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Report on the ANC Progressive Business Forum (PBF) Interaction with Councillor Peer, Deputy Mayor of Ethekwini

13 April 2017

1. Background and objective of the discussion

An interaction between the eThekwini municipality leadership, the Progressive Business Forum (PBF), and the business community was held at Deloitte Durban on 13 April 2017.

The PBF is the business programme of the African National Congress with the objective of promoting honest, frank and open dialogue between the business community of South Africa and the movement, as the primary policy developer of South Africa. The discussion was facilitated by Daryl Swanepoel, PBF convenor.

The interaction was located in the need for stakeholders in Durban and broader KwaZulu-Natal (KZN) to understand the key challenges faced by local government, as well as role of the private sector in being responsive and playing a part in improving the life of all South Africans.

The meeting was attended by Her Worship, the Deputy Mayor, Councillor Fawzia Peer; council officials Shunnon Tulsiram (Head: Economic Development and Investment Promotion), André Peterson (Head of Procurement), and Steve Angelos (Project manager); Zama Dlamini, Phillip Merkofer, Reyaaz Jacobs and other members of Deloitte KZN; representatives of the PBF, and members of the broader business community.

2. Summary of the opening address by Her Worship, the Deputy Mayor, Councillor Fawzia Peer

“Coming together is a beginning, staying together is progress, and working together is success.” Henry Ford

In the current climate, economic development is key. Cities are regarded as the agents of growth and wealth creation; as such, eThekwini municipality has a role to play in addressing key challenges of unemployment, poverty and inequality. To this end, the municipality has a strategic priority to become a Smart and financially sustainable city, and also to subscribe to the Government’s radical economic transformation agenda. There has been significant investment in infrastructure to create an enabling environment for business and attracting new investors, including projects such as the Cornubia housing development, the Point Waterfront, Go Durban, and node development in the city. About 80% of all contracts have been given to local businesses, through a preferential procurement framework.

Unfortunately, there are challenges facing the long-term sustainability and viability of municipalities. These include climate change, as evidenced by the recent drought and its impact on food prices. With 80% of South Africa’s population being urbanised by 2030, this is a serious challenge: however, it can also be a business opportunity. Initiatives include Smart City technologies, such as the procurement, creation and supply of green energy sources, as well as sustainability projects relating to water, electricity and landfills, with the broad aims of managing complexities, reducing expenses, increasing efficiency, and improving quality of life.

Another challenge to municipalities is the fight against social exclusion and widespread poverty. One consequence is pressure on access to basic services and the associated collection and management of revenue. However, basic service delivery remains a priority. Again, digital solutions, including smart metering, cloud computing and fibre-optic networks can play a role.

To become an agent of growth, eThekwini has devised a Business Development Strategy, which includes a Strategic Partnership Programme with external organisations, as well as an Access to Finance Programme to develop and empower SMMEs by providing innovative financial and non-financial assistance, including how to access finance from banks. Other positive strategies include art and culture programmes, sister city programmes, business linkage programmes, and women empowerment programmes, to name a few.

To enable the eThekwini municipality to achieve its vision, partnerships with business are essential. Business needs to be responsive and responsible, helping to uplift the quality of life of South Africans socially, economically and financially. On the other hand, the private sector must hold local government accountable, particularly regarding service delivery. Communication is key to working together, which is essential to make a better future.

3. Summary of Investment in Durban Survey Results by Phillip Merkofer

Deloitte, together with Durban Investment Promotion, and Trade and Investment KZN, surveyed 59 companies in eThekwini to discover what makes it an attractive investment location for both local and international business.

Five main positive themes emerged. First, the Durban and Richard’s Bay harbours are key locations for export. Second, Durban is an important logistics hub in terms of transportation infrastructure. Third, Durban offers a quality lifestyle around work, schools, and private life, a factor linked to the fourth theme, the geographical beauty, climate and weather. Finally, Durban is characterised as a major tourist destination.

In terms of economic indicators, Durban enjoys sound public finances, good administration and a developed financial market. As such, Durban is on a par with Pretoria in terms of overall investment attractiveness, leading even Johannesburg and Cape Town as an attractive social environment with competitive housing and utility prices. However, the city lags behind in economic growth, innovation capacity, and access to a highly skilled workforce.

Durban is seen to have improved in investment attractiveness over the past 5 years by a majority of business leaders (51%), although a large group (38%) disagreed. A similar majority (55%) see the future of Durban as positive. A total of 56% wished to invest in Durban, while 60% look to the wider KZN to establish new ventures and joint ventures. Trends in disinvestment show a minority planning to relocate from Durban (28%) and KZN (25%), because of better growth opportunities elsewhere in terms of customer base.

Five main challenges facing investors in Durban and KZN emerged. First, investors have a negative perception of municipal management and service delivery, and second, of bureaucracy and corruption. Third, investors are concerned about the lack of political stability and leadership.  Infrastructure is deteriorating, poorly maintained and incomplete. Finally, the challenges of crime and a lack of safety and security impact negatively on Durban’s status as a world-class investment location.
Key opportunities for future growth and investment are tourism (81%) throughout the province, as well as transportation and logistics, making Durban the gateway into Southern Africa. Construction and manufacturing (50%), agribusiness (37%) and the ICT and electronic sectors (35%) were also seen as drivers of growth.

Areas of particular improvement are city management and service delivery (73%), as well as administrative procedures and smooth approval processes (70%), while improving safety and security (52%) is paramount. The city also needs to invest in infrastructure and improve investment incentives to ignite an investment drive. Greater collaboration and partnership with both business and governmental stakeholders, as well as investment promotion agencies, the media and civil society are essential to become a province branded by passion, pride and patriotism.

4. Summary of input by City managers

4.1 Supply Chain Management – André Peterson

In the context of radical economic transformation, new regulations regarding preferential procurement came into effect on 1 April 2017. The regulations’ introduce set-asides, which means specific values or components of a project can be set aside for various target groups. Contract participation goals are also new, where targets are set for inclusion of, for example, people with disabilities, youth, women, military veterans and other priority population groups. These will be features of new tenders.

These regulations will need to be used in conjunction with existing empowerment charters. However, the practice of trade-offs, where such charters are ignored, will be phased out. For all projects, funds will be ring-fenced for skills training, especially for young artisans. Furthermore, eThekwini Municipal Academy (former Skills Development Unit) is creating a skills development database on a ward by ward basis, to match skills with capacity.  Then, during the procurement and tendering processes, opportunities for participation will be highlighted, along with budget and deadlines.

Issues of fronting and corruption are also important. National Treasury has a list of restricted suppliers and tender defaulters, which is available as part of the Central Supplier Database. Records include ID numbers, to avoid “reinvention” of suppliers into other entities.

A Preferential Procurement Bill is out for consultation, which also lays down guidelines regarding increasing the benefit through BEE preference points, as well issues of contract participation goals. Participation in the consultation process is welcomed.

4.2 Catalytic projects – Steve Angelos

There are three types of catalytic projects: Category A refers to those that are in or near construction; Category B projects are in the planning phase; and Category C projects are extensions to existing developments, as well as shopping malls. Currently there are 30 catalytic projects, many of which are driven by the private sector.

Category A projects include the Cornubia project, developed as a PPP (public private partnership) with Tongaat Hulett, Momentum, Investec and others, where the industrial and business estate are in operation, and the Dube Trade Port, where phase 1 is complete, including the $20 million Samsung factory. Others are the Keystone industrial and logistics park, which will inject over R6 billion into the local economy; and the integrated rapid transport network (IRTN), including the C2 and C3 corridors. In the inner city, regeneration plans and projects include the Centrum; the Point; Warwick Junction, and plans which focus on urban management issues, including mechanisms dealing with crime. Infrastructure upgrades are planned along with these projects, as well as green landscaping and security.

Category B projects planned are an auto supplier park at the Dube Trade Port, supported by Toyota; the brickwork logistics and warehouse development at the Corobrik factory site; Cato Ridge, an intermodal transport site; the Clairwood Logistics Park; the Durban Film City site; the Durban Iconic Tower; Finning Estate; Kings Estate; Shongweni; Rivertown cultural precinct; and the Beerhall precinct.

Category C projects include the extensions to the Beverley Hills Hotel and Oceans Marina in Umhlanga, the Durban Marina and the Pavilion Mall. Extensions to the Sun Coast Towers and Westwood Mall, and the construction of Westridge Mall are all catalytic projects.

The catalytic projects office is the forerunner of one-stop-shop, facilitating and fast-tracking development.

4.3 Economic Development and Investment Promotion – Shunnon Tulsiram

The Economic Development and Planning cluster concentrates on five broad areas: Catalytic Projects; Urban Renewal; Business Support; Marketing and Tourism; and Economic Development and Investment Promotion. Business Support, and Marketing and Tourism share three main thrusts, facilitation of access to markets, to finance, and to skills, around which all programmes, events, and workshops are developed. Examples are the Durban Business Fair, the Essence Event, and the Tourism Development Programme.

The Economic Development and Investment Promotion unit has many focus areas and projects. First, there is Innovate Durban, a specialised vehicle to drive the Smart City and innovation agenda of the city, for instance, in ICT and Smart Cities. Second, there is a focus on the automotive industry, which has had success in increasing local content to 38%. The catalytic project of the auto supply park is linked to this sector. A third sector is the film office. This unit also focuses on development and investment in the township areas, such as in Bridge City, Kwa-Mashu, Umlazi and Mpumalanga.

The investment promotion strategy is currently under review, rethinking how Durban can be positioned as an attractive investment destination in the light of the challenges mentioned above.

5. Conclusion

Economic indicators show that investment in Durban is on the increase, being Africa’s leading and most liveable destination for trade and travel, having the country’s second largest economy. With a diverse culture, well developed infrastructure, industrial and technological opportunities, and ease of access to African and global markets, Durban is posed for economic and social growth.

Despite these opportunities, eThekwini municipality cannot address the multiple socio-economic challenges cities face, without the business sector. To this end, local government has an interest in economic development to grow existing businesses and promote new businesses. In turn, business has a responsibility to grow employment opportunities, build skills for the future and create a business model that deals with societal inequalities.

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