How Cape Town can become a neutral global city in a multipolar world

More than 30 years ago, the sociologist Saskia Sassen coined the term “global city” to capture the phenomenon of some large cities gaining extraordinary prominence in a globalising world. Their importance transcended national boundaries to become global in scope. They functioned as the critical nodes that anchored the worldwide networks of finance, trade, and investment.

The rise of these 20th-century global cities, such as New York, London, Hong Kong, and later Singapore and Dubai, coincided with the era of heady globalisation and the spread of global supply chains. They also emerged as headquarters locations for multinational corporations. As Sassen pointed out, the more the world globalised, the more global cities were needed to serve as command centres of the global economy.

These cities also became extraordinarily wealthy. Well-paid industries and executive jobs were created, which, in turn, fuelled the development of advanced transportation, communication and logistics infrastructure.

The spending power stemming from the concentration of well-paid jobs stimulated the growth of sophisticated services catering to the needs of well-heeled consumers. Not just material needs, but cultural ones as well. As a consequence, arts and entertainment activities flourished, and the quality of life in these global cities became the envy of the world.

Today, the globalisation of the previous decades is steadily being replaced by a multipolar world in which countries are organised into different, often competing networks built around shared interests. This old order has been upended by the new megacities in Asia and especially China, which have embraced technological shifts. It is now tariffs, technology and human capital that are reshaping global supply and value chains. The disruption and fragmentation of supply chains is creating renewed opportunity for economies in key regions to increase their participation in these supply chains and capture a larger share of economic activity.

Consequently, the functions of aspiring cities are now changing. The success of global cities in the multipolar world will depend on maintaining their global reach by securing access simultaneously to multiple networks and staying close to all competing blocs of countries without being subsumed by any one of them. In other words, they need to function as neutral hubs that do business with all blocs of countries, attract capital from everywhere, trade with everyone, and remain neutral amid competitive tension and rivalry between blocs.

In the case of South Africa, rather than relying on ideologically tired and often dogmatic national foreign policy positions that can be economically damaging, cities should proactively engage in more focused “city diplomacy” to promote their own commercial interests and carve out their own distinct economic niches. To compete with highly ambitious cities such as Dubai, Ho Chi Minh City, Riyadh, Seoul and Shenzhen, leaders in government must be bold to enhance the drivers of their own competitiveness.

Pillars of competitiveness

A city’s competitiveness is underpinned by six pillars:

1. Effective institutions need to be in place that are well governed to ensure a transparent and predictable regulatory environment supported by easy-to-navigate administrative processes.
2. The city needs an enabling pro-business environment that fosters a productive and investable economy, enabling firms to operate efficiently and at scale.
3. A city government needs to ensure that its infrastructure and connectivity facilitate the efficient movement of people and goods through reliable, well-integrated and low-congestion transport, logistics and connectivity infrastructure.
4. A quality-of-life offering must be present that provides safe living conditions, promotes robust health standards and supports human capital development, enhancing the city’s attractiveness to local and expat talent.
5. An urban environment requires a focus on sustainability that encourages renewable energy adoption, minimises pollution and ensures improved management of water and waste.
6. A city needs a “future readiness” mindset that gives it the ability to anticipate and adapt to future business, economic and technological shifts. This is imperative for public policy, which typically is reactive rather than proactive to the shifting dynamics of the market and the business needs.

The African regional market

Several macro-enabling assets are already in place in the region. First and foremost, Africa is working to bring about the African Continental Free Trade Area (AfCFTA) to create a single African market. Realistically, a handful of Africa’s coastal economies less constrained by infrastructure limitations can take advantage of a sweeping regional liberalised trade agenda. Cape Town is in an ideal position to serve both as a gateway to Africa for the outside world as well as a hub for managing intra-African trade and investment.

But inherent value from the AfCFTA cannot be unlocked by South Africa until it can significantly address its existing logistical constraints that are down to the overly centralised national state ownership of port and rail assets.

Festering problems of countrywide mismanagement and underinvestment in public infrastructure inevitably affect Cape Town and all other coastal cities that are conduits to the global economy. The dead hand of the national government and state ownership is hindering Cape Town’s ability to compete internationally.

Unlike cities in China (for instance), there is little policy space in South Africa for municipal governments to design their own economic policy. City-level initiatives are snuffed out by the one-size-fits-all national policy framework that does not allow for intra-country competition.

It is to be noted that one of the main (intangible) drivers of growth in China and other successful Asian economies has been the highly competitive environment encouraged by the central government through allowing provinces and cities to formulate their own policies and incentives to better compete with each other for capital.

Cape Town has been pushing for greater autonomy to manage economically enabling infrastructure for the wider province, including the port. The World Bank and S&P Global Market Intelligence 2025 Container Port Performance Index (CPPI), ranked Cape Town a woeful 400 (bottom of the list), with Durban ranked 398th. Gqeberha and Ngqura (Coega) ranked only marginally better.

There may have been some recent initiatives following the partnering with private sector bodies and some equipment upgrades, but South Africa’s state-owned ports need dramatic and structural improvements to be considered to be anywhere near competitive internationally.

Inefficient infrastructure has undermined Cape Town’s ability to compete and negates any advantage that can be gained from its strategic geographical location. Bad infrastructure not only undermines an economy’s ability to compete, it also stifles export businesses and raises input costs that are highly inflationary for consumers.

Missing a strategic opportunity

A real-time example of this is playing out following the conflict in the Gulf. The disruption of shipping and ongoing energy crisis resulted in an oil supply shock with the resultant economic fallout. The Middle East conflict has dramatically diverted shipping, with traffic passing Cape Town up significantly.

The Cape Chamber reported a surge in shipping traffic of 112% in early March. But by and large this has not translated into port visits for Cape Town. This is largely down to the small share of the region’s participation in global trade and handling of container traffic. The opportunity to capture a greater share of maritime traffic is begging.

Bloomberg summed it up in a recent article when it said: “African ports are capturing only a fraction of shipping rerouted around the continent’s southern tip after the closure of the Strait of Hormuz, underscoring their limited ability to turn global trade disruptions into gains.”

However, certain African ports offering refuelling and bunkering services such as Lüderitz (Namibia) and Port Louis (Mauritius) have benefited as shipping companies have used their services to accommodate the longer routes and time at sea. For South Africa, the infrastructure is largely already there, but policy and resultant inaction are not allowing this capability to be exploited and scaled.

Global exporters will now seek lower-cost and more predictable trade routes. Longer-term strategic policy shifts are now required to reposition in light of these shifting geopolitical fault lines. This opens up the opportunity for Cape Town — an opportunity that has always existed but not been leveraged.

From a logistics perspective, the Port of Cape Town offers direct access to sea lanes connecting the South Atlantic and the Indian Ocean — itself a highly strategic location in the same manner that Singapore, Suez, Djibouti, Gibraltar, and Panama all enjoy.

To be able to leverage this comparative geographic advantage, greater agility and strategic action are required. The conferring of authority over infrastructure assets by the national government to city level should be a priority structural reform of Operation Vulindlela — the government’s reform agenda that needs to be far bolder and implemented faster.

Global networks

With reform, opportunities will emerge, especially for a city such as Cape Town which is increasingly attracting domestic and international talent and the global networks that come with it. These network linkages serve as an instant human-capital-powered value chain that facilitates flows of knowledge, commerce and capital.

As a consequence, new opportunities are opening up for Cape Town to become the new kind of global city that can thrive in the emerging multipolar world. The fact that South Africa sits in neither the US nor the Chinese bloc is also very helpful.

Like Singapore and Dubai, Cape Town can position itself as a neutral ground for commercial deals, arbitration, and capital flows that cannot easily happen in more aligned cities. Being part of the BRICS grouping may also increase its credibility with the Global South. A targeted investment promotion strategy can talk to this initiative and focus on clusters and where the city is already enjoying a comparative advantage.

Attracting multinationals seeking an African headquarters and international associations will help attract talent and support the development of locally based ecosystems that encourage R&D, innovation and the commercialisation of knowledge.

Given the city’s vibrant tech sector and venture capital activity, export-oriented digital services, financial services, asset management and creative and cultural industries are the sectors with strong potential for rapid expansion. The focus is not on the national economy’s old industries of mining and industry, but new economic growth clusters that encourage diversification and are largely free of state interference.

Ultimately, the business model of leading international hub cities is simply to manage the “flows” that pass through their economies — trade, capital, labour and services — and to create a highly enabling business environment to increase these without friction. By doing so, Cape Town may emerge as a new kind of global city that drives South Africa’s economic development locally and regionally. DM

Dr Martyn Davies is an adviser to governments and multinationals on economic strategy and a Young Global Leader alum of the World Economic Forum. Dr Yuwa Hedrick-Wong is chief economic adviser at the Southern Capital Group, Singapore.