ABSTRACT
13.4. KEY FINDINGS FROM PINETOWN
13.4.1. SUSTAINABLE ECONOMIC GROWm INDICATORS
One of the critical conclusions from the survey is that Pinetown has the characteristic of a 'growing economy'. Sustainable economic growth indicators that the study shows are:
• A strong SMME sector
• Strong export orientation of the local economy
• Strong ITC infrastructure
During the past decade, the area has managed to retain its businesses, despite the opening up of global markets, which brought new global opportunities for businesses located in the area However, one of the worrying factors is that Pinetown's economic growth has hardly yielded any new job opportunities. The area is suffering from 'jobless growth'.
However, the area has managed to attract new medium sized investment, estimated at 39%, from businesses who have largely been in the area for a period of 1 to 5 years and 28% of whom were in the area for 10 years.
The area is therefore characterised by:
• A strong SME sector
• A growing IT sector
• A well managed economic infrastructure
13.4.2. SECURITY OF TENURE INmELOCAL ECONOMY
The length of time spent by economic players in a spatially defined economic zone is the best determinant of the performance of the local economy. As can be seen from the graph below, the majority of companies and business enterprises located in the Pinetown area are relatively new: 39% falls in the category between 0 - 5 years.
40%
30%
20%
10%
...4"r;.Qf,;o---...18%
0%+ - - - . - - - . - - - . - - - ,
0-5yrs 6 - 10yrs 11 - 20yrs 21 - 50yrs
I... Percentage I
Figure 13.1: Number of YearsinCurrent Location
It is therefore appropriate to conclude that the area has a growing economy and is thus vulnerable to a wide range of economic pressures. Itis therefore important for role-players in such local economic system to proactively develop a set of interventions aimed at dealing with economic vulnerability, with visible signs of global fragility.
13.4.3. DISCOVERING BUSINESS CONCERNS ABOUT THE AREA
Unlike Mooi River and other localities within the coal rim area of Dundee, PinetoWIlhad no signs of large-scale relocations, as the area managed to pick up major business threats and any anti-competitive behaviour, which may have lead to relocations if they were to be ignored by government. These concerns were categorised as follows:
• Economic vulnerability
• Economic fragility
• Perceptions of crime
• Lack oflocal government support to the local economy
• Lack of cooperation among economic role players.
13.4.4. BUSINESS STATUS OF FIRMS LOCATED IN THE AREA
Recent reports undertaken in KZN indicate that Durban wll need to work very bard to attract business head offices to relocate to the city; particularly those, which are involvedin, export trade. One of the positive outcomes of the study was to learn that the area is increasingly becoming a preferred destination for company 'head offices'.
A number of reasons were cited for the emergence of such a trend, which were categorised as follows:
• Closer proximity to the port of Durban
• Closure proximity to the national route, the N3 highway
• Efficient transportation infrastructure
• Excellent IT infrastructure
• Responsive and dynamic logistics industry
The 58% of companies surveyed (whose head offices are in Pinetown) are comprised of:
• Freight clearing and forwarding companies,
• Storage and warehousing companies,
• Distribution and logistics firms (mainly in the Westmead area),
• A number of business service providers.
12%
80%
60%
40%
20%
0% - ! - - - , - - - r - - - ,
-+-Percent age
Head office
Figure 13.2: Business Status
Branch Subsidiary
A strategy to improve business status is based on three elements. The first element revolves.
around the development of an industrial base that links into macro-level initiatives presently being developed by the provincial and national government. The second element concerns the need to develop small businesses, particularly those that could meet local consumer needs.
Thirdly is the need to develop a policy with regard to export promotion of resources that can draw upon the conventional regional export trade as well as markets for the exporters located in the study area
13.4.5. PINETOWN AS A HUB FOR EXPORT RELATED BUSINESSES
Data analysed during the study also suggests that Pinetown is becoming more and more 'an ideal location' for companies who are active in international trade. The 30% of manufacturing businesses, who were surveyed, export their products to the ED region and to North America
60%
50%
40%
I_Percentage
I
30%20%
10%
0%
Importer
Figure13.3:International Trade%
Exporter Neither
The picture shown in the graph above is likely to change in the next ten years ifthe proposed relocation of the Durban International Airport to Durban North (La Mercy) and the establishment of the 'free trade IDZ' adjacent to La Mercy, as the areawillbenefit directly, as it is likely to attract more warehousing companies, or expand the existing ones, whose goods may only go to La Mercy for freight handling.
However, though the relocation of the Durban International Airport to La Mercy will have beneficial spin-offs to current export/import trading companies in the area, the design, development and implementation of a comprehensive business retention and expansion programme in industrial Pinetown will ensure that the designation of the IDZ in La Mercywill have positive spin-offs for Pinetown, as opportunities willbe created through the expansion of production levels and bigger storage capacities in the IDZ, thus creating impetus for investment opportunities in the area
More and more comparnes might relocate to the North Central area, thereby impacting negatively on the local economy. The first group of such companies who might relocate are those who are located in closer proximity to human settlement areas, such as Emshinini and Marianhill, who were experiencing problems related to land claims by displaced communities during the time of the study.
13.4.6. PRODUCTMTY AND COMPETITIVENESS OF LOCAL FIRMS
Improved productivity is the best indicator of the area's stability and growth. 40% of the companies surveyed reported high productivity levels and a high quality of their products.
These were probably the only reasons they have remained competitive, despite increased competition, due to opening up of global markets.
Globalization has introduced flexibility, with regard to technological systems. This has enabled many companies to select target markets around the world, in an endlessly variable geometry of value searching. Short-term profit making is no longer the correct indicator of value. In this survey, the following factors were identified, as being the main reasons for surviving global competition and unfriendly market conditions:
Table 13.1: Competitiveness Indicators
Qualityofproduct and service 40010
Pricing 8%
Market share / leader 8%
Product design 8%
Business attraction efforts are less likely to be successful ifthe existing business owners are unhappy. The survey found the following as being major business concerns and the reasons for wanting to relocate:
Table 13.2: Business Concerns and Reasons for Wanting to Relocate
Access to finance and bad investment environment 45%
Land and building (space) 17%
Demand / Market decline 23%
Competition 5%
Labour regulations
Crime 1010
HighExchange Rates 8%
None 20%
The design of BRE strategies and the institutionalisation of BRE will assist the Metro's efforts to attract new investments in the following ways:
• By solving immediate short-term problems faced by the existing investors who are considering relocations
• By demonstrating community support for local businesses
• By increasing competitiveness of local businesses
To measure such perceptions, respondents were asked to identify the advantages of being located in the area Responses analysed suggest the following picture:
Table 13.3: Locational Advantages and Disadvantages
Location (harbour, DBN
52% Rent, water and electricity infrastructure etc 10%
Access to suppliers and customers
23% 45%
38% 10%
13% 2%
1010 5%
Affordable Rent
5% (garbage 12%
13.4.7. ENVISAGED RELOCAnON PLANS
The thesis found that there were no major industrial migration threats to Pinetown. This was indicated by the 74% response of the surveyed companies having no plans to move their operations to alternative localities. However, the only worrying factor was the 10% potential closures, allof which were attributed to global economic pressures.
80%
70%
60%
50%
40%
30%
20% 16%
10% 5% 5%
0%
Moving Selling Closing
73%
None
Figure 13.4: Businesses' Relocation Plans
Unlike other depressed inland areas such as Dundee, positive economic growth through business expansions was widespread. The analysis of the survey responses suggests that the majority of businesses in Pinetownhadplans to expand their business in the immediate future.
However, such plans were not yet ready for implementation, and thus required some stimulus from government.
Government has developed a local economic development plan aimed at stimulating business growth through the BRE programme. The implementation of a coordinated BRE strategy is seen as a strategy for business growth realisation.
13.4.8. AVAILABILITY OF RAW MATERIAL
The availability of raw material is one of the factors that attract FOrs. As can be seen from the graph below, 63% of the companies surveyed reported a level of confidence in the availability of raw material and the suppliers of the material. It istherefore logical to conclude
that the area has the potential to attract new businesses. The area therefore possesses a lot of business growth potential and therefore some form of interventions are required to attract more FDls, on the basis that raw material suppliers are available in the area
13.4.9. NATURE OF ASSISTANCE REQUESTED FROM LOCAL GOVERNMENT
The following is the list of concerns that the respondents identified, which requires urgent attention on the part of local government:
Table 13.4: Business Service Requirements
Itis clear from the above discussion that the Early Warning Survey is a response to problems facing local business. In the case of Pinetown, the system was able to detect whether a local company was interested in leaving the area or in expanding.
A rapid response programme includes pre-planned procedures that are implemented to remedy whatever problems are C&using a local company's interest in leaving or expanding. A rapid response programme implies procedures that are planned and prepared ahead of time so that they can be implemented immediately when they are needed.
Many companies have only a short window of opportunity for moving operations or expanding. If a community has pre-planned' the communication and coordination that is necessary to keep the company operating or expanding in the same community is ready to implement. The final goal of the system is to resolve issues causing a local company to consider leaving the area or selecting another city for expansion. Taking action is the key.
CHAPTER FOURTEEN: PLACE MARKETING AND INVESTMENT PROMOTION A RESPONSE THE PROBLEM OF INDUSTRIAL MIGRATION IN THE CONTENT OF SMALL TOWNS