LOCAL GOVERNMENT

Rejuvenating municipal economies

Dr Pierre Voges, CEO of the Mandela Bay Development Agency
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The role that SMMEs can play in the rejuvenation of municipal economies and local trade and investment is more often than not overlooked - and in most cases not really fully grasped.

Given that local government’s core function is service delivery, the rejuvenation of poor municipal economies partially left behind by apartheid, more often than not, lack the human resources to attend to this peripheral, yet important task that could uplift our communities, boost our socio-economic challenges and ultimately contribute to the local and national bottom line.

This topic is not just one that hardly gets enough attention in the bigger scheme of things – and even in the media, but it’s sadly also a field in which South Africa, in its transformation phase, seriously lacks the knowledge and expertise.

Then one meets the likes of Dr Pierre Voges, CEO of the Mandela Bay Development Agency (MBDA), who was also a speaker at the recent SMME Opportunity Roadshow (at the Boardwalk Hotel in Port Elizabeth), and a ray of hope emerges as you realise that the visions of healthy SMME / municipal partnerships to turn around local government is not as far-fetched as one would imagine.

Under the leadership of Dr Voges, the MBDA has since its establishment in 2003, become the driving force behind urban regeneration in Nelson Mandela Bay. Could the answer to South Africa’s municipal development issues be locked up in the establishment of development agencies?

Dr Voges says his philosophy is to “keep it simple and do what you must do to get the job done”. He explains that the agency is not a municipal department, but a section 21 company with the Nelson Mandela Bay Municipality and the Industrial Development Corp as shareholders. Their aim is to project-manage regeneration of the Port Elizabeth CBD with a view to promote economic and tourism development against the backdrop of urban renewal.

The MBDA, a special-purpose vehicle that would reverse the trend of urban decay and bring people and business back into the inner city by leveraging existing assets, works according to a master plan by which two or three infrastructure projects are introduced every year. Dr Voges, who gave up his career as a successful accountant to start this venture, based the DNA of the MBDA on the premise of ‘putting public money into well researched projects in bad retail, residential, office, tourism and leisure areas’.

Looking at the success of the MBDA to date, one realises how such a simple yet effective pioneering project could change the entire municipal landscape and in the process has huge potential to boost SMME growth.

Dr Voges says municipal legislation provides a lot of power to municipalities and we don’t often realise that in South Africa. Before 1994 municipalities didn’t have much developmental powers. In terms of the constitution our municipalities today have serious developmental powers, so a lot of developments in South Africa should not happen only at national and provincial level, it should happen in terms of the powers of municipalities at local level.

“Municipalities can play an instrumental role in the development process, getting more work to SMMEs. But it’s not just about getting more work to SMMEs, it’s also about SMMEs actually getting the necessary training and the experience to climb the ladder.  You don’t want an SMME to remain an SMME. You want them to get a foot in the door and municipalities can do that through their tendering procedures. However, 20 years later that SMME should not be there anymore - it should have climbed that developmental ladder. Municipalities have extensive powers to help make this happen,” he says.

Dr Voges is of the opinion that not enough municipalities in South Africa are actually embracing the notion of getting involved and assisting SMMEs, specifically when it comes to driving their economies.

“I don’t think all mayors and mayoral committees actually realise what powers they have. We mostly talk about service delivery, and that is important. That’s the buzz-word in municipalities. Service delivery to me is the first part. It must be done - it’s non-negotiable. There’s just no way that the bucket system should not be eradicated. But over and above that, municipalities have developmental powers, and should drive work,  but I think that’s not always well understood in municipalities. The power of a municipality is to change the face of that municipality.”

Looking at the challenges for municipalities and SMMEs working alongside each other, Dr Voges says the main plight of SMMEs is the Construction Industry Development Board (CIBD) Grading 1. Here we’re looking at people who haven’t had a job before and they battle to get their foot in the door - that’s where the big plight lies. If you see a big protest against a municipality not employing people, it’s normally in CIDB grading 1. So the bigger number of people yearning for work and training probably lies in CIBD Grading 1. It’s not just about a municipality ensuring that a certain percentage of work goes to emerging contractors, its about training them to actually climb the ladder, otherwise the number of people in there gets bigger and bigger and you end up with a ticking time bomb. You’re only going to get that problem solved if you give jobs and you’re investing in training to get them there.

As a pioneering project, Dr Voges says this is a very unique model and the IDC, as one of the project funders, refer a lot of agencies, both from South Africa and abroad, to them to see how they work. He believes that any city in the world that went through a bit of a downturn such as Port Elizabeth should establish some kind of special purpose vehicle or agency to get things going again.

“We must remember that cities have a core business, and that is service delivery, basic service delivery, which includes the provision of water, sanitation and electricity. That’s what a city must do first – and the rest will come later. In most cases we find that cities are dug into service delivery mode that they forget about developing the economy.

“With limited human resources, economic development will not happen at municipalities. A few examples of cities that succeeded in driving their economic development agendas by introducing development agencies include Gothenburg in Sweden, New Castle in the UK and Dublin in Ireland,” he says, adding that in driving economic development agendas, one of the objectives should be to bring SMMEs into the equation.

Dr Voges says he is proud of a number of good urban designs projects the agency has done in the city of PE, but he views his first security contract as the agency’s biggest achievement.

“When we started working in 2006, security in PE was bad. PE was a city completely without any security whatsoever. We employed a big security company to safeguard people trading in Govan Mbeki Avenue and in other areas where the public didn’t feel safe. When letters of appreciation in the local media came pouring in, thanking the security guards, I knew we were on the right track.

“We sometimes in South Africa try and do the smart stuff first, and then the other stuff follow. I believe one should really get the basics right first. Minister Pravin Gordhan’s national development plan for municipalities is called ‘Back to Basics’. For me ‘basics’ mean three things: security, cleansing and maintenance. Only then, when you really have a breeding ground, you can start with the real catalytic development program. It’s about changing the minds sets first.”

Sharing his thoughts on the lessons learnt over the past 12 years, Dr Voges says it’s been a long journey and they have  first and foremost, learnt that they would have to be viewed as a credible organisation in the eyes of all role players. Our business is not just about designing things and building them, it is also about including the community. We’ve learnt that public participation is important. We live in a country where we are constantly saying that we must talk to the community and listen to people’s needs. But we’re so much in a rush that we just don’t do it.

“We’ve learnt that we have to remain a modest workmanlike organisation – and we have to remain politically neutral. Then you will be viewed upon by the broader communityas being credible – and the man in the street to me is important, because he/she is the person who is working and driving the economy.”

Dr Voges says infrastructure is the one area where collaboration between local government, SMMEs and agencies such the MBDA can actually make a huge impact on SMME development. “To me sustainable infrastructure is if you invest in a pocket of infrastructure and the private sector starts investing based on that. The Donkin nature reserve is a good example of this. After we upgraded the whole Donkin reserve, private investors started to invest around the Donkin. Within that you have a huge power to actually get SMMEs into the equation, but you need to be willing to do so, there must be a strong commitment to do so.

“One must be an absolute fool if you don’t write tender documents in such a way where you push the percentage of emerging contractors participating. The legal requirement is 25%, but nothing prevents a development agency to write a construction contract in terms of reference in such a way that it is 30% or 35%.  You need to get the co-operation of the main contractor, but you can push that margin. And you can include more of those people into the mix. However, we shouldn’t only get them in the door though, we must also include an element of training. The ideal is that once they leave that job they must have a CIDB grading say from 1 to 2 and 2 to 3. That will enable them to climb the emerging contractor or SMME ladder.”

But the big question that remains, is how can municipalities overcome these challenges and actually involve and help grow SMMEs? In Dr Voges’ mind the solution is very clear. “I don’t think training is taking place at all.  We have many incubators these days and there’s lots of money available for training, but I get the impression not enough SMMEs in CIDB Grading 1 is getting through the system to actually climb that ladder.”

However we look at it, the importance of partnerships between development agencies in general and South African municipalities, when it comes to addressing the country’s SMME development challenges, cannot be emphasised enough.

“Municipalities have a great lack of capacity. They just don’t have the manpower to take the development agenda forward. If you don’t grow the economy, you’re not going to give SMMEs enough work. And the only way we’re going grow the economy, is with special purpose vehicles that will focus on tackling certain catalytically projects to actually get the job done. It is now a worldwide trend that municipalities that are battling to get their development agendas going are establishing special purpose vehicles to actually drive that agenda,” Dr Voges concludes.

Lindsay King

 

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