ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT CHAPTER 4: THE BUSINESS SECTOR 1. INTRODUCTION 1.1 PURPOSE OF REPORT Chapter 4 of the Status Quo Report forms part of the Phase 3 product of the Zululand Coordinated Local Economic Development Framework project focussing specifically on the Business Sector. Whereas Chapter 1 of the report provides a general introduction to local economic development and the context for local economic, Chapters 3 to 4 of the document presents a status quo analysis of what has been identified as the key economic sectors in the Zululand District Municipality, the sectors being respectively the Tourism Sector (Chapter 2), the Agricultural Sector (Chapter 3) and the Business Sector (Chapter 4). Although the Status Quo Report is structured on a sectoral basis it is widely acknowledged that close linkages exists between the various sectors and economic development activities within each of the broad sectors. These linkages will be addressed in more detail in Phase 4 of the project, the strategy development phase. The Business Sector Status Quo Report is aimed at providing: an overview of current activities within the business sector and highlighting key issues impacting on the development of the sector; an evaluation of the potential for the future development of the sector; and an identification of key opportunities relating to the sector. 1.2 DEFINING THE SECTOR The Business Sector, as defined for the purpose of this project, does not relate to any established industrial sector classification system. The Business Sector does, however, include a number of generally recognised industry sectors including commerce, manufacturing, construction, transport and mining. By establishing the Business Sector it was attempted to group all those sectors functioning on the same basic set of business principles together in order to facilitate discussion and participation. Most of these sectors are generally represented by established business organisations/associations, whereas farmers associations are in place for the agricultural sector and tourism associations for the tourism sector. An overview is provided below of the activities included in each of the industry sectors forming part of the Business Sector. Commerce: Including retail and wholesale sales, private sector services (e.g. medical, financial, property and others). Manufacturing: Including all types of factories, engineering works, arts and crafts and agri- processing. Construction: Including the construction of facilities, housing, infrastructure Transport: Including road freight, rail transport, air transport and public transport PREPARED BY: IYER ROTHAUG PROJECT TEAM – MAY 2003 120 ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT Mining: This sector is primarily focussed on the coal mining sector, although attention should also be afforded gold mining and quarries. 1.3 CONTENTS OF THE REPORT This Chapter of the report includes four sections. The Sections following the general introduction are: Section 2: The Business Centres: This sections considers existing business centres within the District and provides an indication of future planning relating to the establishment of Regional Service Centres. Section 3: Business Organisations and Support: Existing business organisations and business support services in Zululand is discussed. Section 4: Consider the Sectors: Each of the industry sectors forming part of the business sector is discussed in this section under three broad headings, viz. (1) an overview of the sector, (2) the competitiveness of the sector, and (3) the opportunities in the sector. The key focus is on the discussion of the competitiveness of each of the sectors. PREPARED BY: IYER ROTHAUG PROJECT TEAM – MAY 2003 121 ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT 2. THE BUSINESS CENTRES 2.1 INTRODUCTION At present economic development, and specifically the activities of the business sector, both formal and informal, is primarily concentrated in five urban centres within the Zululand District Municipality. Some thirteen smaller underdeveloped centres, historically established to service the agricultural sector and large concentrations of the rural population, also exist in the rural areas. Importantly, Table 2.1 below reflects that there are a total of 872 settlements in the District Municipality area. This provides an understanding of the settlement patterns within Zululand, but also illustrates the large dependence on the five major urban centres for access to commercial and social services. TABLE 2.1: ZULULAND DISTRICT MUNICIPALITY SETTLEMENT PATTERN RURAL RURAL RURAL MUNICIPALITY URBAN SCATTERED TOTAL VILLAGE SCATTERED FARMS eDumbe 1 7 14 8 8 38 uPhongolo 1 31 43 19 1 95 Abaqulusi 2 39 4 6 15 66 Nongoma 1 290 72 - - 363 Ulundi 1 198 60 22 29 310 Zululand Total 6 565 193 55 53 872 Source: WSDP Viewer (2001) as in ZDM IDP 2002 The ZDM IDP (2002) further estimates that 80.5% of the district’s population resides in rural settlements. The majority of this population is at present totally or partly dependent on the five major centres for access to commercial and social services, again illustrating the important role that the centres fulfil in the District economy. 2.2 THE MAJOR CENTRES 2.2.1 Introduction A total of five established urban centres exist with the Zululand District Municipality. The fact that the local government demarcation process ensured that at least one established urban centre is located in each of the local municipalities is important for the future development of the economies of each of the municipalities. The municipalities and the urban centres relating to them are: Ulundi Municipality – Ulundi town; Nongoma Municipality – Nongoma town; uPhongola Municipality – Pongola; Abaqulusi Municipality – Vryheid; and eDumbe Municipality – Paulpietersburg. Although each of the towns listed above has been identified as the municipal centre for the specific municipality they vary considerable in terms of size, functions and character. A brief overview of the structure and function of each of the municipal centres is provided below. PREPARED BY: IYER ROTHAUG PROJECT TEAM – MAY 2003 122 ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT 2.2.2 Ulundi Ulundi as a town fulfils a major administrative function in the Provincial and District context. According to Robinson (1999) this brings a “sizeable resident population with secure incomes” to the town. The town further serves as service centre for the large rural population of the Ulundi Municipality and to a lesser extent the Nongoma Municipality. At peak times it is estimated that there are 200 taxes serving the centre with more than 450 informal traders trading in the town. Although there are a substantial number of historical and cultural attractions in the area it has been difficult to promote the town as a tourism destination for a number of reasons. Most importantly is the appearance of the town dominated by administrative and lower order commercial buildings (Robinson 1999). However, it is stated that Ulundi can be developed into a gateway for a variety of attractions in the area. The town is undersupplied in terms of professional, business and personal services. It is reported that the lack of suitable office accommodation in the town is a constraint to the town developing its commercial potential (Robinson 1999). 2.2.3 Nongoma Nongoma town is the only urban centre within the Nongoma Municipality which has a population of approximately 230 000 people. The population of the town itself only approximately 4 000 people. The rural landscape of the Nongoma Municipality is characterised by rural settlements of various densities. Nongoma town is home to a range of public sector and formal and informal commercial sector activities. The general characteristic of Nongoma is that of large rural market town. 2.2.4 Pongola Pongola is located on the N2 between Piet Retief and Richards Bay. The town has a well-developed commercial sector and CBD which straddles the N2. A comprehensive range of business in the town serves the population of the town and the commercial farming sector and rural population of the municipality, as well as the wider region and the through traffic on the N2. A key characteristic of the town centre is its orientation towards the passing traffic on the N2. The Illovo Sugar Mill located in proximity to the town is a major employer and also one of the only major beneficiation activities currently underway in the District. 2.2.5 Vryheid The town of Vryheid operates as a service centre for a large rural population, including areas such as eMondlo, Hlobane, and Coronation and areas further afield such as Ulundi and eDumbe. However, its economic base and reason for existence is as service centre for the primary sector activities of mining and agriculture. This economic base has, however, been eroded in recent years with the closure of major mines in Hlobane and Coronation. PREPARED BY: IYER ROTHAUG PROJECT TEAM – MAY 2003 123 ZULULAND LED FRAMEWORK FINAL DRAFT PHASE 3: BUSINESS SECTOR REPORT Regarding this Robinson (1999) suggests that the town “held up reasonably well after the closure of the coal mines, but in recent years it has been adversely affected by national economic conditions”. Accordingly the town has become increasingly dependent on the output achieved in a specific agricultural season. Robinson (1999) further indicates that the town lack the “pre-conditions” for becoming