How to bring local economies to life

South Africa needs a radical change in its approach to local economic development. Beyond social security and central government transfers, each district and local municipal area needs a clear plan to attract investment and create jobs.

These plans should address the two facets of economic sophistication. The first is to increase the range of products and services offered. Reliance on just one product or service should be reduced. The second is an emphasis on developing own technologies and processed goods. Selling a pig is one thing: developing and deploying technologies for processing pork products to increase value is another.

South Africa cannot create sustainable employment through its existing Expanded Public Works Programmes. These involve the central government funding temporary low skill jobs: filling potholes, construction, picking up trash, sweeping and even clerical work. The aim is to get people economically active. But these programmes are never linked to a process of skill formation that propels medium to high-tech industrial activity.

For any local economy to be resilient it must have the local skills – including those of an entrepreneurial nature – in sufficient quantities to support the creation of local industries. These can supply products and services to the surrounding towns, neighbouring provinces and countries. Simply put, to grow a local economy you must trade with the people who are closest to you geographically and are not too advanced technologically.

Scoping local market and regional opportunities

One example is the Kenneth Kaunda District Muncipality in South Africa’s North West province. This area used to be the country’s gold mining powerhouse. Today it boasts some of the highest unemployment rates. Yet it houses the University of Northwest’s Potchefstroom campus, which has substantial capability in engineering research and development. The mining industry and its value chain, although in rapid decline, leaves behind droves of artisans, technicians and engineers. These people could be harnessed and refocused into high-tech activities that support automation and mechanisation in other industries. This includes agriculture, agro-processing and the value chain of mining areas in the neighbouring Platinum district, Northern Cape, Botswana and Namibia.

The first step would be to consider which high value services and products can be supplied to these areas. The Platinum district relies on platinum mining and migrant labour. Botswana and Namibia rely on diamonds and low-tech beef farming.

Immediately, the Kenneth Kaunda District can change its local economic development focus to stimulate local entrepreneurs who can provide medium to high-tech services and technologies that support the value chains of these neighbouring industries. It can also help its own residents to participate in emerging knowledge-based industries in partnership with foreign technology agencies and investors.

Opportunities beyond mining

There are plenty of opportunities beyond the world of mining and its related industries. For example, the University of Limpopo in the Capricon District, has very good optometry skills. It could offer an opportunity to create an industry around the treatment of eyesight and optics manufacturing. Those services and products could be exported to the whole of southern Africa.

At the moment Malawi is leading the way Southwards in the provision of optometryservices. The opportunity I’m describing here is not just about training and deploying optometrists. It’s about developing the entire value and supply chain around correcting and improving human vision. This includes infrastructure, manufacturing various quality and cheap optical products, logistics and developing service delivery points. The University of Limpopo can be at the centre of it all just like Massachusetts Institute of Technology is at the centre of similar initiatives in the US.

A strategy for market leadership

A successful strategy entails trading first with economies that are either below, on par or slightly ahead technologically. This means the local municipality’s economic development office must seek to integrate local companies in both value and supply chains of other high-tech neighbours. This would generate medium to long-term revenues. It would also create sustainable human and finance capital and increase chances for diversification.

These ideas have been used at a more advanced level by South Korea in dealing with the US in the Samsung versus Apple competition and collaboration. Samsung started out making components and phones for Apple. It eventually became a realistic contender for market leadership against Apple in its home market, the US.

So a company based in the North West province would be well advised to tackle the opportunities presented by its immediate neighbours, both technologically and geographically. The stable revenues, skills, capital and experience gained in these more rural settings could later be used to catapult to more demanding markets like the urban hub of Gauteng and beyond.

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