The Western Cape enjoys a litany of advantages: it is the best province in terms of service delivery, skills development and, arguably, quality of life. It also boasts the best call centre location in the world, and is the country’s green economy headquarters, Africa’s tech capital and South Africa’s leading tourism destination.
However, despite all these advantages, and the lowest regional unemployment rate (at just 21.6% vs the national average of 32.9%), the Western Cape has not been able to decouple from the national economy.
Since 2014, its economic growth rate has mirrored the national average — 1.2%, against the country’s annual average of 1%.
This is hardly surprising, as provincial performance is constrained by overarching factors such as national fiscal and monetary policy, and the failure of the national logistics system — including energy, ports and rail — over which individual provinces have limited powers.
But this has not stopped the Western Cape from crafting its own ambitious growth plan — the Growth for Jobs (G4J) strategy — which identifies the key levers that it can, and must, pull if it is to provide sufficient jobs for its rapidly growing population.
The growth plan sets an ambitious target of expanding the provincial economy by 40% into a R1-trillion, jobs-rich economy that will grow 4%-6% a year in real terms by 2035. This has the potential to create more than 600,000 new jobs.
Western Cape premier Alan Winde’s favourite saying is that “the best antidote to poverty is a job”. He repeated it at the G4J launch, adding: “If we get the right strategy, we get the right number of jobs coming in, we change everything.”
The nub of the problem is that the province hasn’t been growing fast enough to create enough jobs to keep pace with the growth in the size of the labour force. The solution, the province believes, is to achieve “breakout growth”.
This means decoupling from national trend growth — an admittedly tall order, given the drag from load-shedding and the country’s malfunctioning logistics system, among other national failures.
In addition, all provinces are heavily reliant on central government for funding, so the Western Cape’s ability to increase spending to stimulate rapid economic growth is severely constrained.
But by far the biggest constraint is that its mandate is limited largely to providing education and health care, which cannot shift the growth dial in the short to medium term. This means the province is unlikely to decouple from the rest of the country economically any time soon.
Western Cape finance MEC Mireille Wenger remains undeterred, however. The real question, she says, is not whether the province can grow at 4%-6% but why South Africa as a whole isn’t achieving rapid growth.
“We have everything we need to succeed as a country, if we just get the fundamentals of growth right,” she says. “What is clear to me is that we will never achieve it if we are limited in our ambition, constrained by the wrong policies, and lack the courage to adapt, reform and make the right choices.”
Taken as a whole, the G4J plan concentrates on unblocking the key constraints in the province’s network industries and on raising industry-wide productivity and competitiveness. But given the Western Cape’s fiscal limitations and restricted constitutional mandate, it plans to leverage the private sector’s capabilities as much as possible.
The best antidote to poverty is a job. If we get the right strategy, we get the right number of jobs coming in, we change everything
— Alan Winde
At the heart of the plan, says Wenger, is the understanding that it is the private sector — particularly entrepreneurs and small firms — that creates jobs. The government’s role is to make this as easy as possible by creating an enabling environment. This will be done by ensuring that the private sector has access to the energy, water, infrastructure, skills and technology it needs to grow and succeed.
But the Western Cape government doesn’t see itself in a passive role. It is a strong believer in forming strategic partnerships and co-operating with other spheres of government and the private sector to increase the speed and scale of change.
As to what sets the regional growth strategy apart from the country’s national growth plans, Wenger tells the FM that G4J was developed in close conjunction with the private sector, including formal and informal firms and township economies, “as a key partner”.
It also relies on a “whole-of-government approach” so that the whole might of the provincial government can get behind delivering the plan.
“The national government struggles with this sometimes,” she says. “You have lots of different strategies from different departments, sometimes working at cross-purposes. The entire [provincial] economics cluster co-developed the strategy and will co-deliver it.”
Also significant is that the plan is committed to easing the cost of doing business. In the past 2½ years, the province’s red-tape unit has saved its economy R1.8bn. This approach will be broadened to address systemic blockages and constraints where they start, not just deal with individual complaints.
Also, unlike so much national government policy, the Western Cape wants to ensure that its economic decisions are strictly evidence-based and data-led.
And finally, recognising that the country has failed to deliver on so many of its policies and projects, the Western Cape government has tied the G4J strategy to a practical implementation plan.
When it comes to delivery, the plan stresses the importance of the provincial government being innovative, agile, responsive and “pushing the boundaries” of its limited constitutional mandate.
“Even within the current South African policy framework we’ve pushed the boundaries, changed the rules and started doing things differently,” says Winde. He cites the province’s air access strategy, which ignored the national hub-and-spoke plan that has aircraft flying first into Joburg and then to secondary cities. The strategy succeeded in securing four new air routes and three new airlines to the Western Cape in the past few years.
Winde thinks the next example of where the province will deviate from the national norm will be in the energy space. He notes that the R7bn budgeted for energy by the provincial and various local governments in the province since the start of the year has enabled R70bn of new private investment.
The Western Cape is focusing on growing faster and investing more while most of the rest of government and the private sector are in retreat
— What it means:
The G4J strategy was launched just as Nedbank published its Capital Expenditure Project Listing for the first half of the year.
According to the report, there was a 35% decline in the real value of large new expansionary fixed investment projects announced in South Africa — to R173.1bn, against R268.6bn last year. That’s mainly because more private companies are postponing investment plans, given the tough economic climate.
This meant that in the first half of the year, South Africa experienced the unusual situation in which general government replaced the private sector as the major driver of fixed investment activity. Planned new general government projects rose fivefold to an annualised R103bn. This was surprising in itself — even more so is that 93% of these projects were announced by the City of Cape Town.
It will spend R45bn upgrading roads, sewerage and wastewater works, and R23bn across two renewable energy schemes. These involve the creation of a large solar plant in Paardevlei capable of reducing load-shedding by one stage during the day, and the Steenbras hydro pump storage scheme, which aims to reduce load-shedding by two stages.
These plans underscore the Western Cape’s bullishness at a time when the rest of the country, including the private sector, is largely in retreat. It also lends credibility to the G4J plan’s strong focus on accelerating public infrastructure and fixed investment.
The plan identifies inadequate economic infrastructure — which is under the direct control of national departments and state-owned enterprises — as the most immediate and binding constraint on the province’s growth prospects.
Conversely, it means that increasing investment in infrastructure can be a powerful catalyst to stimulate growth. Under the G4J plan, the province will prioritise foundational infrastructure that improves transport and digital connectivity.
Priorities include continuing to push for the devolution of power over passenger rail from the Passenger Rail Agency of South Africa and to get Transnet to allow a private operator to run the Cape Town harbour, which suffers from major inefficiencies and underinvestment.
Other priorities include stimulating exports; raising the province’s energy resilience and reducing its reliance on Eskom; achieving water security; expanding innovation and research & development; and improving the employability, skills and capabilities of the workforce.
As always, agriculture and agro-processing are going to play vital roles in the Western Cape’s economic progress story. Agriculture makes up only 4% of the regional economy but is a large contributor to employment, and more than half the province’s exports originate in the agricultural sector.
Agriculture Business Chamber chief economist Wandile Sihlobo, who attended the G4J launch, finds the plan “encouraging” and says a similar focus on growth is needed in other provinces.
“What will be important is taking the strategy through various business formations in the province (and outside) to ensure they buy in and invest in the identified areas of growth,” he says.
“Broadly, we need such focus in other provinces, and for the Western Cape government to broaden its work and have an impact on all communities there that have not enjoyed much economic progress.”
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