The City of Surreal Ramaphosa on the banks of the Rubicon

Johannes Wessels
@johannesEOSA1

Cyril Ramaphosa’s vision of “a first post-apartheid city with skyscrapers, schools, universities and factories” (if implemented) has all the potential of becoming a disastrous social engineering experiment wasting resources on a massive scale. Not because the idea of a new city is wrong per se, but simply because the president is ideologically wedded to state-led development, holding a very negative view of the role of the private sector.

Ramaphosa doesn’t consider the private sector as efficient or more effective than the public sector, despite the fact that State-owned enterprises are mismanaged, bankrupt and a drag on economic development with Denel and the SABC even struggling to meet salary commitments.

Peas of the same pod

The creation of such a city is, in the Ramaphosa framework, not a vision of dynamic economic growth, but an ideological blinkered perspective of how government can improve society. Ramaphosa and all the social engineers within the ANC are, in that sense, not far from the approach of Hendrik Verwoerd. The National Party was, just like the ANC, a force pursuing transformation through prescription and limitation of choices.

Individual freedom has never been for either the NP or the ANC that important. They are peas of the same pod: both using race to meddle in the internal workings non-state entities like schools, universities and businesses.

Interference in the internal affairs of non-state entities is pursued in the name of transformation: government knows best.

One of the last attempts of new cities in the apartheid framework was Botshabelo, between Bloemfontein and Thaba Nchu. In the mid 70s Connie Mulder and his apartheid planners announced that they were developing what would become “a model city in Africa”. 

The factory with 30 washing machines…

After the decision to relocate the Sesotho speakers from Kromdraai in Thaba Nchu (in the then Bophuthatswana) to Onverwacht where Botshabelo was developed, attempts to lure businesses to the area commenced.  Factory shells were built and rented out at a tuppence as part of a range of incentives to lure “industrialists” to the industrial park.

One of the erstwhile “successful” industries was operated by a Taiwanese who had 30 industrial washing machines in a 1400 sq. m. building.  His “factory” was stone-washing of imported jeans from Taiwan to achieve the popular worn-out effect before exporting them. And he farmed with wage subsidies under the decentralisation scheme as well.  

Today the industrial park is about 80% occupied but not by manufacturers, rather warehousing. The majority of Botshabelo residents who are employed, work in Bloemfontein and commute daily. The illogical (that is what ideological decisions turn out to be) placed town requires several thousands to commute daily: expenditure of time and money that could have made a major difference in the livelihood of poor and lower middle-income households were they located closer to their places of work. 

Sasolburg, Richards Bay, Secunda

Botshabelo stands in stark contrast to other new towns that came into being in the pre-democratic era: Sasolburg, Vanderbijlpark and Richards Bay. These were not attempts at building cities, but to get internationally competitive businesses of substance going.  The development of core businesses spurred the relocation of other enterprises to these localities and also the formation of new businesses, either in the direct value chain or simply to service the local consumer needs of the growing population in these towns.  Urbanisation and growing towns in these localities were the result of exporting industries, not vice versa.  

It is important to note that the government did play a significant role in these developments:  at that stage Iscor (Vanderbijlpark) and Sasol (Sasolburg) were state-owned enterprises.  In the case of Richards Bay, the harbour development and the dedicated coal railroad were massive public-sector investments in port and rail infrastructure. However, the Sasol factory was almost from the beginning supplemented by British investments (e.g. the Fisons fertilizer plant) and several other private sector investments. A similar story unfolded in Richards Bay with Triomf fertilizer, the Alusaf smelter and Bell Equipment and later on Mondi and numerous others…

The contrast between Sasolburg, Vanderbijlpark and Richards Bay as new economic hubs on the one hand and Botshabelo as an ideological “dream city” on the other, is there for all to see, provided one sheds one’s ideological blinkers.

Urban well-being depends on ability to attract money from elsewhere

Cities (just like towns and villages) have been defined through the ages by their non-agricultural economic activities.  In the Dark and Middle Ages, towns and villages in Europe and England that successfully developed processing and crafts based on local agricultural produce grew quicker and more diverse than those that were purely dwelling places for works on close-by farms. Towns that were market towns in addition attracted income from visiting customers from neighbouring villages and towns that could not obtain these goods in their locality.

Towns and cities that through business acumen and highly skilled craftsmen produced differentiated products (e.g. the woven tapestries from Bruges) and not merely commodities (e.g. yarn) became concentrations of productive knowledge and wealth. Such cities and towns attracted income from the outside and the tapestries of the weaver guilds in Bruges were sourced by courts all over the then known world.

The advent of the industrial revolution and the birth of the modern mega producer conglomerates, led to an acceleration of urbanisation, diversification and more and more denser concentrations of productive knowledge.

A spontaneous enterprise order emerging from trillions of transactions

EOSA research on SA enterprise data reveal a direct correlation between the abundance or scarcity of enterprises (numbers) and the population size of cities and towns. In addition, there is a correlation between enterprise richness (diversity of business types) and the total household income of a town or city.  It sounds very logical, but the statistical analyses that revealed these correlations are so strong that they have predictive potential.

The regularities are not the result of a National Development Plan, but the outcome of an uncoordinated evolutionary process in which millions of individuals and firms as customers create markets. One can describe it as a spontaneous order that emerge from trillions of transactions. 

Is this the manifestation of the Invisible Hand?   

The intimate correlations between enterprises and settlement size as well as between innovation and urban density are well-known.  See especially Edward Glaeser’s Triumph of the City and Geoffrey West’s Scale: The Universal Laws of Life and Death in Organisms, Cities and Companies. Other important sources are the World Bank’s 2009 World Development Report Reshaping Economic Geography, Fernand Braudel’s Wheels of Commerce and the classic by Ephraim Lipson: The Economic History of England Vol I (The Middle Ages) & Vol II (The Age of Mercantilism).

Run-of-the-mill enterprises

The growth or decline of a city or town is determined by the flow of money into or out of the locality. Enterprises are important generators of income, but the largest percentage of enterprises are mainly aimed at servicing local consumer needs, therefore feeding primarily off money already in the locality.  EOSA refers to such enterprises as run-of-the-mill enterprises.  The majority of businesses belong to such categories.

Analyses of data on all formal enterprises in the Free State province confirm the existence of extremely strong regularities in the enterprise world. A correlation of r = 0,994 is extremely significant, considering it covers all 76 cities and towns in the province

Analyses of EOSA’s unique enterprise data base of formal enterprises in more than 400 SA cities and towns, reveal extremely strong regularities at work in these enterprise sectors. In fact, in some of these sectors the correlation is so strong that it has predictive potential. The number of traders – whether a Shoprite, Pick & Pay or Spar or the independent corner café – in a locality is extremely significantly correlated to the overall number of all non-trader businesses in that locality. 

Productive knowledge enterprises

Productive knowledge, far more than infrastructure, determines the well-being of cities and towns. This was the case in medieval Bruges where the guilds of the goldsmiths and the tapestry weavers (all with their value chain linkages) produced export products, backed up by a growing network of private financiers for the expansion of production that was required. It is still the case today.

The availability of productive knowledge enterprises that are based on real market demand and not ideological subsidies, is the dividing factor between Richards Bay and Botshabelo. Policies of the right kind lead to sustainable urban growth.

EOSA enterprise data on Botshabelo and Richards Bay 2018. Other data StatsSA 2011

Richards Bay developed into what it is, not only because of the capital that was invested in the infrastructure, the harbour and the factories. Human capital (measured in this case by the percentage of the population over 20 with tertiary qualifications) is the key factor. 

Enterprise density & Enterprise Richness

Richards Bay’s Enterprise Density (the number of enterprises per 1 000 of the population) is 21.9 compared to Botshabelo’s 1.1. The Enterprise Richness (measuring enterprise differentiation) of 24.9 is also 6.5 times more diverse than that of Botshabelo.

Enterprise density and richness are indicators of economic health.

Successful and failing cities (and towns) can experience population growth. However, successful cities do not only attract people, they also grow connectivity with external markets and diversification of products and services.  That requires entrepreneurs that provide products and services of export standards.

Ricardo Hausmann reckons the abundance of productive knowledge is the key factor in successful countries and a shortage thereof the main reason for failing economies.   The same argument holds at city and town level.

Productive knowledge is scarce

Productive knowledge is not in abundance in South Africa and the country has lost a substantial percentage of its productive knowledge since 1990. The brain drain has already resulted in South Africa becoming poorer and unable to keep up with the growth in the rest of the world.

Cities and towns that want to grow should do their utmost to create conditions that are enterprise-friendly, otherwise they will not be able to grow or even maintain their pool of productive knowledge.

None of these fundamental aspects have been mentioned in either the dreamy SONA address of 20 June, nor in the response to the debate. That places the envisaged Ramaphosa city in concept closer to Botshabelo than to Richards Bay. 

It could even be worse…

Gbadolite & Yamoussoukro

Africa has cities that were developed as dreams and not for economic reasons.  The decaying concrete ruins and cracked marble palaces of Mobutu’s Gbadolite, a city with a runway where the Concorde had landed regularly, springs to mind.

The terminal building at Gbadolite… Pope John Paul, President Francois Mitterand, the Belgian king and the UN Secretary-general were among those who flew in to Gbadolite.
Picture by Sean Smith of The Guardian….

There is also Houphouet-Boigny’s Yamoussoukro with its massive cathedral. 

Unwilling to cross the Rubicon

The South African economy is not waiting for a new city.  It needs sound policies, not a fine-tuning and we-will-manage-the-same-better-than-before approach.  And policy change is required today, not tomorrow.  The President, neither in his surreal SONA speech nor in his response to the debate, did indicate a willingness to cross the Rubicon.  Like P W Botha before him, he chose a prolongation of the existing rather than a bold step for change.

Without a break with the ideological approach of a state-led economy, the yearning for a city may resemble the old Yiddish L’Shana Haba’ah B’Yerushalayim… Next year in Jerusalem…

That was also sung in desperation by Jews when they were herded into the gas chambers of Auschwitz.

PS:   The examples of China’s new-built cities are simply not replicable in the SA context.  China experience accelerated urbanisation in the post-Mao era simultaneously with the technological innovation of computerisation and digitisation , enabling the country to skip some of the more conventional phases of infrastructure roll-out and industrialisation.   In addition, in 1990 China was only 26% urbanised, way lower than South Africa at that stage.  Even now South Africa is a more urbanised country than China where the figure now stands at 59%.  And rapid city development is necessary when 330 million people urbanise over a period of 40 years! South Africa’s cities are not large by international standards, but they are ill-equipped through poor management and policies.

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