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Sustainable Resource Use Paper

Economic and industrial development: options facing Cape Town from a “sustainable city”
perspective (3rd draft)

1. INTRODUCTION

1.1 Ecological limits to economic growth and development: implications for the City of Cape Town
(CoCT)

What kind of growth should Cape Town aspire to? Can growth be de-coupled form rising rates of
resource consumption?

It is no longer possible to think about the economic growth of developing economies within a globalised
economy without taking into account the effects of the ‘oil peak’ on oil prices and how rising oil prices
will blow holes in oil dependent economies (Swilling, et all, 2006). The linkage between climate change
and human activity is now an uncontested fact. There are similar concerns about the impact on food
supplies and the relationship between population growth and the transition to a majority urban world.
How will all this be affected by the oil peak, climate change and eco-system degradation? What are the
implications for municipal policies on local economic development, service delivery, revenue generation
and the provision of infrastructure?

Food for thought: in 2006-7 Cape Town spent R12 billion of its total annual budget of R17 billion on
energy, water, sanitation and waste services alone. This is a full 10% of the Gross Geographic Product
(GGP) of the metropolitan economy, even though it excludes the full environmental costs arising from
the ‘free’ ecosystem services these systems depend on (such as CO2 sequestration, catchment areas
regulating water supplies, landfills to absorb waste, air quality and negative effects on health). The Cape
Town urban system really is extremely resource intensive. Every oil price rise corresponds to net
increases in the amounts of cash transferred from the Cape Town economy into national and global
financial circuits (Swilling, et al, 2006).

What does all this mean for the economic development path that a city such as Cape Town must follow?
Should it aspire to be part of the global competition? Should it try to find a place for itself in the
globalised economy? The dominant answer to be found in city development strategies is yes to the global
integration of the City: draw in foreign investors to the City, let there be a shopping mall for local
townships, let the property market work to promote investment, etc. (City of Cape Town, 2006). At the
core of such an approach is the control and realisation of returns from such a path outside the City,
reduced capacity for local production, consumption of goods produced internationally without local
resources (labour, physical and financial) contained in them, flooding of local markets by cheaper
commodities from other countries displacing local goods, etc. Is there ‘elbow room’ or space for a local
economy that meets basic needs through local resources?

Given the magnitude of Cape Town’s expenditure on natural resources, it is important to look at who
benefits, the long-term impacts on the space economy, social structure and eco-systems, and the
possibility of designing and implementing more sustainable urban systems in future. This brings into
focus the potential economic and social benefits of a sustainable resource use perspective, and the
benefits that sustainability reporting can generate.

This paper presents an argument and proposed solutions for an alternative economic development path
for Cape Town. Such solutions need to take into account several challenges:
i) The integration of ecological limits to economic and industrial development;

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ii) Overcoming underdevelopment and apartheid spatial patterns; and
iii) Ensuring balanced and sustainable growth and development.

These challenges put contradictory pressures on the local government. However they cannot be avoided.

In order to contextualise the challenges and the proposed solutions, this paper starts with critical
overview of the economy of Cape Town. This overview also discusses growth and employment trends
and prospects, and how Cape Town is located in the global economy. Cape Town’s future economic
growth and development must also take into account the system of urban development that has shaped
the city. The paper uses the ‘consumption city’ model and the notion of an ‘apartheid city’ to provide a
critical understanding of this urban system.

1.2 Cape Town recognises the challenges

The above concepts and the solutions proposed in this paper are already embedded in policy debates
within the Cape Town municipality. For example, the CoCT’s Updated Growth Scenarios (2007), the
Economic and Human Development Strategy (EHDS), the 2007-2012 Integrated Development Plan
(IDP) and other key strategy documents underline the importance of economic growth as “the primary
vehicle through which to address the development goals of reducing poverty and unemployment” (CoCT,
2007a, pg: 6). In all these key strategy documents, the emphasis on economic growth has also sought to
integrate environmental sustainability which is identified as one of the “5 stars” of the EHDS strategy.
Impending climate change and the imperative for Cape Town to continue to work on positioning itself as
a “green” destination to attract investment has driven the city’s strategic thinking on economic growth
scenarios (CoCT, 2007b). Background research used by the CoCT strongly states that “global evidence is
increasing in its consensus that future economic growth will indeed depend on economically positive
ecological preservation” (CoCT, 2007b, pg: 2).

Already in December 2007, the CoCT recognised that “future economic growth in Cape Town is
dependent on environmental sustainability” (CoCT, 2007a, pg: 4). This perspective is contained in a
discussion document released by the CoCT’s Department of Economic and Human Development entitled
“The Economic Imperatives of Environmental Sustainability”. This document underlines the following
policy perspectives:
i) The CoCT is increasingly identifying environmental sustainability as a strategic priority: “the
economic opportunities inherent in the threats of climate change should be immediately
exploited, benefiting both the economy of Cape Town, the local community and the
environment” (pg: 6);
ii) The CoCT recognises the economic benefits of environmental sustainability for firms and
individuals alike, and that these would require changing current consumption and production
patterns.
iii) The CoCT recognises that current models and measurement tools do not take into account the
very real environmental, opportunity and blackout costs of economic activity. Upon this
recognition, the City is considering using policy tools and planning models that address this
gap.
iv) A major determinant of current economic activity in the City and South Africa as a whole is
the fluctuating prices of exported oil. Recognising this, the CoCT now believes that it is
essential that all future policy decisions are mindful of the need to reduce the economy’s
dependence on oil.
v) The CoCT recognises the prudence of investing in renewable energy technologies and related
benefits such as the creation of a private market in renewable technology.
vi) The “greening” of Cape Town will reduce pressure on basic service infrastructure capacity
and attract investment, which will grow the economy and contribute to the environmental
preservation of the city at the same time.
vii) Several key documents have been developed, these being: the Draft Energy and Climate
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Change Strategy (for Cape Town) (2006), a draft report on Renewable Energy and the City of
Cape Town: an Economic Model of Environmental Costs (2007).

In terms of the Cape Shared Growth Initiative, the Cape Town’s regional development strategy will
unfold in a partnership-driven process in the course of 2007. The Sustainable Development Summit that
was organised by the multi-stakeholder Provincial Development Council (PDC) on 21-22 June 2005
adopted a Declaration of Intent that has far reaching implications for Cape Town. It sets a framework for
positioning the Western Cape as the Province that will lead the way both nationally and internationally
with respect to regionally-based sustainable development strategies focusing on:
i) Promoting greater equity in wealth and land distribution;
ii) Satisfaction of fundamental human needs;
iii) Job creation through economic development and investment strategies;
iv) Incorporation of biophysical and ecological limits in planning and decision-making;
v) Conservation and sustainable use of biodiversity and other natural resources;
vi) Sustainable living within peaceful economically viable communities;
vii) Internationalisation of environmental and social costs in the design and operation of
production and consumption systems; and
viii) Promotion of environmental, social and economic justice.

Out of these documents and processes, the CoCT has reached the conclusion that the current rate of
natural resource exploitation will retard economic growth when it reaches a supply ceiling. resource use
occurs at a highly correlated level to economic growth (CoCT, 2007a). This recognition is an important
platform upon which to take forward action on ecologically informed economic growth and development.
However, there is no information available regarding the extent to which this recognition is translated
into practice and whether it informs the investment and production decisions of industry and other
economic players. Another challenge has been how to ensure that paradigms which inform economic
growth and development plans integrate the provisions of the above documents. Not much success has
been achieved in this regard. Therefore, this paper seeks to consolidate the above processes by putting
forward concrete proposals for a “sustainable city” model which require action by the City.

1.3 The “sustainable city” model

The solutions provided in this paper rely on the very useful framework provided by Swilling (2006). This
framework is implied, but not explicit, in current internal CoCT policy debates and recommendations.
According to Swilling et al (2006), the “sustainable city” model requires the Provincial, City and
National Government to realise early on that sustainability provides the means to achieve equity and
integration. Massive savings are generated from investments in smart infrastructures designed by
engineers and financial experts who are briefed to learn from thousands of working models found locally
and elsewhere in the world where poverty eradication has been achieved via sustainable resource use
strategies. More equity is achieved by removing the subsidies and reducing the costs of middle class
lifestyle via restructuring the techno-infrastructure that supports it.

Swilling (2006) contrasts this “sustainable city” model against three other development scenarios:
i) Business as usual: basically a continuation of the status quo into the future. The consequences
are increasing inequalities and deepening poverty; race and class divisions will get worse
within a context of state subsidised urban sprawl; and highly inefficient urban systems will
persist causing eco-system services to further degrade, rapidly rising costs of energy (in
particular oil), water, refuse removal, transport, food and shelter which, in turn, will
exacerbate inequalities reinforced by spatial disintegration. Ultimately this will lead to a
general state of decline represented most graphically by the continued expansion of gated
communities on the one hand and sprawling informal settlements on the other, with
corresponding totally disconnected lifestyles.

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ii) Developmental state option: in this scenario, Provincial Government and the City manage to
agree on a package of developmental interventions in the land market in particular in order to
achieve greater integration and equity, with at best a rhetorical commitment to sustainability.
Publicly owned inner city land is secured for socially mixed integrated developments that
result in densification, new local economies, and the promotion of a kind of ‘melting pot’
lifestyle. Infrastructure funds get spent on expensive sewers rather than much cheaper biogas
digesters, public transport is expanded but remains dependent on fossil fuels, the middle class
is allowed to build energy inefficient houses that are not forced to separate wastes, and
nothing is done to promote local food markets. Unfortunately, the ignored eco-system
thresholds come home to roost: the wrong assumptions about cheap water, oil, energy, waste
management, sewerage treatment, food and eco-tourism dollars undermine growth and
therefore the resources for poverty eradication and ultimately integration as the rich buy their
way out of unsustainability by reversing integration. Islands of eco-efficiency do emerge, but
the continuation of public subsidies of eco-inefficiencies (that the emerging black middle class
require to make it into the middle class) undercut the resources required to fully realise the
poverty eradication aims of the developmental state option.
iii) Deep Green option: in this scenario, sustainability becomes an end in itself. Instead of using
sustainability as a means to achieve sufficiency and integration via the notion of sustainable
resource use, sustainable living becomes the overriding focus in ways that may result in
integration via densification, but not necessarily across racial boundaries because race will not
be seen as such a problem. This scenario is most likely to happen later after a ‘business as
usual’ scenario has been allowed to run it’s course ending in a severe crisis in ten or fifteen
years time.

2. THE CAPE TOWN ECONOMY: A CONTINUING “CONSUMPTION CITY”

This section is a broad survey of the major structural features of the economy of Cape Town in relation
to the broader Cape Town Functional Region and the rest of the Western Cape economy. The city’s
insertion into the global economy and future growth and employment prospects are also highlighted. To
apply Swilling’s development scenarios (Swilling, 2006), the analysis below shows that Cape Town’s
current and future economic growth and development trends display a dominant “business as usual”
approach with nascent elements of the “developmental state” option. The dominant “business as usual”
approach perpetuates established production and consumption patterns.

2.1 Size, Sectors and Growth

As the figures cited in this paragraph demonstrate, the economy of Cape Town is not small and
insignificant in relation to the South African economy. In the year 2000, Cape Town produced goods and
services worth more than R85.9 billion (PGWC, 2005). Cape Town’s 2006 Gross Geographic Product
(GGP) is estimated at R123 billion. Cape Town constitutes 78% of the Western Cape Economy, and
11.58% of South Africa’s Gross Domestic Product (GDP) (Ashley, 2008). This is many times larger than
Lesotho or Swaziland and is essentially same size as the Tanzanian economy, a country of 35 million
people. The same pattern is true of the City’s budget:
Financial year Operating Budget Capital Budget
2004-05 R11.3 bn R1.53 bn
2005-06 R13.97 bn R3.8 bn
2006-07 R11,3bn R1,94bn
2007-08 R14,15bn R4bn
2008-09 R15,75bn R3,91bn
Source: www.capetown.gov.za (City of Cape Town Budget: 2008 / 2009 - 2010 / 2011, May 2008).

The most important characteristic of the Cape Town’s economy and its economic development is its
diversified broad base. The key sectors of the economy (manufacturing, trade, and financial and business
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services) are each well diversified, thereby reducing the risk of over-dependence on any single industry
(PGWC, 2005). In addition, even though not primarily agricultural but the Cape Town economy also
includes a significant agro-processing component. The Cape Town economy is also strengthened by a
well-developed and diversified tourism sector, and relatively strong and dynamic construction, fishing,
professional services, higher education and transport sectors (PGWC, 2005). Within manufacturing, the
major activities are agro-processing, metals and engineering, oil and petro-chemicals, and clothing and
textiles. The absence of large mines and capital-intensive mineral processing as well as heavy industry
complexes accentuates the dominance of small and medium-sized enterprises (SMEs) in Cape Town’s
economy (PGWC, 2005).

Source: PGWC (2005). Micro-economic Development Strategy.

The infrastructure and economy of Cape Town is far more established than any other settlement in the
Western Cape. Since 1996 the Cape Town economy has grown by 51% (CoCT, 2007a). Between 1995
and 2006, the fastest growing service sub-sector per annum was communications (16.39%) (Ashley,
2008). Second was finance and insurance (10.82%), followed by construction (8.02%), then wholesale
and retail trade (7.03%). The 1995-2006 growth period of the service sector was built on an earlier period
of the expansion of the service sector which goes back to the early 1980s (City of Cape Town, 2001). By
2001, the fast growing service sub-sectors had increased their contribution to Cape Town’s economic
output from 35% to 42% (City of Cape Town, 2001). Other contributors to the 1990s period of growth
were the transport, communication and construction sectors, which are expected to continue to be
significant contributors to local economic growth. An important pillar in Cape Town’s growth pattern

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was the positioning of export products as the central driver of local economic growth, increasing from
R6.6 billion in 1996 to R9.7 billion in 1999. Between 2001 and 2005, the average annual growth in
exports from the Western Cape as a whole was 5% (Wesgro, 2006). Cape Town contributes a significant
part of this growth. Textiles have declined to 3.5% of exports in _2005 compared with 6.1% in _2001
(Wesgro, 2006). A number of other manufacturing sectors saw overall declines – food and beverages;
non-metallic minerals, , and wood, paper and publishing. Some of the decline is due to world trade
commitments to lower trade tariffs against imports. This affected the clothing and textile sector in
particular. The general decline in manufacturing was paralleled by a growth of the informal sector which
by 2001 employed more than 22% of the labour force and produced about 12% of local economic output.
The increasing export orientation of the local economy was actively encouraged by the national,
provincial and local spheres of government (see discussion below on globalisation and its impact on the
city). For example, the 1996 GEAR policy emphasises the international competitiveness of the South
African economy as a whole. Like most metropolitan municipalities in South Africa, the City of Cape
Town took its cue from the GEAR policy in this regard.

In line with its higher rates of economic growth, fixed investment spending in the Western Cape also
grew more rapidly than nationally between 1995 and 2005 – 4.2% as compared to 2.2% (PGWC, 2005).
Most of this investment has gone into economic sectors located in Cape Town. In terms of sectoral
contribution, financial and business services played a major role in this increased investment: investment
in the service industries is less cyclical (PGWC, 2005). Transport and communication, government and
internal trade and catering also contributed to the growth in fixed investment spending. The only
manufacturing sectors that made any significant positive contribution were petroleum products,
chemicals and transport equipment.

But GGP is in fact only a partial measure of the actual city economy, as it excludes the “second
economy” and does not measure the ecological impact of growth. The informal economy has become an
important source of livelihood for many, employing an estimated 22% of the labour force and
contributing 12% to economic output (CoCT, 2007a). 93% of Cape Town’s formal businesses are small,
contributing 50% of total output and 40% of total employment (PGWC, 2005). The figures would be
even higher if informal business were included. Further, the above economic structure arises out of a
century or more old growth path that has not yet integrated ecological sustainability, equity and
overcoming underdevelopment.

2.2 Employment

Despite the rates of growth reported above, formal unemployment still grew from 16% in 1996 to 18% in
2000. GGP growth rose from R82bn in 1997 to R108bn in 2004 rising to R112.5bn in 2005. In terms of
the Labour Force Survey (Statistics South Africa), unemployment in the city had grown from 13% in
1997 to almost 23% in 2004, although a drop was recorded in 2005 to 20.7%. In line with national and
international trends in economic growth, the City experienced both JOBLESS AND JOBLOSS growth in
the 1990s (City of Cape Town, 2001). The decline in manufacturing has largely been responsible for the
rise in unemployment.

What are the underlying causes of the economic and employment trends? The legacy of apartheid has
meant that a large portion of the labour force has limited skills which are not suitable to an increasingly
globalising economy which requires soft skills that are very limited in the economy. This has also meant
a limited domestic market. Other factors which explain these economic and employment trends are the
historical structure of the South African economy, the impact of globalisation and deepening capital
intensity. Historically, the South African economy as a whole has been based on a dependent capitalist

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accumulation path which relies heavily on primary product exports, particularly from mining and
agriculture, and it is excessively dependent on imports of capital goods and many commodities required
in manufacturing. Therefore, economic growth and development has been exceedingly vulnerable to
global fluctuations, especially movements in commodity prices. The structure of the economy retains the
basic features of an export-oriented and import-dependent economy, with an under-developed domestic
market.

Table 1: Employment and unemployment between 1995 and 2004

1995 2004
Population aged between 15-64 1,644864 1,983,916
Economically active 1,014,102 1,178,436
Not economically active 630,762 805,480
Employment: formal 727,538 715,505
Informal employment 111,412 187,201
Total employment 838,951 902,706
Unemployed 175,152 275,730
Unemployment % 17,27 23.4
Source: Quantec Research using data from Statistics SA’s 2004 Labour Force Survey (cited in WCPG,
2006)

Table 2: GGP Growth and Associated Employment Growth by Skill Category 1995-2006

1995-2006 Skills Demand Average Skills Demand % Growth p/a


R Sector Average Highly Skilled Semi & Total Highly Skilled Semi &
a GGP skilled unskille skilled unskilled
n Growth p/a d %
k 1995-2006 % growth growth %
growth

1 Communication 16.39% 1195 6629 2821 10646 0.68% -3.62% -3.45%

2 Finance & 10.82% 15787 35874 1414 53075 1.79% -0.35% 3.74%
insurance

3 Construction 8.02% 2882 6923 47824 59628 -2.89% -2.86% -3.94%

4 Wholesale & 7.03% 18080 74627 20190 11289 3.30% 3.81% 1.48%
retail trade 5

5 Transport 5.69% 1779 13753 4165 19698 -2.75% -3.56% -3.83%

2 Mining -5.80% 400 379 2019 2797 0.21% 0.23% -2.32%


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Total average 4.79%

Source: CoCT (2007a)

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Table 2 shows that for all the growth sectors mentioned above (petro-chemicals, transport and
communications, and financial services), there is a disjuncture between growth in fixed capital formation
and employment creation: significant increases in capital investment were not accompanied by any net
employment growth (PGWC, 2005). Employment declined in almost all sectors – the major exceptions
being automotive, retail and wholesale trade, and business and community services. Employment decline
was particularly sharp in manufacturing at 3.2% per annum compared to a national average decline of
0.8% per annum (PGWC, 2005). Between 1995 and 2005, employment in financial services grew by
1.1% per annum while output growth was 6.1% and investment growth 5%. Rising fixed investment
accompanied by falling employment is a clear indication of capital deepening and labour displacement.
In line with this strong tendency to capital deepening, employment creation in the Western Cape (in
particular in Cape Town) is significantly skill-biased (PGWC, 2005). In all sectors, even in the unskilled
areas, the share of unskilled workers has tended to decline. Between 2000 and 2003, two-thirds of the
jobs created accrued to those with a matric certificate or higher (PGWC, 2005). Another factor in
growing unemployment has been the net in-migration to the city from the poor and rural parts of the
Eastern Cape which has seen a massive growth of unskilled labour in the city.

The above trends also raise serious questions about the efficacy of economic growth as a vehicle through
which to create jobs and alleviate poverty. The challenge therefore is not solely to raise the rate of growth
but also to foster growth that takes a more labour absorbing path, and more especially to increase the
demand of unskilled and semi-skilled labour. This underlines the importance of SMME development,
cooperatives, entrepreneurial development, skills development and public works programmes. As will be
argued later, a sustainable city model also has positive labour absorption advantages.

2.3 Cape Town in the global economy

One of the most significant spatial dimensions of global growth is that coastal economies have tended to
grow significantly faster than hinterland economies (PGWC, 2005). The principal factor underlying the
enhanced economic performance of coastal regions is that their location allows for easier engagement in
the global economy, particularly if, as in the case of the Western Cape, it sits astride established trading
routes. For the Western Cape, the rise in exports has exceeded the growth rate of the regional economy
by a significant margin. The growth in Western Cape exports in the period 1996-2003 has been estimated
as being between 8% and 11.4% per annum (PGWC, 2005). This compares to a provincial growth rate of
3.9% over the same period. Much of this export growth comes from the Western Cape’s top 3 export
categories – fruit, alcoholic beverages (wine) and iron and steel: products which are all not typical
Capetonian. These 3 categories account for a little under half of all Western Cape exports. However,
export growth is very widespread (and this is where Cape Town contributes) – notably in boats and ships,
furniture, chemicals, wood products, automotive components, tobacco and paper (PGWC, 2005).

The global economy is seen by both the CoCT and the provincial government as offering several
advantages for Cape Town:
i) The global dispersion of production offers opportunities to Cape Town - new export
opportunities to manufacturers, but only if they can meet the exact technical requirements,
operational parameters, and pricing structures specified by their global value chains. However,
the other side of export opportunities is vulnerability to global economic fluctuations and the
threat of cheaper imports wiping out domestic market share.
ii) The global importance of knowledge intensive processes (‘branding’, ‘marketing’, ‘design’,
‘research and product development’, ‘logistics’, ‘organising sourcing’, ‘managerial
skills’,‘financial services’, etc.) as high rent yielding activities – with implications for
fostering specific knowledge activities/sectors, and attracting skilled high income earning and
spending personnel.
iii) The segmented nature of global tourism and the advantages Cape Town has in facilitating the
synergies between natural and cultural resources.

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What implications does this global location and insertion of Cape Town have for sustainable and all-
rounded growth and development? In the current efforts to build the Cape Town Functional Region as a
global competitive city region there is inadequate consideration of ecological sustainable resource use,
equity and overcoming underdevelopment. There is also limited consideration of the negative impacts of
an over-reliance on exports in an unstable global economic environment.

Further, globalisation has had negative consequences for the Cape Town economy already. Global
economic developments are significantly determining policy options for the local scale, to which most of
the economic activity is increasingly confined (Kgara, 2008). Yet, in the South African context the macro
parameters set in the governance, spatial and housing policies have ensured that the national scale
significantly frames the local development trajectories, even though there may be some room to pursue
alternative paths (Kgara, 2008) This can be seen in how interest rates, fiscal austerity and trade
liberalisation have affected the local economy.

According to Kgara (2008), the process of globalisation has had considerable impact on urban spaces and
city economies as follows:
i) a polarised and fragmented urban morphology defined by de-industrialisation and urban
sprawl;
ii) competition for prestige and investment by increasingly global cities and “city regions”; and
iii) profound changes in the management of municipalities, provision of infrastructure and
delivery of services.

The polarised and fragmented urban morphology refers to simultaneous flourishing of elite enclaves in
the urban cores (Central Business Districts - CBDs, some inner-city zones and edge-cities)1 alongside
increasing expanses of decaying working class neighbourhoods. One of the underlying factors in the
development of this deepening socio-spatial polarisation and fragmentation is de-industrialisation
(causing decays especially in cities that were anchored by the old “smoke-stack” industries) and the
private sector led urban sprawl on the fringes (characterised by expanses of town-houses estates,
shopping centres, etc). The Century City, Grand West Casino and CTICC developments are concrete
manifestations of aspects of this global trend: in essence they are emerging as key sites of allocation of
prime multi-use property alongside complementary developments which do not contribute to spatial
integration and equity. Combined de-industrialisation and urban sprawl reproduce zones and circuits of
inclusion and exclusion through unequal access to infrastructure and economic activities. This process
has contributed to maintaining Cape Town one of the most unequal cities in the world: Gini coefficient of
0.67 with 36% of households (1,2 million people) living in poverty (Ashley, 2008).

2.4 Future Growth and Employment Prospects

On the basis of past economic performance and the perceived advantages offered by the global economy,
Wesgro has identified several growth sectors within the province, one of which is the film industry,
estimated to be worth R2,65 billion per year with positive spin-offs to the hospitality, clothing and
carpentry industries. Further, according to the provincial government and the CoCT, the outlook for
rapidly growing sectors (identified as financial and business services, transport and communications,
property and retail, and wholesale trade and catering) is seen as very favourable (PGWC, 2005).
However, are these the sectors to grow the economy whilst creating jobs, overcoming under-development
and integrating ecological aspects into economic growth and development? Financial and business
services as well as communications require a certain level of skills: a factor which does not take into
account the low skills base of the majority of the unemployed labour force in the City. So long as
transport heavily relies on imported oil its contribution to future growth is likely to be limited. Property

1 Inner-city refers to places just outside the CBD such as Sea Point or Hillbrow, whereas the edge-city refers to the new nodal developments on

the outskirts of cities partly caused by capital flight from the CBD. Edge-cities tend to emerge around the elite residential landscapes, for
example Century City, Sandton, etc.
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and retail may contribute to growth but they have a limited contribution in job creation. n line with such a
“dependent growth path”, were significant investments expected to have a long-term impact This can be
seen in the already existing property and retail mega-investments which are mainly focused on the
development and expansion of commercial and residential property: Century City, Grandwest Casino, the
Cape Town International Convention Centre (CTICC), the V&A Waterfront, other expansions
(particularly in the Cape Town CBD) and other new developments located in other nodes.

Even though manufacturing does not feature strongly in these projections, there is a latent assumption in
CoCT and provincial government discussions that the manufacturing sector is likely to be favourably
affected by strong domestic demand. The sustainable city model can also boost manufacturing to meet
local demand in a way which centralises sustainable resource use in economic planning.

Despite these projections, limiting factors and potential threats are seen as:
i) Short-to-medium-term implications of the strong Rand, which directly impact on a wide range
of Cape Town exports and dampen the opening up of new export niches (e.g. yacht building
and film production).
ii) Stark, and increasing, income and wealth inequality in the region, which limits local markets
and potentially threatens the social cohesion of society.
iii) Sizeable net in-migration, with about two-thirds of the 50 000 net immigrants per year coming
from poor, rural communities in the Eastern Cape
iv) Steady annual out-migration of relatively well-skilled (young) people to the northern hub as
well as other centres of the country and overseas.
v) The challenge of quota removals and other global trade liberalisation measures on hitherto
relatively protected local industries (such as clothing).

Further, the uncertainty over guaranteed electricity supply and the massive rise in electricity tariffs may
dampen the growth prospects: for the 2008/9 financial year, the CoCT raised electricity tariffs by 38%
and future increases will be informed by the fact that ESKOM is guaranteed to raise tariffs by at least
14% for every year of the next three years. Given that 5% of businesses employ approximately 90% of
the local labour force (CoCT, 2007a), the Cape Town economy is distorted and potentially vulnerable to
external shocks which even if they affect a few firms but may affect a large number of the labour force. A
collapse of key sectors could therefore be disastrous for local economy. It is not clear how the proposed
growth sectors seek to address this challenge and meet the need for diversification. The positive growth
prospects were also dependant on global economic growth which is not a given. The City also recognises
that its previous strategies to date have not said much about how the growth path would absorb the larger
numbers of unskilled workers (CoCT, 2007a). But existing plans for economic growth and development
still fall short of addressing this challenge. The same applies with regards to ensuring that economic
growth and development is built on the basis of ecological sustainable resource use, equity and
overcoming underdevelopment.

2.5 Critique of the continuing ‘consumption city’ model

Despite the recognition made by the CoCT on the importance of ecologically sustainable economic
growth and development (as discussed in section 1. 1 above), the main thrust of existing plans for
economic growth and development confirms the current status of Cape Town as a “consumption city”.
Cape Town is essentially organised and structured as a site for accumulation and consumption. Globally,
the ‘consumption city’ model was driven by the economic realities of the 20th century city: namely, the
need to create a mass of consumers that provide the markets for the suppliers of urban goods that are now
defined as the basic elements of urban living - houses, vehicles, energy, food, leisure, household
appliances and fittings (Swilling, et al, 2006). To illustrate, “when General Motors and Standard Oil
bought up the trams in US cities in order to close them down while they promoted highway construction,
their aim was to sell more cars and oil, not build the ‘good city’” (Swilling, et al, 2006).

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According to Swilling et al (2006), the basic building block of the ‘consumption city’ is the ‘consuming
neighbourhood’ that, in particular, needs to buy in the necessities for daily living from the outside (often
from very distant locales) – energy, water, waste removal services, building materials, food, vehicles, etc.
which all were cheap and abundant to make it all possible. Working together with the logic of
segregation from the colonial and apartheid periods, this pattern of consumption has resulted in the
contemporary modern urban system (in terms of the spatial layout/form, function, economy, tax base and
operational requirements). Historically, the development of the apartheid city, in particular its white core,
was at the expense of its black and working-class appendages. Post-apartheid social and spatial relations
in many South African cities have the effect of reproducing the key features of an apartheid city structure
where largely black poor and working people are perversely included (through simultaneous integration
and marginalisation) in the city’s economy and spaces. The CoCT has also noted this as applicable to
Cape Town (CoCT, 2007a). As a result of how consumption was structured in apartheid cities, more than
80% of capital accumulation and exchange in South Africa is said to be taking place in urban centres
(Kgara, 2008).

Gasson (2007) shows convincingly that the absorptive and regenerative capacity of the land in Cape
Town is under severe pressure: this is to argue that a consumptive Cape Town will ultimately not be able
to achieve its economic growth and development goals. For example, Gasson (2007) shows that as far as
energy consumption is concerned, petrol and diesel (both derived from imported oil) provide no less than
56% of total net energy consumed by the Cape Town economy whereas grid electricity accounts for only
33%. Transportation consumes 54% of all energy, compared to 15% for households and 29% for
businesses. Swilling et al (2006) conclude that these figures reveal how extremely vulnerable the Cape
Town economy really is with respect to future oil and energy price increases.

Apartheid spatial relations combined with this consumption and accumulation model to ensure that
contemporary urban policies link urban land use to economic growth in a way which mitigates against
sustainable resource use, equity and integration. Contemporary urban policies perpetuate the view that
urban areas are primarily engines of economic growth (DfID, 2001). In South Africa, this has meant that
local governments have been encouraged to plan and promote this economic growth through developing
efficient cities (Pieterse, 2003). This is what explains the policy approaches of the CoCT as discussed
above. Important in this paradigm, is the assumption that economic growth must be the outcome of
competitive urban land markets (Marx, 2006). Therefore many local, provincial and national government
policies are geared to ensure that everything is done to make land markets contribute to economic growth
without any critical questions asked about sustainable land and natural resource use, who this economy is
growing for, who benefits most from economic growth and the process of the extraction of surplus on
which such economic growth rests..

The geographical location of economic growth is a key outcome of this framework: economic growth
takes place in ‘consuming’ enclaves (Marx, 2006). Within these ‘enclaves’, economic growth is
considered to possess an inbuilt, organic logic that will inevitably increase the standard of living and
welfare of the general population (Marx, 2006). In the search for economic growth, this dominant
approach is blind to its own ecological inefficiency. Another contrast to the logic is how it locates poor
people’s economic activities as being in the household rather than the economy. This limits the
understanding of the possibilities for outputs from poor people’s economic activities (Marx, 2006). This
approach also denies the possibility of seeing the location of poor people's economic activities as
productive and contributing to urban economic growth and thereby freezing poor people in their current
locations (Marx, 2006). A sustainable resource use approach to economic growth and development can
reintroduce ecological considerations and also integrate poor people into economic growth in a way
which ensures growth, human development, integration, equity and sustainability.

To conclude this critique, despite the recognition by Cape Town of the need for a sustainable use
approach, the pervasiveness of the ‘consumption city’ model has meant that there is yet insufficient room
for alternative economic policy and investment decisions. For example, the provincial Micro-Economic
11
Development Strategy ignores the economic advantage and potential of a Cape Town city region that
specialises in knowledge-based systems, technologies, products, value chains and investments that seek
to promote alternative/sustainability based industries (Crane & Swilling, 2007). This is the case with
most other investment and economic policy decisions. Another problem points to the absence of
mechanisms to measure progress made in areas where the City has taken action in this direction.

3. TOWARDS A “SUSTAINABLE CITY” MODEL FOR ECONOMIC GROWTH AND


DEVELOPMENT: A FRAMEWORK AND CONCRETE PROPOSALS

The chosen globalisation-dependent development path has serious implications for Cape Town. What
will be the pattern of economic growth when it comes to spatial patterns and localisation? What will be
the patterns of accumulation? How will natural resources (that will be required to support and sustain this
path) be affected by a globalisation-dependent development path? What are the options for sustainable
economic and industrial development for the City of Cape Town in a world characterised by multi-fold
economic crises (peak oil, energy, food prices, environmental pollution, permanent structural
unemployment)? Can there be another option for local economic development that delinks from a crisis-
ridden path of development?

3.1 Equity, integration and sustainability

This paper argues for an alternative economic development path for Cape Town which would integrate
the ecological limits to economic and industrial development. In this way, the ‘consumption city’ model
would be gradually replaced by a new model: a ‘sustainable city’ model that decouples improving living
standards from rising (and increasingly unsustainable) resource consumption (Swilling, et al, 2006). The
‘sustainable city’ approach associates the following concepts with economic growth and development:
equity, sustainability, integration, labour absorbing, transforming spatial patterns, sustainability, broad-
based, redistributive, own production, local economy, self-reliance, and social wage.

Equity, integration and sustainability are at the core of the ‘sustainable city’ model. Equity means
significantly reducing the inequalities that exist between classes, which are to a large extent expressed in
the city in spatial terms (Swilling, et al, 2006; Crane & Swilling, 2007). A precondition for this is the
provision of the urban infrastructure (including housing) that many poor communities lack (Swilling, et
al, 2006). Integration inevitably means both densification and a social mix across race and class
boundaries (Swilling, et al, 2006). In this model, sustainable resource use is critical. According to many
authors (Larson and Smajgl, 2007; Swilling and Crane, 2007; Prato, 1998; and Lakhani, undated), the
concept of sustainable resource use integrates the following elements:
i) Ensuring that our rate of consumption of natural resources does not damage the environment
by rethinking which natural resources we use and how we use them - by reducing, reusing and
recycling;
ii) Reducing the quantity of natural resources used as material inputs into production and
consumption processes (inputs here would include fossil fuels, wood, water, metals, clay, food
supplies produced from the exploitation of soils, sea and water resources);
iii) Improving the efficiency of throughputs as they go through production and consumption
cycles over a given period
iv) Eliminating entirely unproductive wastes by turning all outputs into inputs in a complete cycle
wherein waste is thought of as a “residual product” or simply a “potential resource”.

These elements combine to define sustainability as an approach to resource use that ensures that every
citizen has sufficient to live a decent quality of life without consuming more than his/her fair share of the
eco-system services that are required by this and future generations to live a similar or better quality of
life (Swilling, et al, 2006; UNEP, 2002; Brundtland Commission, 1992; and Burgess & Carmona, 1997).

3.2 Elements of the ‘sustainable city’ model


12
The basic building block of the sustainable city is the ‘sustainable neighbourhood’, namely the
neighbourhood that generates more energy than it consumes, generates zero waste (both liquid and solid),
meets most of it’s basic food requirements from local sources, requires little or no fossil fuels to transport
people, and releases minimal amounts of CO2 into the atmosphere (Swilling, et al, 2006). The
‘sustainable neighbourhood’ helps to rebuild eco-systems and mitigates the risks associated with the
rising costs of fossil fuels as these non-renewable resources run out. As such, the ‘sustainable
neighbourhood’ is also economically more efficient because in theory the ‘sustainable neighbourhood’
should be able to pay lower rates and taxes because it makes less demands on externally provided
services, thus making it a more attractive operational space for households and businesses (Swilling, et al,
2006); Crane & Swilling, 2007). The biggest challenge is to put in place frameworks and tools for
transforming cities by building up ‘sustainable neighbourhoods’ from below.

In the Cape Town context, key elements of the ‘sustainable city’ model include:
i) Overcoming apartheid spatial relations through densification and multi-income settlements –
with positive spin-offs for public transport routes and location close to work opportunities;
ii) An approach to economic growth and development where the process, means and benefits are
shared, democratised and equitably redistributed amongst all sections of society with a bias to
those who are marginalised from current patterns of growth and development;
iii) Addressing energy security and natural resource constraints – through locating recycling and
increased use of renewable energy at the centre of economic growth and development
including shortening logistics lines (not least through local, national and regional economic
development);
iv) Reconceptualising the economic sphere where the poor are involved as inherently containing
economically productive activities;
v) Universal access to free basic services (discussed in a separate paper on social justice); and
vi) Consolidating food sovereignty – this would require a combination of sustainable urban
agriculture, land reform, small-scale production for household consumption and local markets.

This model includes a focus on building self-sustainable communities, stimulating local economies,
including stimulating local consumption and trade, building of cooperatives, fostering training and skills
development, and public works programmes. Important by-products of this model would include
conducive conditions for valuing authentic cultural diversity and a sense of community via a participatory
culture and health, well-being and soulfulness (UNEP, 2002). In this ‘sustainable city’ model, the
economic development path that Cape Town follows, industrial policy measures, infrastructure
investment and sector specific programmes should seek not to seal the local economy off, but to ensure as
best as possible a sustainable and balanced economic growth path that factors in not just the requirements
(where appropriate) of global competitiveness, but also the often contradictory requirements of local,
national, and regional development.

The ‘sustainable city’ option recognises that local government has the capacity (via land-use, investment
and service delivery) to influence the way urban infrastructures evolve in ways that result in different
outcomes for households, i.e. either more or less equity, more or less integration and more or less
sustainability.

The logic of what is suggested in this section (3.2) is absent from current ‘consumption city’ paradigms
that inform Cape Town’s economic growth and development. This largely explains why the
commitments made by the City to sustainable ecological resource use have not been realised: ‘sustainable
city’ opportunities cannot be fully recognised in an economy oriented to consumption.

3.3 Localisation: stimulating local economies

13
The key challenge is how to foster economic activity in the townships. The localisation option
emphasises the need to meet as many basic needs within the local community economy. It does not
reject having relations with the wider global economy where necessary. In the main the localisation
option must focus on economic growth alternatives such as the development of urban agriculture on a
massive scale, recycling, the use of renewable energy in communities, local savings schemes and co-
operatives: these various alternatives can be taken up with any of the concrete proposals given as
recommendations below.

Self-reliant economic activity is about harnessing local savings, labour and physical resources for local
production and consumption. It means organising local production for use values and need, using local
resources. The knock-on consequences of this would be the stimulation of a community controlled
economy. At the same time, localisation and self-reliance is not about autarky, but about utilising the
conditions and resources for human survival in a community to meet the basic needs of local
communities on their terms. This means local communities would also meet other needs but not through
local economic activity – a balance has to be struck between the local economy and the wider or external
economy.

But the localisation alternative does not fully come to terms with (i) overproduction (ii) the technological
displacement effect and (iii) the social forces and economic processes driving the economic system. This
is not an immediate challenge.

Beyond the economic production interventions above attention will have to be paid to the role of tenure
systems in the townships and how can they be changed to benefit the poor (see section 3.4 below).

3.4 Overcoming apartheid spatial relations

The logic of “one-city-one-tax-base” implies the spatial restructuring of the apartheid city linked to
sustainable urban development. Key principles here include:
i) Compacting development of the city in order to stem the sprawl and to foster intensive and
inward oriented spatial development;
ii) Mixed activity corridors, which were intended to break with the inherited mono-functional
design of land-uses with the view of enhancing sustainable socio-economic development -
characterised by high-density, mixed-land uses and activity corridor such as in Salt River and
Observatory in Cape Town; and
iii) Densification, especially in the development of low-income dwellings not only to maximise
the use of space but also to build the necessary economic thresholds to support local economic
development and public amenities in fostering sustainable urban development.

The above principles begin to make ‘sustainability’ accessible to the poor. In this sense, sustainability
must mean investments in decent housing, more and better decommodified services, and neighbourhood
facilities and infrastructure (both built and natural). A ‘sustainable development’ approach has to
discourage the building of exclusive low-income suburbs. There is also an economic logic to
sustainability: by investing R75 000 to create a serviced house for a poor family in a uniformly poor
neighbourhood, the value of that asset is the same - if not less - after occupation and/or sale (Swilling, et
al, 2006). The same asset constructed in a mixed neighbourhood where there is a more active housing
market can have a market value that is three to five times the value of the initial subsidy without any
cross-subsidisation. Simply by being creative with space, zoning, bye-laws and planning instruments, the
same investment can generate much greater returns for poor households. This, when coupled to eco-
efficiencies, can contribute significantly to local economic growth stimulated by a virtuous cycle of
access to credit, more disposable income, higher re-investment levels back in the neighbourhood, reduced
leakage as the benefits of eco-efficiencies kick in, and as local food markets reduce the costs of healthy
eating.

14
These principles were variously encapsulated in the new government and municipal policies and
legislation as discussed in section 1. Why have they been difficult to implement? Landman and Ntombela
(2006) believe that post-apartheid urban planning has instead resulted in a segregated approach to urban
design. As a result, we have a separation of land uses, the physical separation of neighbourhoods, the
privatisation of community and recreational facilities, the use of gates and fences to define divided space
and an incorporation of extreme target-hardening measures (Landman & Ntombela, 2006). This
undermines alternative and integrated approaches to urban design which would focus on the public realm
through sufficient public and private investment. According to Landman & Ntombela (2006), the
characteristics of an integrated urban design approach would include mixed land use, the externalisation
of public facilities and amenities along accessible roads and activity corridors and in mixed use nodes, as
opposed to centralisation inside residential neighbourhoods, and the integration of different urban areas
and smaller neighbourhoods through integrated routes, a well-functioning public transport system and a
continuous open space system. Such an integrated urban design approach seems to be a better model to
ensure women’s access to a wide range of benefits, markets and services including land, housing, jobs,
safety, mobility, and opportunities for individual development. A ‘sustainable neighbourhoods’ approach
must not be limited to the ‘new neighbourhoods’ that will emerge at both the lower income and upper
income ends of the property development market.

When it comes to the reform of tenure systems in ways that can benefit the city’s poor (as raised in
section 3.3 above), consideration has to be given to using housing policy as an intervention in land tenure
systems and housing markets. Key here is the practical creation of human settlements that can be
regarded as assets by the beneficiaries, contributing to their quality of life. Among the contributing
factors to the asset value of the human settlements, is the location of land and level of infrastructure and
services available. The City will have to work with the provincial government in this regard.

Together with this must the implementation of the policy commitment to increase the supply of
subsidised formal public and private housing, improving its quality, and speeding up the rate at which it
is being delivered, and ensuring that it is located in thriving economic zones. Another intervention is to
introduce regulations on inclusionary housing where developers building more than a certain number of
houses at a time would be obliged to build a certain proportion (around 20 to 30%) in the affordable
housing band (Napier, 2007). Such socially mixed settlements would provide a platform for the poor to
enter profitable economic activities. All this will go a long way towards ensuring security of tenure and
economic revival. The critical element in housing delivery is whether land and housing (with secure
tenure) can be used as a platform for accumulation through being linked to a socially mixed income
milieu as a basis for generating household savings, income generation and gradual capital formation. The
challenge would to align these activities with sustainable resource use. In this scheme, integration would
achieved via densification and the use of public land to build numerous socially mixed and mixed use
areas that are designed to reduce distance between home and work and increase use of public transport by
the middle class. In these ways, a sustainability approach can release large quantities of funds that would
otherwise be spent on the subsidisation of the currently ecologically inefficient urban systems.

3.5 Shared, democratic, equitable and redistributive economic growth and development

There is a need for a strategic approach to the city’s economic growth and development. This must rest
on local job creation as a major goal of economic growth and development. This can be done through
policies that promote businesses that either operate at high levels of labour intensity or can generate
substantial employment multipliers. This must go together with policies that address the tendency to
informalise employment. This would require a more balanced growth and development strategy going
beyond the inherited economic structure with all its distortions and blind spots. Elements of this balanced
strategy must include:
i) Developing an effective industrial policy that focuses, in particular, on ensuring that the
labour-intensive manufacturing sector is built into a much more vibrant and dynamic sector of

15
the economy – the production of renewable energy sources, the conversion of existing systems
towards sustainability, etc. must take labour absorption into account;
ii) Actively linking industrial policy with and support major infrastructure development;
iii) Well-resourced and strategically directed education and training to overcome the massive
skills distortions in the local economy – a sustainable resource use approach can be relevant
here: ensuring that large numbers of unemployed unskilled labour can be skilled for the
purposes of a changed economy;
iv) Reconceptualising the economic sphere of the poor by integrating them to economic growth -
this would need to involve innovative thinking through how urban land markets can be related
to supporting networks of innovation and productivity, valuing (including prime) land in
terms of its ability to create new forms of economic opportunities for the poor, and other
measures to ensure that a sustainable resource use approach integrates poor people in
economic growth; and
v) The balanced development and effective industrial policy integration with other parts of the
province and country is also critical.

The above elements must be integrated into the conceptualisation of economic growth and development.
This would mean a review of the existing policy frameworks and plans. The challenge for the City of
Cape Town is to work out local industrial development strategies working together with a range of
stakeholders This must start with ensuring that the economics of sustainable resource use are factored
into all planning, in particular the costs of known constraints such as finite water supplies and rising oil
prices, the economic job-creating potential of eco-efficient technologies such as waste recycling, the
renewable energy economy and urban agriculture (including food markets) (Swiling et al, 2006). This
would require the creation of an entirely new ‘green economy’ driven by a new generation of “GEEs” –
“Green Economic Empowerment” entrepreneurs with massive investments in hydrogen-mediated energy,
windfarms, the solar power sector, carbon trading, new inner city eco-designed office blocks, sustainable
mari-culture businesses, organic farming and the fastest growing sectors of all, namely sustainable
construction, recycling, public transportation and authentic eco-tourism (Swilling et al, 2006). A local
industrial strategy must speak to all these things.

3.6 Cooperatives

Cooperatives have a central role to play in an economic growth and development path characterised by
democracy, equity and redistribution. Co-operatives have a critical role to play in the creation in
economic growth and development. They are not necessarily going all solve all ills of society. Co-
operatives show simply that there is an alternative way of doing business and really making a difference.
They are even more relevant in the present challenges facing society – employment creation, wider
distribution of surplus, fighting financial exclusion, local economic development, building community
buying power, and enhancement of broad-based economic empowerment. Co-operatives, when they are
actively promoted and achieve sufficient concentration in a particular geographic area, co-operatives can
contribute to local economic development, perhaps more than any other form of enterprise. Co-operatives
can also contribute to mobilising community buying power and broad-based economic empowerment.

Because the surplus remains with the members of the co-operative, money potentially stays and grows in
the local community. In times of economic crisis, co-operatives do not readily close or relocate because
they are controlled by members residing in the communities which would be affected. They thus protect
the sustainable development and livelihoods of many communities especially in rural and urban areas.

Currently, cooperatives are a very small of part of the local economy in Cape Town. Systematic steps
will have to be taken to ensure that cooperatives can grown and develop in ways that can change the
accumulation logic of the local economy and meet the goals of equity, sustainability and integration. The
following practical measures are proposed:

16
i) A process to identify, mobilise and engage with existing cooperatives on their needs,
challenges, interests and proposals on their role in the local economy;
ii) Municipal policy and strategy on the promotion of cooperatives;
iii) Procurement spend by the municipality on cooperatives;
iv) Municipal supported programmes for the business promotion, support and incubation of
cooperatives;
v) The integration of cooperatives in the IDP, the Economic and Human Development Strategy
and other key strategies of the city;
vi) Providing incentives for cooperatives; and
vii) Building institutions for the support and promotion of cooperatives – an interesting example
here is the role the Nelson Mandela Metropolitan Municipality is piloting the establishment of
a municipality linked Cooperative Development Centre. The CoCT should consider this
option.

These proposed measures on cooperatives would build on what the City is doing already. Cooperatives
would consolidate these city initiatives into demonstrable interventions particularly if they are also linked
to supporting economic activity in the townships.

There is ample international evidence to show that cooperatives have a long and successful tradition
around the world and have proved amazingly flexible in meeting a wide variety of social and economic
human needs. International experience shows that countries that have achieved economic development
have a vibrant and a dynamic cooperative sector, contributing substantially to the growth of those
economies. For example, in Kenya co-operatives contribute 45% of the Gross Domestic Product (GDP)
and 31% of the total national savings and deposits. Co-operatives control 70% of the coffee market, 76%
of the dairy market and 95% of the cotton market (ICA Report, 2006). With a conducive economic,
legislative and support environment cooperatives in South African can achieve such survival attributes
whilst also contributing to economic growth, development, job creation and a fairer distribution of
surplus. Cooperatives, when they are actively promoted and achieve sufficient concentration in a
particular geographic area, co-operatives can contribute to local economic development. The challenge
for the City of Cape Town lies in an explicit and shared commitment to growing cooperatives into a
significant player in the economy of Cape Town.

The City of Cape Town can explore what the Ekurhuleni, Nelson Mandela and eThekwini municipalities
have done in promoting cooperatives. The Western Cape Provincial Government has also just completed
drafting its strategy and policy on cooperatives which could provide a foundation for what the City
undertakes in this regard. The challenge would be to ensure that the promotion of cooperatives is linked
to sustainable resource use.

3.7 Trade

Equity and fair trade at all levels (global, regional and local) can change the way Cape Town is inserted
into the global economy. Although increasingly common across many value chains at the local and global
levels in many other parts of the world, there is little evidence that the local Cape Town discussion about
ways of growing the economy have factored in a value chain approach that takes into account equity and
fair trade issues (Swilling et al, 2006). The Proudly South African campaign is clearly a key reference
point when it comes to branding, but this way of thinking does not seem to have penetrated into the
discussion of micro-enterprise development which remains fixated on the traditional concerns of this
sector – namely micro-entrepreneurs and how to secure finance and opportunity for them. An equity and
fair trade perspective looks at value chains and how these can be restructured to advantage smaller
players and build local economies. Local credit systems, through to sophisticated ways of linking waste
streams from certain industries to the input streams of others are some of the ways that employment is
created without depending purely on new investment. Local food markets could well become the key
locus for an equity and fair trade focus. This approach breaks with seeing globalisation in a uni-linear
17
way wherein the emphasis is on producing for, or importing from global markets at the expense of local
markets. The City of Cape Town already recognises that it can play an enabling and catalytic role to
encourage equity and fair trade practices amongst Cape Town businesses. However, even existing
initiatives undertaken by the City are not done at sufficient scale and are still subordinate to the dominant
economic growth and development paradigm. The recommendations made below seek to break out of
this logjam.

3.8 Addressing energy security

Swilling et al (2006) convincingly argue that the limited household incomes of the poor mean that they
need to be protected from service systems that will be a constant drain on their finances, such as energy
systems that are dependent on oil or grid electricity, transport systems that will become increasingly
expensive as the oil price goes up, and sanitation options that become increasingly costly to maintain.
Solar water heaters can solve this problem.

Swilling et al (2006) underline the importance of urgently reducing oil consumption by changing the
transport system, shortening logistics lines, densification to reduce travel distances, and building mixed
use settlements comprising residential, work and consumption spaces. Applying the above to public
transport, the fact that transport subsidies for residents of dormitory townships have yet to be phased
shows that urban areas continue to be characterised by severe inefficiencies caused by the dislocation of
the poor to the periphery. Historically, transport subsidies underpinned the operation of the apartheid city.
They met the cost of travelling to and from distant dormitory townships to access employment and other
urban opportunities. In Cape Town in 2001, transport subsidies were more than twice the budget for new
low income housing (Napier & Ntombela, 2006). Subsidies for public transport can be used in ways
which work with energy efficient transport systems.

Crane and Swilling (2007) had called on the CoCT to instigate the formation of an “energy consortium”
to mobilise research and investment in pilot massive renewable energy and energy efficiency schemes
including wind farms on the west coast, massive solar/geo-thermal power stations, the installation of
solar roof tiles in all new houses together with incentives to install them on existing structures and
ensuring that the Cape Town CBD has energy efficient buildings. These proposals remain valid and
important. It is recommended that the city urgently undertakes a cost-benefit analysis of each of these
proposals and commit to pilot those with most potential.

Other elements required in energy reductions would include interventions that transform all liquid and
solid wastes into productive inputs into the urban system (e.g. via biogas digesters – see below for more
information), reducing total consumption of water while increasing access to more free water for all, and
flooding the market with subsidised compact fluorescent lighting coupled to supermarket agreements not
to stock incandescents (Swilling, et al, 2006). Of the 550 000 tons of sewerage produced by Cape Town
per year, only 5% is recycled This raises an obvious question: if the sewerage was productively re-used,
would this generate enough savings (of purified water) and revenues (from the productive re-uses) to
cover the cost of providing sanitation to the unserviced? Significantly, 60% of industrial waste is
recycled, with only 6,5% of residential and commercial waste recycled and there are no by-laws that
make it attractive to recycle (Crane and Swilling, 2007). This is very low by international standards –
some European cities recycle up to 40% of residential and commercial wastes. The city must use its
powers to promote and incentivise recycling linked to job creation and renewable energy production (as
in the case of bio-digesters).

On solar water heaters, the City must mobilise investors, local business, national government, and other
players to put resources on the table in order to inject capital into an industry that is vital to the
environmental sustainability upon which economic growth can pivot. Current demand for solar water
geysers is low – due to high start-up costs. A massive subsidy and capital injecting project of this nature
would induce a shift in the demand curve, thus preceding future economic growth. Furthermore, and most
18
importantly, it would provide the kind of output volume opportunities on which firms depend to achieve
increasing returns to scale. Competition and scale in the market of solar geyser production and
installation will also bring the initial start-up costs down, thus incentivising middle and upper income
households to invest in the sustainable, medium term cost saving option. All this is contained in several
recommendations already in front of the City. However, the bias in these is to seek leadership from, and
reliance on the private sector. Energy is a strategic resource for city-wide and nation-wide social and
economic well-being and development. In this sense, energy is a public good. Viewing energy in this way
points to a necessary discussion about the role of the local state vis-à-vis the role of the private sector in
generating and transmitting renewable energy, the provision of renewable technology, and in other loops
of the renewable energy value chain. Also important is the important international experience of energy
production by cooperatives which are not the same as the private sector2. questions about the wisdom of
locating the primary role of the new renewable. Therefore, it is proposed that the CoCT itself must take
the lead in ensuring sustainable energy security. This is not to cut out the private sector. Instead, a multi-
layered approach to the creation and development of markets in renewable energy and related
technologies which could include the local state, other public agencies, the private sector and new
cooperatives which will need to be promoted, supported and developed.

3.8.1 Biogas promotion

In February 2008, the Engineering News magazine reported on a national biogas feasibility study, which
was completed in November 2007 for the Department of Minerals and Energy. Biogas is a cheap form of
energy that can be used for cooking, lighting and heating (for more information on biogas, see Box 1).
The feasibility study showed that a rural biogas pilot project covering 360,000 households would have
15% and 67% financial and economic internal rates of return respectively. The study recommended the
rollout of the first phase of a national biogas programme which would involve the construction of 20,000
biogas digesters at a cost of R238-million over five years. For a densely populated metropolitan area like
Cape Town, biogas production can be more cost-effectively produced.

It is therefore recommended as follows:

2
The US and Germany has a few case studies of renewable energy cooperatives which, unlike private producers, are locally
embedded and can be locked into long-term socio-economic development planning.
19
Box 1: What is biogas?

Biogas is the gaseous product of anaerobic digestion of organic waste in a temperature controlled environment provided
by biogas digesters. These digesters are airtight containers in which water, animal wastes, sewage and other organic
i) The
waste are acted upon by anaerobic bacteria (i.e. those bacteria that thrive in the absence of oxygen). To minimise costs
CoC
for the water used in biogas digesters, most biogas systems use already available wastewater streams: such as urine of
T
farm animals, grey water and black water. The average domestic biogas digester comprises an airtight container with an
must inlet for the solid waste, an outlet for the nutrient-rich outflow, and a gas line to the kitchen.
imple
ment Biogas is formed by bacterial action on the organic matter inside such a bio-digester. The final stage of this process is the
a production of methane and carbon dioxide, which make up 66% and 33% of the total gas produced, respectively. Small
city- amounts of nitrogen, hydrogen and hydrogen sulphide also occur. Other important by-products include high-grade fertiliser
(that can replace expensive mineral fertilizers, in particular nitrogen) and treated water that can be used for irrigation.
wide
bioga One cubic metre of biogas will provide a cooking time of at least 2 hours, or 1.5 kWh electrical output. In the Goedgedacht
s farm (outside Malmesbury), a 20 cubic metre digester provides energy for conference cooking and lighting. Bio-digesters
feasib helps to provide clean renewable energy cheaply. Properly designed, executed and utilised the average pay back period
ility of a bio-digester is less than 4 years. The lifetime of its main structure can easily be more than 20 years. In fact, bio
study digesters offer a three-pronged solution to energy and waste management needs – energy production, a waterborne
using sanitation system, and an waste recycling opportunity. Biogas, unlike Low Pressure Gas, is considered a green energy
lesso source because it’s not derived from crude oil. Biogas digesters are also remarkably efficient at eliminating pathogens
ns from waste.
from
Internationally, there are very few large-scale bio-digesters. The most famous is the City of Stockholm which runs its
the busses and municipal vehicles off the gas produced by bio-digesters. The largest known South African biogas project is
Philli the Philippi Business Place Development where AGAMA Energy has been appointed to design, install and commission
pi biogas digesters provide energy services to this proposed 450 house and office development, including the sanitation
Busin system for up to 3000 people.
ess The Lynedoch EcoVillage model outside Stellenbosch has demonstrated that it is possible to treat all sewerage on site
Place and re-use the treated sewerage for on-site food production and as a secondary supply to households for toilet flushing
Devel and irrigation. If used on a wide scale, biogas digesters can reduce the use of water supplied by the municipality by 45%
opme per household.
nt
Sources:
(see
box AGAMA Energy (www.agama.co.za). 2007. Integrated Biogas Solutions.
1);
ii) The CoCT must promote biogas in at least 50% of all new buildings and settlements
iii) The CoCT must develop a long-term business plan for the promotion of biogas (including
financing mechanisms).

3.9 Consolidating food sovereignty

Urban poverty relates to the greater reliance of urban households on income and the monetary economy
and relatively lesser reliance on the natural environment to produce food. Cape Town depends on long-
distance, energy intensive food supply chains to import 1,3 million tons. This makes all Cape Town
households extremely vulnerable from a food security point of view in the medium- to long-term
(Swilling, et al, 2006). Consideration has to be given to the relatively low cost regulatory and investment
strategy to create neighbourhood-level spaces for food markets where farmers and growers can sell
directly to households (Swilling, et al, 2006). This could reduce prices for the consumer and increase the
returns for farmers. It can stimulate the growth of local small-scale growers who tend be much less
dependent on oil and more efficient users of water. The Abalimi Bezekhaya story is relevant here: the
group is constituted by more than 200 local farmers who use small pieces of land in Khayelitsha, Langa
and Phillipi. Over time, they have built production systems and relational markets which do not only
provide them with their own food but with surplus production for sale throughout the city of Cape Town.
This initiative can be supported and adapted to several other settings in the city. The urban agriculture
policy of the city does not go far enough in this regard. Absent in the policy are the following elements:

20
i) Upscaling of urban agriculture to develop a critical mass of producers providing a significant
portion of food for local markets;
ii) Provision of infrastructure, extension, financial and market support for urban agricultural
producers at the required level, scale and regularity; and
iii) Adapting other policies and by-laws to ensure success of urban agriculture – for example, the
city ban on mobile marketing of agricultural produce may hinder the success of urban
agriculture.

Together with this must be a focus on the recycling of organic waste. Between 40% and 60% of the
domestic waste stream is organic waste (from kitchens, garden cuttings, etc). This is a rich source of
nutrients that could be composted and ploughed back into urban agriculture (Swilling, et al, 2006).
Instead, it gets combined with all other wastes and dumped into toxic landfills (Swilling, et al, 2006).
Imagine the beneficial consequences for poor households if food could be made more affordable by re-
using composted urban organic wastes in local urban agricultural undertakings, and then selling the
product at local neighbourhood retail markets (Swilling, et al, 2006). The use of organic waste and
organic farming methods in such a system also reduce irrigation requirements if combined together with
on-site rainwater supplies. In one stroke, the costs of long-distance transport, packaging, cold storage,
middlemen costs (wholesalers, packagers, retailers) and chemical treatments can be eliminated from the
cost of each item of fresh produce. This option would require a combination of sustainable urban
agriculture, land reform, and active promotion of small-scale production for household consumption and
local markets. This requires massive state regulatory and financial investments in local food markets.

There are many examples around the world of localised and decentralised food systems. For example, in
the densely populated cosmopolitan city of Shanghai 80% of the land is reserved for crop growing. The
city is self sufficient in vegetables, rice, pork, chicken, duck and carp. Urban agriculture is part of city
planning and local production is integrated into city plans. Another example is the city-state of Singapore
which is self sufficient in meat production and produces 25% of its vegetable consumption locally. An
example closer to home is Bamako, Mali, which is self sufficient in vegetable production and meets 50%
of its poultry needs through local production. There are also many examples where urban families have
food gardens and meet local needs through their own production. In Dar Es Salaam 67% of families are
involved in farming, while in Moscow 65% of families are engaged in farming.

4. ADDITIONAL RECOMMENDATIONS AND CONCLUSION

The City must implement recommendations made in the December 2007 “The Economic Imperatives of
Environmental Sustainability” paper. These recommendations were:
i) All new buildings built in Cape Town must be fitted with energy efficient lighting, solar water
heaters and rainwater tanks linked to skills developed for currently underskilled and
unemployed.
ii) The City must use the Economic Model as a policy tool to indicate the environmental and
economic costs and benefits of any new development or project.
iii) The City must retrofit the Centre with Tri-Phosphor lamps which would result in
extraordinary cost savings and also send a strong signal to the market that the City is serious
about environmental sustainability.
iv) Within MFMA provisions, the City should provide solar water heaters for the poorest
households as a once-off subsidy which will provide a much-needed incentive for local
producers of renewable energy to become competitive, thus making it more attractive for
higher-income users as well (as manufacturers experience increasing returns to scale through
higher sales volumes).

21
v) The City should consider setting up a special purpose vehicle (SPV) to guide the process of
creating a local market in renewable energy.
vi) The City should actively promote residential water tanks through an awareness campaign and
a subsidy.

In addition, the City must also consider the following recommendations:


i) Using existing calculations of Cape Town’s ecological footprint to work out formulas for
costing ecosystem services provided to all economic activities in Cape Town. The next
challenge would to be use this costing to appropriately factor these costs into incentives, taxes,
and ecological obligations on the municipality, businesses and homes in the city.
ii) Set targets for sustainable resource use by all economic actors in the city – this would require
engagement, social dialogue and leadership; This could also be an opportunity for education
and identifying new economic activities (therefore identifying opportunities for economic
growth).
iii) Consider providing incentives for rich households switching to rainwater tanks so as to
minimise pressure on water systems – such incentives could be geared to achieve critical
volumes which could encourage increased production of rainwater tanks thereby contributing
to economic growth and job creation. Consideration should also be given to the promotion of
rainwater tank systems for small businesses , schools, clinics and other public amenities where
it makes economic sense. This can also be linked to the promotion of urban agriculture.
iv) The 2009, 2010 and 2011 reviews of the 2007-2012 IDP as well as the 2012-2017 IDP must
incorporate targets from the above recommendations (section 3 and section 4). This also
includes necessary budget allocations for identified projects as well as the strategic use of
procurement. About 30% of the city’s budget is put out for public tender. Therefore the city’s
budget is an important tool here.
v) The CoCT must undertake exchange with places and initiatives with experience on the above
in order to learn and to negotiate for skills and knowledge transfer.
vi) The CoCT must undertake a massive public education programme on sustainable resource use
and economic growth linked to practical projects in communities (practical demonstration of
benefits).

Conclusion

In critically analysing the features and prospects of the Cape Town economy, this paper has sought to
argue that there is a need for a new paradigm to economic growth and development. This new paradigm
has been elaborated as the ‘sustainable city’ model. As already stated, the CoCT has already recognised
the need for this paradigm shift. However, this has not been optimally recognised in practice. By
providing several concrete proposals, this paper seeks to enable the City to take the next step. Many of
these concrete proposals arise from already existing recommendations in front of the City. Others come
from initiatives taken by citizens in the City and elsewhere. The proposals pose this question: can the
City of Cape Town take the next steps required to reorient away from the current models of economic
growth and development, and be a ‘sustainable city’? Cape Town has the opportunity and orientation to
opt for a new path. The logical conclusion of this paper is the need for a political champion in the city to
drive this reorientation.
22
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