TOWARDS AN UNDERSTANDING OF THE ECONOMY OF JOHANNESBURG Industrial nodes survey Final Draft report July 2016 Prepared by: Centre for Competition, Regulation and Economic Development University of Johannesburg Abbreviations CAGR Compound Annual Growth Rate DTI Department of Trade and Industry FET Further Education and Training GDP Gross Domestic Product ICT Information and Communications Technology IDC Industrial Development Corporation MCEP Manufacturing Competitiveness Enhancement Programme SETA Skills Education Training Authorities. SIC Standard Industrial Classifications 2 Table of Contents 1 Introduction ...................................................................................................................................... 7 2 The economics of cities and the changing economic structure of Johannesburg .......................... 8 2.1 Overview of industrial development in Johannesburg ............................................................ 8 2.2 The City of Johannesburg’s economic development strategy .............................................. 12 .............................................................................................................................................................. 14 3 Approach and methodology .......................................................................................................... 15 3.1 Identifying the firms ............................................................................................................... 15 3.2 Firm survey ............................................................................................................................ 16 3.2.1 Survey methodology ..................................................................................................... 16 3.2.2 Data collection ............................................................................................................... 16 3.2.3 In-depth interviews ........................................................................................................ 18 4 Findings from the census and the survey ..................................................................................... 19 4.1 Findings from the census ...................................................................................................... 19 4.2 Findings from the survey ....................................................................................................... 20 4.3 Overview of the respondents ................................................................................................ 21 4.3.1 Manufacturing respondents ........................................................................................... 21 4.3.2 Manufacturing-related services firms ............................................................................ 25 4.3.3 Conclusion on characteristics of manufacturing and services firms ............................. 28 4.4 Performance in the prevailing environment conditions ......................................................... 28 4.4.1 Determinants of manufacturing firms’ performance ...................................................... 30 4.4.2 Capacity utilisation of manufacturing firms ................................................................... 32 4.4.3 Access to markets: exports ........................................................................................... 33 4.4.4 Main customer markets ................................................................................................. 37 4.4.5 The main challenges faced by firms in the City of Johannesburg ................................ 38 4.5 Improving competitiveness .................................................................................................... 39 4.5.1 Manufacturing firms’ equipment and innovativeness .................................................... 39 4.5.2 Technology and investment by manufacturing firms ..................................................... 40 4.5.3 Skills and training .......................................................................................................... 43 4.5.4 Public services for manufacturing firms ........................................................................ 47 5 Industrial Node Review ................................................................................................................. 51 5.1 Classification of industrial nodes ........................................................................................... 52 5.2 Cross-cutting issues emerging from in-depth interviews ...................................................... 53 5.2.1 Government incentives ................................................................................................. 53 5.2.2 Electricity supply............................................................................................................ 53 5.2.3 Training ......................................................................................................................... 53 5.2.4 Public transport ............................................................................................................. 54 5.2.5 Interaction with the City – billing and response times ................................................... 54 3 5.3 Specific issues in different categories of nodes .................................................................... 54 5.3.1 Sophisticated and diverse: Kya Sand, Strijdom Park, and Robertville ......................... 54 5.3.2 Niche and neglected ..................................................................................................... 54 5.3.3 Average performance of firms in various nodes ........................................................... 55 5.4 Individual node profiles ......................................................................................................... 56 5.4.1 Robertville ..................................................................................................................... 56 5.4.2 Kya Sand ....................................................................................................................... 57 5.4.3 Devland ......................................................................................................................... 59 5.4.4 Strijdom Park ................................................................................................................. 61 5.4.5 Nancefield ..................................................................................................................... 62 5.4.6 Marlboro/Wynberg ......................................................................................................... 63 5.5 City Deep: Africa’s largest inland port ................................................................................... 65 6 Conclusion and Recommendations .............................................................................................. 69 6.1 What is the nature of economic activity across the industrial nodes in the City of Johannesburg? ................................................................................................................................. 69 6.2 How are firms performing? .................................................................................................... 70 6.3 What are the key constraints to firm growth? ........................................................................ 70 6.4 What should the City do? ...................................................................................................... 70 References ........................................................................................................................................ 72 List of Tables Table 1: Manufacturing sector CAGRs ................................................................................................. 11 Table 2: Indication of years spent at current location by subsector ...................................................... 23 Table 3: Imputed employee numbers for manufacturing firms ............................................................. 25 Table 4: Imputed employee numbers for manufacturing related services’ firms* ................................. 28 Table 5: The relationship between size (turnover) and change in growth for manufacturing firms in 2014, n=267 .................................................................................................................................................... 30 Table 6: The relationship between size (number of employees) and change in growth, n=281 .......... 30 Table 7: The relationship between growth and capacity utilisation....................................................... 33 Table 8: The relationship between exporting and change in growth for manufacturing firms .............. 35 Table 9: The relationship between exporting and size of manufacturing firms ..................................... 36 Table 10: The proportions of total sales offered to manufacturing versus non-manufacturing firms by manufacturing-related service firms ...................................................................................................... 37 Table 11: Relationship between growth and average age of equipment among manufacturing firms . 40 Table 12: Top 10 manufacturing subsectors: indication of investment in past two years .................... 41 Table 13: Relationship between growth and investment for manufacturing firms ...............................