Are South African cities stuck in economic growth limbo?

The growth of cities in developing countries has been remarkable as thriving metros fostered investment, businesses, jobs and economic growth.

Shanghai, for example, has mushroomed over the past three decades, with employment driven by growth in the services sector. Its population has tripled. There has been similar growth in other cities in Asia, the Middle East, Latin America and, to a lesser extent, Africa.

It’s been different in South Africa, where cities are crumbling under the weight of deteriorating infrastructure and services and where population growth is seen as a problem.

This is borne out in a report based on a data set of employee tax submissions, which provides municipal-level data of employment growth and employment disparities. The data reflects a lack of economic diversification and adaptation, “a lack of new industries emerging and a government bereft of new thinking”, says co-researcher Ivan Turok, South African research chair in city-region economies at the University of the Free State.

There has been little change in South Africa’s spatial patterns for decades, according to “Striking Disparities in Employment Across South Africa: Evidence From a New Spatial Database”, a report by Turok and Justin Visagie, of the Human Sciences Research Council.

Turok says the results reflect “inertia and lack of new development, which are partly due to weak policy [and] the government not understanding the importance of cities”.

South Africa remains “way behind the curve”, Turok says. Urbanisation and growing populations are a drain on dwindling resources rather than a sign of economic dynamism.

The report indicates that Cape Town’s employment increased by 20% between 2014 and 2023 compared with a national average of 8%. Employment growth in Joburg was less than 2%, and employment in Nelson Mandela Bay decreased by more than 4%.

Cape Town mayor Geordin Hill-Lewis highlighted the city’s stable governance and relatively high infrastructure investment, with more than R6.4bn invested and more than 15,000 jobs secured in 2024 via outsourcing, technology, clothing and textile manufacturing and marine manufacturing.

Cape Town’s growth over a decade is mediocre, with modest growth compared with Asian, US and Latin American cities which have boomed

—  Ivan Turok

While it was the best performer, Cape Town’s growth was only in line with its population growth rate. “Its growth over a decade is mediocre, with modest growth compared with Asian, US and Latin American cities which have boomed,” Turok says.

The biggest sources of employment growth in Cape Town were retail and wholesale services, administrative activities (such as call centres, labour brokers and security) and finance and insurance. The main sources of job growth in Joburg were public administration and education, retail and wholesale services and hospitality, while the source of the most job losses was construction.

“None of the metros experienced appreciable employment growth in manufacturing and other tradable goods and some lost jobs in manufacturing,” the researchers say, adding that the shift in jobs to nontradables “suggests that these local economies are not evolving in ways that raise productivity, imply technical progress or reflect positive structural transformation”.

The poor performance of most metros over the past decade was due to energy and water crises, transport and logistics failures, infrastructure decay and collapse, as well as instability and mismanagement in local government, and it is “difficult to imagine the national economy prospering as long as the main cities struggle and stagnate”.

Mining remains a major part of the economy. Other sectors, however, have not grown as expected. This is in contrast to structural transformation in other economies, which has been a natural progression, Turok says.

There are some successes in sectors whose growth has been supported, such as automotive and call centres. Tourism has also been positive in some parts. But these are isolated, and “the overall message is stagnation rather than dynamism”.

As the report points out, “cities are places of greater economic possibilities and entrepreneurship potential because of their productive assets, supportive institutions, infrastructure and skills available”; they deserve distinctive treatment because of the superior opportunities they offer. Large cities have a more favourable and diversified economic structure than towns and rural areas, and offer opportunities to attract investment and grow jobs, providing more reliable routes out of poverty.

“The government should be more focused on cities in its economic policies and spending of public money, but for political and historical reasons, it wants to treat everything the same. Cities should be the focus of national development dialogue, and the government has to take the challenge in cities more seriously,” Turok says.