South Africa

OP-ED

Opportunities for change: Bridging class divides and addressing underinvestment for Gauteng’s poor

Parks Tau, May 04, 2016. (Photo by Gallo Images / Sowetan / Vathiswa Ruselo)
By Parks Tau
05 Mar 2021 0

Covid-19 has upended almost everything since a year ago when the first suspected case of Covid-19 was confirmed in South Africa.  This is what Gauteng — with 15 million residents — is working on when it comes to managing urbanisation, inequality and infrastructure. 

The conjunctural period presented by Covid-19 and its associated variants manifests both challenges and opportunities. Even before the arrival of coronavirus, the province of Gauteng faced interlinked structural challenges which, inarguably, were exacerbated by this global health pandemic. These ranged from rapid urbanisation, economic inequality and inequitable access to infrastructure, including digital access. 

Like any crisis, established and emergent, there are opportunities to reset the compass and recalibrate fitting policies and programmes. Undergirding these interventions, as made evident and urgent in this Covid-19 zeitgeist, should be targeted and time-bound social compacts and public-private partnerships (PPPs). As Kofi Annan said in 2009 about problematiques like climate vulnerability and migration, these are problems that travel without passports and consideration of borders, race, class or economic status.     

For the Gauteng Department of Economic Development (GDED), these are matters it practically has to deal with, year-on-year, relating to material conditions of its diverse populations and overstretched infrastructure networks. There is increasing pressure on the GDED to balance between, for example, equitable access to basic utilities and integrated public transport systems in a context of increasing households living in informal dwellings, electricity grids and sanitation systems overloaded with increasing users and public transport suffering from years of serial underinvestment. 

As a province with more than 15 million residents (using July 2020 StatsSA estimates), with eight out of 10 living in an urban context, Gauteng’s economy is based on service industries dependent largely on physical real estate models. Such models expose and render it vulnerable (not “antifragile” as Nassim Taleb opines, 2012) to current Covid-19 conditions where there is a shift to remote working and less commuting to work by the middle-class and elites. What are the cumulative impacts of this, in terms of investment incentives, for the township populace and urban poor who rely on public transport to commute to work, school, and in search of opportunities? What does this mean for policy- and decision-makers when there is talk about a “sustainable urbanisation process”? 

Quite obviously, these structural challenges compel the province to propose tangible solutions to address a reduction in the province’s tax base support, departure of businesses to the north and derelict infrastructure in the CBDs. These matters are pertinent in a province that has long prided itself as the country’s economic engine and the continent’s seventh-largest economy. Compounding the situation is the province’s magnetic attraction to internal and external economic migrants. It is no coincidence that these migrants, as to be expected, continue to contribute to households while living in informal dwellings, numbering 850,000 homes occupied by over four million people, in the Gauteng City region. 

The implications and opportunities are evident across different sectors. Firstly, the electrical grids, sanitation systems and road systems designed for far fewer users are frequently overloaded and cost recovery from users in these contexts is low. Moreover, this directly contributes to over 30% of water and electricity being lost through non-billable channels (both through under-investment in infrastructure at points of very acute use and through direct theft through illegal connections).

Secondly, public transport has suffered from underinvestment despite the fact that the working class and working poor rely on it. The minibus taxi economy, prevalent across almost the entire African continent, represents a vast and largely under-developed economic network. Arguably, the evolution of the taxi industry has been held back by its profile as doggedly informal. There are opportunities here for the Gauteng taxi economy, serviced by 120,000-plus minibus taxis and collecting the equivalent of R70-million per day in fares. Meanwhile, the South African transport system focuses subsidy allocation on much less utilised forms of transit such as bus and light rail (and South African Airways), which are very expensive to implement and have nowhere near the reach of the semi-formal minibus taxi systems. 

Thirdly, since there is now the hegemony of working-from-home or remote learning, the GDED has to factor in the need for equitable broadband access for the urban working poor and working-class in general. This is an urgent intervention requiring PPPs, since recent surveys indicate that only 59.3% of all South Africans have access to the internet in some way. And of course, though mobile phones with data capability are now ubiquitous, the price of data remains a major issue of concern compared to other emerging markets like Rwanda and Kenya.

Why are social compacting and PPPs irreplaceable for the GDED? Why is the practice of an “entrepreneurial state” (Mariana Mazzucato, 2013) relevant in the Covid-19 period? 

The informally urbanised and the working poor represent a mass-scale market for utilities, digital services and transport infrastructure who, unfortunately, will not be able — as taxpayers or service users — to carry the cost of the vast upfront investment required to provide this infrastructure to them, at least initially. The risk is an even more severe inequality of material conditions under which the middle class and upper-middle class continue to privately finance the infrastructure (cars, fibre to the home, single home off-grid solutions) which allows them to participate in the world of work, while the working class are left at the mercy of a perpetually underfunded state system. 

And so, without ways of structurally cross-subsidising new public capabilities in a way that draws on the proceeds of growth, the problem cannot be sustainably solved. It requires planning and financing at regional scale and being about cross-subsidisation. 

How is this being done in practice? 

Firstly, the South African government is using a new planned city node north-west of Johannesburg, called Lanseria, to demonstrate how platform public infrastructure can be planned and financed at a regional scale and in an integrated way, that sees all public infrastructure as a meshed network. This cluster of developments constitutes an opportunity for the first genuinely post-apartheid urban node developed in accordance with smart city principles, with an estimated population of over 3.5-million people by 2035.

Furthermore, the Presidency Office is working with the Development Bank of South Africa (DBSA), the Gauteng province and North West province to set up the special purpose vehicles (SPVs) which unlocks these developments by funding the bulk infrastructure and other enabling public sector investments needed. This funding is a loan linked to future flows of cash from developments that will now happen as a result of the bulk electricity, sewerage, water, roads and fibre being available.

This allows the proceeds of the most commercially feasible developments to fund the same SPV that is planning and area-wide networks, including ubiquitous fibre networks and scalable green micro-grid systems in the first instance, with the intent to scale to mobilise subsidised housing for approximately 50% of the tenancies and ultimately light rail networks plugging into a regional design. After all, when you finance at a portfolio level you can cross-subsidise and do so transformatively.

Secondly, there is also a need to understand and use the power of the commuter economy and give operators equity. One of the ways the GDED is adapting to rapid informal urbanisation is to directly support opportunities for the key commuter nodes, used by the minibus taxi system, to be upgraded to micro-CBDs. The model the GDED is using builds on the negotiations which rolled out the first BRT systems in South Africa, which were seen as competitors to the minibus taxis. The taxi associations received equity in the BRT route companies in return for surrendering part of their right to operate those same routes.

Presently, the GDED is giving taxi associations equity in operating companies that will commercialise key transit points, in return for allowing these professional operating companies to run formal, compliant operations which de-risk financing linked to the commuter economy at these major nodes – including the development of new retail and business operations which grow the local tax base and can cross-finance upgrades.

Building a network of these, the GDED can use the same logic to convert minibus taxi ranks and routes to full-scale tram systems and fully-realised commuter stations linked to commercial and retail within a generation. This echoes what has been done with the more formal economy, with light rail systems aimed at middle class and white-collar workers. 

Since 2010 and within a two-km radius of the Gautrain light rail stations, 820,000 new square metres of office space, 31,000 new square metres of retail, and 805,000 square metres of other commercial activity amounting to 66,000-plus new jobs have been realised. Using the same principles to develop the mass-scale commuter economy, with the backbone of the minibus taxi industry, is how we scale capability.

Thirdly, the GDED is deploying agility in design by using micro-grids that link with new forms of urbanisation. The four million people that live in backyard rental units in Gauteng are clustered in specific areas. Hence the GDED is working with partners that can finance the upgrade of off-grid, single-story units to multi-story dwellings, multiplying the earning potential of the same ground by three or four times. In this way, there is room for creating the opportunity to develop high streets by putting commercial operations at ground level.

By clustering into precincts, these upgrades can support the deployment of micro-grids which combine access to the main grid with embedded generation, financed through a portfolio fund linked to upgrading hundreds if not thousands of backyard units.

Indeed, Covid-19 has upended almost everything that existed in March 2020 when the National Institute for Communicable Diseases confirmed the first suspected case of Covid-19 case in South Africa. For the Gauteng Department of Economic Development, there are opportunities aplenty. As President Cyril Ramaphosa said in October 2020, in the “aftermath of the (Covid-19) fire, green shoots begin to emerge. The ashes enrich the soil and new life takes root to replace what was lost. Together, we will build a new economy. The time is now. Ke nako”.    DM

Parks Tau is the MEC of Gauteng’s Department of Economic Development. This article is an edited version of his presentation to the 23 February 2021 World Bank Group panel entitled, Urban, Resilience and Land (URL) Global Practice Forum. 

Information pertaining to Covid-19, vaccines, how to control the spread of the virus and potential treatments is ever-changing. Under the South African Disaster Management Act Regulation 11(5)(c) it is prohibited to publish information through any medium with the intention to deceive people on government measures to address Covid-19. We are therefore disabling the comment section on this article in order to protect both the commenting member and ourselves from potential liability. Should you have additional information that you think we should know, please email [email protected].

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