Competitive Cities as Drivers of Growth

02.06.2006 World Economic Forum on Africa 2006 Africa has the world's fastest rate of urbanization, Ade Animashahun, Managing Director, Investec Asset Management, South Africa, told participants at the start of the session on competitive cities. But, what are the key ingredients to ensuring that the growing cities are competitive and drivers of growth? he asked.

Karl Sauvant, Special Adviser Millennium Project, Executive Director, Columbia Program on International Investment, Columbia University, USA, underscored this by pointing out that if rural development does not work, people migrate to urban areas. And, if it does work and agriculture becomes more efficient, rural jobs disappear and people migrate to the cities. Central to turning this to advantage, Sauvant said, is having integrated economic/health/educational development strategies that take account of cities' own particular circumstances. This, he added, needs to be accompanied by the provision of sound infrastructure and a focus on good governance at city level and the autonomy necessary for cities themselves to plan and implement policies.

Ann Bernstein, Executive Director, Centre for Development and Enterprise (CDE), South Africa, agreed, pointing out that while many African people romanticize the joys of the countryside, it does not prevent urban migration. She pointed to the strong correlation worldwide between urbanization and economic growth. Where does most economic growth occur? she asked. In the cities but cities are in competition with each other to attract businesses.

Bernstein said she is opposed to "balanced development" too little attention, she continued, is paid to urban areas. It is not services that the poor need in a city such as Johannesburg, but good transport to carry them to the jobs that provide the incomes that fuel further development. This needs to be coupled with provision of facilities that make a particular city attractive to the skilled, professional people who are crucial to the success of enterprises.

Helen Zille, Mayor of Cape Town, South Africa, identifying a problem said that national government views cities as units of service delivery rather than as agents of economic growth. She asked why there were more failures in Africa than successes, and put it down to the concept of the "shell state" in which local government is hollowed out and seen by politicians as being a source of jobs and tenders for cronies. The state is a vehicle for the advancement of small privileged groups. In Cape Town, Zille said, that entire approach needs to be turned around.

If Cape Town is to be a competitive city, she added, economic growth must take priority over social spending. And that calls for cutting red tape, and building infrastructure that leads to development and transparency in appointments and awarding tenders.

Juma Ngasongwa, Minister of Planning, Economy and Empowerment of Tanzania, said that in his country central government has to come to the help of towns which do not, themselves, have adequate revenue bases. He also said that rural development would help stem the flow of migrants towards the cities.

Sauvant introduced the point that, apart from providing infrastructure and appropriate regulatory frameworks that are often similar around the globe, cities need to promote themselves. What, he asked, does Cape Town stand for? A city needs to provide "aftercare" for the businesses it attracts. Nevertheless, the availability of infrastructure and skills will be the key determinants in whether businesses locate to a particular city.

Bernstein underscored her contention that cities have to find innovative ways of attracting businesses, much as Atlanta or Indianapolis have done in the US. Business and city hall have to come up with joint visions of how both will benefit. She pointed to the South African dilemma that houses are needed for migrants to the cities, but the housing policy can only be sustained if people have jobs. Zille did not see social and economic development as mutually exclusive, though she said that South Africa's strategy had centred on wealth transfers rather than wealth creation through economic development. This, she said, has resulted in widespread cronyism and patronage.

One participant made the point that most key economic policy issues are handled by central government and asked what cities should be doing in the face of this. Bernstein was clear: cities need to fight for their interests, they need to be aware of how national policies might affect local industries and then go in to bat for those industries. Zille agreed, saying cities needed more autonomy and needed to fight for their own interests.

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