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South Africa’s economic growth depends on well-functioning secondary cities

South Africa’s economic growth depends on well-functioning secondary cities
Shabari Shaily-Gerber and Diale Josiah Lodi
By Shabari Shaily-Gerber and Diale Josiah Lodi
1 Nov 2023
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The race to transform local governments into well-functioning and efficient systems is a marathon and not a sprint, and clean audits — which less than a third of SA’s municipalities received — are only a fraction of that process.

South Africa is one of the most urbanised countries in Africa, with about 67% of its population living in urban areas, projected to increase to about 80% by 2050.

South Africa’s national urban policy, the Integrated Urban Development Framework, is arguably one of the best in the world. It advocates for cities to embrace urbanisation and introduce systems and processes that will allow them to address the urban divide.

However, the country’s urban economy has seen only moderate growth since the early 1990s, with less than 20% of the population of secondary cities in employment — half that of metros.

According to the United Nations Human Settlements Programme, UN-Habitat, the socioeconomic and political residues of apartheid still have deep roots in South Africa’s urban system, which is resulting in an increasingly fragmented urban landscape.

Secondary cities hold untapped potential for job creation and boast a significant industrial base. These cities also have substantive access to land which if leveraged appropriately can provide innovative sources of revenue while fostering inclusive development. Infrastructure support and incentives are imperative, but local municipalities are failing to provide what is needed.

South Africa needs to urgently invest in its secondary cities to unlock significant opportunities for economic and social development for its highly urbanised population.

A three-pronged approach to development should address technical competency, multilayered governance and a strategic flow of capital to achieve sustainable growth.

Closing the skills gap


The technical skills gap in local government is hindering the impact that existing projects, like those funded by the UK, can have. For municipalities in secondary cities, which are often subject to constrained human and financial resources, it is recommended that a combination of long-term planning and project-based technical support is provided by state and non-state actors with capacity-building resources.

Such assistance should allow public officials to close critical investment and service delivery projects in parallel with addressing fundamental planning and governance issues.

Improving governance


Within each of  South Africa’s 52 district municipalities, there is generally a secondary city that anchors the regional economy of the district space. If the secondary city that is an anchor to the regional economy fails, the entire regional economy is also likely to fail.

The government sought to use the District Development Model (DDM) to strengthen regional governance within the district space by in part introducing a long-term planning instrument popularly known as the “One Plan”. It is imperative that the One Plan implements measures through which regional governance, by a social compact, sustains the implementation of the DDM.

Private capital


With a shrinking national government purse, local governments need the private sector to meet their development objectives. South Africa’s municipalities are endowed with significant fiscal autonomy to raise capital from varied sources beyond the national grants. Yet, there is limited evidence, especially in secondary cities, of successful private sector collaborations with local government to unlock productivity and boost infrastructure spending.

The private sector has agreed to step up in some areas to provide basic services such as water and electricity. Still, the overall footprint of public-private partnerships in municipalities remains dismally small due to poor capacity. This results in a lack of project pipeline as well as uncertainty. When these factors are considered in conjunction with political economy risks, the private sector is prevented from committing to long-term investments.

That is why we must help municipalities to access readily available development finance by improving the financial viability of projects identified in existing local economic development plans. This requires an intensive period of targeted support to transition projects from the feasibility to the transaction phase.

Even though this is undoubtedly expensive and time-consuming, an evidence-based approach will enable the long-term process of strengthening municipal health and expanding access to economic and social gains for people living in our secondary cities. 

It is clear that the government alone will not be able to tackle these colossal developmental challenges. The race to transform local governments into well-functioning and efficient systems is a marathon and not a sprint, and clean audits — which less than a third of SA’s municipalities received — are only a fraction of that process.  

The UK government has committed up to R185-million to partner with South African cities to promote inclusive development. Through this partnership, secondary cities in Gauteng, Limpopo, KwaZulu-Natal, Eastern Cape and Mpumalanga have been identified to deliver catalytic economic development projects over the next four years. South Africa is fortunate to have a rich and diverse network of academic institutions and civil society actors offering thought leadership to help deliver this.

Institutional tools such as the DDM must find ways to respond to financing opportunities available from development finance institutions and the private sector to plan, de-risk and implement urban infrastructure and set struggling municipalities on a path to recovery.

The theme for World Cities Day this year was “Better city, better life”. By unlocking transformative investment in urban planning, we can finance a sustainable future for all. By engaging all stakeholders, cities can harness transformational change and ensure a better life for all in an urbanising world. DM

Shabari Shaily-Gerber is the head of urban economic development at the British High Commission in South Africa. Diale Josiah Lodi is the chief director of integrated development and spatial planning at the Department of Cooperative Governance and Traditional Affairs in Gauteng.

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