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KZN Overview -A New Initiative 2008 - Grant Adlam

2008-07-25

A New Initiative-Grant Adlam    

The Concise Oxford Dictionary defines the word'initiativeas both the ability to initiate or begin something as well as a fresh strategy intended to resolve or improve something.

KwaZulu-Natal is once more on the move and the various stakeholders in the Province; from government departments to civil society are not afraid to try new approaches in their drive to succeed. Considering the many challenges in the Province, both at a global and at a local level; the ability to find fresh strategies at every level of business is particularly relevant.

Millennium Development Goals

Forming the basis of socio-economic development in the Province are the eight Millennium Development Goals, which range from halving extreme poverty to halting the spread of HIVAIDS and providing universal primary education, all by the target date of 2015. The goals form a blueprint agreed to by all the world's countries and all the world's leading development institutions. The consensus is that 'business unusual is needed to get on track in achieving the much acclaimed Millennium Development Goals, through new and innovative approaches and ideas.

The United Nations Secretary-General, Kofi Annan, stated, 'We will have time to reach the Millennium Development Goals - worldwide and in most, or even all, individual countries - but only if we break with business as usual. We cannot win overnight. Success will require sustained action across the entire decade between now and the deadline. It takes time to train the teachers, nurses and engineers; to build the roads, schools and hospitals; to grow the small and large businesses able to create the jobs and income needed. So we must start now. And we must more than double global development assistance over the next few years. Nothing less will help to achieve the Goals".

The need to try new approaches was also referred to by KwaZulu-Natal MEC for Finance and Economic Development, Dr Zweli Mkhize in his address at the Local Economic Development Conference in November 2007. He stated, "South Africa's transaction to democracy has given its citizens the power to influence and direct the direction of this country. This signals the need for a new approach: an approach which requires today's leaders to define development priorities, plan for the attainment and collaborate in their implementation.
With the millennium development goals in view, the country needs to raise its economic growth rate to an average of 6% between 2010 and 2014, and to halve the unemployment rate by 2014. Of necessity, a transparent and high-quality economic governance approach is the key to a healthy business environment. Provincial strategies take their cue from - and are supportive of - national policies and goals, such as the Accelerated and Shared Growth-South Africa (ASGISA) programme. Specific KwaZulu-Natal strategies include the Provincial Growth and Development Strategy (PGDS), the Provincial Spatial Economic Development Strategy (PSEDS), and the Provincial Industrial Development Strategy (PIDS). At the local government sphere, the Integrated Development Plans (IDPs) and Local Economic Development Plans (LED), complement and support these provincial strategies.
The different initiatives in action are evident in government departments and businesses. The provincial priorities in KwaZulu-Natal consist of: • Strengthening governance and service delivery • Sustainable economic development and job creation • Integrating investments in community infrastructure • Developing human capability • Developing a comprehensive response to HIVAIDS • Fighting poverty and protecting vulnerable groups in society.

KwaZulu-Natal's Economy

KwaZulu-Natal has historically been a key component of the southern African economy. With the national and provincial governments providing a sound foundation, which is crucial for investment and growth, KwaZulu-Natal has the basis for success. Notwithstanding this base, the Province has a well-developed infrastructure, including an excellent roadrail system with access to two deep water ports providing easy links to Mozambique, East Africa, Asia and Europe. There is widespread availability of energy, water and sewerage utilities and the telecommunications system links to regional and global markets. KwaZulu-Natal has the second biggest economy in the country, which has developed as a logical step to the many advantages that the Province offers, over the past years.

KwaZulu-Natal's Contribution to the National Economy (Source: Trade and Investment KZN)

In his State of the Province Address in 2008, KwaZulu-Natal Premier, Sibusiso Ndebele stated that the Province's economic development strategy aimed to; transform the structure of the provincial economy and narrow the gap between first and second economies; to increase investment; to build skills and capacity, to broaden participation in the economy; and increase competitiveness. Given its potential to stimulate economic growth across the board, infrastructure delivery will remain on the key focus areas of this government. Infrastructure expenditure by provincial government has more than doubled between 200304 and 200708 from a baseline of ZAR 2, 9-million to ZAR 6, 4-million and it alone will grow to ZAR 9, 8-million in 200910.

Economic sectors

KwaZulu-Natal's diverse economy consists of activity in a range of different sectors. The provincial government has identified four key sectors as drivers of economic growth. These are:
Agriculture and agri-industry (including land utilisation mapping and giving particular attention to Land Reform).
 Industry, including heavy and light industry and manufacturing.
 Tourism, including domestic and foreign tourism.
 Services sector, including ICT, financial, social, transport, retail and government.

Some highlights of the economy include:
 Lucrative agricultural production;
 Largest sand mining and mineral processing operation in the Southern hemisphere;
 The world's largest smelter;
 Vast prime industrial land along the coast and further inland;
 Good sized Business Outsourcing Processing market with the fastest growing call centres in Africa;
 Stunning tourism opportunities from ranging from mountains to game-parks and beaches.

The Information Communication Technology and Electronics (ICTE) sector has also been selected as a key driver on the basis of its potential to generate high-value knowledge intensive employment and promote wider social enterprise and social development. ICTE was also identified as the industry sector with the greatest potential to drive the long-term competitiveness of the provincial economy. A number of local electronic manufacturers such as Siemens, Altech UEC, and PFK Electronics are making their mark on the local and local marketplace with innovative products.

KZN GROWTH FUND
Although not linked to a specific sector, an important initiative devised by the provincial government to stimulate economic growth and employment creation is that of the KZN Growth Fund. The strategic objectives of the Growth Fund can be summarised as follows:
 An intervention to enhance growth & development in KZN
 Accelerate socio-economic upliftment via job creation
 Create opportunities and promote effective BEE
 Target productive infrastructure to crowd-in private sector investment into KZN
 Enhance existing comparative advantages of the Province by focussing on: tourism, provision of bulk water supply, transportation and logistics and sector-specific infrastructure projects.

The Gijima KZN programme is a European Union initiative which aspires to create an enabling environment by expanding business activity to all parts of the province, particularly in rural areas. These include socio-economic boosters such as tourism, clothing and textiles, crafts, wood products, logistics and communications technology. A number of beneficiaries across these sectors are beginning to reap the rewards of the grants e.g.

• Muthi Futhi, an innovative agricultural co-operative in the Uthungulu District focuses on the cultivation, processing, packaging and marketing of medicinal plants.

• Crosswind Business Projects serves the surrounding community with a variety of products, including its own maize meal and samp brand called Inkululeko (freedom in Zulu.)

Small micro and medium sized enterprise
To achieve the objectives of economic growth, South Africa's small micro and medium sized enterprise (SMME) economy has been actively promoted since 1995. SMMEs encompass a very broad range of firms, from established traditional family businesses employing over a hundred people (medium-sized enterprises), down to the survivalist self-employed from the poorest layers of the population (informal micro-enterprises) The KwaZulu-Natal Department of Economic Development has recently opened the One Stop Shop Business Support Centre to help Small Medium to Micro Businesses (SMMEs) to grow. SmartXchange is eThekwini Municipality's vehicle designed to build the city's ICT Cluster and grow the BEE SMME base. Since its inception in 2004, SmartXchange has invested heavily in building the technical and business capacity of the SMMEs and their employees to enable these companies to become nationally and globally competitive. Key to meeting the objectives of the ICT Cluster and SMME development are the creation of partnerships with big business.
Co-operatives
The co-operatives initiative in KwaZulu-Natal (KZN) was started in 2005 with an initial investment of R110-million. Since then over 3 200 cooperatives have received training from Further Education and Training (FET)colleges to develop skills required to draw business plans. The co-operative form of enterprise lends itself well to the African value of ubuntu as it allows members of the community to work together to in producing or offering services to other members of the community and other markets.
Foreign Trade
The composition of South Africa's foreign trade is typical of an emerging economy, with exports being dominated by resources-based and relatively low value-added commodities and imports primarily by higher value-added goods. Among non-gold merchandise exports, the top five categories are precious and semi-precious stones and precious metals, mineral products, vehicles and other transport equipment, machinery and mechanical appliances and electrical equipment, and base metals and articles thereof.

Much of the growth in these categories, particularly growth of vehicles and other transport equipment, has been linked to the preferential market access South Africa enjoys under the African Growth and Opportunity Act (AGOA).

KwaZulu-Natal's share of overall South African exports has remained constant over a 10-year period, at around 17 percent. There has been constant growth in provincial exports, with ore, slag and ash, aluminium products and products from the iron and steel sector amounting to more than 49 percent of KwaZulu-Natal's exports, while there has been a decline in exports of wood pulp, waste and scrap paper. The top five import product categories comprise machinery and mechanical appliances, mineral products, chemicals, vehicles, and original motor vehicle components.

Export-focused manufacturing has been a strong growth area identified in KwaZulu-Natal. Manufacturing has shifted away from the more traditional textiles and assembly to higher value-added sectors, particularly those of chemicals and metal. A number of opportunities linked to a range of niche markets are also available in the KwaZulu-Natal. The need to develop the beneficiation of primary products in minerals, agriculture and fishing will add value to the economy. This push to beneficiate opens up many opportunities for emerging black entrepreneurs and investors alike. This trend demands new skills and provides local employment opportunities for graduates.

KwaZulu-Natal's top export destinations are the United States, China, Japan, India, the United Kingdom, the Netherlands and Germany. Exports from the Province are set to increase with the construction of the new airport and the Dube TradePort.

Growing cities

A growing economy attracts people as such the role of cities in the global economy is changing. Cities and towns are expanding; as urban populations grow by 3.8 per cent a year, the world is undergoing an era of unparalleled urban transition. This growth is particularly visible in developing countries of which South Africa is no exception. Predictions are that urban areas will hold more than half the world\\\'s entire population within a decade. The quality of the locality is now an important criterion for investment decisions, in addition to costs, infrastructure and availability of skills. Of relevance is that well-managed cities are a pre-requisite for attracting investment, and are essential for national competitiveness.

"Cities have a social infrastructure that facilitates contact between people and exchange information, where they have office buildings, international hotels, conference centres, prestige residencies and distinct architectural design. This social structure is supported by sophisticated transport and information systems", (www.socyberty.comwritersPrit ).

The above definition may well be applied to KwaZulu-Natal's major cities of Pietermaritzburg, Durban, while others such as Richards Bay growing in statue. Smaller centres including Port Shepstone and Newcastle are also moving upwards.

A New Metropolitan

Pietermaritzburg's reputation is slowly changing from sleepy hollow to that of "City of Choice'. Since the re-instatement of Pietermaritzburg as the provincial capital, the city has done much to reinvent itself. Pietermaritzburg combines both style and vitality apart from a centre of governance, the city is a regional centre for impressive sports events, outdoor festivals, shows, education, and the arts.

Until recently Pietermaritzburg which falls in the Msunduzi Municipality was under the jurisdiction of uMgungundlovu District Municipality. Msunduzi has recently been declared a metropolitan as it deserved recognition for its status as home to the capital city and as the power-house of inland KwaZulu-Natal. Msunduzi more than meets the criteria of the Municipal Demarcation Board to be called a metropolitan. These are as follows:
• Areas of high population density;
• Intense movement of people, goods and services;
• Extensive development and multiple business districts and industrial areas;
• A centre of economic activity with a complex economy;
• A single area for which integrated development planning is desirable and;
• Strong interdependent social and economic linkages between its constituent units.

According to Municipal manager Mike Haswell, since its inception Msunduzi has continued to perform all of the power and functions designated to the district. While it was hoped that the new metro boundaries would be extended beyond the present municipal demarcation to include the neighbouring local municipalities, this has not occurred. Pietermaritzburg is now South Africa's smallest metro. A further review of the municipal boundaries is expected after the forthcoming national and provincial elections which will be held in 2009, and local elections in 2011.

Economy
Pietermaritzburg has a diverse economy with a robust manufacturing sector. Current economic activities include:

 Industrial: Aluminium, footwear, textiles, furniture, wood products, electronics, motor components
 Agriculture: Timber, beef, dairy, sugarcane, citrus, exotic fruit, cut flowers
 Business: Major service centre for the KwaZulu-Natal Midlands area, legal services
 Tourism: Parks and Gardens, historical buildings and architecture, dams

The past few years have seen the economy of the city becoming more buoyant. Since 2003 an unprecedented growth in economic activity has been achieved, with business confidence currently very high. The property and retail sectors have grown substantially; major recent developments include the Liberty Midlands Mall, the Golden Horse Casino and Hotel,"Motor City"- a zone of all the established motor dealerships and the Victoria Country Club Golf Estate. There are definite signs of a strong recovery in airport activity; the increasing number of passenger arrivals suggests a growing interest in the local economy. According to Clive Coetzee's April 2008 Economic and Business Report on Pietermaritzburg, Capital Expenditure increased from a quarterly average of ZAR 816 million in 2003 to ZAR 1.07 billion in 2007. This represents an average yearly increase of 7.8% from January 2003 to December 2007, which well indicates the sustained economic development and growth in the City.

Business investment is a key driver of an economy and based on the growth rates of the demand for business finance it is possible to argue that the local economy has experienced significant rates of business growth and expansions. Examples include the recent construction of Toyota's ZAR 4, 5 million rand new forklift premises; the expansion of the Hulamin plant and Alltube's current ZAR 8 million investment in new plant and tooling in order to expand its market with a number of new products. Alltube aims to more than treble its local sales in 2008 while adding another 28% to product sold abroad.
The vision of Mkhambatini Game Reserve developers is to create a 110 sq km game reserve ten minutes from Pietermaritzburg. The park's enormous competitive advantage over the established game parks is that visitors will be able to view rhino, elephant, buffalo, antelope and a variety of smaller predators at a convenient location.

Coetzee's April 2008 report also states that the expanding local economy is evident in terms of the increasing number of households. Professionals declined by 34.50% per annum between 1996 and 2001, but from 2001 to 2007 have increased by 114.57%. Professionals are a key employment category that is synonymous with a burgeoning middle class and hence a positive future economic growth outlook. This is clearly indicative of a strong and healthy economy with an environment conducive to earn good earnings andor make good profits. Along with increasing number of households come potential consumers. In addition the capital's government wages will, on a limited scale, protect the Pietermaritzburg economy from any major downturn. The expenditure patterns or behaviour of government employees is fairly stable and predictable, thus contributing to the stability of the local economy.

The growth in the economy has created a shortage of affordable and middle-income homes. This in turn has provided the trigger for the development of a ZAR 2 billion eventual small town on a 500 ha site near Ashburton incorporating 4 000 free-standing housing units and a 1 000 unit retirement village.

Amdec one of South Africa's leading property development, investment and project management specialist firms, and plans substantial investments in Pietermaritzburg, Hilton and Howick during the next decade."There is huge potential in the midlands region and we have great confidence for its future. These developments will serve to assist in enhancing local economies, infrastructure and services," said Regional Director for Amdec Property Development Magnus McDowall.

Amdec ranks as one of the country's biggest private property developers. The company has developed from its origins as an entrepreneurial family business into a national concern active in almost all sectors of property development with projects in the Cape, Gauteng and Eastern Cape. Amdec's first foray into the province will see a total investment in the area at an estimated ZAR 750 million over the next five to seven years.

The economy of Pietermaritzburg is also bolstered by the diverse and interesting functions, sport and entertainment that take place in Pietermaritzburg on an on-going basis. The positioning of the City as the cycling capital of Africa is fast becoming a reality as road cycling, BMX and Mountain Biking are all taking place in Pietermaritzburg in February, March and April 2009. The Intaka Tech World's View Challenge is South Africa's first UCI 1.1 status series of events with the teams competing for a total prize cheque of R650 000 as well as points for the UCI Africa Tour leader board.

The UCI 1.1 status ranking means that these events are the highest-quality events on the international cycling calendar. Pietermaritzburg and the KZN Midlands with its rolling hills, perfect altitude and close proximity to both ocean and mountains, makes it the ideal choice for major cycling events. The capital of KwaZulu Natal is fast becoming the cycling capital of not only South Africa but the entire continent.

Durban
The City of Durban, with a population of 3, 7 million people, offers much as one of South Africa's fastest growing urban areas. A previous winner of the United Nations Award for Best Managed City in Africa, eThekwini Municipality maintains effective control of the City's resources while steering its progress.

Durban is emerging as a focal point for investment activity, which is being given momentum by the city's enthusiastic approach to the regeneration of the Central Business District. Mark Stewart, MD of BDO Spencer Steward (KZN) claims that "Less panicked by economic fluctuations, this burgeoning city has the potential to become one of the showcase cities of both SA and the continent."With a stable local economy poised for further growth Durban seems to be a city determined to make its presence felt on both the local and global stage";


Dube TradePort
Central to Durban and the rest of the Province's logistics development will be the construction of the state-of-the-art King Shaka International Airport. The facility is to be situated about 30 kilometres north of Durban's city centre, in close proximity to the Indian Ocean. The new airport will be built, owned and operated by Airports Company South Africa (ACSA).

The airport is being built to boost passenger capacity in Durban, as well as to allow bigger, new-generation aircraft, such as Airbus's A380 superjumbo, to land in the city. The Airport will include a four-million-passenger-a-year terminal, runway, air-traffic control tower, multi-storey, car park, fuel farm and related infrastructure. Construction of the airport began on August 24, 2007 and this is well progressing steadily.

The total investment required for the airport, is about ZAR 2, 5 billion and the Development Bank of Southern Africa will provide ZAR 500 million in debt funding. Durban International Airport will relocate to King Shaka International, when it is operational.

The new airport should boost tourism as there will be more international flights to our Province. The facilities will provide easier access to the wealth of attractions present. Clearly though, the effects of the airport will not only be in felt in the tourism sector but in trade.

The second step of this development will be the Dube TradePort, with full customs and excise facilities and bonded areas. The Dube TradePort will be connected to the national N2 freeway and the busy R102, with a railway station alongside the site. In the future, the new dual freeway road corridor between Durban and Richards Bay will stimulate growth by effectively linking to the two ports. Further development of the transport corridor, linking Durban to Gauteng, the inland economic heartland, means that Durban can supply Gauteng with a variety of manufactured goods. The overall aim is to integrate air, land and sea transport. The multibillion-rand initiative will also contain commercial developments such as hotel and conference facilities, as well as service activities, residential elements, and a resource centre focusing on training workers to international standards.

This exceptional project is expected to provide an outstanding environment for manufacturing, agro-industrial, logistics, transportation and e-commerce related activities. These measures will ensure that KwaZulu-Natal remains strong in transportation and logistics; contributing to the southern African economy for decades to come. The development will provide a boost for the participation of the southern African region and the entire African continent in the global economy.

As a consequence a high demand is evident for industrial and commercial land in proximity to the Dube Tradeport. Together with this, the demand for homes is moving even further north. Substantial residential developments actively being marketed in the region include: Simbithi, Blythedale Coastal Resort, Seaton Delaval, Palm Lakes and Brettonwood.

The Port of Durban
The Port of Durban is an exciting hub of economic activity and the largest of South Africa's seven ports. The Port handles in excess of 31, 4 million tons of cargo a year, with a value in excess of ZAR 100-billion per annum - approximately 65 percent of the value of all cargo going through South African ports. According to Clive Coetzee's Economic and Business 2008 Report on Durban and eThekwini Metropolitan Area, harbour activity surged from November 2004 and has stayed at these higher levels throughout the period, increasing very moderately through 2007. The average monthly number of vessel moves increased from 355 in 2003 to 851 in 2006, representing a massive 140% increase for the period. The massive increase in the number of vessel moves is most probably due to the surge in imports experienced in South Africa due to the strength of the Rand and the strength of domestic demand during this time. Established export-led businesses, such as the Toyota assembly plant, have invested heavily in expansion, significantly increasing the number of vehicles exported out of Durban through the Port.

More than ZAR 3-billion has been set aside for investment in Durban Port\\\'s infrastructure since 2002 for improvements. The widening of the harbour mouth and deepening of Durban harbour will enable the Port to contend with the new generation of super-tankers. From new locomotives to the upgrading of strategic rail links and the building of new stations, road restoration as well as the increasing port capacity, mutual advantage can be derived from private public partnerships in these opportunities.

The eThekwini\\\'s Municipality\\\'s Economic Development Department has recently spearheaded the formation of a maritime cluster. The maritime cluster will ensure that this sector consistently operates at the better end of international standards. Members of the cluster will work together and share views, plans and experiences for the benefit of the industry. The cluster includes shipping, boating, cargo handling, storage, transport and logistics. Support services, such as ship repairs, communication, pilotage, customs clearing, inspection services, and marine insurance are also covered. The Department\\\'s Acting Head, Shunnon Tulsiram, said: \\\"The development and operations of the port and city are interrelated. To achieve a common vision for the sustainable development of the port and city in the future, and to ensure their successful coexistence, joint planning is essential.

Urban development Zone
Investment finance has been committed to Durban\\\'s inner-city Urban Development Zone (UDZ), which will assist in the arrest of urban decay and contribute positively to the restoration of the city\\\'s business and residential status. The past decay has been the result of the displacement of capital from the inner city to other urban areas and the suburbs. The eThekwini Municipality regards the investment turn-around in Durban as being indicative of the overall success of the UDZ incentive scheme in the city. Existing projects such as uShaka Marine World and the Point Development Project have had the effect of attracting further interest in areas outside the zone.

Head of eThekwini Municipality\\\'s Strategic Projects Unit (SPU), Julie-May Ellingson, said, \\\"The successful regeneration of Durban\\\'s CBD has been, and continues to be, a partnership between the private and public sectors and clearly indicates the confidence investors and developers have in our city. The city has received more than 350 enquiries from prospective investors since the inception of the scheme and forthcoming developments qualifying for the depreciation allowance will bring the total value to some ZAR 1,2 billion\".

Successful developments under the scheme include the new Standard Bank regional offices at Kingsmead Office Park, the recently launched ABSA building in Gardiner Street, the JBS building, housing a Mr Price shop, and the Olwandle Guest House in Stalwart Simelane Street, General Motors Dealership on the corner of Prince Alfred Street and Old Fort Road, Himalaya House at 273 Yusuf Dadoo Street, and Albaraka Bank at Kingsmead Office Park.

The scheme, originally set to expire in March 2009, has been extended by five years to enable the private sector to play an increasingly significant role in assisting with the development of South Africa\\\'s inner cities. The extension of the scheme means that projects regarded as being under threat of the scheme\\\'s cut-off, will now qualify, while others in the pipe-line are set to proceed, giving further impetus to the city\\\'s regeneration. The city has welcomed the extension as a means of maximising investment and development in previously neglected areas

Critical to the city\\\'s regeneration is the transformation of the depressed Warwick Junction area. The Warwick Junction Precinct Plan includes a ZAR 400 million private investment for the construction of the 22 000 square metre Warwick Mall, which will be complimented by an eThekwini Municipality contribution of a comprehensive 500-bay taxi rank. The project is to be developed by Warwick Mall (Pty) Ltd, a Durban-based Black empowerment company specialising in property. Company Chief Executive Officer, Mr Carlos Correia, said: \\\"Warwick Mall, which will straddle the railway lines at Berea Station, is the catalyst for the entire precinct plan and introduces a vast new retail element to the Warwick Junction inter-modal transport node\\\".

Smartest City in Africa

Durban also aims to become the Smartest City in Africa. The idea is to connect up all the citizens with free or affordable broadband in order to change the delivery of government services, business processes, education and people\\\'s access to information.

Business unusual
Business tourism focuses exclusively on the provision of facilities and services to the millions of delegates who annually attend meetings, congresses, exhibitions, business events andor who participate in incentive travel and corporate hospitality. The Durban International Convention Centre (ICC) and many of the other facilities and attractions beyond the city are attracting an increasing number of business delegates from around the globe. Having played host to the Tourism Indaba over a number of years Durban has proved that it is capable of handling the capacity and numbers associated with events such as these. The ABSA stadium, home to the Sharks Rugby team has also hosted a number of events ranging from rugby, to football matches and music concerts such as Sir Elton John and Celine Dion. Kingsmead Stadium is host to a large number of international cricket matches.

Fifa World Cup

The FIFA World Cupâ„¢ in JuneJuly 2010 will bring to South Africa one of the biggest single sporting events in the world. The statistics involved are impressive: a global television audience of 30 billion; a total of 3 million tickets sold; and 360, 000 international arrivals along with many possibilities.
Durban as a host city will be given exposure to a global audience, tourists and potential investors, which budgets could otherwise not afford. Consequently the FIFA 2010 World Cup provides an unprecedented opportunity for Durban to showcase its business capabilities and prospects, tourism attractions, sport and leisure facilities as well as its lifestyle.

Currently the World Cup is a catalyst for a range of infrastructural projects which in turn will provide a legacy for the Province beyond 2010. Former President of South Africa, FW de Klerk recently expressed his confidence in the event . \\\"The 2010 World Cup is helping our socio-cultural development. I am very optimistic because everyone in South Africa wants the World Cup to be a success\\\".

The eThekwini Municipality has established the Strategic Projects Unit & 2010 Programme to drive and co-ordinate all strategic initiatives in the city as well as all the projects required to fulfil the City\\\'s hosting obligations. A key component of the business plan is the iconic Moses Mabhida Stadium which is currently under construction. This 70 000 seater stadium is centrally located within Kings Park Sporting Precinct and is expected to be completed in June 2009. The multifunctional stadium will accommodate a range of sporting and other activities.

Beyond the stadium and its precinct, the city is also planning a number of transport upgrades, as well as redesigning and upgrading major roads and intersections within the city. In addition, smaller sporting hubs are to be established around the identified training venues which are located in previously neglected parts of the city.

Another spin off is the change over from analogue to digital television transmission. South Africa needs to update its broadcasting capacity ahead of 2010. The country will switch to digital broadcasting from November 2010.

And Beyond Durban
It is not only the centre of Durban but the areas beyond its boundaries that are growing. Durban is definitely a multi-nodal complex; stretching across the Umhlanga Ridge, Gateway and the La Lucia Office Estate, the area is recognised as South Africa\\\'s fastest-growing commercial and residential property development region. Other major existing nodes are at Pinetown, Amanzimtoti, IsipingoProspecton, Hillcrest, and Westville. The construction of a new 35 000 m2 Westwood Shopping Centre in Westville well indicates the growth occurring in the suburbs. The ZAR 345-million construction contract is being undertaken by Grinaker-LTA Building, part of the JSE-listed Aveng Group.

Bridge City
The new 60 000 m2 Bridge City Precinct is an initiative by the eThekwini Municipality and Tongaat Hulett Properties to establish a mixed use node to serve the people of KwaMashu, Inanda, Ntuzuma and Phoenix. \\\"There is a railway station planned to be built below the two-level shopping centre that will allow people to embark and disembark into and through the shopping centre. Above the shopping centre, we also have plans to cater for about 750 residential apartments,\\\" said Crowie Projects director Fred Pietersen.

The shopping centre is due for completion at the end of October 2009. Grinaker-LTA, along with its joint-venture partner Enza Construction, said that about one million bricks would be used in the project, together with 47 000 m3 of concrete and 5 300 t of reinforcing steel. Located on the well known KwaMashu Highway strategic access between Bridge City, KwaMashu and the Phoenix Industrial Park will be provided. The new commuter station and rail link within the transport precinct will provide direct access between Bridge City and all the major metropolitan areas of KwaZulu Natal. The rail infrastructure, which formed part of the bigger 650 000 m2 of high-density, mixed-use public private-partnership development, would provide an underground destination station serving 40 000 commuters a day, an inter-modal taxi, bus and car terminal will ease internal traffic congestion. The development represents over ZAR 4 billion in investments with as much as 25 000 much-needed permanent jobs created.

Beyond this, other \\\'emergent nodes\\\' are identified at Hammarsdale and Cato Ridge. It is thought that Cato Ridge will become the \\\"Midrand\\\" of KwaZulu-Natal over the next decade and an integrated approach to the development of the Durban-Pietermaritzburg corridor is also essential. eThekwini Municipality is considering a number of plans from companies and groups. One plan proposes a housing development on one side of the N3 from Pietermaritzburg to Durban, at Cato Ridge, and an industrial development on the other. eThekwini Mayor Obed Mlaba has also stated that Durban needs an inland dry port and that Cato Ridge is an ideal venue for such a development.
Mauritius-based Safal Investments, which owns steel-coating facilities in eastern and southern Africa, plans to build a US$100-million plant in Cato Ridge, is the company\\\'s third investment in the country and will create about 300 jobs for the local community. Safal South Africa chief executive Ronnie Graham stated that the Cato Ridge plant would produce 150 000 tons of coated steel a year in its first three to four years (Business Day, 2007).

Richards Bay

Richards Bay is one of the fastest growing industrial areas in the Province and the centre of operations for South Africa\\\'s aluminium industry.

The modern Port of Richards Bay is South Africa\\\'s premier bulk cargo handling port and is well situated to serve the KwaZulu-Natal and Mpumalanga coal fields and has expanded into other bulk and break bulk cargo, including timber and granite. The port handles in excess of 85 million tons of cargo per annum and is one of the few South African ports with the flexibility to expand with demand to become one of the largest ports in the world. Harbour activity has increased consistently, albeit at a moderate rate, since the beginning of 2004 and could be due to the surge in international trade experienced in South Africa due to the strength of the world economy and the demand for commodities from countries like China and India. The number of vessel moves increased from a monthly average of 286 in 2003 to 308 during 2007, representing a 4.64% increase for the period (Coetzee, 2008).

Driven by the country\\\'s economic growth, the National Ports Authority has announced that Richards Bay will receive a ZAR 600-million boost for the upgrading of the coal terminal and improvements to the bulk liquid berthing capacity. Port Manager Thami Ntshingila said that the investment will enable the port to handle increased cargo volumes and also reduce the costs of operating out of the port. This upgrade will make the facility the world\\\'s largest coal export terminal. The cost of the expansion will be borne by RBCT\\\'s shareholders which are; AngloCoal, BHP Billiton\\\'s Ingwe, Xstrata, Eyesizwe, Kanga Coal, Sasol and Total Coal South Africa.

Economic activity in Richards Bay is still expanding at a fairly rapid and somewhat
surprising pace. The region is home to some of the biggest business concerns in the country namely Foskor, Richards Bay Minerals, Hillside Aluminium, Bayside Aluminium and Richards Bay Coal Terminals. The Richards Bay Coal Terminal is instrumental in securing the country\\\'s position as the second-largest exporter of steam coal in the world and Richards Bay Minerals is the largest sand-mining and mineral-processing operation in the world.

The manufacturing sector is the dominant sector in the local economy contributing 74% of total turnover and 50% of the total wage bill. According to Clive Coetzee\\\'s June 2008 Economic and Business Report for Richards Bay and Uthungulu District, the Business Confidence Index (BCI) for the Richards BayEmpangeni and the uThungulu District is 61.4 at present compared to 80.9 in 2007 (48 for South Africa at March 2008) and should be interpreted as follows, i.e. a value of 50 is indicative of neutrality, 100 indicates extreme confidence and 0 indicates extreme lack of confidence. It seems that businesses are still extremely positive and confident about the current and future state of business in the Richards BayEmpangeni and the uThungulu District.

Further to Coetzee\\\'s Economic Report, year-on-year economic activity expanded by a very healthy 14.09% year-on-year during 2007, which is a huge contrast to 2006, where economic activity expanded by only 2.07% for the year. The increase in economic activity seems to suggest that a combination of factors due to the structure of the economy has caused the increase. In addition, the interest rate increases and the general deterioration of the national economic environment seem not to have had a significant impact on the regional economy.

The Richards Bay Industrial Development Zone (RBIDZ), on the north-eastern coast of South Africa, encourages international export competitiveness through tax and duty-free incentives, world-class infrastructure and competitive input costs. The IDZ, which totals 540 hectares, comprises five sites that have been developed to suit various industry types. The site for light industry is presently being developed into a customs-controlled secure estate, while the other four sites that focus on medium to heavy industry are being developed to client specifications.

Prospective tenants are geared to take up export opportunities which will be afforded to them through their extremely close proximity to the port, a dedicated customs facility, and the incentive of non-liability for import duties and VAT. In addition, they will also be able to utilise incentive programmes in respect of establishing new companies, increasing competitiveness and innovation, the import of new machinery, and the establishment of export markets.

A further advantage for industries locating in the IDZ is the immediate supply of feedstock, including: aluminium, heavy metals, various chemicals, wood, pulp, paper, agricultural products, gas, coal and electricity, with numerous of these opportunities having been scoped by the IDZ, for uptake by investors.

Tata Steel rated as the most efficient steel producer in the world, started construction of its ZAR 670 million ferrochrome plant at in the IDZ in 2007. Ferrochrome is used in the manufacture of stainless steel and the plant\\\'s output will be exported to Tata Steel\\\'s existing customers, principally in Asia, Europe and the United States. Tata Steel is the largest fully integrated chrome manufacturer in India, where its operations extend from chrome mining to beneficiation and the manufacture of ferrochrome for local and international markets. Managing Director of Tata Steel, Mr B Muthuraman, said that that the high carbon ferrochrome plant would be \\\"the cleanest in the world\\\" with state-of-the-art production processes.

Tourism
Besides rapid industrial expansion, the tourism industry of this region is flourishing. The commercial and industrial development of Richards Bay has been a bonus for the sophisticated tourist and holiday maker. Its bustling business centre has every modern facility and the town boasts excellent recreational facilities for residents and visitors alike. The north coast also offers magnificent scenery, unspoilt beaches in coastal conservation areas. Industrial Tourism is actively promoted and industrial plants, mines and other operations may be visited.



Port Shepstone
Port Shepstone, which falls under the Ugu District Municipality, is fast approaching a boom time. Port Shepstone is today the administrative, commercial, distribution and transport centre of the South Coast. The demand from national retail and corporate tenants looking for space in the region is an indication that growth is occurring with potential for more investment. An urban renewal programme had been proposed with the specific aim of stimulating the tourism economy in the area. It will include the development of:
- Residential property along the seafront and riverfront
- Office blocks in the commercial core
- Four new hotels (4- and 5-star), including a conference facility
- The \"Settler\'s Park\"


A recent trip to Portugal and Spain by Ugu District Municipality, the Hibiscus Coast Local Municipality and Trade and Investment KZN to build relationships with businesses and government in these two countries was successful. One result is that the Portuguese company Construta do Tamega is planning to builds a multi million rand Portuguese village in the Port Shepstone area for the World Cup 2010.

Other projects in the region include the development of the Biofuels industry; the development of clinics and hospitals in rural areas; local skills development; developing a tourism and agricultural master plan for the region; investment in electricity generation infrastructure; the proposed upgrading and expansion of the Margate Airport; and setting up major local manufacturing operations.

Current challenges
Of significance in any assessment of KwaZulu-Natal\\\'s current business activities and opportunities, as well as chartering a course for the future is to acknowledge the significant challenges facing the Province both on a global and local level

Taking a new direction (and not a positive one) may well be applied to the current decline in many of the global economies. The biggest test is the global oil market, which has currently undergone steady and disquieting price increases from $90 to nearly $150 a barrel. Few businesses predicated that the oil price could spiral upwards at such rate and many a boardroom discussion on future scenarios had scoffed at the idea of oil at $150 a barrel, never mind the unimagined threat of $200 a barrel. While the prices appear to have stabilised at present future price predictions are uncertain.

To add to the economic woes, dwindling global food supplies are causing ripples of discontent. According to Canada\\\'s National Farmers Union (NFU), rising population, water shortages and the growing costs of fossil fuel-based fertilisers point to a calamitous shortfall in the world\\\'s grain supplies in the near future. While the biofuel industry has been blamed for increasing food costs, eliminating the demand on grains created by ethanol production would be nothing more than a quick fix temporary solution. Of note is that the rising demand for grain in China, stemming from an increase in meat consumption, is overwhelmingly the cause of supply and demand imbalances in corn production. The only real long term solution is finding ways to increase supply through increased yields, bringing idled farmland back into production and improved farming practices (Biofuels Digest, 2008).

Other declines in the global economy are apparent in the housing market slump that got underway during 2006-2007, led by the United States, United Kingdom and Spain. A similar housing decline is currently being experienced in South Africa, fuelled by increasing interest rates as well as inflation. As pointed out by Cees Bruggeman, Chief Economist for First National Bank, this fall has significantly eroded household wealth, employment and real income growth in the affected regions. The decline is also suggestive of the housing market correcting itself given the rapid increases in prices that had previously occurred.

The growing middle class has had an enormous impact on the South African economy in respect to purchasing power in the retail market. The negative side had seen a sharp rise in credit, which is similar to trends seen in many other emerging and developed countries. The potential inflationary impact of excessive growth in consumer spending prompted the South African Reserve Bank (SARB) to raise its benchmark repo rates by 5 percentage points since June 2006 in an effort to curb high inflation, which hit a 512 year peak of 10.9 percent year-on-year in May 2008.

The current increases in interest rates is set to continue both internationally and locally, ultimately the Reserve Bank aims to achieve a creditable circle of low inflation, moderate interest rate cycles and high and sustained economic growth.. In a televised interview on CNBC Africa in July 2008, South Africa\\\'s central bank Governor Tito Mboweni said that \\\"at global level it is clear interest rates have to go a bit higher and monetary conditions have to tighten because we still have inflationary pressures throughout the world. How large these interest rates changes will be I don\\\'t know... In South Africa we have had quite a prolonged period of less accommodative monetary stance so I don\\\'t know, I wish I knew.\\\"

These increases have had major repercussions for many businesses. Raw material prices are going up, energy costs to operate facilities are increasing, and distribution costs to transport their products to customers are rising. According to PricewaterhouseCoopers, manufacturers must decide how much, if any, of these rising costs to pass onto their customers. Many are attempting to do so, but tightening margins indicate that end markets will only absorb so much. It\\\'s a delicate balancing act.

Predictions are that global growth will continue once the market has stabilised. For the world to resume progress by way of high growth, it apparently may first have to regress a bit, sacrificing a year or two (or more) in order to clean up some of these imbalances accumulated over years of uncritical prosperity (Bruggeman).

Climate
Climate change cannot be ignored as a threat to human security and South Africa is well placed to play a meaningful leadership role in the global debate. Of necessity, care for the environment is growing in importance, not just as a moral issue, but, increasingly as an integral part of the purchasing criteria of major organisations such as local authorities, government departments and large businesses.

Environmental Affairs and Tourism Minister Marthinus van Schalkwyk recently stated that climate change could cut South Africa\\\'s maize crop by 20 percent within 15 to 20 years as the west of the country dries out while the east is afflicted with increasingly severe storms. As such, as a signatory to the Kyoto Protocol efforts to reduce the country\\\'s carbon footprint and the implementation of other energy efficiency processes need to be taken seriously.

A FutureWorld presentation on \\\'Business and the Environment\\\' recently stated that increasingly, organisations around the world are recognising the value of demonstrating transparency and accountability beyond the traditional domain of financial performance. This trend has come about through increased public expectations for organisations to take responsibility for their non-financial impacts, including impacts on community and the environment. Many KwaZulu-Natal companies are leading the way in using business as the vehicle for responsible environmental change. Forestry giant Mondi has acknowledged the importance of ecosystems and that, unless the global degradation of ecosystems is checked and then reversed, where possible, the survival of people and business would be seriously threatened.

Mondi and WWF have signed an agreement to extend their partnership in the Gilboa Wetlands in KwaZulu-Natal for another five years. Mondi has been involved in the programme for seven years and has confirmed its commitment to the wise use and rehabilitation of South Africa\\\'s wetlands through a contribution of ZAR 20-million and continued partnership with WWF and MWP.
Technology is also the source of new energy-efficient and environmentally friendly solutions. Increasingly, major corporations are recognising that going green is not only the right thing to do, but makes business sense too. Pulp and paper group Sappi is in talks with Eskom about a 40 MW co-generation facility at its chemical cellulose Saiccor plant at Umkomaas in KwaZulu-Natal, as well as another 10 MW at its Tugela mill.

In the past, \\\"black liquor\\\" a chemical by-product of the pulping process in the paper making industry killed aquatic life in the rivers it was unthinkingly released into. These days it has considerably more value when it is burned in order to generate electricity. Sappi hopes to have some commercial projects ready by 2012. Indications are that Eskom may pay between 65c and ZAR 1.05 a kilowatt-hour to private generators bringing capacity on stream before 2012 - enabling Sappi to earn a higher rate than it pays for the electricity it buys from Eskom (Business Report, August 2008).

Localized factors
Economic growth is the fuel to fund and drive a new, positive future for the Province. However, localized factors also affect South Africa\\\'s and KwaZulu-Natal\\\'s current economic growth rate.

Eskom
Eskom\\\'s inability to supply sufficient power to the county during much of the first half of 2008 has been problematic. However, steps are currently underway to correct the problem. Eskom intends to bring three \\\'mothballed\\\' power stations back into operation within the next 12 months as well as build two new plants. The additional capacity will help meet soaring industrial demand, alleviating growing pressure on the country\\\'s electricity grid.

Part of the solution to meet expansion demands is to raise tariffs. While this has raised much concern over the cost of doing business, Eskom CEO Jacob Maroga bragged that at $0.03 (23c) per kilo Watt hour for industrial customers after increases, prices still remained competitive (January 2008). That\\\'s the understatement of the year, given that US electricity is three times and Danish electricity eight times more expensive than what the average firm here pays.


Crime
Crime is often singled out as being a deterrent to investment and to living standards in South Africa. In response to these concerns the government is to increase its safety and security budget by R10-billion over the next three years as South Africa moves to strengthen its police force and judiciary. Presenting his 200809 Budget in Parliament, Finance Minister Trevor Manuel said the allocation would see more than 200 000 police officers in the country by the end of March 2011 - 22% more than the current 163 000 - as well as more prosecutors, judges and magistrates.

Action for a Safe South Africa is another new initiative that has been launched to actively address the causes behind high levels of crime in the country, with the aim of realising the vision of a safer South Africa. The programme intends to focus on reducing the demand on the country\\\'s criminal justice system, as opposed to focusing on improving the country\\\'s police force, prisons and courts. The Action for a Safe South Africa aims to intervene within the cycle of violence at key junctures through the collaborative efforts of eight working groups. These include A Million Mothers, Peace in the Home, Opportunity of Youth, Action for Victims of Crime, A Role for Every South African, A Sober South Africa, (Guns) Unsafe in Anyone\\\'s Hands, and Second Chance.

Locally, the city of Durban has set aside ZAR 12 million to boost the Metro Police service. Durban is the country\\\'s only city with its own City Metro Police in addition to the national police force. The aim is to develop a firm, but friendly police presence where personnel are geared towards both enforcing the law and acting as ambassadors. Security in the city is also enhanced by sophisticated technology, including surveillance cameras for incident free events.

Political leadership
President Thabo Mbeki is fast approaching his political retirement in 2009 after two terms at the helm of country. Currently there is much debate as to his successor, with controversial Jacob Zuma as the current leader of the African National Congress (ANC), the people\\\'s choice. However, Zuma has spent much of his time assuring big business that there will be no significant changes in economic policy under his presidency. During a recent address by MEC Zweli Mkhize business, political and media leaders were told that as the ANC held the broader interests of South Africa as the main priority, they should not be concerned about political developments in the country (KZN Growth Coalition breakfast August, 2008).

Land Reform
Land reform is a priority in South Africa - and the government has given its assurance that the free market system will remain one of the pillars of its redistribution programme. South Africa has the resources to negotiate and sustain a successful programme of land reform. At present the restitution process has successfully settled almost all urban claims. However, the slow pace of processing and settling the remaining large and complex rural claims appears to be largely attributable to huge backlogs, inexperienced and inappropriate staff and understaffing in the Department of Land Affairs (DLA) and the Land Claims Commission, both nationally and provincially. This problem needs to be solved as a matter of urgency as some proposed developments\\\' progress is currently being hampered causing much frustration and loss of revenue.

And the Promising
However alarming the individual negative factors are, the bigger picture is not so murky. Trade and Industry Minister, Mandisi Mpahlwa Mpahlwa recently stated that the South African economy has increasingly shown resilience, and the capacity to cope with global challenges, as well as having undergone qualitative changes in macroeconomic policy (Engineering News, July 2008).

China\'s largest bank, Industrial and Commercial Bank of China (ICBC) invested ZAR 36.7 billion in Standard Bank (a 20% share) in 2007. The deal was also the largest investment made into Africa in 2007 which clearly shows the positive sentiment that exists towards South Africa\'s future.

Bain LLC\\\'s acquisition of the Edcon Group valued at ZAR 25 billion also ranks highly in Ernst & Young\\\'s latest Mergers & Acquisitions Handbook. Speaking at the launch of the handbook, Ernst & Young\\\'s Sean McPhee said that South Africa has benefited from international interest in emerging markets, which generally show higher growth than the developed markets. McPhee believes that private equity will remain a significant driver of mergers and acquisitions in the future.

\\\"We are encountering more and more foreign private equity groups that find the South African market attractive. This stems from the growth our market is experiencing, access to resource-rich Africa and the opportunities in infrastructure development,\\\" says McPhee.

Optimism
South Africa and KwaZulu-Natal are indeed raising the stakes when it comes to initiatives to cope with many of the challenges facing the country and the Province. According to Grant Thornton\\\'s 2008 International Business Report, South Africa is placed as the ninth most optimistic country for 2008 in the survey where 34 countries were included. The optimism for the future covers key areas such as employment and economic growth.

This claim is supported by the Organization for Economic Co-operation and Development (OECD)who recently stated that \\\"a combination of sound macroeconomic policies and structural policies aimed at increasing competition appear the most promising to unleash the enormous potential of South Africa\\\'s labour force and address social ambitions\\\".

South Africa also made her debut in the 2007 Foreign Direct Investment (FDI) Confidence Index at 18th place. South Africa joins the Gulf States as newcomers to the index as corporate investment increasingly targets developing nations.

The index, compiled by global strategic management consulting firm A.T. Kearney, lists the world's 25 most attractive FDI destinations."Although South Africa is the only African country featured in the index, the report states that there has been a boost in investor optimism in Africa due to reducing government bureaucracy and the introduction of financial or tax incentives. South Africa's position places the country ahead of Central Asia, South Korea and Poland, among others.

The KwaZulu-Natal government has also embarked on a strategy to attract international investors to the Province. MEC for Economic Development, Zweli Mkhize reported that the regional economy has shown resilience with investments totally nearly ZAR 8 Billion from only 19 investors arriving in the last 24 months (Growth Coalition Breakfast, August 2008). The hosting in October 2007 of the much talked about first South African International Trade and Investment Conference and Exhibition contributed greatly towards profiling KwaZulu-Natal as an investment and trade partner. The conference attracted over 800 delegates from many targeted countries including Germany, Switzerland, USA, China, Nigeria, Mozambique, India, United Arab Emirates and Portugal to mention a few.

On January 8, 2008, a memorandum of understanding was signed between the KwaZulu-Natal government and international developer Ruwaard Holdings who are based in Dubai. The proposed project involves a multibillion- rand investment on the northern side of uThukela river, in the Macambini area on the KwaZulu-Natal north


Grant Adlam
www.topbusiness.co.za


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KZN Overview -A New Initiative 2008 - Grant Adlam

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