Key messages of the `Urbanization Review, and other CSP work on urban development in South Africa. 31 st August 2018

Transcription

1 Key messages of the `Urbanization Review, and other CSP work on urban development in South Africa 31 st August 2018

2 Comments 1. Really appreciate the detailed mechanics on the `Housing Economic Value Chain (Housing Construction VC and Housing Rental VC) Respected NT economist: `I was not taught about value chains in undergraduate Economics Presumably these value chains are generic across all construction and all rental? 2. Intrigued that the smaller the economy output per person, the greater the importance of the housing sector; and also that the rental value chain makes a greater contribution than the construction value chain Does this hold true for the four countries studied? Could this be graphed? 3. Is there a housing pyramid for countries other than Kenya? 4. One issue that is not explored are the spatial / economic geography implications. In principle a value chain approach (of course supported by adequate data) should help one understand spatial economies 5. Further work How does the HEVC work in township economies? Especially in relation to `affordable housing What policies might improve the economic impact for township economies? 2

3 Why did we commission this work? Key issues and challenges Percentage of South Africa's population living in urban areas 62% 71% 80% South Africa should be benefitting from an `urban dividend, but instead: South Africa is home to the most unequal cities on the planet economic growth and job creation is insufficient and insufficiently inclusive current patterns of urban development appear to be reinforcing spatial divisions created under apartheid. 56% 0,8 0, ,6 0,5 South Africa is already very urbanised, and urbanisation continues to increase International evidence suggests that a one percentage point increase in a country s urban population should result in a 3 to 8 percent increase in national per capita income. 0,4 0,3 0,2 0,1 0 Johannesburg East London Bloemfontein Ekurhuleni Pietermaritzburg Pretoria Port Elizabeth Durban Cape Town Goiana (Brazil) South Africa Brazil Russia India China Beijing Tokyo Copenhagen Stockholm Prague Bratislava Olso Helsinki Bonn Zagreb 3

4 Urban agglomeration should boost inclusive economic growth q Agglomeration economies: The density and connectivity of people and companies q creates opportunities for scale, specialisation, and knowledge spill-overs q drives virtuous cycles of economic growth q allows infrastructure, public spaces, and services to be provided more efficiently at scale. q workers and firms benefit from being close to one another. q International evidence suggests that a 1% increase in a country s urban population should result in a 3% to 8% increase in national per capita income. q But South African urban areas are uniquely uninclusive, un-productive, and un-sustainable. q Costs are borne by poor households, the state and ultimately the real economy q the spatial economy dampens growth, deepens inequality, and creates inefficient and rising local government expenditure pressures q We are perpetuating the urban spatial form inherited from apartheid Proposition: apartheid inheritance and current practise, is a major reason why South African urban areas are so un-inclusive, unproductive, and unsustainable. 4

5 South Africa s response: NDP, MTSF and now the Integrated Urban Development Framework (IUDF) Policy recognizes the important role of towns and cities as places of inclusion and growth National Development Plan (NDP), the Medium- Term Strategic Framework (MTSF), and now the IUDF. Underpinned by emerging global agenda in Sustainable Development Goals (SDGs) and the New Urban Agenda (NUA) 5

6 Process followed and papers produced ( PROCESS FOLLOWED 1. July 2015: Scoping mission. 2. Nov 2015 onwards: Local and international experts appointed by WB. Engaged extensively with local institutions and local research, identified information constraints and policy tensions, and generated draft papers. Multiple video conferences on emerging draft papers. 3. November 2017: Detailed consultative engagements in four cities (CCT, ETH, JHB, TSH), with pre-identified respondents. Lots of constructive feedback. 4. December 2017 to April 2018: Detailed comments (36 pages) sent to authors of the draft papers Revisions of the draft papers 5. May - July 2018: Refinements, quality control, finalisation PAPERS PRODUCED 1. Managing urbanisation for inclusive growth 2. People on the Move: Spatial Mismatch and Migration in Post-Apartheid South Africa. 3. Jobs to People or People to Jobs? 4. Urbanization, Structural Transformation and Rural- Urban Linkages in South Africa. 5. The Composition and Sustainability of Urban Finance in South Africa. 6. Spatial Industry Policy, Special Economic Zones and Cities in South Africa. 7. The Human Settlements Programme and its Subsidy Instruments. 8. Logistics and freight patterns, constraints to productivity, and network mapping 9. Analysis of urban transport in South Africa. 10. Urban Public Finances, Urbanization and the Inclusiveness of Urban Space in South Africa. 6

7 Housing and land use programmes should increase economic density IUDF lever Key issues 3. Integrated and sustainable human settlements q Not integrated, not sustainable q Over-emphasis on housing megaprojects placed in urban peripheries trapping the poor q Declining delivery capacity q Supply-side subsidy approaches creating housing dependency and market distortions Housing units delivered by government housing programmes Recommenda tions Increase emphasis on other types of projects and demand-side incentives to stimulate infill, densification, conversion, and refurbishment Regularize informal backyard densification and broaden services to backyard dwellers Devolve human settlements functions

8 Public transport programmes should reduce economic distance IUDF lever 2. Integrated transport & mobility % of trips vs. % of government public transport expenditure Key issues q Not integrated, not sustainable q Fragmented public transport systems and excessive focus on BRT q Lack of support for key transport modalities q Separated supply-side public transport funding streams q Failure to integrate public transport modes into comprehensive city-wide networks 63% Percentage of expenditure Percentage of trips (mode share) 67% Recommendations q Engage with multiple public transport modes to create integrated public transport networks q Devolve public transport functions q Investigate new municipality-level revenue sources to accommodate long-term operational subsidies for public transport 36% 17% 16% 1% Rail Bus Minibus taxi 8

9 Special economic zones should integrate with city economies IUDF lever Key issues Recommendations 6. Inclusive economic growth q Not integrated, not sustainable q Trying to use industrialization to spatially spread economic and job growth q Special Economic Zone (SEZ) locations are working against the most obvious benefits of agglomeration Integrate and connect SEZs with adjacent urban areas Where access to land is a constraint to investment, explore non-contiguous SEZ models or expand Urban Development Zones (UDZs) SEZs perform better in economically denser settings Positive spillovers extend only 10km SA municipalities have little incentive to service remote SEZs Basic services and infrastructure are costly to supply (the dti funds capex internal to the SEZ, but is currently seeking to move opex responsibility to provinces) although the SEZs impose significant bulk supply costs on municipalities (SEZs aggravate fiscal risks for the municipalities on which they depend) Municipalities and SEZs have no formal relationship (SEZ Act does not refer explicitly to local government) 9

10 Municipal finances should be sustainable over the long term IUDF lever Key issues Recommendations 9. Sustainable finances q Not sustainable: it is not fiscally feasible to continue on our current trajectories q Housing, transport and SEZ programmes which might conceivably meet their targets would cost an extra R50 billion per year q Increased capital expenditure making recurrent costs unaffordable for cities Assess need to expand flexible central government grants to municipalities Explore ways for municipalities to increase own-source revenues Robust public housing scenario (high density, high delivery 75k housing units per year, instead of 41k (R10.4b extra per year by year 10) Additional cost for complementary infrastructure and recurrent cost of additional municipal services (R17.8b extra per year by year 10) Aggressive investment in inclusive public transportation - expand public transport network by 6% per year (R21.5b extra per year by year 10) Public housing and public transportation spending could increase from R28b to R78b year 10

11 Re-calibration of South Africa s government urban development programmes IUDF lever Key issues 1. Integrated urban planning & management 4. Integrated urban infrastructure q q Not integrated Misalignment of departmental and SOE investment plans with local spatial plans q q q Metro infrastructure services are deteriorating, due to aging infrastructure and inadequate maintenance Inadequate sanitation in informal settlements is a significant risk. The conventional electricity distribution business model is decreasingly viable Recomm endations Recognise municipal SDFs as the dominant planning and land use management framework, to which all other public landowners must align their strategies at the local level. SDFs should engage explicitly with land reform and should receive national regulatory and administrative support Introduce a national sanitation challenge fund to improve sanitation in informal settlements. Facilitate crowding-in of commercial financing Investigate suitable business models for local electricity distribution Improve incentives to accelerate materials recovery, etc 11

12 South Africa needs a more productive approach Government programmes are currently almost exclusively nationally driven and supply-side. They are Individually ineffective (they cannot meet their targets, and they are misdirected compared to demand) Collectively incoherent (they are spatially unaligned) Collectively unaffordable (they are extraordinarily expensive) Put more emphasis on locally-driven government programmes Especially, recognise the primacy of the local spatial development framework Put more emphasis on demand-side programmes to use the agency and energy of agents outside government

13 Conclusions: (a) Focus more on local spatial coherence (b) Focus more on the demand-side 1. Despite the achievements over the last 24 years, the current urban development trajectory is not delivering enough economic growth, social inclusion or spatial integration. 2. It is also not fiscally sustainable. 3. Recognise that urban economic efficiency and growth is central to inclusive economic growth, social inclusion and spatial integration. 4. The success of urban development projects depends upon connections to nearby activities, services and infrastructure. 5. There should be should be far stronger incentives within government, to coordinate the programmes of different government units. 6. Municipalities must be capacitated to play a greater role in urban development, and key housing and public transport responsibilities should carefully and quickly be devolved. 7. Emphasis should change from direct provision of facilities towards the promotion of efficient urban markets and demand-driven inclusive growth. 8. This will mean rapidly and progressively shifting the focus of central government funding for urban development towards demand-side subsidies that support the agency of households and communities.

14 Thank you