Why government should stick to core competencies and let the private sector do its thing

Although it is famous among middle-class tourists for its exquisite beaches, life in the OR Tambo district municipality in the former Transkei is far from beautiful for its residents. The district is one of the most deprived places in the country. Barely 6% of homes have piped water while less than one in ten households have flush toilets.

It is home to almost one and a half million people – two-thirds of whom are under the age of 25. Yet most young people are unemployed; only 18% of residents have finished school and a mere 6% have higher education.

Politicians lack the skills and competence to manage

Close to 60% of households are headed by women, many of whom are pensioners. It is clear that this beautiful area of the country needs investment and know-how that will capitalise on its beauty and create jobs for a discouraged youth and in order to raise living standards.

Yet in the midst of this need you have government officials floating fanciful plans of a 'waterfront development' in Port St Johns to revive the town, plans which have failed to materialise because in 2017 the municipality only spent 35% of its budget according to Treasury, which saw R42 million rand being returned to Treasury.

While this is better than the outright corruption we are so used to seeing, for people it still has the same effect as money simply being stolen.

Why was the allocated money not spent? Simply because the officials and politicians lack the skills and competence to manage the sub-district. This is where the true problem lies: Municipalities such as OR Tambo have a mandate that is too broad for their skill base and capacity. Their mandate, which should be narrow and focused on basics such as like fixing roads, delivering services and making sure infrastructure like wastewater plants work, is too broad and hobbles private investment.

Investing and creating jobs

All the prerequisites for investment and growth in tourism are forgotten because the government fixates on being saviours, and is guided by state paternalism, rather than simply allowing the private sector to do what the private sector does best: invest and create jobs.

To better understand the private sector's ability to turn around depressed areas and create jobs, we need to look at the pioneering – albeit flawed – work of maverick property entrepreneur Jonathan Liebmann. He turned a part of the east side of Johannesburg's Central Business District (CBD) into what is now the world famous Maboneng district.

Despite the eventual crumbling of Liebmann's Propertuity development company, companies like Divercity have taken over with more sensible approaches, and built on Liebmann's work with Jewel City and the ABSA towers.

There are other smaller and sporadic developments all over the inner city and together with larger investors, they show how even without favourable conditions, the private sector is able to create value and upgrade areas.

These first fruits of development, while relatively small considering the size of the CBD, point to what can happen if a virtuous cycle of investment is created in formerly dilapidated and depressed areas. Because safety and security concerns are the number one deterrent to affluent people moving into the inner city and creating fertile ground for business growth and job creation, the City of Johannesburg needs to come to the party and work with the private security employed by the developers.

The government must stick to core issues

In both instances – OR Tambo Municipality and the City of Johannesburg – the solution is for the government to stick to core issues such as safety and security, provision of services and the maintaining of public infrastructure, while the private sector is allowed to respond with dynamism and agility to challenges and needs.

This kind of development encourages the establishment of better schools (Curro and Spark are the best examples) and healthcare facilities such as the Jewel City Medical Centre.

Judging from the international plaudits the Maboneng district received at its height, one can only imagine the overall benefits to tourism in Johannesburg if a safe, interesting, amenity-rich and vibrant inner city was to emerge.

Government can focus on core issues and  create an environment for private investment to flourish. The same can be said of the OR Tambo municipality and its coastal locales which would give tourists more options than just the very successful Cape Town.

More development would bring in not only much needed revenue to municipalities but also help alleviate the ancillary issues associated with increasing poverty and hunger, such as rising (violent) crime, theft and the formation of harmful black market industries which cause illicit drugs to flourish and destroy communities.

This article was first published on BBrief on 12 May 2021.

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