FUTURE OF THE KZN ECONOMY
Dr Jeff McCarthy
Chairman, Mercury High Road Board
profmac@mweb.co.za
This article is concerned with projecting the likely future of the KZN economy, say
two decades hence. In this regard we can observe that there are very few places
in the world that radically change from what they once were over such a time frame, but rather they tend to evolve from – or develop out of - the existing
pattern. In an open economy (which KZN very much is), the evolution is shaped
largely by the extension of the region’s comparative advantages in the national
and global contexts, and the reduction in scale of those existing activities in
which other parts of the world are likely more successful.
Sectors of the KZN economy which fall into the latter group most obviously include for example clothing and textiles manufacturing and sugar cultivation,
each of which actually led economic growth here in (many) decades past. More
recently there are others which have appeared on the endangered list, including
rubber products, fabricated metal products, non-electrical machinery, plastic
products and footwear, and no doubt there will be more to come in the future.
These will simply atrophy, and some will fade away, in much the same vein as
the British car industry (and other of their own ‘sunset’ industries) have over time.
In all regions and countries, the failure of firms in such sectors capture short term
political attention, and the newspapers will often report on associated weeping
from vested interests. However, the main hypothesis of this article is that the
future KZN will be shaped by largely un-sung success stories, some of which
emerge from changing global relationships, but many of which are also rooted in
fairly durable elements of the regional economy.
Combining historical strengths and weaknesses: Internal geographical
organization of the KZN economy
A combination of historical durables and changing global relationships make up
KZN’s relative location within the national and global economy. KwaZulu-Natal as
a province virtually owes its economic existence to its positioning in global trade
relationships (specifically, in the late nineteenth century, the port of Durban’s
access to the Witwatersrand). But the province can no longer rely upon its
nineteenth century foundations in this regard; and, until it establishes a strong
air-based logistics platform, its economy could fall behind. Fortunately, it is
currently doing just this, as we shall remark shortly in relation to the
airport/tradeport planned for the La Mercy area.
Yet, to underline the general historical point: Most people in KZN tend to take for
granted that Durban today is the country’s second or third largest city, despite
obvious signs of decay in some of its areas. Is this complacence? The people of
the small university town of Grahamstown in the Eastern Cape may have felt
equally complacent in 1850 (when it was actually the country’s second largest
city). Many people of Pietermaritzburg, in the mid-to-late nineteenth century,
likewise assumed that merely their political leadership of the Natal Colony would
keep Durban in second place as a town to them. (Pietermaritzburg was in fact
larger than Durban then, but is now one fifth its size).
Things can change on the basis of access and, in an externally oriented
economy like KZN’s, they actually do. At one time – only three or four decades
ago – Richards Bay was seen as a sleepy fishing village in the province. But on
the basis of its deep water port, and its specialization in the aluminum cluster,
Richards Bay has emerged as South Africa’s fastest growing local economy
during the past 15 years, with triple the rate of growth of Durban.
We are not necessarily predicting the demise of Durban, but rather the extension
of growth into a corridor north of it. In the future, the new dual freeway road
corridor between Durban and Richards Bay, with a new international airport
located adjacent, is almost certain to emerge as the economic engine room
within the province.
Durable Sectors – and those elements of them which will lead in the future
The future of the KZN economy will be set by the leading elements of four
fundamental components of the current economy. The four leading aspects of
the province’s durable advantages that can be highlighted here are:
1)KZN’s has historically been the primary artery of the southern African economy, linking southern Africa through trade to the rest of the world. Its two major sea ports, Durban and Richards Bay, are southern Africa’s busiest in terms of handling cargo by value and bulk respectively. These ports have been the foundations for the respective economic leadership of their associated cities in the provincial economy. Moreover, the two KZN ports continue to stretch their leads over other southern African ports, with Durban, for example, despite its capacity constraints now handling more container cargo by value than all other southern African ports combined; and with Richards Bay being in a similar position with regard to cargo measured by mass. With the addition of the new
international airport at La Mercy, KZN will remain strong in transportation and logistics; and will be the primary artery for the southern African economy for decades to come.
2)The province’s two major port cities are also its main centres of manufacturing, largely because of the locational advantages offered to industrialists by proximity to such ports. Manufacturing, in turn, dominates the province’s economy. By comparison with the national pattern, KwaZulu-Natal is a heavily industrialised, with some 30% of KZN’s GGP deriving from manufacturing compared to the national figure of 20%. Durban – the province’s major metropolis – is at the centre of that manufacturing powerhouse, but manufacturing is by no means limited to Durban. On a proportional basis, Richards Bay’s economy is even more oriented towards manufacturing (over 50% of GGP), and this town has had the fastest rate of economic growth of any major centre in South Africa in recent years (between 1996 and 2001 for various SA cities Richards Bay was placed first with GGP growth of 7,4% p.a. on average, versus 2,4% p.a. in Durban, which was closer to the national norm). Whilst the mix of manufacturing will change, the pool of industrial skills in the province, its infrastructure and
locational advantages will ensure that manufacturing remains the economic centre-piece; with aluminum, motor components and motor assembly, chemicals and pharmaceuticals, furniture, paper and pulp likely to lead within it.
3) In a country noted for its vulnerability to drought (only some 15% of land is arable), KwaZulu-Natal is South Africa’s best watered province; it has a larger area of high quality agricultural land than any other province, and it is the national leader in several agricultural products. The so-called Midlands area between
Pietermaritzburg and the Drakensberg is the heart of this high quality agricultural area, but there are other high quality areas including the north coast. Although in GGP terms agriculture is smaller than manufacturing, agriculture is a labour-intensive sector, which is especially relevant in a provincial context of high
unemployment. Some traditional foci for agriculture – such as sugar - are now more competitively produced elsewhere in the world, but most studies show high value/ low mass floriculture and horticulture for export are likely to take the lead in the future; and certain historical strengths in relation to the domestic market such as dairy, will be retained.
4)KZN’s Drakensburg mountains, sub-tropical coastline and resorts are closest to the main national population and economic centres in Gauteng; and KZN thus remains the nation’s premier domestic tourist destination, with twice as many domestic tourists as any other province; and it also has a significant share of international tourists. Like agriculture, tourism also manifests a relatively high
labour intensity, and it too is therefore of special strategic interest in the context of current development challenges. In some contexts, KZN agriculture is being combined with tourism as it has been with the winelands in the Cape, but in the KZN context the emphasis has also extended to ecotourism. Examples here are new developments between Pietermarizburg and the Drakensburg Mountains (the Midlands). In the words of a major developer (Elan) there: “(the) vision for the Midlands is to create a world class tourism and lifestyle resort, while preserving the natural beauty and environment that gives this area its sense of place……(where there are)…agri-village and working farm concepts….(and) the
environmental aspects will involve the introduction of recycled water, solar heating and the eradication of alien vegetation. …”.
The public sector plays a significant role in tourism promotion in the province, and will likely do so in the future. This has been recognized for example in the promotion of public investments in places like the International Convention Centre (ICC), the uShaka Marine Park project, and public regulation of the location and character of several new casino and other resorts (e.g. Suncoast,
Umdloti, Zimbali, etc). Most observers anticipate that the mix of undeveloped coastline with warm waters on the north coast, combined with their proximity to “big five” game reserves and the new airport at La Mercy, will be the focus of several new planned resorts which are likely to lead the growth in this sector. Second homes and resorts, in turn, have led the growth in the provincial
construction sector (also labour-intensive) which looks set to continue for a decade, in combination with national/provincial government’s infrastructure thrust (for example building new roads, airports, port extensions).
In conclusion, the “engine-room in the subtropics” which is KZN is evolving, like
any other regional economy; and this is largely in response to the reconfiguration
of comparative advantage, in relation to its historical and geographical assets.
Its key elements are transport/logistics, restructured manufacturing, and tourism/second-homes/construction. These are redefining the new KwaZulu-
Natal.
It may seem odd to discuss a province’s economy in isolation from the national
pattern, but the truth is KZN’s economy is as large as Tunisia’s and more than
half that of Nigeria; and whilst it started as the port-service district for the Witwatersrand (now Gauteng), apart from tourism and some aspects of
agriculture, its future economic relationships depend more on the outside world
than anywhere else. Exports by KZN firms already account for some 30% of
GGP, and whilst Rand strength has hurt the pattern slightly recently, the long
term prognosis is that this share is bound to grow in the future.
