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Integration and planning are critical in the development of cities – the country’s economic engines, said the Chairperson of the Select Committee on Appropriations, Mr Charel De Beer. Mr de Beer was making opening remarks before the Committee’s consideration of the Financial and Fiscal Commission’s submission to the 2018/19 Division of Revenue Bill. 

The Chairperson of the Financial and Fiscal Commission (FFC), Prof Daniel Plaatjies, presented research findings and recommendations on the macroeconomic parameters underpinning urban development. He confirmed that cities account for 60% of gross domestic product.

However, rapid urbanisation has created massive gaps between demand and supply of urban services. This has contributed to high levels of inequality, poverty and unemployment in urban areas. Hence the need for an integrated urban development plan.  

“But a situation in which the economy is unable to grow at a pace that can markedly reduce inequality, poverty and unemployment, there needs to be a new way of harnessing the existing resources to alleviate that.”

One of such opportunity is infrastructure development. “Improved provision of infrastructure would be reflected in lower cost of service delivery in the medium term and higher public spending. Income inequality would decline by 0.3 percent, due higher direct taxes to finance this investment, lower consumer prices for poor households and higher demand for informal labour.”

An urban development-related grant must be introduced to support the integrated urban development framework to deal with rapid urbanisation, on the one hand, and urban poverty and inequality, on the other, he said. “The Department of Cooperative Governance and Traditional Affairs and the National Treasury must consolidate the urban development-related grants so as to achieve the Integrated Urban Development Framework objectives and address urban development holistically.”

The mainstay of the integrated urban framework proposed by the FFC are compact cities with mixed use services and facilities that include hospitals, parks, schools and businesses, said the FFC’s Head of Research, Dr Ramos Mabugu. “The National Treasury must introduce incentive grants specifically targeting city compaction, an urban form that has the potential to remedy apartheid geography and bring masses closer to opportunities for work and facilities.”

The FFC also recommended that cities support the Department of Trade and industry’s Industrial Policy Action Plan, which should form part of the industrial economic performance of urban municipalities as a means to enhance economic diversity.

Cost-effective spending could also help municipalities reduce urban unemployment, she said. Furthermore, integrated public transport and credit ratings could increase urban municipalities’ revenue streams, which could, in turn, make many of them self-sufficient, Dr Mabugu said.

One of the members of the committee, Mr Malgen Terblanche, said there was nothing in this report that would move him to start a new business. “This is an academic desktop exercise we have in front of us. You talk of an integrated public transport system. What are we talking about when there is no effective transport now to take workers to work?”

Dr Mabugu replied: “The issues of an integrated public transport relate to connectivity. It can connect people with their places of work, where they reside and could give them access to services. Urban development must be about connectivity and the integrated public transport system is critical in that. There should not be a disjuncture in that because there are departments that are charged with that task. If implemented effectively, that could reduce the cost of services and of going to work.”  

According to Mr Terblanche, the FFC presentation would not ignite the private sector to start investing. Dr Mabugu responded: “When we have these integrated urban settlements as part of our urban development, they will create a stable economic environment, and will boost business confidence. This will increase the value of land and the cost of service will decrease. That would stimulate economic growth and will lure the private sector to invest.”

Another Committee member Mr Farhat Essack questioned Dr Mabugu on the need for municipalities to have a system of credit rating. He wanted to know why there has not been one, as this could have a huge revenue impact on municipalities.  

Dr Mabugu replied: “We are also puzzled by that. In fact, this idea was once mooted, but it fell through because it was not institutionalised. Arrangements can be made with the Development Bank of South Africa going forward to have it as a means of boosting the coffers of urban municipalities.” 

Dr Hunadi Matema urged her fellow Committee members not to shoot the messenger. She was pleased with the FFC’s presentation of research findings.

Chairperson Mr De Beer said the FFC was in Parliament to make recommendations. It is up to the Committee to interact with the relevant departments to ensure that the recommendations are implemented.

Abel Mputing
12 September 2017