Reaping the urban dividend

Our success in raising the country’s economic growth rate, lowering the cost of living for households and reducing the cost of doing business depends on our ability to transform South African cities into engines of growth.

More than 75% of SA’s Gross Domestic Product is generated in metropolitan and other large urban municipalities and more than 53% of the population lives and works in large cities. Our metros therefore, need to channel increasing amounts of resources towards economic and social infrastructure to sustain the reliability of services and extend the reach of these services to cope with expanding demand.

No one would dispute that SA cannot afford to maintain the apartheid legacy of sprawling and segregated spaces that characterise our cities. These spatial patterns reinforce the exclusion of the majority of those who live around our major cities and undermine their meaningful participation in the economy.

As more people move to the cities we should be reaping the "urban dividend", where the increasing concentration of a young, economically active population translates into higher levels of economic activity, greater productivity and higher rates of growth. This has been witnessed in many other urbanising countries — China’s eastern seaboard being the best example.

In view of the urbanisation rate reflected in successive population censuses and from lessons learnt from other countries, the government needs to strike the delicate balance of investing more resources in cities where more and more citizens are moving while sustaining rural economies and livelihoods.

In the lead-up to this year’s budget, the Treasury and the Department of Co-operative Governance met with mayors and city managers to agree on more ways to work together effectively, especially given that there is limited room to increase national transfers to meet the increasing demands for infrastructure in the cities.

We committed ourselves to working in a more focused manner to accelerate the implementation of investment projects that build more compact, integrated cities. It was agreed that this challenge requires a far stronger partnership with the private sector and urban households in planning for, financing and implementing these investment programmes.

The 2015 budget outlines several initiatives that would unlock the economic potential of our urban areas through increased investment in infrastructure and stronger partnerships with the private sector.

It is aimed at supporting our metropolitan municipalities to enhance their planning capacity, lessen their dependence on conditional grants and leverage private sector sources of funding. This will enable them to increase infrastructure investment and create economically dynamic cities.

Through implementing these measures, we will create the dynamic and inclusive economy that is envisioned in the National Development Plan (NDP).

Source: BusinessDay Live

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