexander Forbes (online). 5 Krugman, PR. 1991. Geography and Trade, The MIT Press, Cambridge. (book). 6 Fujita, M, Krugman, PR & Venables, A. 1999. The Spatial Economy: Cities, Regions, and International Trade (book); Fujita, M & Krugman, PR. 2004. The new economic geography: past, present and the future. Papers in Regional Science, Volume 83, Issue 1, pp. 139–164 (journal); Fujita & Krugman (2004). 7 Fujita & Krugman (2004). 85

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When economic activity is pulled together, (or thick) labour market, and access to a diverse agglomerations are created. Over time, these range of intermediate inputs.13 A thick labour agglomerations generate spillovers (or externalities) market benefits both the organisation and the which can be classified either as localisation employee, as it enables organisations to choose economies or urbanisation economies.8 the most appropriate person for the job. The result is a better match between employees and jobs. Over time, the organisation’s efficiency improves if Jargon buster employees are well suited to their tasks. Moreover, Urban agglomeration: an extended city or a thick labour market allows employees to become town area comprising the built-up area of more specialised, which also enhances efficiency. a central place and any suburbs linked by continuous urban area.9 The availability of a diverse range of both tradable and non-tradable inputs further contributes to improved productivity. (Tradable inputs are used in the production process; non-tradable inputs Externalities, Fujita and Krugman write, include a range of auxiliary services, such as are positive or negative consequences (or maintenance and repair services, and finance.14) external effects) of economic activity. These Linkages with foreign markets through import effects influence not only the producer and export activities extend the range of inputs but also those not directly involved in available to a region. In short, when there is production. A well-known example of a specialisation, innovation and growth occur negative externality is pollution; research and at a faster rate for all organisations, as similar development activities, or a skilled labour organisations are able to share knowledge, 10 force create positive externalities. sector-specific inputs, and skilled (or specialised) labour and technologies.15 Localisation economies are externalities that occur when the same, or similar, industries are grouped Urbanisation economies together11 (for example, in Silicon Valley12). The externalities created as a result of this regional Urbanisation economies are externalities that occur specialisation of economic activity can be grouped when an organisation is close to all economic into two categories: the availability of a specialised activity16 (for example, being located within the

8 Definition.net. 2018. urban‘ agglomeration’. 19 July 2018 (online) 13 Krugell, WF & Matthee, M. 2008. Measuring the inward FDI potential of South African regions. 9 International Monetary Fund. 2010. What Are Externalities? (online); Investopedia. 2018. Externality (online). Acta Commercii, Volume 8, pp. 160–180 (journal). 10 Brakman, S, Garretsen, H & Van Marrewijk, C. 2001. An Introduction to Geographical Economics (book). 14 Krugell & Matthee (2008). 11 Desmet, K & Fafchamps, M. 2005. Changes in the spatial concentration of employment across 15 Lall, SV, Koo, J & Chakravorty, S. 2003. Diversity matters: the economic geography US counties: a sectoral analysis 1972–2000. Journal of Economic Geography, Volume 5, Issue 3, of industry location in India, The World Bank (online). pp. 261–284 (journal). 16 Desmet & Fafchamps (2005). 12 Rosenthal, SS & Strange, W. 2007. The micro-empirics of agglomeration economies. In Arnott, RJ & 86 McMillen, DP (eds.): A Companion to Urban Economics, Blackwell Publishing Ltd. (book).

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city of Los Angeles17). In general, organisations Spatial inequality in South Africa: that operate in a location with a diverse range of studies to date In summary, investment fl ows industries have access to a wide range of services to a location where investors that can support and expand their business.18 The South Africa has always been characterised by are likely to experience spillovers are linked to an organisation’s proximity signifi cant spatial inequality. A small percentage of spillovers or benefi ts accruing to knowledge-sharing and infrastructure.19 regions in the country contribute to the bulk of the from a large local market, a Knowledge spillovers, or knowledge-sharing, can country’s output – a situation that remained largely thick labour market, foreign result in learning, innovation and, ultimately, faster unchanged from 1996 to 2017 (see Table 2.1.1). trade linkages, a diverse growth, especially if knowledge is shared among range of intermediate inputs, 20 organisations from diverse industries. In addition, This section delves into the South African literature knowledge-sharing and access access to infrastructure, or public goods and before setting out a location attractiveness index to infrastructure. services, can reduce costs and increase effi ciency based on localisation and urbanisation economies. within a particular location.21 Unequal development In summary, investment fl ows to a location where South Africa’s unequal or skewed spatial structure investors are likely to experience spillovers or can to some extent be attributed to developments benefi ts accruing from a large local market, a thick on the policymaking front, but the main cause can labour market, foreign trade linkages, a diverse be traced to the discovery of diamonds and gold. range of intermediate inputs, knowledge-sharing and access to infrastructure.22

17 Rosenthal & Strange (2007). 18 Lall et al. (2003). 19 Krugell & Matthee (2008). 20 Jacobs, J. 1969. The Economy of Cities (book); Krugell & Matthee (2008). 21, 22: Krugell & Matthee (2008).

13 Krugell, WF & Matthee, M. 2008. Measuring the inward FDI potential of South African regions. Acta Commercii, Volume 8, pp. 160–180 (journal). 14 Krugell & Matthee (2008). 15 Lall, SV, Koo, J & Chakravorty, S. 2003. Diversity matters: the economic geography of industry location in India, The World Bank (online). 16 Desmet & Fafchamps (2005).

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Figure 2.1.1: Contribution to total gross value added by province (in 2010 constant prices)23

NORTH WEST LIMPOPO NORTHERN CAPE 1996 6% 1996 7% 1996 3% 2017 5% 2017 7% 2017 2%

GAUTENG 1996 33% 2017 35%

WESTERN CAPE MPUMALANGA 1996 13% 1996 8% 2017 14% 2017 7%

KWAZULU-NATAL EASTERN CAPE FREE STATE 1996 1996 8% 1996 6% 16% 2017 2017 7% 2017 5% 16%

Source: Authors’ calculations using Global Insight’s Regional Economic Explorer (ReX) data23

88 23 Global Insight Southern Africa. 2018. Regional economic explorer (ReX) database (online).

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During the 1700s, spatial development in South The NDP summarises developments in South Africa was largely concentrated along the coast Africa’s spatial structure since 1994 as follows: By the 1950s, the tightening (in Cape Town, Port Elizabeth and Durban). The of apartheid’s grip reinforced discovery of diamonds in the 1800s changed this The Gauteng city-region has reinforced its South Africa’s spatial concentration, with Kimberley developing into the inequalities, with the first major inland agglomeration. The discovery of national dominance and attracted growing migration. The coastal city-regions have introduction of various territorial gold spurred the development of Johannesburg in a development policies fostering similar fashion. Johannesburg and its surrounding performed less well, especially in terms of job creation, largely because the manufacturing the unequal development of areas experienced rapid urbanisation, as supporting economic activity. The NDP industries to the mining sector stimulated the sector has failed to gain traction despite the apparent advantages of their location. explains that because of development of a manufacturing sector within the apartheid the majority of South Johannesburg–Pretoria agglomeration.24 The performance of smaller cities has been uneven, depending on their dominant Africans were relegated to locations far from their places By the 1950s, the tightening of apartheid’s grip industries. Many small towns and rural areas of work. reinforced South Africa’s spatial inequalities, with have stagnated or declined as agriculture the introduction of various territorial development and mining have gone through structural policies fostering the unequal development of changes, while others have developed economic activity.The NDP explains that because dramatically as economic activity has of apartheid the majority of South Africans were increased. Parts of the former homelands are relegated to locations far from their places of changing their economic structure, supported work.25 This created inefficient land use, exclusion by increased spending from social grants, from the benefits of society, high transport costs which raises questions about long-term and under-investment in transport infrastructure, sustainability but does potentially open new telecommunications and electricity, as these opportunities. This is occurring along major services could not be sustained.26 transport corridors, in developing tourism areas and along national borders where trade At the onset of democracy in 1994, South Africa’s and transport are growing.28 trade liberalisation process also influenced the spatial structure of economic activity in the country. Owing to changes in trade policy and Studies at firm, city and incentives, including the reduction of protective municipal level tariffs, organisations that could not cope with rising levels of competition closed down (for example, Many empirical studies have been conducted to the textile industry in the Western Cape), while investigate the spatial structure of South Africa’s those that were able to move into new markets economy at various subnational levels. Table 2.1.1 thrived (for example, the motor industry in the summarises a selection of those studies. Eastern Cape).27

24 Krugell, WF. 2011. Putting the Economy in its Place: Geographical Economics in South Africa (online). 25 Krugell (2011). 26 Naudé, WA & Krugell, WF. 2005. The geographical economy of South Africa. Journal of Development Perspectives, Volume 1, Issue 1, pp. 85–128 (journal); Matthee, M. 2007. Essays in domestic transport costs and export regions in South Africa. North-West University (online); National Planning Commission (2012). 27 Matthee (2007); Edwards, L., Cassim, R. & Van Seventer, D. 2009. Trade policy in South Africa (in South African Economic Policy under Democracy) (book). 28 National Planning Commission (2012), p. 262. 89

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Table 2.1.1: Studies on the spatial structure of South Africa’s economy

Level of study Authors Topic Organisation-level studies Kleynhans and Drewes (2008)29; Does location explain differences in efficiency at organisation level? Krugell and Rankin (2010)30 City-level studies Naudé and Krugell (2003a)31; The optimal size of cities; role of cities (2003b)32 Naudé and Krugell (2005) The specialisation and diversification of cities Magisterial district or Krugell et al. (2005)33 The distribution of income within magisterial districts municipality-level studies Naudé and Krugell (2006)34 The convergence of per capita income between magisterial districts Bosker and Krugell (2008)35 Dynamics of spatial income distribution Krugell and Matthee (2008)36 Investment attractiveness of magisterial districts Matthee and Naudé (2008)37 Determinants of regional manufactured exports Gries and Naudé (2008)38 Geography and trade patterns Krugell and Matthee (2009)39 The measurement of the export capabilities of South Africa’s magisterial districts Kleynhans and Sekhobela The spatial development and structure of value-added production in the (2010)40 manufacturing industries of the Southern District Municipality (SDM; now the Dr Kenneth Kaunda District Municipality) Naudé et al. (2010)41 Export specialisation and local economic growth Naudé and Matthee (2010)42 The dynamics of the location decision of manufacturing exporters in South Africa Kleynhans and Claassen (2012)43 The performance of the Platinum Spatial Development Initiative (Platinum SDI) development corridor in South Africa Laubscher (2017)44 The resilience of the Western Cape’s regional economy through an analysis of the recession in 2009

29 Kleynhans, EPJ & Drewes, E. 2008. The influence of location on the efficiency of manufacturers in 38 Gries, T & Naudé, WA. 2008. Trade and endogenous formation of regions in a developing country. Review of South Africa. Town and Regional Planning, Volume 53, pp. 1–8 (journal). Development Economics, Volume 12, Issue 2, pp. 248–275 (journal). 30 Krugell, W & Rankin, NA. 2012. Agglomeration and manufacturing output: Firm-level evidence from 39 Krugell, WF & Matthee, M. 2009. Measuring the export capability of South African regions. Development South Africa. Urban Forum, Volume 23, Issue 3, pp. 299–318 (journal). Southern Africa, Volume 26, Issue 3, pp. 459–476 (journal). 31 Naudé, WA & Krugell, WF. 2003a. Are South African cities too small? Cities: The International Journal of 40 Kleynhans, EPJ & Sekhobela, MJ. 2011. Shift-share analysis of production in the manufacturing industry of Urban Policy and Planning, Volume 20, Issue 3, pp. 175–180 (journal). South Africa’s Southern District Municipality. Journal of Economic and Financial Sciences, Volume 4, Issue 32 Naudé, WA & Krugell, WF. 2003b. An enquiry into cities and their role in sub-national economic growth in 1, pp. 10–30 (journal). South Africa. Journal of African Economies, Volume 12, Issue 4, pp. 476–499 (journal). 41 Naudé, WA, Bosker, M & Matthee, M. 2010. Export specialization and local economic growth in South Africa. 33 Krugell, WF, Koekemoer, G & Allison, J. 2005. Convergence or divergence of South African cities and towns: The World Economy, Volume 33, Issue 4, pp. 552–72 (journal). Evidence from kernel density estimates, Paper presented at the Biennial Conference of the Economic Society 42 Naudé, WA & Matthee, M. 2010. The location of manufacturing exporters in Africa: empirical evidence. of South Africa (online). African Development Review, Volume 22, Issue 2, pp. 276–291 (journal). 34 Naudé, WA & Krugell, WF. 2006. Sub-national growth rate differentials in South Africa: an econometric 43 Kleynhans, EPJ & Claassen, C. 2012. A shift-share analysis of job creation by the Platinum SDI during its first analysis. Papers in Regional Science, Volume 85, pp. 443–457 (journal). decade (1996-2006). Journal of Economic and Financial Sciences, Volume 5, Issue 2, pp. 591–606 (journal). 35 Bosker, M & Krugell, WF. 2008. Regional income evolution in South Africa after apartheid. Journal of 44 Laubscher, P. 2017. The business cycle resilience of the Western Cape economy: A regional analysis of the Regional Science, Volume 48, Issue 3, pp. 493–523 (journal). 2009 recession and subsequent recovery. Studies in Economics and Econometrics, Volume 41, Issue 3, 36 Krugell & Matthee (2008) pp. 1–33 (journal). 37 Matthee, M & Naudé, WA. 2008. The determinants of regional manufactured exports from a developing country. 90 International Regional Science Review, Volume 31, Issue 4, pp. 343–358 (journal).

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These studies show that spatial inequality is investors or its investment potential. The indicators persistent. Krugell emphasises how inclusive of investment potential that were used to construct These studies show that spatial spatial development can be achieved through the location attractiveness index are: inequality is persistent. Krugell investment in, for example, human capital and emphasises how inclusive 45 ■■ Measures of local market size: gross domestic infrastructure. In light of this body of evidence, spatial development can be product (GDP) per capita; index of buying power where could investment be directed in order to achieved through investment with retail spending as a percentage of total stimulate development? in, for example, human capital retail spending and infrastructure. The current study: empirical ■■ Measures of the agglomeration of people: total evidence population; population density; the percentage of the population who are urbanised Computing the location attractiveness ■■ Measures of the agglomeration of economic index activity: manufacturing employment as a The data used in this study was obtained from percentage of total employment; the Tress index Global Insight’s Regional Economic Explorer (smaller values indicate a more diversified (ReX)46 database. The ReX provides data at economy); location quotient for manufacturing provincial, metro, district and local municipality (a larger quotient reflects a comparative level for the years 1996 to 2017. For this study, advantage in manufacturing) mainly municipality-level data was used. ■■ Measure of the openness of the local economy: total trade as a percentage of GDP Principal component analysis was used to construct the location attractiveness index. The ■■ Measure of the cost of labour: average wage investment attractiveness (or investment potential) per worker in manufacturing of a location is a latent variable which cannot be ■■ Measure of the quality of labour: the directly measured. Krugell and Matthee47 provide a percentage of the population with post-matric range of subnational variables, based on the United qualifications Nations Conference on Trade and Development’s ■■ Measures of local stability: the percentage of (UNCTAD’s) Inward FDI Potential Index, which people who live below the food poverty line; the are measures of how attractive a location is to Gini coefficient (larger values indicate greater inequality); an overall crime index

45 Krugell (2011). 46 Global Insight Southern Africa (2018). 47 Krugell & Matthee (2008), pp. 166–174. 91

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Principal component analysis is used to group ■■ We give a detailed view of the places that The location attractiveness these variables into factors based on their have persistently performed well since 1996. index results are presented commonalities. These factors correspond with Those marked in bold have consistently (with to provide a holistic overview the literature and present investment themes, the exception of 2012 in some places) shown of the performance of the namely: urbanisation economies (diversity), investment location attractiveness. These are municipalities and their localisation economies (specialisation), thick also discussed in further detail. corresponding cities and towns markets (in terms of size) and openness. The The first set of results is shown in Table 2.1.2. within the index since 1996: factors are then summed to arrive at the overall Places ranked high in the 1996 index are also comparing top and bottom location attractiveness index. We can unpack those that ranked high in the 2017 index, with ranked places, showing places the information of a location with a high index the exception of a few. The same goes for the that have improved their ranking score in terms of one or more of the investment lowest-ranking places. and discussing places that have themes. For example, a location with a high score persistently performed well. in openness, relative to the other factors, indicates Over the period, numerous places have improved that it can offer investors spillovers from openness. their ranking, as shown in Figure 2.1.2 on Negative values imply that the variables in the page 95. For example, the Mantsopa Local factor (or investment theme) make a weaker Municipality (whose towns include Excelsior, contribution to the overall index value than those in Hobhouse, Ladybrand, Thaba Patchoa and other factors. Tweespruit) has moved up from number 146 to 70. Comparing the raw data from the indicators listed We present the results from three angles to provide above, the municipality has since 1996 improved a holistic overview of the performance of the its location quotient in manufacturing, become municipalities and their corresponding cities and more urbanised and open, and grown both its towns within the index since 1996: percentage of skilled workers and the average wage per person in manufacturing. While these ■■ We compare the top 10 ranked places in 1996 and 2017, together with the worst performers. are off a very low base, they represent an improvement nonetheless. ■■ We show the top 40 places that have improved their ranking between 1996 and 2017.

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Table 2.1.2: Highest-ranking and lowest-ranking municipalities in the location attractiveness index, 1996 and 2017

Top 10 ranked places in 1996 Top 10 ranked places in 2017 1 Evaton, Sebokeng, Vaal Oewer, Vanderbijlpark, Vereeniging Empangeni, Richards Bay 2 Ashburton, Pietermaritzburg Evaton, Sebokeng, Vaal Oewer, Vanderbijlpark, Vereeniging 3 Deneysville, Kragbron, Oranjeville, Sasolburg Dolphin Coast/Ballito, KwaDukuza, Nkwazi/Zinkwazi Beach 4 Krugersdorp, Magaliesburg, Muldersdrift Ashburton, Pietermaritzburg 5 Franschhoek, Klapmuts, Pniel, Stellenbosch, Stellenbosch Farms De Doorns, Rawsonville, Touws River, Worcester 6 Hopefield, Jacobs Bay, Langebaan, Paternoster, Saldanha, Franschhoek, Klapmuts, Pniel, Stellenbosch, Stellenbosch Farms St Helena Bay, Vredenburg 7 Empangeni, Richards Bay Krugersdorp, Magaliesburg, Muldersdrift 8 Gouda, Paarl, Saron, Wellington Gouda, Paarl, Saron, Wellington 9 Kriel, Ogies, Phola, eMalahleni Deneysville, Kragbron, Oranjeville, Sasolburg 10 Hendrina, Middelburg, Pullens Hope, Rietkuil Hopefield, Jacobs Bay, Langebaan, Paternoster, Saldanha, St Helena Bay, Vredenburg

Bottom 10 ranked places in 1996 Bottom 10 ranked places in 2017 196 Alldays Dutywa, Elliotdale, Willowvale 197 Utrecht Cofimvaba, Tsomo 198 Mbazwana Bizana 199 Ingwavuma, Jozini, Mkuze Mbazwana 200 Pomeroy Alldays 201 Nkandla Engcobo 202 Tabankulu Disaneng, Kraaipan, Madibogo, Setlagole 203 Piet Plessis, Pomfret Nkandla 204 Impendle Cacadu (Lady Frere), Dordrecht, Indwe 205 Hotazel, Santoy, Van Zylsrus Tabankulu

Source: Authors’ calculations using ReX data

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Figure 2.1.2: Top 40 municipalities that improved their ranking in the location attractiveness index48

Municipalities that improved ranking

The location attractiveness index identifi es investigate places that consistently offer spillovers places where an investor is likely to enjoy returns to investors by identifying those that have from spillovers or benefi ts. These spillovers can performed well consistently since 1996. Investing accrue from a large local market, a thick labour in these places will unlock the potential of not only market, foreign trade linkages, a diverse range of the cities themselves but also the surrounding intermediate inputs, knowledge-sharing and access areas through proximity and connectivity. The to infrastructure. Places that offer these spillovers Western Cape provides an interesting example of are more likely to be attractive to potential investors. this: in 1996, the province had 14 of the top 40 municipalities. In 2017, this number increased Although many places have improved signifi cantly to 20. This kind of focused investment will in the rankings, they may have done so from a ultimately contribute to transforming South Africa’s low base and therefore may not yet offer benefi ts entrenched pattern of spatial inequality. to fully lock in investment. We therefore need to

48 Htonl. 2016. South Africa municipalities 2016 blank, Wikimedia Commons (online). 95

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Table 2.1.3: Breakdown of scores of top 40 municipalities in the location attractiveness index Outcomes of key variables District name Cities or towns Major cities Urbanisation Market size Localisation Openness 1. City of uMhlathuze Empangeni, Richards Bay Empangeni, -0.51 2.35 1.10 5.81 (KZN) Richards Bay 2. Emfuleni (GP) Evaton, Sebokeng, Vaal Oewer, Vanderbijlpark, 0.19 5.48 0.82 1.02 Vanderbijlpark, Vereeniging Vereeniging 3. KwaDukuza (KZN) Dolphin Coast/Ballito, -0.22 1.63 1.08 4.39 KwaDukuza, Nkwazi/Zinkwazi Beach 4. Msunduzi (KZN) Ashburton, Pietermaritzburg Pietermaritzburg -0.08 5.24 0.08 1.24 5. Breede Valley (WC) De Doorns, Rawsonville, Touws 0.72 -0.11 0.30 5.22 River, Worcester 6. Stellenbosch (WC) Franschhoek, Klapmuts, Pniel, Franschhoek, 1.66 1.42 1.01 1.47 Stellenbosch, Stellenbosch Farms Stellenbosch 7. Mogale City (GP) Krugersdorp, Magaliesburg, Krugersdorp 1.13 2.50 0.32 1.20 Muldersdrift 8. Drakenstein (WC) Gouda, Paarl, Saron, Wellington 1.08 1.50 1.05 1.21 9. Metsimaholo (FS) Deneysville, Kragbron, Sasolburg 1.83 1.16 2.66 -0.88 Oranjeville, Sasolburg 10. Saldanha Bay Hopefield, Jacobs Bay, 1.32 0.08 1.31 1.75 (WC) Langebaan, Paternoster, Saldanha, St Helena Bay, Vredenburg 11. Midvaal (GP) De Deur/Walkerville, Eikenhof, 1.54 0.50 0.81 0.90 Meyerton, Vaal Marina 12. Overstrand (WC) Betty's Bay, Birkenhead, 1.88 0.33 0.55 0.80 De Kelders, Fishers Haven, Franskraal, Gans Bay, Hawston, Hermanus, Kleinmond, Onrus, Pearly Beach, Pringle Bay, Rooi-Els, Sand Bay, Stanford, Van Dyks Bay, Vermont

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Rank through time

District name Cities or towns Major cities Index 2017 2012 2007 2002 1996 2017 rank rank rank rank rank 1. City of uMhlathuze Empangeni, Richards Bay Empangeni, 8.75 1 31 6 4 7 (KZN) Richards Bay 2. Emfuleni (GP) Evaton, Sebokeng, Vaal Oewer, Vanderbijlpark, 7.51 2 1 1 1 1 Vanderbijlpark, Vereeniging Vereeniging 3. KwaDukuza (KZN) Dolphin Coast/Ballito, 6.88 3 35 15 19 19 KwaDukuza, Nkwazi/Zinkwazi Beach 4. Msunduzi (KZN) Ashburton, Pietermaritzburg Pietermaritzburg 6.48 4 5 2 2 2 5. Breede Valley (WC) De Doorns, Rawsonville, Touws 6.13 5 174 18 11 15 River, Worcester 6. Stellenbosch (WC) Franschhoek, Klapmuts, Pniel, Franschhoek, 5.56 6 10 5 5 5 Stellenbosch, Stellenbosch Farms Stellenbosch 7. Mogale City (GP) Krugersdorp, Magaliesburg, Krugersdorp 5.15 7 12 4 7 4 Muldersdrift 8. Drakenstein (WC) Gouda, Paarl, Saron, Wellington 4.84 8 13 10 8 8 9. Metsimaholo (FS) Deneysville, Kragbron, Sasolburg 4.77 9 2 3 3 3 Oranjeville, Sasolburg 10. Saldanha Bay Hopefield, Jacobs Bay, 4.46 10 24 14 6 6 (WC) Langebaan, Paternoster, Saldanha, St Helena Bay, Vredenburg 11. Midvaal (GP) De Deur/Walkerville, Eikenhof, 3.75 11 22 12 12 12 Meyerton, Vaal Marina 12. Overstrand (WC) Betty's Bay, Birkenhead, 3.56 12 32 19 13 18 De Kelders, Fishers Haven, Franskraal, Gans Bay, Hawston, Hermanus, Kleinmond, Onrus, Pearly Beach, Pringle Bay, Rooi-Els, Sand Bay, Stanford, Van Dyks Bay, Vermont

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Table 2.1.3: Breakdown of scores of top 40 municipalities in the location attractiveness index (continued) Outcomes of key variables

District name Cities or towns Major cities Urbanisation Market size Localisation Openness 13. Mandeni (KZN) Isithebe, Mandeni -0.82 0.35 1.60 2.31 14. Govan Mbeki Bethal, Charl Cilliers, Embalenhle, Secunda 1.19 1.64 1.31 -0.73 (MP) Evander, Kinross, Leandra, Secunda, Trichardt 15. George (WC) George, Haarlem, Herolds Bay, 1.47 0.63 0.26 0.40 Uniondale, Victoria Bay, Wilderness 16. Swellendam Barrydale, Buffeljagsrivier, Infanta, 1.27 -0.89 0.94 1.33 (WC) Malagas, Suurbraak, Swellendam 17. Swartland (WC) Abbotsdale, Chatsworth, 0.60 -0.31 0.92 1.34 Darling, Grotto Bay, Kalbaskraal, Koringberg, Malmesbury, Moorreesburg, Riebeeck Kasteel, Riebeek West, Riverlands, Yzerfontein 18. Kannaland (WC) Calitzdorp, Ladismith, Vanwyksdorp, 0.73 -1.19 0.96 2.04 Zoar 19. Rand West City Randfontein, Westonaria 0.93 1.16 -0.08 0.42 (GP) 20. Newcastle (KZN) Charlestown, Newcastle Newcastle -0.23 1.61 1.31 -0.27 21. Theewaterskloof Bot River, Caledon/Myddleton, 1.08 -0.47 0.53 1.23 (WC) Genadendal, Grabouw, Greyton, Riviersonderend, Theewaterskloof, Villiersdorp 22. Mossel Bay Boggoms Bay, Brandwag, Mossel Bay 2.07 0.42 1.82 -1.95 (WC) Friemersheim, Great Brak River, Herbertsdale, Mossel Bay, Vleesbaai 23. City of Barberton, Emoyeni, Entokozweni, Mbombela 0.30 3.23 0.48 -1.67 Mbombela (MP) Hazyview, Kaapschehoop, Kabokweni, Kanyamazane, Luphisi, Matsulu, Mbombela, Mpakeni, Msogwaba, Ngodwana, Skukuza, Tekwane, White River

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Rank through time District name Cities or towns Major cities Index 2017 2012 2007 2002 1996 2017 rank rank rank rank rank 13. Mandeni (KZN) Isithebe, Mandeni 13 70 25 20 20 14. Govan Mbeki Bethal, Charl Cilliers, Embalenhle, Secunda 14 6 8 10 11 (MP) Evander, Kinross, Leandra, Secunda, Trichardt 15. George (WC) George, Haarlem, Herolds Bay, 15 29 22 16 17 Uniondale, Victoria Bay, Wilderness 16. Swellendam Barrydale, Buffeljagsrivier, Infanta, 16 63 38 32 34 (WC) Malagas, Suurbraak, Swellendam 17. Swartland (WC) Abbotsdale, Chatsworth, 17 54 27 14 14 Darling, Grotto Bay, Kalbaskraal, Koringberg, Malmesbury, Moorreesburg, Riebeeck Kasteel, Riebeek West, Riverlands, Yzerfontein 18. Kannaland (WC) Calitzdorp, Ladismith, Vanwyksdorp, 18 115 53 43 51 Zoar 19. Rand West City Randfontein, Westonaria 19 39 23 31 27 (GP) 20. Newcastle Charlestown, Newcastle Newcastle 20 16 13 15 13 (KZN) 21. Theewaterskloof Bot River, Caledon/Myddleton, 21 73 51 54 43 (WC) Genadendal, Grabouw, Greyton, Riviersonderend, Theewaterskloof, Villiersdorp 22. Mossel Bay Boggoms Bay, Brandwag, Mossel Bay 22 3 9 9 16 (WC) Friemersheim, Great Brak River, Herbertsdale, Mossel Bay, Vleesbaai 23. City of Barberton, Emoyeni, Entokozweni, Mbombela 23 4 11 21 24 Mbombela (MP) Hazyview, Kaapschehoop, Kabokweni, Kanyamazane, Luphisi, Matsulu, Mbombela, Mpakeni, Msogwaba, Ngodwana, Skukuza, Tekwane, White River

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Table 2.1.3: Breakdown of scores of top 40 municipalities in the location attractiveness index (continued) Outcomes of key variables District name Cities or towns Major cities Urbanisation Market size Localisation Openness 24. Langeberg (WC) Ashton, Bonnievale, McGregor, 0.85 -0.50 0.89 1.06 Montagu, Robertson 25. Knysna (WC) Brenton, Brenton-on-Sea, Knysna 1.72 0.20 0.68 -0.34 Buffels Bay, Knoetzie, Knysna, Rheenendal, Sedgefield 26. Cape Agulhas Agulhas, Arniston, Bredasdorp, 1.85 -0.87 0.20 0.98 (WC) Elim, Klipdale, Napier, Protem, Struis Bay, Suiderstrand 27. Witzenberg (WC) Ceres, Op-die-Berg, Prince Alfred 0.73 -0.41 0.86 0.97 Hamlet, Tulbagh, Wolseley 28. Steve Tshwete Hendrina, Middelburg, Pullens Middelburg 1.62 1.47 0.94 -1.96 (MP) Hope, Rietkuil 29. Cederberg (WC) Citrusdal, Clanwilliam, Elands Bay, 1.10 -0.74 -0.44 2.05 Graafwater 30. uMngeni (KZN) Hilton, Howick 1.14 0.89 1.17 -1.35 31. Lesedi (GP) Devon, Heidelberg, Nigel, Nigel, 0.69 0.44 1.67 -0.94 Vischkuil Heidelberg 32. Emalahleni (MP) Kriel, Ogies, Phola, eMalahleni eMalahleni 1.28 2.17 -0.37 -1.29 33. Ray Nkonyeni Hibberdene, Margate, Port Edward, -0.17 1.48 0.21 0.25 (KZN) Port Shepstone, Southbroom 34. Madibeng (NW) Brits, Hartbeespoort, Mooinooi Brits 0.28 2.22 0.28 -1.04 35. Oudtshoorn (WC) De Rust, Dysselsdorp, Oudtshoorn 1.02 -0.79 -0.06 1.48 36. Bitou (WC) Keurboomstrand, Krantshoek, Plettenberg Bay 1.43 0.16 0.54 -0.68 Kurland, Kwanokuthula, Nature's Valley, Plettenberg Bay, Wittedrift 37. Bergrivier (WC) Aurora, Eendekuil, Piketberg, 0.90 -0.55 0.30 0.74 Porterville, Redelinghuys, Velddrif 38. Alfred Duma (KZN) Colenso, Ladysmith, Van Reenen -0.67 0.80 1.04 0.20 39. Rustenburg (NW) Hartbeesfontein-A, Marikana, Rustenburg 0.82 3.09 -2.91 0.36 Phatsima, Rustenburg, Tlhabane 40. uMfolozi (KZN) KwaMbonambi -0.84 0.09 2.52 -0.45

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Rank through time

District name Cities or towns Major Index 2017 2012 2007 2002 1996 cities 2017 rank rank rank rank rank 24. Langeberg (WC) Ashton, Bonnievale, McGregor, 2.30 24 64 43 45 42 Montagu, Robertson 25. Knysna (WC) Brenton, Brenton-on-Sea, Buffels Knysna 2.26 25 17 20 18 22 Bay, Knoetzie, Knysna, Rheenendal, Sedgefield 26. Cape Agulhas Agulhas, Arniston, Bredasdorp, Elim, 2.16 26 74 45 33 39 (WC) Klipdale, Napier, Protem, Struis Bay, Suiderstrand 27. Witzenberg (WC) Ceres, Op-die-Berg, Prince Alfred 2.15 27 68 54 44 40 Hamlet, Tulbagh, Wolseley 28. Steve Tshwete Hendrina, Middelburg, Pullens Hope, Middelburg 2.07 28 7 16 22 10 (MP) Rietkuil 29. Cederberg (WC) Citrusdal, Clanwilliam, Elands Bay, 1.97 29 159 108 89 87 Graafwater 30. uMngeni (KZN) Hilton, Howick 1.85 30 11 21 27 30 31. Lesedi (GP) Devon, Heidelberg, Nigel, Vischkuil Nigel, 1.86 31 14 17 25 26 Heidelberg 32. Emalahleni (MP) Kriel, Ogies, Phola, eMalahleni eMalahleni 1.79 32 9 7 17 9 33. Ray Nkonyeni Hibberdene, Margate, Port Edward, 1.77 33 42 32 42 45 (KZN) Port Shepstone, Southbroom 34. Madibeng (NW) Brits, Hartbeespoort, Mooinooi Brits 1.74 34 8 24 24 23 35. Oudtshoorn (WC) De Rust, Dysselsdorp, Oudtshoorn 1.65 35 128 69 50 50 36. Bitou (WC) Keurboomstrand, Krantshoek, Kurland, Plettenberg 1.45 36 18 26 26 28 Kwanokuthula, Nature's Valley, Bay Plettenberg Bay, Wittedrift 37. Bergrivier (WC) Aurora, Eendekuil, Piketberg, Porterville, 1.39 37 92 60 47 35 Redelinghuys, Velddrif 38. Alfred Duma (KZN) Colenso, Ladysmith, Van Reenen 1.37 38 38 33 29 38 39. Rustenburg (NW) Hartbeesfontein-A, Marikana, Phatsima, Rustenburg 1.36 39 76 36 36 21 Rustenburg, Tlhabane 40. uMfolozi (KZN) KwaMbonambi 1.32 40 28 44 30 29

Source: Authors’ calculations using ReX data 101

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Targeting investment in secondary cities

The appointment of four special investment envoys by President Cyril Ramaphosa is a testament to his commitment to bolstering investment in the South African economy. The envoys are tasked with campaigning for investment to the amount of $100 billion over the next fi ve years. President Ramaphosa has emphasised that a conducive environment has to be created to attract investment and unlock the growth potential of the economy.48 The location attractiveness index presented here provides a fi rst step towards identifying places that are conducive to investment and where growth potential can be unlocked. Using municipal data, we now give a synopsis of the economies (and spatial locations) of the secondary cities that have performed consistently well in the location attractiveness index.

President Ramaphosa has emphasised that a conducive environment has to be created to attract investment and unlock the growth potential of the economy.The location attractiveness index presented here provides a fi rst step towards identifying places that are conducive to investment and where growth potential can be unlocked.

102 48 Sunday Times. 2018. 5 ways Ramaphosa’s investment envoys will boost the economy, 8 May 2018 (online).

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OVERVIEW OF LOCATION AND ECONOMIC CHARACTERISTICS OF BEST-PERFORMING MUNICIPALITIES THROUGHOUT THE PERIOD 1996 TO 201749

City of uMhlathuze Local Emfuleni Local Municipality

Municipality Emfuleni Local Municipality offers market-size spillovers to investors. The City of uMhlanhuze Local Municipality (which comprises the secondary cities of Richards Bay and The Emfuleni Local Municipality’s secondary Empangeni) has the greatest location attractiveness. cities, Vanderbijlpark and Vereeniging, are This municipality offers investors both openness and located in the southern part of Gauteng. They market-size spillovers to investors. have access to a well-maintained road network and are strategically located near the N1 freeway The municipality’s economy grew at an average linking Johannesburg and Bloemfontein. The annual rate of 0.5% between 1996 and 2017. municipality’s largest location quotient is in Most of its formal-sector employment is generated manufacturing (1.96), followed by fi nancial through construction (7.2%), education (7.8%), intermediation, insurance, real estate and land and water transport (5.7%), metal products, business services (1.10) and construction (1.04). machinery and household appliances (4.5%), and The majority of formal-sector employees work other business activities (12.7%). The municipality’s in the manufacturing sector, specifi cally the highest location quotient is for manufacturing (2.17), manufacturing of basic metals, fabricated metal followed by transport (1.48) and agriculture (1.26). products, machinery and equipment, and offi ce, A value above one means the municipality has a accounting and computing machinery (10.3%). comparative advantage (taking production and Around 9.6% of employees are in the retail trade employment into account) over other municipalities and repair of personal household goods sector in those sectors. The region is involved in the 9.6%, and 13.3% are in business services. manufacture of basic metals, fabricated metal products, machinery and equipment, and offi ce, The municipality’s average annual GDP growth accounting and computing machinery. rate between 1996 and 2017 was 0.8%. Sectors that contributed most to GVA in 2017 were Apart from manufacturing, land and water transport manufacturing, real estate and education. made the greatest contribution to the gross value added (GVA) in 2017. The municipality is home to the Richards Bay Industrial Development Zone (RBIDZ), which offers access to the port of Richards Bay and strategic inland links through the R43 and N2 roads.

49 In this section (unless indicated otherwise), information relating to economic indicators is from the Global Insight Southern Africa regional economic explorer database (2018). Other information related to the municipalities is sourced from https://municipalities.co.za/. 103

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Msunduzi Local Municipality Stellenbosch Local Municipality The Msunduzi Local Municipality has a comparative The Msunduzi Local Municipality offers market- The Stellenbosch Local Municipality offers advantage in a number size spillovers to investors. urbanisation-economies spillovers to investors and is located next to the Cape Town metropolitan area. of sectors: electricity, gas The municipality consists largely of and water supply (1.45), Pietermaritzburg and is part of two major Its GDP grew at an average annual rate of 2.9% community, social and personal development corridors, namely the industrial between 1996 and 2017. The Stellenbosch services (1.28), transport, corridor between Durban and Pietermaritzburg district boasts a comparative advantage in many storage and communication and the agro-industrial corridor between sectors: agriculture (2.08), manufacturing (1.45), (1.20), agriculture (1.09), Pietermaritzburg and Estcourt. Moreover, the construction (1.34), fi nancial intermediation, construction (1.02) and municipality is strategically placed along the insurance, real estate and business services manufacturing (1.00). N3 freeway and is connected to King Shaka (1.07), wholesale and retail trade, hotels and International Airport and the port of Durban. restaurants (1.04) and community, social and personal services (1.00). The municipality’s economy grew at an average annual rate of 2.2% between 1996 and 2017. The largest contributors to the district’s GVA in The NDP asserts that the region could enhance 2017 were fi nancial intermediation, insurance national growth through its port and industrial and pension funding and activities auxiliary to and agro-processing hubs.50 The Msunduzi fi nancial intermediation, and the manufacture of Local Municipality has a comparative advantage food products, beverages and tobacco products. in a number of sectors: electricity, gas and The retail and wholesale trade sector and business water supply (1.45), community, social and services sector have the highest formal-sector personal services (1.28), transport, storage employment rates in the municipality (16.0% and and communication (1.20), agriculture (1.09), 11.7%, respectively). construction (1.02) and manufacturing (1.00). The education industry employs 9.7% of formal-sector workers, with the health and social work sector at 9.4%, retail trade and repair of personal household goods at 8.8% and business services at 12.9%.

Sectors that contributed most to the municipality’s GVA in 2017 were retail trade, land and water transport, other business activities, public administration and defence activities, education, and health and social work.

104 50 National Planning Commission (2012).

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Mogale City Local Municipality Metsimaholo Local Municipality The Metsimaholo Local Mogale City Local Municipality offers market-size The Metsimaholo Local Municipality’s main urban Municipality’s main urban spillovers to investors. area is Sasolburg. The district’s proximity to area is Sasolburg. The district’s Johannesburg provides an opportunity for investors Situated in the West Rand region of Gauteng, proximity to Johannesburg to make use of the localisation-economies provides an opportunity for this municipality forms part of the development spillovers created in this municipality. around the mining belt between Johannesburg and investors to make use of Krugersdorp. It has strategic transport linkages to The municipality’s average annual growth rate the localisation-economies both Johannesburg and Pretoria, and a large urban between 1996 and 2017 was 3.2%, and the largest spillovers created in this concentration between Krugersdorp and Kagiso. contributor to GVA in 2017 was the manufacture municipality. Although Mogale City recorded an average annual of fuel, petroleum, chemical and rubber products. GDP growth rate of 0% between 1996 and 2017, This sector also formally employs the most workers it has a location quotient above one in various (14.2%), followed by construction (9.3%). Another industries: manufacturing (1.56), electricity, gas signifi cant contributor to GVA is the mining of coal and water supply (1.11), construction (1.14) and and lignite. The municipality’s location quotient community, social and personal services (1.19). values for 2017 refl ect this, with manufacturing at 3.21, mining at 2.11 and electricity, gas and water Most formal-sector workers are employed in supply at 2.10. business services (15.9%), with 7.6% in the manufacture of basic metals, fabricated metal Govan Mbeki Local Municipality products, machinery and equipment, and offi ce, accounting and computing machinery, and 8.9% The Govan Mbeki Local Municipality is located in in the retail and wholesale trade. The largest Mpumalanga, with Secunda its main urban area. contributors to GVA (in 2017) were fi nancial It offers market-size and localisation-economies intermediation, insurance and pension funds and spillovers to investors. activities auxiliary to fi nancial intermediation, and health and social work. The municipality’s economy grew at an average annual rate of 0.9% between 1996 and 2017. The largest contributors to GVA in 2017 were the manufacture of fuel, petroleum, chemical and rubber products, and the mining of coal and lignite. Around 10.0% of formal-sector employees work in other business services and around 9.6% in agriculture. The municipality had a 2017 location quotient above one in the following sectors: mining (4.02), manufacturing (2.31) and electricity (1.38).

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Newcastle Local Municipality City of Mbombela Local

Newcastle is a secondary city located in Municipality KwaZulu-Natal which offers market-size and Mbombela, the capital of Mpumalanga, offers localisation-economies spillovers to investors. market-size spillovers to investors. The municipality’s GDP increased at an average The municipality’s average annual growth rate annual rate of -0.1% between 1996 and 2017. between 1996 and 2017 was 4.0%, and the Its comparative advantages are in manufacturing largest contributors to GVA in 2017 were wholesale (1.51), electricity (1.14), agriculture (1.04) and retail trade, fi nance, public administration and community services (1.08). The sector and education. The education sector also formally that contributed most to GVA in 2017 was the employs 9.2% of workers, whereas agriculture manufacturing of metal products, machinery and employs 10.0%, other business activities 14.2% household appliances. Business services (13.4%) and the retail sector 9.5%. The municipality’s have the highest percentage of formal-sector location quotient values for 2017 refl ect this employees in the municipality, followed by retail diverse range of sectors, with electricity at 1.53, (11.4%) and construction (6.4%). trade at 1.43, agriculture at 1.11, construction at 1.08, manufacturing at 1.05 and community Mossel Bay Local Municipality services at 1.00. The Mossel Bay Local Municipality offers urbanisation-economies spillovers to investors. It Knysna Local Municipality is situated midway between the port cities of Cape The Knysna Local Municipality offers urbanisation- Town and Port Elizabeth, along the N2 freeway. economies spillovers to investors and is situated The municipality’s economy grew at an average between George and Plettenberg Bay. annual rate of 6.3% between 1996 and 2017. The municipality’s GDP increased at an average Its highest location quotients are for electricity annual rate of 4.1% between 1996 and 2017. Its (5.90), construction (1.75), agriculture (1.59) and comparative advantages are in agriculture (which manufacturing (1.14). The majority of formal- includes fi shing) (1.27), construction (3.54) and sector employees work in other business activities trade (1.57). The sectors that contributed most to (19.0%) and in retail (12.1%). The largest GVA in 2017 were construction and retail trade. contributor to GVA (in 2017) was the supply of Construction (13.7%) has the highest percentage electricity, gas, steam and hot water. of formal-sector employees in the municipality, followed by hotels and restaurants (11.5%) and other business activities (10.9%).

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Steve Tshwete Local Municipality Emalahleni Local Municipality The Steve Tshwete Local The Steve Tshwete Local Municipality’s main urban The Emalahleni Local Municipality in Mpumalanga Municipality’s main urban area area is Middelburg in Mpumalanga. The district offers market-size spillovers. Its particular spatial is Middelburg in Mpumalanga. is located between Johannesburg and Mbombela importance is outlined on the Municipalities The district is located between and offers an opportunity for investors to make use South Africa website as follows: Johannesburg and Mbombela of the market-size and urbanisation-economies and offers an opportunity for spillovers created in this municipality. The Emalahleni Municipality is strategically investors to make use of the The municipality’s average annual growth rate located in terms of the provincial context market-size and urbanisation- between 1996 and 2017 was 2.6%, and the and transport network. It is situated in economies spillovers created in largest contributors to GVA in 2017 were the close proximity to the City of Ekurhuleni, this municipality. mining of coal and lignite and the manufacture City of Johannesburg and City of Tshwane of metal products, machinery and household Metropolitan Municipalities in Gauteng, and appliances. This sector also formally employs is connected to these areas by the N4 and the most workers (15.4%), followed by other N12 freeways. These freeways converge at business activities (13.1%). The municipality’s eMalahleni in Emalahleni, from where the N4 location quotient values for 2017 refl ect this, with extends to Mbombela, the provincial capital, manufacturing at 1.49 and mining at 4.57. and ultimately Maputo in Mozambique. The N4 freeway, along with the railway line that Lesedi Local Municipality runs adjacent to the freeway from Gauteng to Mozambique, constitute the Maputo Corridor.51 The Lesedi Local Municipality, situated between the N17 and N3 freeways, offers The municipality’s economy grew at an average localisation-economies spillovers to investors, annual rate of 1.3% between 1996 and 2017. The which makes it attractive for future economic Emalahleni Local Municipality has a comparative development. advantage in two sectors: mining (6.36), and The municipality’s GDP increased at an average electricity, gas and water supply (2.23). The mining annual rate of 4.8% between 1996 and 2017. sector employs 22.0% of formal-sector workers, Its comparative advantages are in agriculture with business services employing 11.8%. (1.60), manufacturing (1.48), construction (1.14), Sectors that contributed most to the municipality’s community services (1.15) and transport (1.01). The GVA in 2017 were mining (coal, lignite and metal sectors that contributed most to GVA in 2017 were ores) and the manufacturing of metal products, the manufacturing of food, beverages and tobacco machinery and household appliances. products, and fi nance, retail trade and public administration. Business services (14.6%) have the highest percentage of formal-sector employees in the municipality, followed by retail (9.3%) and the manufacturing of metal products (8.5%).

51 Municipalities of South Africa. 2018. Emalahleni Local Municipality (online). 107

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Madibeng Local Municipality The municipality’s average annual growth rate The municipality’s average between 1996 and 2017 was 6.6%, and the largest annual growth rate between The Madibeng Local Municipality in the North contributors to GVA in 2017 were construction, 1996 and 2017 was 0.7%, and West province is strategically located near Gauteng retail trade and fi nance. The construction sector the largest contributor to GVA in and Limpopo. It also offers a gateway to Botswana also formally employs the most workers (14.4%), 2017 was the mining of metal via the N4 freeway. The municipality offers followed by hotels and restaurants (10.1%) and ores, followed by real estate. urbanisation-economies spillovers to investors. business services (12.7%). The municipality’s location quotient values for 2017 refl ect this, with The mining sector also formally The municipality’s economy grew at an average employs the most workers construction at 4.03, trade at 1.63 and agriculture annual rate of 4.8% between 1996 and 2017. at 1.44. (36.4%), followed by business Mining contributed most to the municipality’s GVA services (6.9%). in 2017, followed by education. Correspondingly, Rustenburg Local Municipality the mining sector employs 18.9% of formal-sector workers, followed by business services at 9.9%. The Rustenburg Local Municipality’s main urban The municipality’s location quotient values for area is Rustenburg, which is also the most 2017 refl ect this, with mining having a location populated municipality in the North West province. quotient above one (3.97). It offers market-size spillovers to investors. Bitou Local Municipality The municipality’s average annual growth rate between 1996 and 2017 was 0.7%, and the The Bitou Local Municipality is located in proximity largest contributor to GVA in 2017 was the mining to the N2 freeway connecting Port Elizabeth and of metal ores, followed by real estate. The mining Cape Town. It provides an opportunity for investors sector also formally employs the most workers to make use of the urbanisation spillovers created (36.4%), followed by business services (6.9%). in this municipality. The municipality’s location quotient values refl ect the role of the mining sector, as only mining had a location quotient above one for 2017 (9.43).

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DRIVING INCLUSIVE GROWTH THROUGH TARGETED INVESTMENT: THE LOCATION ATTRACTIVENESS INDEX Chapter 1

Consolidating the evidence More quick wins, particularly for organisations, are possible. Organisations also prefer safety Economic theory and international evidence show and services but really benefi t from reliable that economic activity is never evenly distributed and cost-effective transport (refer to Part 2: across a country. People and organisations tend Chapter 1 fl x case study on page 115), as well as to cluster together in cities to take advantage of connectivity. Investment in roads and information the benefi ts that proximity offers. This chapter has and communication technology infrastructure is shown that specialised and diversifi ed economies paramount. If specifi c sectors in specifi c places are offer cost benefi ts to organisations and effi ciency to be targeted, the next step would be conducting benefi ts to workers. Large local markets and an input–output analysis of backward and forward openness to international markets attract more linkages, specifi cally within the context of global people and more organisations. It is easy to arrive at value chains. a general recommendation for attracting investment: make it cost-effective for people and organisations Looking ahead to be close to one another. That means developing land for commercial and residential use in ways Unlocking potential through trusting that encourage density and also lower the cost of partnerships connectivity. However, as our brief history since South Africa has always had embedded social and democracy has shown, urban development and spatial inequalities. The country needs to grow renewal are slow and precarious processes. in a more inclusive manner: a process that can be accelerated through targeted investment and Special zones and industrial parks are often a policy environment that supports this vision. In planned without consideration of urbanisation seeking to provide an answer to the question of and localisation economies. Many spatial policies just where this investment should be targeted, an fall into the political trap of trying to spread out overriding consideration should be that investment economic activity instead of fi nding ways to is a scarce resource. For this reason, it must be agglomerate it. Instead of initiating grand projects allocated in the most effi cient manner. with the thinking, ’build it and they will come’, we need to realise that people will always be attracted to safe neighbourhoods with reliable services, good schools, effi cient and affordable public transport systems, and functioning hospitals.

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Chapter 1 DRIVING INCLUSIVE GROWTH THROUGH TARGETED INVESTMENT: THE LOCATION ATTRACTIVENESS INDEX

The above cities and towns offer various benefits Ultimately, policies must be place-specific or Only through compacts that to investors, according to the identified investment location-specific, and investment should play to involve business, government themes. Participants in the economy must give a location’s strengths. For example, industrial and citizens can the slow these places special attention with a view to policy should see to it that global value chain process of transforming unlocking their investment potential, leading to connections are built or strengthened through South Africa’s entrenched inclusive growth and development. As emphasised developing upstream and downstream activities spatial anomalies start in the NDP: around existing industries. An example of this is to gain momentum. creating or expanding agro-processing industries in agriculture-intensive areas. There is also a critical lack of trust between different interest groups which reduces the This chapter has presented some of the thinking willingness of economic players to commit to behind, and the methodology used to arrive at the the kind of long-term investments which are location attractiveness index. It has also identified needed to generate jobs and the economic places where targeted investment and focused returns that would support sustainable policies are likely to bear fruit. The results have (urban) growth.52 shown that places with the greatest potential are close to major agglomerations. A few secondary Proximity and connectivity at the core of cities and towns have also featured in the rankings, policy development as they are well connected through road and rail networks as well as transport corridors. Proximity and connectivity (to agglomerations) must be at the core of policy development. After all, spatial development needs to focus on By way of conclusion: enabling people to be pulled into agglomerations Is a ‘new deal’ possible? through mobility and connectivity. For example, the development of transport infrastructure, in line with Greyling and Mothata argue that the proposed the government’s infrastructure plan, is crucial for ‘new deal’ of President Ramaphosa must be linking economic hubs across the country. accompanied by the creation of special economic zones that contribute to the development of The NDP points out that numerous spatial secondary cities, with both public and private opportunities remain unrealised because of a lack investment being used to unlock opportunities of connectivity. In this regard, the NDP prioritises for growth and expansion.53 The NDP calls 17 development projects which should act as this a spatial compact, in which trust is the catalysts for connectivity in the different provinces. foundation and broad community engagement and Importantly, lower transport costs as well as the enrichment are recurring themes. Only through rollout of internet and communication technology compacts that involve business, government and will enable people to benefit from opportunities citizens can the slow process of transforming in secondary cities and towns as proximity and South Africa’s entrenched spatial anomalies start to connectivity are enhanced. gain momentum.54

52 National Planning Commission (2012), p. 267. 53 National Planning Commission (2012). 110 54 Greyling & Mothata (2017).

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Looking at cond-tier cities for Lesiba grow : e Mothata Odisha ca

Figure 2.1.3: The state of Odisha has one of the fastest-growing regional economies in India

INDIA

ODIHSA

TELANGANA

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India has consistently grown its gross domestic The Principal Secretary from the state of Odisha, product (GDP) by more than 6% every year since India, gave an update on progress made by the Prime Minister Narendra Modi came into power Startup India initiative since its 2016 launch (see on a promise of becoming a leader who will place Figure 2.1.4). Nineteen states have constructed the country’s economy on a sustained higher Startup India policies and notable progress has been growth trajectory. made in peripheral locations, including Odisha.

At the April 2018 India–South Africa Business Located on the east coast of India along the Bay Summit held in Sandton, Johannesburg, of Bengal, Odisha has a coastline of 485 km and authorities from India detailed what has is endowed with large mineral deposits. According contributed to this enviable economic growth to Invest India, the National Investment Promotion outcome, specifically the approach taken by and Facilitation Agency of India, Odisha is the country to focus on second-tier cities to considered a hub for mineral-based industries.55 produce sustained economic advancement. (Second-tier cities are those at the periphery of a major metropolitan area.)

Figure 2.1.4: Startup India progress from January 2016 to March 2018

$208 8 916 $314 million sanctioned 89 472 start-ups million funds for query resolutions recognised funds to start-ups infrastructure

1 019 203 208 19 learning and state startup 2 441 intellectual property tinkering labs facilitators development users India policies

Source: Invest India and Office of the High Commissioner of India presentation delivered at the India–Africa Business Summit April 2018, Sandton Convention Centre, Johannesburg

112 55 Invest India. 2018. Odisha: Recorded 114% Growth in Exports in 2016-17 to Reach USD 6.4 bn in Value, 22 June 2018 (online).

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Odisha is one of the fastest-growing regional Technology-enabled economies in India, outpacing national growth opportunity set It is interesting that economic since 2012 and expected to achieve double-digit growth in Odisha is the result GDP growth by 2020. It is also home to a few Odisha has embraced the use of technology in of a deliberate strategy to focus second-tier cities, defined as having a population creating investment opportunities in the region. on start-ups and entrepreneurs of less than one million. The government of Odisha To improve the ease of doing business, in 2017 in second-tier cities. A lesson has positioned the state to become a budding hub its government launched an online single-window here is that achieving sustained for start-ups so it can occupy a top-three spot in investor portal called GO-SWIFT (Government of high levels of GDP growth India by 2020.56 Odisha Single Window Investor Facilitation and requires micro-economic 57 reforms, focused on second-tier It is interesting that economic growth in Odisha is Tracking). GO-SWIFT makes it easy for investors cities, to augment the macro the result of a deliberate strategy to focus on start- to access information on projects, simplifies initiatives expressed at ups and entrepreneurs in second-tier cities. application processes and expedites approvals national-government level. A lesson here is that achieving sustained high levels for projects. of GDP growth requires micro-economic reforms, The system removes human involvement from the focused on second-tier cities, to augment the macro investment process. It’s a single portal for lodging initiatives expressed at national-government level. applications and seeking clearance for establishing A framework for productive multistakeholder a business. Investors no longer have to knock engagement has underpinned the success of on the doors of various government departments the strategy to ignite growth in second-tier cities to comply with regulations, which improves in India. The interplay between business (big implementation efficiency. The Associated and small), policymakers (regional and national) Chambers of Commerce and Industry of India, an and private capital (local and foreign) has industry body, ranks Odisha highly on its ability to 58 yielded meaningful results. The policy framework implement projects and attract investment. established by the government has become a major support for business to invest in new projects and has allowed funders to take risks by providing them with capital for development.

A framework for productive multistakeholder engagement has underpinned the success of the strategy to ignite growth in second-tier cities in India.

56 Invest India (2018). 57 Government of Odisha. 2018. Welcome to GO-SWIFT, 22 June 2018 (online). 58 ASSOCHAM India. 2017. Odisha Ranks 3rd Top-most in Attracting Live Investments across India, ASSOCHAM, The Associated Chambers of Commerce & Industry of India, 12 October 2017 (online). 113

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Private funders looking for value and governments in the form of sovereign wealth Second-tier cities such as funds looking to make a meaningful impact on Odisha, given their status as Given its investment constructs, Odisha is most society, and high net worth individuals seeking peripheral and unexplored, likely to attract funders from the private sector to diversify their wealth in less-researched and usually present a compelling looking to deploy capital into assets expected to untapped markets. investment proposition. Their yield high returns at a commensurate risk level. low-cost structure, relative to Second-tier cities such as Odisha, given their status Bottom line established metropolitan as peripheral and unexplored, usually present a India presents a useful example of how to integrate areas, is attractive in many compelling investment proposition. Their low-cost micro-economic reforms focused on second- important aspects. structure, relative to established metropolitan areas, is attractive in many important aspects. tier cities with big macro initiatives to unlock sustainable growth. The multistakeholder approach Wages are naturally low in second-tier cities, undertaken by Modi’s administration shows that and municipal costs, housing and land prices development and growth can be achieved when all are competitive relative to those in big cities. parts of society are working together. Governments According to an Asian Development Bank (ADB) need to create a conducive environment for study, Odisha has a competitive edge over other investment. Business ought to seek opportunities Indian cities in terms of the cost of establishing and take risks. Private capital in the form of and running a business. Using three key variables savings can be used to fund development. The – wages of skilled labour, electricity tariffs and interconnectedness of these three stakeholders – land costs – the ADB’s study found Odisha had a business, government and savings owners – can constructive cost environment for doing business.59 make a major contribution to economic growth and improve the livelihood of citizens. Environments such as these can attract formal savings using pension funds, endowments and saving pools from private investment companies

59 Dash, J. 2018. Odisha steals march over other states in cost of doing business: ADB study, Business Standard, 24 March 2018 (online).

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CASE STUDY FLX – MOBILITY AS A SERVICE

The problem of transporting South Africans to work in major urban centres

Justin Coetzee Margaret O’Connor Funder Adventure Capitalist CEO of GoMetro The Centre for Disruptive Technologies Family guy

Waiting 40 minutes to exit our offi ce parking lot into rush-hour traffi c isn’t exactly time well spent. At the end of another hectic work day, Young working woman I’m exhausted. The stress of crawling home in bumper-to-bumper traffi c doesn’t help me After a year of riding with fl x with four other reboot for an evening with the family. But people from my offi ce, I can honestly say I what can you do? Public transport doesn’t generally feel better. I don’t waste endless hours work for me. I’ll try ride-sharing to the offi ce and money on minibus taxis. I don’t miss the if it’s reliable. And affordable. Uncapped WiFi unwanted attention from some of the drivers would be great. and passengers. In the morning, I’m rested and I can easily get into work. On the way home, I sink into my seat and listen to music. The one morning I overslept was the only time I missed fl x. Luckily for me, my boss let me work from home. But I’m on the development team and the data bill was too expensive.

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Congestion on our ever-expanding road networks But what real choices do working people have? is a reality for most people during the morning and evening rush to work and to school. The physical Figure 2.1.5 shows the dimensions of quality a user and emotional stress of navigating rush-hour traffi c considers when deciding on a mode of transport. is starting to challenge South Africans’ love affair with their cars.

Figure 2.1.5: Quality dimensions in order of importance

EXPERIENCE Positive emotions SATISFIERS Time is available

Physical effort COMFORT Personal convenience

Mental effort DISSATISFIERS EASE No hassle, no stress

Travel time door to door The faster, the better SPEED

Trust Safe and secure journey. Get what you expect. SAFETY RELIABILITY

Source: Van Hagen60

Our current mobility options are limited. I can route and where the bus stop is. Oh, and that I choose the convenience of a car – and live with the have credit on my card, or cash, for the fare. And consequences of gridlock, air pollution, pedestrian my local bus or train or metro or taxi is safe, clean and cyclist accidents, and eroding disposable and reliable, and the walk from the bus or train is income. Or I can make the socially responsible safe and not too hilly. Socially responsible? Yes. choice to use public transport – assuming it’s Convenient? No. readily available and I know the schedule, the

116 60 Van Hagen. 2016, p. 2.

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Figure 2.1.6 Expanding transport options

Your current options are limited What if we expanded our options by using tech to promote shared mobility?

Convenient Socially responsible Shared door-to-door Shared mall-to-mall

But what if we could create new categories What is fl x? of transport services that are convenient, comfortable, affordable, predictable and safe? fl x was conceptualised in 2016 at a GoMetro What if we could create a compelling value strategy day. The idea was to offer mobility as a proposition for personal travel that removes the service to corporates. need for parking, that reduces emissions, saves money, gives back time, is safer to use than driving The GoMetro Group is a South African yourself and gets you exactly where you want to technology company with international be, when you want to be there? technical expertise. In the last six years, This is what we are working on at GoMetro. It’s GoMetro has become a trusted global B2B the world of fl exible mobility: a smart engine brand in urban planning and smart city that matches supply and demand across a city transportation mapping. fl x has been designed as an and uses the principles of shared mobility, ride- enterprise solution that may hailing and subscription services to deliver a South African companies and government one day help manage an transport experience like nothing before. fl x offers organisations have a unique opportunity to share entire fl eet. We’re focusing employees and employers the chance to contract the future of global mobility with us, right here on corporate shuttles and with a responsible corporate service provider to and right now, by helping to test and to tweak fl x. employee transport solutions, deliver people between work and home, safely and We’d like to share our patented fl exible-shuttle working with like-minded reliably, in a WiFi-enabled vehicle. technology solution to help calculate and build companies to get this right. customised contracts for daily commuting trips. fl x has been designed as an enterprise solution that may one day help manage an entire fl eet. We’re focusing on corporate shuttles and employee transport solutions, working with like-minded companies to get this right.

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Figure 2.1.7 Your home-to-work shared shuttle

Fancy quality We group you with shuttle. your colleagues. Pick up all riders in Work is the about 20 minutes. destination. Door-to-door.

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Figure 2.1.8 How we group you with your colleagues

How does fl x work? Multistakeholder approach fl x works with independent transport service providers (shuttle companies, transport operators, fl x is a multistakeholder initiative that involves: individual professional drivers) to provide a ■ business (corporate customers, fl x insurance, service to a market the service providers would banking partners, and fl x operators – mostly not otherwise have access to, with a pre-approved small businesses) fl eet. It provides a demand-responsive transport solution to commuters, allowing them to bend the ■ public–private sector strategic urban planning system to speak to their needs. Each person is stakeholders charged individually. ■ government urban planners Employees are grouped into the most optimum ■ academic research partners (local and global) ‘pods’ of people, based on where they are. Each ■ investors pod has an associated travel cost, regulated by a smart social contract that’s calculated up front and presented to the employee to accept.

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The role incentives play The future is flx. What does the While shared mobility isn’t future look like? new (think buses and taxis), The average person has become programmed to ignore actual costs and instead focus on what we’ve the concept of innovating this While shared mobility isn’t new (think buses and termed ‘direct costs’. These direct costs are what particular mode of transport taxis), the concept of innovating this particular drivers feel in their wallets: petrol, car payments, and saving money is the mode of transport and saving money is the insurance. Few South Africans factor in vehicle new cool. The future holds new cool. The future holds many unknowns but it’s depreciation, the cost to themselves and to their many unknowns but it’s an exciting one, filled with possibility and flexibility, employers of parking, and the value of their time an exciting one, filled with where decreasing expenditure and increasing spent fighting traffic and looking for parking. Almost possibility and flexibility, where employee benefits take centre stage. decreasing expenditure and no one factors in the cost to their personal wellness, increasing employee benefits professional productivity and presenteeism, or The use of electric vehicles will likely power up take centre stage. the cost to the country of pollution, congestion, more start-ups in an effort to reduce carbon accidents and lost productivity. footprints and congestion in cities. Countries with excess electrical supplies, like India, have already What type of incentives do South African shown a vast interest in scaling up electric vehicle workers need? operations: with more electric vehicles on the road, ■■ Flexible auto insurance coverage that allows and less dependency on the cost of oil and fuel, people to pay only for the days on which they the mobility industry could become incredibly drive their car. sustainable in the long term.

■■ A cash grant for those who don’t cost the But there’s more to this than just electric cars. company money in the form of parking. In Property developers are seeing a future of business urban South Africa, the average cost for renting parks and campuses without parking areas. This parking bays is around R600 a month. vision of a carless society offers massive cost-saving ■■ A ‘well-being’ incentive of 0.25 days’ additional benefits to the developer, and corporate benefits, annual leave for every month you’re with flx too. More space for offices and less money spent (three days a year) to recognise the measurable on parking facilities means companies can focus physical and emotional wellness improvements on employee benefits and creating an environment that come from a reimagined commute. For in which employees feel appreciated. The use of many companies, the bottom-line benefit a service such as flx allows businesses to offer of improved employee health, morale and their employees a way to save money and time, motivation far outweighs any incremental cost. and arrive at work – and depart later – feeling energised and relaxed, ultimately resulting in higher productivity than in most current cases.

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A new role for the employer: their core focus. As change agents, organisations should therefore put pressure on property The employer is key to the mobility change agent developers and lobby government. success of this initiative. What businesses demand of property The employer is key to the success of this initiative. The clear and consistent interpretation of the developers and managing What businesses demand of property developers South African Revenue Service (SARS) policy agents is what they will get. and managing agents is what they will get. The about the tax treatment of employee transport The employer also needs to employer also needs to incentivise the change services should help drive corporate subsidies incentivise the change for for the user. for employees who use services such as flx. In the user. the same way government taxes fuel, it could Organisations have a responsibility to their offer a green-tax subsidy on monthly earnings for employees to offer a workplace which promotes contributing to efforts to look after the environment. well-being, and actively endorses and supports campaigns which have employee well-being as

Figure 2.1.9: Cost of flx versus cost of Figure 2.1.10: Total monthly savings owning a vehicle from riding with flx

R8 000+ R25 R7 000 R20 Parking Cost of flx R6 000 R15 Savings R5 000 R10 Fuel R4 000 Total cost 0 of owning a Insurance R3 000 vehicle -R10 Depreciation R2 000 -R15 Cost of flx R1 000 -R20 Vehicle repayments R0 -R25

Actual monthly cost to own a vehicle The graph above shows the total savings one Actual monthly cost to ride with flx can make monthly when riding with flx

The graph above shows the actual cost of flx versus the actual cost of owning a vehicle

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Figure 2.1.11 Benefi ts of using fl x

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How do corporates start their own They’re counting their pennies but at the same time getting frustrated with the limited public flx experiment? Market testing and customer transport options out there. They’re hoping a journeys with like-minded shared-mobility solution will give them back Market testing and customer journeys with like- corporates will help to evolve their time, save them money and make their minded corporates will help to evolve mobility mobility solutions in ways journey to and from the office a far more solutions in ways that make business and lifestyle that make business and pleasant experience. sense for employees across South Africa. When lifestyle sense for employees starting its own flx experiment, the corporate has ■■ The graduate user is just being introduced to across South Africa. When to first ascertain the needs of employees and corporate life. starting its own flx experiment, their current transport challenges. For example, the corporate has to first it makes perfect sense for a corporate to invest They have the perfect car in mind but may also ascertain the needs of in (and potentially subsidise) a flx experiment realise the benefits of investing their money into employees and their current if employees live a fair distance from the office property rather than a depreciating asset (the transport challenges. and spend eight hours a week in traffic. Once car). This user has an opportunity to reinvent the corporate has identified a need for flx, the or create their asset wealth, and ensure flx not next step is for a senior employee to lead the only saves them money but helps them build a ride-sharing recruitment drive and work with foundation of investment for the future. the flx operations team to fill a shuttle. Once the ■■ The company-supplied transport user relies shuttle has been filled, and corporate ride-sharing solely on the company for transport to and ambassadors are born, it’s only a matter of time from work. before demand grows organically and people are signing up one after the other. Usually, this is a low-income earner who is completely or mostly reliant on management’s The different types of flx users choice of transport to get them to the office and back home again. They may also work shifts ■■ The convenience user is looking for a more outside regular working hours. convenient way to get to work (early adopters). The law and regulations They’re not too perturbed by high prices because they know the value of their time and Corporate group commuter transport is regulated have been looking for a solution that’s far more by the National Land Transport Act of 2009, which reliable and comfortable than public transport – states that local authorities are responsible for even if it’s at a premium. regulation. If you can prove demand, municipal or provincial regulating entities will consider and issue ■■ The cost-efficient user is looking to save licences for each vehicle in a charter or commuter money through shared mobility (public staff transport scheme. transport replacement).

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The tax treatment of fl exible traffi c. The bus is fi tted with WiFi and tables, so people can use their laptops during their commute The world’s fi rst electric mobility services for ride-sharing car, MOIA, aims to to work. ‘It’s the most useful Google fringe benefi t,’ create a solution for the typical corporate employees said Wiltse Carpenter, a 45-year-old software transport problems that cities engineer. ‘It’s changed my quality of life.’ SARS released Binding Private Ruling 262 face, such as congestion, air (BPR 262) and Binding General Ruling (Income The Ford Chariot is an on-demand ride-sharing and noise pollution, and limited Tax) 42 (BGR 42) in 2017. According to BPR commuter shuttle service. It’s a 14-seater bus fi tted space, while helping them 262, there are two types of services that can be with WiFi. The aim is to provide a mass-transit reach their sustainability goals. implemented under the transport service scheme: system that relieves congestion while offering a Operational from the end of a direct service and a shuttle service. fl x is a direct more comfortable and personalised commuting 2018, MOIA is a fully electric service, as it provides a dedicated transport service experience. Unlike the Google Bus, the service is car that provides space for up between the employee’s residence and their not limited to the employees of a certain company. to six passengers. place of work. Regarding the BGR 42 and under A commuter can reserve their seat on the Chariot by paragraph 10(2)(b) of the Seventh Schedule to using an app. The Chariot service is cheaper than the Act, transport services provided to employees Uber and Lyft. Here’s one Chariot commuter’s review to and from any collection or drop-off point of the service: ‘Commuting to the Financial District en-route to or from the employees’ homes and from the Marina was extremely stressful until I found place of employment is accepted to fall within the Chariot. With Chariot, there are always plenty of vans provisions of paragraph 10(2)(b). No value will, available to pick me up so it is very fl exible with my therefore, be placed on these transport services. schedule. I never have to worry about surge pricing or whether or not I’ll be able to fi nd a ride to get me Case studies to work on time, like I did with Uber and Lyft.’

Google Corporate Shuttles, known as the ‘Google The world’s fi rst electric ride-sharing car,MOIA , Bus’, transport employees from various tech aims to create a solution for the typical transport companies, not just Google, from their homes in problems that cities face, such as congestion, San Francisco and Oakland to corporate campuses air and noise pollution, and limited space, while in Silicon Valley, almost 65 km away. The commute helping them reach their sustainability goals. takes 90 minutes to two hours, depending on Operational from the end of 2018, MOIA is a fully electric car that provides space for up to six passengers. It was developed with a ride-sharing service in mind, so has spacious seating for improved comfort. MOIA also comes with an app that allows riders to book trips and pay for their rides. This visionary shared-mobility service offers an alternative to car ownership.

124 Images provided by fl x

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