Cities play important role in economy

CITIES have an important role to play in the economy, according to Finance Deputy Minister Mcebisi Jonas who was speaking at the launch of the Sub National Doing Business report in Midrand. “Cities drive the world’s economy. The 60 biggest cities account for more than 60% of global Gross Domestic Product (GDP),” said Jonas. Adding that global cities are increasingly driving world affairs economically, politically, socially and culturally as cities are no longer just places to live in.

In 2013 National Treasury, the Department of Trade and Industry and the South African Cities Network partnered to conduct a “Doing Business” survey of the country’s nine largest cities. The survey, which was conducted by the World Bank and the International Finance Corporation (IFC), was conducted in 2014.

“Equally in our context in South Africa, cities are playing an increasingly important role in our economy. But we also have to acknowledge that they need to become more competitive to be real players on the global stage,” explains Jonas.
For cities to be real players spatial integration needs to be sped up so that people have easy and cost-effective access to the centres of economic activity.

“We recognise that the cities are the engines of the South African economy. Between 1996 and 2012 South Africa’s eight metros accounted for 53% of all the additional value-added that was achieved. In addition, while the national economy was growing at an average compound annual growth rate of 3%, the metro economies were growing at 3.7%. As a consequence the eight metros increased their contribution to the South African economy from 39.9% to 44.8% over the same period,” said Jonas.

He said the national economy and city economies are driven by the private sector economic decisions made by firms and households.

The Deputy Minister said government needs to acknowledge that the decisions it makes are critical in creating an enabling environment for business to thrive. Part of government’s responsibility is to ensure that the environment is one that drives private sector development and growth.

“The purpose of cities should be to provide effective platforms for local economic activity. In general this should mean providing the essential infrastructure and services that facilitate economic activity and investment.”
He added that city governments need to properly understand how to use the levers at their disposal to promote local economic activity.

“The survey should serve as a reminder that our service delivery performance as local government has a direct effect on economic development.

“The success or failure of local government determines whether millions of poor and marginalised people live in decent conditions, have a dignified life and are able to enjoy a happy and secure family life.”

By conducting the survey, government is launching a process whereby city government will seek to improve their processes, to become more competitive and to facilitate city economic growth and development.

“The government of South Africa is committed to expanding economic opportunity for its citizens and improving the business climate in the country is a first step towards that goal,” concludes Jonas.