CONTENTS FOREWORD BY THE EXECUTIVE MAYOR...4 INDEX OF TABLES. INTRODUCTION...6 Aims of the Summit...6 Aims of this document...7 Methodology...

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3 CONTENTS FOREWORD BY THE EXECUTIVE MAYOR INTRODUCTION Aims of the Summit Aims of this document Methodology DISTRICT SNAPSHOT SPEED UP DELIVERY OF BASIC SERVICES...12 Water Sanitation Electricity Housing IMPROVE PUBLIC SERVICES Access to Clinics, schools, Roads & Emergency Health Services School Sanitation HIV and Aids Roads & Transport Skills upgrading CREATE JOBS & LIVELIHOOD OPPORTUNITIES Structure of the District Economy Unemployment &Household Income Priority Economic Sectors in Amathole..29 Business Development Services The Challenge of Jobs Creation BUILD & MAINTAIN INFRASTRUCTURE Provincial Department Infrastructure expenditure Plans Critical Economic Infrastructure Kei Development Corridor FIGHTING POVERTY The Human Development Index (HDI) Number of People in Poverty Social Grant Dependence CONCLUSION Growth and diversification of the urban economy INDEX OF TABLES Table 1: Water Access by Household for Local Municipalities in Eastern Cape and Amathole for Table 2: Type of Sanitation by Household for Local Municipalities in Amathole and the Eastern Cape for Table 3: Households below RDP Standards Table 4: Estimated Water and Sanitation Backlogs for Amathole Table 5: MTEF Funding (MIG) Table 6: MTEF Funding (MIG) Table 7: Bucket Backlogs and estimated Costs by Local Municipality Table 8: MTEF allocation for eradicating the bucket system in Amathole Table 9: Energy Sources for Lighting in the Eastern Cape and Amathole for Table 10: Level of Informal Housing in Amathole and the Eastern Cape for Table 11: Housing Backlogs for Amathole Table 12: Household access to basic services.. 20 Table 13: Sanitation facilities in schools for education districts in Amathole Table 14: HIV Prevalence in Amathole District.. 22 Table 15: Functional literacy: age 20+, completed grade 7 or higher Table 16: Unemployment & HH Income for the Eastern Cape and Amatholde District Table 17: Opportunities for Agriculture in Amathole Table 18: Possible High Value Crops Table 19: Current Employment by Sector in Amathole, Estimates of Targets and anticipated Interventions and Investments required to meet Targets Table 20: Amathole Transport Projects Table 21: Amathole District Infrastructure Invesments over the MTEF Table 22: Human Development Index (HDI) for Amathole Table 23: Proportion of People in Poverty in Amathole Table 24: Whether Household Member is receiving Social Grant GLOSSARY

4 FOREWORD BY THE EXECUTIVE MAYOR The decision to host the Amathole District Municipality Growth and Development Summit (GDS) arises from the Provincial Job Summit Agreement held in East London on 16 February The provincial summit built on the 1998 Presidential Jobs Summit and the 2003 National Growth and Development Summits. The purpose of the national growth and job summits were to develop plans to achieve Vision The governing party, the ANC, in its 2006 local government manifesto, determined that each district municipality and metropolitan municipality should hold growth and development summits within one year of elections in order to create platforms for dialogue so that all sectors of society have a common vision in building better communities and to improve the lives of all. The objectives of 2014 form part of the eight United Nations Millenium Development Goals, with the key objective of halving poverty by Local government is at the coalface of service delivery and development. This sector has undergone enormous transformation since 1996 and great strides have been made to make local government more democratic and responsive to the needs of the communities it serves. This, however, has not been without challenges and indeed there is enormous pressure to deliver services, to provide greater access and improve the lives of all. Shortly after the last local government elections, we held a strategic planning session in April 2006 to review national government s targets and the gaps in our integrated development plan (IDP) and to plot the way forward for the next five year period. We concluded that our key strategic focus areas would be: To reduce unemployment by half; Poverty eradication; Investing in sustainable infrastructure development; Enhancing the economy of the district; and To reduce the impact of HIV and Aids. 4

5 It is no accident that these goals have resonance with It is therefore critical that we all have a common vision and the Provincial Growth & Development Plan, the National purpose within our district across all sectors of society and Spatial Development Framework, and also the millennium that we all play our part and make public our commitments goals of the United Nations. to make it work. The Amathole Growth and Development Summit (GDS) which will be held on 8 and 9 March 2007 Thus it is encouraging to note that the Eastern Cape is therefore vital. The GDS is the platform where all key Provincial Government will be investing some R2,5 billion stakeholders from all sectors of society in the district in infrastructural development within our district over the will gather to debate and chart the way forward. This medium term expenditure cycle ending in the 2008/09 will assist in the development of the Amathole Regional financial year. Economic Development Strategy which will form part of the Amathole s Integrated Development Plan. A number However, we have a daunting task ahead of us. Current of workshops have been held with different sectors in available statistics indicate that the number of jobs in the preparation for the GDS and we are indeed grateful to all formal sector amount to 194,000 with a further 63,000 in our communities who have participated and who have the informal sector, and there are a further 330,000 people played their part in this process. who are seeking employment. Therefore, to reduce unemployment by 50% by 2014, requires the creation of I have great pleasure in presenting the Amathole District 160,000 new jobs. In order to achieve this target, our GGP Municipality s Economic Profile to you, our reader, and would need to be increased by 80% or R13 billion (at 2000 trust that you will join us in our efforts to achieve our prices). Investment of some R40 billion in production vision and make Amathole economically competitive on capacity and probably a similar amount in infrastructure a global scale. and human capital would be needed. Yours sincerely CLLR SAKHUMZI SOMYO EXECUTIVE MAYOR 5

6 INTRODUCTION Building on the results of the National Growth and Development Summit in June 2003, government proposed that all district and Metropolitan Municipalities hold Growth and Development Summits (GDS) in their area of jurisdiction. The summits should provide opportunities for building partnerships with social partners by bringing together representatives from the broadest sections of society: labour, business, community sector and government (local, province and national). Government has identified district and metropolitan areas as the pivotal sites on which to build an understanding of the nature and distribution of regional economic potential across the country. Collaborative action between government and social partners across all the three spheres is vital in forging a common vision for promoting rising levels of growth, investment, job creation, and people-centred development. AIMS OF THE SUMMIT The aim of the GDS is to reach broad agreement on: a development path and programme for the district; what each social partner (government, business, labour and community sector) should contribute to the implementation of the programme; Strengthening the strategic thrust of the district IDP to ensure planning and implementation alignment between the spheres of government, as well as public entities. In this regard the GDS should seek to address the following specific questions and issues: 1. The Amathole District s economic potential and which sectors of the economy should be promoted (this would need, where applicable, to be informed by the IDP, LED and the RIDS); 2. Commitments by government, business, labour and community sector to ensure investment in each of the sectors; 3. Actions required by government and each partner to deal with constraints to such investments, including dealing with bureaucratic delays, EIA processes and land use management; 4. Social and economic infrastructure programmes required to improve investments and provide basic services to communities; 5. Contribution by each partner to the construction of such infrastructure, including possibility of PPP; 6. Second Economy interventions (EPWP including roads & ECD, co-operatives, micro-credit, procurement, land reform, etc) and the role of each sector in such interventions; 7. Promoting local procurement what interventions are required; 8. Improving capacity of local government and contribution of each social partner: including role of public sector unions in ensuring efficiency, role of all in fighting corruption, contribution by private sector and professionals skills required by the district; 9. Establishing a partnerships and/or regional growth coalitions which will act as a mechanism for cooperative action at all levels and a robust framework for monitoring and evaluating progress. 6

7 AIMS OF THIS DOCUMENT METHODOLOGY 1. To ensure that discussion on the above issues takes place on an informed basis; 2. To present a coherent picture of the social, demographic and economic profile and service levels of the area; 3. To present a picture of the challenges facing local government, especially in relation to capacity; 4. To suggest the mechanisms & processes for monitoring progress on the decisions reached and the governance framework for ongoing dialogue and feedback among social partners. This profile for Amathole District is based on a number of documents and information from a range of sources. These broadly include the following: ECSECC data, publications and reports; AEDA data, inputs and reports; District and local municipal IDPs; Data from the Rapid Assessment of Services in the Eastern Cape conducted in 2006); Various research reports The district GDS presents a unique opportunity for constructing partnerships and harnessing the collective energies and contributions of a range of actors and role players with a view to enhancing accelerated and shared growth. The district GDS has the potential to unlock the potential of all localities, and ensure that all sectors of society identify their role and contribute to the common national objective to build a better life for all.

8 DIS TRICT SNAPSHOT The Amathole District stretches from the Indian Ocean coastline in the south to the Amathole Mountains in the north, and from the Mbhashe River in the east to the Great Fish River in the west. It is a land of rivers and fertile floodplains, undulating grasslands, valley bush, estuaries, beaches, forests, and waterfalls. The bio-diversity of the district is often remarked upon, together with possible implications for future socioeconomic developments and competitive advantages. Source: CSIR 8

9 The district lies at the heart of the Eastern Cape Province Sectors that provide formal employment in the district and is presently home to about 1.7 million people. The are public services (75,000 jobs), manufacturing (27,000 economy of the district is dominated by Buffalo City, jobs), trade (25,000 jobs) and agriculture (17,000 jobs). which comprises the coastal city of East London, historical Over the last few years the economic growth of the district King William s Town, and the provincial administrative has been slightly slower than the national average. capital of Bhisho. The district has eight local municipalities, each containing Buffalo City accounts for 42% of the district s population, at least one urban service centre: Mbhashe (Dutywa), 83% of the district s economic output, and 72% of the Mnquma (Butterworth), Great Kei (Komga), Amahlathi district s formal employment. The city is clearly important (Stutterheim), Ngqushwa (Peddie), Nkonkobe (Alice, Fort to the growth and development fortunes of the district Beaufort), and Nxuba (Adelaide, Bedford). and critical to realising an integrated district growth and development agenda. 9

10 Two-thirds of the district previously fell under the two former homelands of Transkei and Ciskei. This is where basic services backlogs, such as domestic water, sanitation, mud schools, poor access roads and unavailable electricity, are most acute. Since 2003/04 the capex budget of Buffalo City has increased by nearly 30%, much more than the provincial average, and in marked contrast to the Nelson Mandela Metropolitan Municipality. The City s operating budget increased slightly faster than the provincial average. There is evidence that poverty has been increasing in the district over the last few years, although there have been some gains in the Human Development Index. The district HIV-prevalence rate is similar to the provincial rate. The problem of informal dwellings (shacks) is most acute in Buffalo City, due to inward migration from the hinterland. The overwhelming dominance of Buffalo City in the district economy points to the importance of strengthening the city s growth, and in particular the success of the IDZ in attracting new manufacturing investment, and the Buffalo City Development Agency, in promoting PPP s around iconic property developments. Total budgeted capital expenditure (capex) for the nine Amathole municipalities was R787 million in 2005/06, equivalent to R472 per capita (slightly above the provincial average). Buffalo City accounts for 58% of this budgeted capex. The district Municipality accounts for a further 29%, and the remaining seven municipalities account for just 13%. Municipal capex outside Buffalo City is about R340 per capita, significantly less than the provincial average. Four municipalities have budgeted capex of less than R10 million. Grants and subsidies finance 65% budgeted capex (about average). The total operating budget for the Amathole municipalities is over R2 billion in 2005/06, or about R1200 per capita (below average). Funding sources follow provincial patterns, as does wages and salaries as a proportion of total budgeted operating expenditure. Efforts to upgrade East London s harbour are critical with regard to the future competitiveness of the manufacturing industry (private enterprises and co-operatives). AsgiSA initiatives around, for example, biofuels, forestry and BPO (call centres) also hold promise for the district. The tourism sector is already showing good (more than average) growth, linked to the various attractions: Wild Coast and Sunshine Coast, mountains and small towns, the rich heritage of frontier wars, crucibles of struggle against apartheid; and the close proximity of all these attractions to each other (a tourism cluster). 10

11 To address Provincial development challenges and opportunities, the Provincial Growth and Development Plan (PGDP) was launched in 2004, and the PGDP finds expression in all the district s IDP s. More recently, AsgiSA has been launched to accelerate economic growth throughout South Africa. The present document aims to outline the elements of a development strategy for the Amathole district. Specifically, this document considers how to: Speed up delivery of basic services; Improve public services (schools, clinics etc); Create jobs and livelihood opportunities; Build and maintain infrastructure; Fight poverty; Augment municipal capacities and co-operation.

12 SPEED UP DELIVERY OF BASIC SERVICES This section briefly outlines service delivery with respect to water, sanitation, electricity and housing, drawing mainly on a provincial household survey conducted in 2006 (RSS). These trends are evaluated against the benchmark of the 2001 census. WATER Significant inroads have been made in terms of extending household water access in Amathole. The district as a whole fairs slightly better than the provincial norm for household water access some 24% of Amathole households access water from natural water sources including dams with the provincial average slightly higher at 28%. Despite a general improvement over the period the former homeland areas of Mbhashe and Mnquma in particular face significant challenges as far as extending basic water infrastructure with almost two thirds and more of households in Mnquma (64%) and Mbhashe (72%) still reliant on natural water sources to meet household water needs. TABLE 1: WATER ACCESS BY HOUSEHOLD FOR LOCAL MUNICIPALITIES IN EASTERN CAPE AND AMATHOLE FOR Water on Site Borehole/Tank Community Stand Natural water/dam Water Vendor/other Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 % % % % % % % % % % Eastern Cape Amathole Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: StatsSA, 2001 and RSS,

13 SANITATION Despite some improvements in household sanitation there are significant challenges as far as sanitation in Amathole is concerned. Great strides have for example been made in Great Kei which extended household access to sanitation by some 50% between and in Nxuba where households with no access to sanitation have virtually been eliminated. The greatest challenges are however again in the former homeland areas with Mbhashe (72%) and Mnquma (47%) recording an appallingly high rate of households with no sanitation that are two and three times the district and provincial norm (22%) respectively. The eradication of the bucket system is also a clear priority in a number of local municipal areas of Amathole with the highest levels of households which currently still use the bucket system reported in Great Kei (36%), Nxuba (27%) and Nkonkobe (15%) - levels which are between three and nine times the district and provincial norm of 4%. TABLE 2: TYPE OF SANITATION BY HOUSEHOLD FOR LOCAL MUNICIPALITIES IN AMATHOLE AND THE EASTERN CAPE FOR Flush Toilet Flush Toilet (connected to sewerage system) (septic tank) Chemical Toilet Pit Latrine Pit Latrine (with ventilation) (without ventilation) Bucket Latrine None Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 % % % % % % % % % % Eastern Cape Amathole Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: StatsSA, 2001 and RSS,

14 Households sanitation backlogs Based on the RSS (2006) data the proportion of households who fall below the RDP standard (household access to on-site sanitation with at least a ventilated pit latrine) is extremely high and generally above the provincial norm. Buffalo City (25%), Nxuba (31%) and Amahlathi (58%) are the only areas reporting levels below the provincial average (60%), with households in Nkonkobe (74%), Great Kei (84%), Mbhashe (93%), Mnquma (94%) and Ngqushwa (95%) recording levels higher than the average for the district (64%). TABLE 3: HOUSEHOLDS BELOW RDP STANDARDS RSS 2006# Eastern Cape 59.7 % Amathole 63.8 % Amahlathi 58.4 % Buffalo City 25.1 % Great Kei 84.1 % Mbhashe 93.4 % Mnquma 93.5 % Ngqushwa 95.3 % Nkonkobe 74.0 % Nxuba 31.1 % Source: RSS, 2006 Source: CSIR 14

15 The Costs of Eliminating Water and Sanitation backlogs Estimates of the cost of eliminating water and sanitation backlogs in Amathole are R602 million and R987 million respectively. The backlogs in the rural areas (92% of water and 87% of sanitation) overshadow the water and sanitation challenges in the urban areas (8% water and 13% sanitation). Mbhashe and Mnquma are clearly priorities accounting for almost two thirds of the Amathole District water and sanitation backlogs (64% of district water backlogs and 65% of district sanitation backlogs) Clearing the Backlog The current MIG allocation to the district over the medium term is approximately R956.8 million which is below funding requirement to meet the targets set up by Government to eradicate social service backlogs. TABLE 5: MTEF FUNDING (MIG) R Current MTEF Funding Funding Requirements Short Fall Source: DORA & WSDP, 2006 TABLE 4: ESTIMATED WATER AND SANITATION BACKLOGS FOR AMATHOLE Category Water Sanitation R % R % Mbhashe Urban 5,362,650 3,412,620 Rural 199,714, ,975,700 Total 205,076, ,388, Mnquma Urban 5,759,600 41,650,050 Rural 174,041, ,583,625 Total 179,800, ,233, Great kei Urban 852,750 2,422,650 Rural 5,482,350 19,814,625 Total 6,335, ,237, Amahlathi Urban 9,870,300 20,131,275 Rural 58,211, ,765,000 Total 68,082, ,896, Ngqushwa Urban 2,571,100 6,512,325 Rural 61,963,300 90,968,625 Total 64,534, ,480, Nkonkobe Urban 12,881,000 21,732,000 Rural 54,379, ,601,375 Total 67,260, ,333, Nxuba Urban 9,681,300 35,902,650 Rural 429,550 1,905,750 Total 10,110, ,808, Amathole Total 601,200, ,378,270 Rural (tl) 554,221, ,614, Urban (tl) 46,978, ,763, Source: DHLGTA and DWAF There is definitely a need to lobby for more MIG funding to achieve provincial (2014) targets, as well as national targets; The eradication of water and sanitation backlogs can be used to boost employment and training under EPWP, and is a significant platform for strengthening the construction and services industries in the district. In order to meet national targets for water to all by 2008 and sanitation to all by 2010, the approximate cost to eradicate the backlog is as follows; TABLE 6: MTEF FUNDING (MIG) R Current MTEF Funding (up to 2010) Funding Requirements Short Fall Source: Amathole District Municipality,

16 Eradicating the bucket system According to the provincial Department of Housing, Local Government and Traditional Affairs the total amount required to eliminate the bucket system in the Amathole District amounts to R71 million, yet the MTEF allocation amounts to only R27 million. The ADM reports that interventions during the financial year 2006/07 have increased the amounts required to meet the targets for eradicating the bucket system by TABLE 7: BUCKET BACKLOGS AND ESTIMATED COSTS BY LOCAL MUNICIPALITY Municipality Backlogs per municipality Funding # R million BCM 953 8,581 m Nkonkobe 860: 77,397 m Great Kei ,520m Mnquma 963 8,664m Nxuba ,860m Amathole ,243m Source: DGLGTA and Amathole District Municipality, 2006 TABLE 8: MTEF ALLOCATION FOR ERADICATING THE BUCKET SYSTEM IN AMATHOLE 2006/ / /2009 5million 10 million 12 million

17 ELECTRICITY Some 20% of households in Amathole have been linked to the electricity grid between with 80% and more of households in all areas other than Mbhashe and Mnquma now using electricity at least for household lighting. Mbhashe and Mnquma scored well below the provincial and district averages with more than half of households in Mbhashe (54%) and only slightly fewer in Mnquma (47%) connected to the grid. These are clearly the priority areas for targeted access to the electricity grid which need to be taken up with Eskom TABLE 9: ENERGY SOURCES FOR LIGHTING IN THE EASTERN CAPE AND AMATHOLE FOR Electricity Gas Paraffin Candles Solar & Other Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 Census 2001 RSS 2006 % % % % % % % % % % Eastern Cape Amathole Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: StatsSA, 2001 and RSS,

18 Eskom s Plans for Electrification in Amathole According to Eskom (submission to the GDS process, 2007) it will reach the target of universal access to electricity by It plans to electrify an additional 233,000 households in the Eastern Cape in order to achieve this. This includes 53,700 households in Amathole at an estimated cost of R408 million. No concrete time frames, targets and plans have however been received. Eskom Infrastructure projects for the Eastern Cape being planned or already underway include the following: 400 kv power line being constructed from Beta substation just outside Bloemfontein to Delphi substation just outside of Queenstown. 3rd 132 kv power line being constructed between Grassridge substation and Chatty substation near Port Elizabeth 400 kv power line and substation being planned between Posiedon substation and Dediza in the Coega IDZ 3 x new substations being constructed in the Cofimvaba and Ngcobo areas which will assist in making more capacity available for the Butterworth area. 4 x new substations being planned in the former Transkei area close to the towns of Elliotdale, Willowvale, Centane and Tsomo The construction of a new Open Cycle Gas Turbine (OCGT) at Coega 400 kv power line being planned between Eros substation near Harding in KZN to Neptune just outside of East London and further to Grassridge Various refurbishment projects focusing on renewing aged infrastructure are also under construction or being planned for the future. Nationally, Eskom is prioritizing developing increased electricity capacity through a number of programmes. These include: The return to service programme (de-mothballing old power stations) Construction of gas turbines Development of the Pebble Bed Modular Reactor (PBMR) These don t seem to have much of a bearing on the Eastern Cape or the Amathole district in particular. 18

19 HOUSING Shifts in the level of informal housing between provide an indication of the extent to which the plight of the most vulnerable has been addressed in terms of their housing needs. Despite an overall decline in the number of informal houses in Amathole between (16.1% down to 7.3%) there are a number of local municipalities where there has actually been an increase in the number of informal houses. Great Kei saw a significant increase in informal housing between (8.7% to 10%) with a slight increase in Mnquma during this period. Buffalo city still recorded the highest level of informal housing in 2006 (16%) despite a significant decline from 28% in TABLE 10: LEVEL OF INFORMAL HOUSING IN AMATHOLE AND THE EASTERN CAPE FOR Informal Housing Census 2001 RSS 2006 % % Eastern Cape Amathole Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: StatsSA, 2001 and RSS, 2006 Housing backlogs are currently being recalculated by the provincial Department of Housing, Local government and Traditional Affairs. The existing data on backlogs given in the table below suggests that there is currently a backlog of some 182,439 units of which the bulk are in Buffalo City (41%). Nxuba has virtually no backlogs (0.5%) while the remaining local municipalities have backlogs of between 7%-13% of the district total. TABLE 11: HOUSING BACKLOGS FOR AMATHOLE 2005 # % Amahlathi Buffalo City Great Kei Mbhashe Mnquma Ngqushwa Nkonkobe Nxuba Total Source: DHLGTA, 2005 There is clearly a need to urgently finalise the process of assessing the backlogs in each local municipality in the district and to prepare Housing Sector Plans for eradicating this backlog; The eradication of current housing backlogs in the district will have a significant impact on the construction industry and the creation of jobs. It is thus critical that housing sector plans are linked to strategies for ensuring greater local content and the development of local small businesses/contractors in this sector. 19

20 IMPROVE PUBLIC SERVICES ACCESS TO CLINICS, SCHOOLS, ROADS & EMERGENCY HEALTH SERVICES Despite low levels of household access to basic water, sanitation and energy in the former homeland areas of Mbhashe and Mnquma, the levels of access to other services appears to be somewhat better; Only Nqushwa (44%) and Mnquma (53%) reported significantly less than two thirds of households with access to clinics; Access to primary schools was generally reported by four fifths (80%) and more of households suggesting widespread access in Amathole; The levels of access to emergency health services (ambulance) is appallingly low throughout the district with even less that half (45%) of Buffalo City residents reporting access to ambulance services. For the remaining local municipalities the levels are one third and less of households accessing ambulance services. TABLE 12: HOUSEHOLD ACCESS TO BASIC SERVICES Access to clinics Access to primary schools Access to roads in good condition Access to ambulance service % % % % Mbhashe Mnquma Great Kei Amahlati Buffalo City Ngqushwa Nkonkobe Nxuba Source: RSS 2006 Source: RSS,

21 Source: RSS, 2006 Source: RSS, 2006 SCHOOL SANITATION There are still a significant percentage of schools within the district that have no sanitation, with the Butterworth education district recording the largest proportion (13%), the remaining schools in this education district recorded between 3% - 8% of schools with no sanitation. These should be targeted for immediate investments in sanitation infrastructure. Overall 50% and more of schools in the district do not conform to basic RDP standards and this clearly requires an immediate plan and resourcing arrangements to address this. TABLE 13: SANITATION FACILITIES IN SCHOOLS FOR EDUCATION DISTRICTS IN AMATHOLE Flush to main sewer Flush to septic tank Ventilated pit Pit Latrine Bucket System No Sanitation % % % % % % Butterworth Dutywa East London Fort Beaufort King William s Town Amathole Eastern Cape Source: EMIS

22 HIV AND AIDS Amathole District is made up of urban, peri-urban and rural areas resulting in pockets of vulnerable groups with high prevalence rates. Amathole District had an antenatal prevalence rate 1 of 27.4% in 2004, up from 21.7% in 2002, which is similar to the average for the Eastern Cape (28.03% in 2004). Current data on HIV is unreliable. It is however estimated that 10% of the Eastern Cape population is HIV positive, and 19.2% of adults (20-64 years) (ASSA 2003 Model). Very little data exists on HIV and AIDs specific to local and district municipal areas. In the Eastern Cape those at greatest risk are women who have higher HIV prevalence rates than men, the African population is at greatest risk, and the epidemic is growing fastest among youth (15-25 years). Young African women are thus clearly the most vulnerable. TABLE 14: HIV PREVALENCE IN AMATHOLE DISTRICT Amathole Eastern Cape Source: Dept of Health antenatal survey, 2004 According to the HSRC 2003 household survey, HIV prevalence is generally higher in urban informal and urban formal settlements and lower in farm and tribal settlements. There is not a significant difference in HIV prevalence among those working and those unemployed. Unlike the results for South Africa as a whole, the Eastern Cape survey shows an increasing HIV prevalence with increasing education up to matric. The epidemic in the province is expected to reach a peak by 2010, at about 16% of the population, before the number of new infections even out (ECAC, 2004). The Department of Health has embarked on a range of prevention, care and treatment interventions. In Amathole 10 service points are accredited for dispensing anti-retroviral treatment, treating a total of 4168 patients in November However, there is still a need to accredit additional points and increase the number of people on treatment. Increasing number of people on TB treatment and partner treatment for people with STIs is also a challenge. 72.3% of scholars in the province reported that they had received HIV education, however 54% had 2 or more partners and only 28.8% reported using condoms during sexual intercourse (ECAC, 2004). This highlights the importance of information, however it also highlights how information, experiences and knowledge does not necessarily translate into less risky behaviour on the part of the individual. 1 Antenatal prevalence refers to the percentage of pregnant women attending public clinics who test positive for HIV. Data is only available per district, and it is difficult to extrapolate this data for the entire population. 22

23 Two major workplace surveys have been conducted in the district. A survey by one of the automotive companies reported a HIV prevalence rate of 9%. A random sample of 20% of the workforce in Buffalo City reported 10.3% prevalence rate (ECAC, 2004). In general HIV affects large companies greater than medium and smaller ones. Hence larger companies have been more responsive than smaller companies. The ADM has also undertaken two workplace surveys amongst its staff. The first survey in June 2003 indicated an HIV prevalence of 12%. The results of the second survey undertaken in November 2006 have not been released as yet. The ADM has an HIV policy for staff and an active workplace programme, including a wellness centre and an Employee Assistance Practitioner. Peer educators have been trained in all departments. Some companies like Daimler Chrysler and Johnson and Johnson are also extending their workplace programmes to family and community members. However sectors like construction which are likely to contribute significantly to economic growth in the next few years do not have any coordinated initiatives in response to the impact of the pandemic. In the 2006/2007 financial year ADM has a budget for HIV and Aids totalling R 1.2 Million. The budget has been planned for the following programmes aimed at enhancing coordination, information dissemination, awareness raising and communication: District Aids Council coordination; HIV and Aids Magazine publication; Capacity Building for Traditional Health Practitioners; Supply and Distribution of Home Based Care Kits; Health Promotion and Awareness Campaign; Strengthening HIV and Aids Community Initiatives. The province is developing a multisectoral plan for scaling up and intensifying the response to HIV and Aids. The plan will outline a set of measurable targets for all spheres of government and other stakeholders. The district and local municipalities should participate in the development of this plan and integrate the goals, objectives and targets of this plan into their IDPs from These should also include dedicated budgets. A multi-sector response to HIV/Aids is critical, given the currently limited impact which government programmes are having on the epidemic. 23

24 ROADS & TRANSPORT Transportation in Amathole is constrained both by infrastructural issues and by limited access to public transport. Despite significant investments in new roads in the district many local communities remain trapped in isolated and disconnected local communities often with very poor road infrastructure. This disconnection has significant consequences in terms of local economic development, social development and services delivery, most evident from the accessibility to emergency ambulance services. Those communities reporting the poorest road infrastructure (Butterworth and Dutywa) also suffer the worst access to emergency services. Although the district has an extensive network of roads, the bulk of these roads are in poor condition some due to increases in road freight volumes, many due to inadequate maintenance budgets. Currently the process of maintenance and upgrade is severely hampered by the lack of clarity with regards to roles and responsibilities between various roads role players as well as the lack of dedicated funding to deal with backlogs. The process is currently under discussion at all levels, thus providing some hope for a resolution in the near future. Furthermore, the road transport network does not favour smooth flow of goods and people between neighboring centres. An example of this is the linkage between East London industrial heartland on the West Bank and the N2, which winds through East London, thus mixing commuter, tourist, freight, taxis and pedestrian traffic. Many other examples of a poor hierarchical road system, and a system that does not provide appropriate connections between current users and their destinations, can be quoted. This leads to increased travel time and costs, increased deterioration of roads, and increased accident risk. The solution lies in a demand management, land-use planning including a regional transport infrastructure framework. A significant increase in capital investment and operational budget is required to improve the economic and social linkages within the district. There is a desperate need for flexible, low cost, safe and regular public transport within municipal areas and between the towns in the district. The poor are particularly affected by time-consuming and costly trips, and are also the most affected by failure of mass-transport systems (eg: breakdowns, accidents). 24

25 Walking is a major mode of transport in Amathole particularly in CBD areas. However, little provision is made for pedestrian and cycle traffic. As a result, pedestrians face many problems due to the limited availability of pedestrian facilities e.g. pavements, pedestrian crossings and hawker stall which block pavements and hamper pedestrian flow. Lack of street lighting and non pedestrian transport utilizing pavements as dropping and loading zones add to pedestrian problems. Lack of pedestrian facilities, coupled with a total absence of pedestrian behaviour education, results in a congestion and increased risk of pedestrian injury. Transport, whether motorised or non-motorised, experiences many problems within the Amathole District. These can be summarised as follows: 1. Poor conditions of roads especially rural roads and those within urban townships result in inaccessibility and inadequate linkages between settlements; 2. Stray animals; 3. Inadequate pedestrian signs and markings and off loading areas especially within CBD areas; 4. Limited traffic calming measures within areas of high accidents; 5. Low visibility of traffic officials and law enforcement; 6. Non-availability of traffic lights, let alone at major intersections; 7. Unavailability of adequate public transport facilities especially for the disabled; 8. Limited albeit improving cooperation between public transport operators and the municipal authorities; 9. Lack of institutional capacity at Local and district Municipal level to manage transport planning and implementation ; 10. Insufficient supply of taxi related infrastructure; 11. Outdated information at the taxi registrar; 12. Lack of pedestrian and non-motorised transport facilities;, 13. More than 50% of the public transport fleet in the district comprises of bakkies (light delivery vehicles) which perform a major feeder role to minibus taxis, especially in rural areas where road conditions are poor. 14. The cost of public transport is very high for low income earners, especially for the unemployed. A user subsidy should be considered. 25

26 SKILLS UPGRADING Most working people (29 %), in the Amathole District have either elementary skills or are unskilled workers (Amathole District Report, 2006). According to this report, only 4 % of Amathole s working people fall into the skilled category. Craft and trade (14%) are significant fields of occupation in the Amathole District, followed by a proportion of technical skills and professionals and a significant number of people in service oriented areas of work. However, these figures do not include people who are experienced in specific areas, such as farming or artisan skills The literacy rate in Amathole is higher than that for the province and has improved between The highest levels of literacy are found in Buffalo City (77%) with the other areas significantly lower. The lowest literacy levels in the district are recorded in Mbhashe (48%) and Great Kei (50%). TABLE 15: FUNCTIONAL LITERACY: AGE 20+, COMPLETED GRADE 7 OR HIGHER % % Eastern Cape Amathole Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: Global Insight, 2006 There is a concentration of academic institutions in the district, including University of Fort Hare, Walter Sisulu University, Lovedale college, Fort Cox college, the FET college, and a number of excellent high schools. Despite this the skills deficit in the district mirrors the skills deficit throughout the province. The primary challenges facing the tertiary institutions, many of which were previously homeland institutions, include the following: Institutional transformation and the integration of multiple institutions; Curriculum transformation through diversification and upgrading of course offerings; Question of access and equity; Improvement of standards. Despite mixed reports, processes of institutional and curriculum transformation particularly for the universities seem to be largely on track. However questions of access and standards are understandably more difficult to achieve in the short term since they include the transformation of a broader range of factors such as income levels of poor households, bursary access and the transformation of secondary education. Institutions are further challenged by the inability of students to pay for tertiary education, as catchment areas are mainly poor and suffer from high unemployment rates. Poor secondary education standards and language challenges also impact on the institutions. University of Fort Hare has embarked on the innovative Incoko programme to re-imagine the university and its place in the province. The programme is looking at curriculum renewal, language education, pedagogy and improved relationships between academic staff, students and the community around the university. 26

27 Development and the ability of the economy to provide job opportunities is strongly correlated to the availability of suitably educated and skilled workforce, hence it is critical that the local educational institutions should deliver appropriate and high quality education. There is therefore a need for a rigorous and collective implementation of the provincial skills development plan. The plan needs to be championed and implemented with the highest possible political buy-in, and must be supported by appropriate budgets. There should be enhanced interaction among SETA s, Department of Labour, academic institutions, FET s etc to strengthen synergies that arise with respect to training provision, learnerships, apprenticeships, and internships, and ongoing facilitation by provincial government is crucial. There should also be mechanisms for monitoring and assessment of interventions so as to constantly keep up with demands of industry, to discard initiatives that are not working and implement new ones, and to ensure that government and public entity training budgets are fully spent, and are spent according to priorities identified in the provincial skills development plan. However, attention must also be paid to methodology, pedagogy and content of courses, as millions of rands have been spent on training that have yielded little result. Innovative initiatives by the universities include the planned Technopark in East London, where Fort Hare and Walter Sisulu Universities are planning to establish a Technopark linked to the East London IDZ for engineering etc. The Agri- park at Fort Hare together with the Nguni cattle project need to be developed into models which can be replicated and which can maximize access. The ADM itself lacks sufficient and requisite skills to achieve its targets which can be addressed through partnership initiatives with amongst others DPLG, DBSA, ADM and provincial government. There is a need to develop a District Skills Plan that is premised on the basis of universal access to quality education at all levels from pre-primary to primary, to secondary and tertiary education. There is a clear need to forge a consensus between all key stakeholders to address skills deficiencies, as even some of the most basic skills are lacking in the district. It is also important to investigate intra-district geographical mismatches between the supply and demand for skills. The involvement of the private sector in course development and skills development planning is critical to address the mismatch between the type of graduates produced and those required, and also to establish the quality and performance requirements to be met. 27

28 CREATE JOBS & LIVELIHOOD OPPORTUNITIES STRUCTURE OF THE DISTRICT ECONOMY From the graph below, it can be seen that the Amathole District economy is dominated by the community services sector with manufacturing only marginally larger than the trade and finance sectors. The structure of the economy has remained static between the period , although the trade and finance sectors reported the largest individual growth rates over this period. GVA-R FOR AMATHOLE (CONSTANT PRICES) Year Agriculture Mining Manufacturing Electricity Construction Trade Transport Finance Community Services Source: Global Insight,

29 UNEMPLOYMENT & HOUSEHOLD INCOME PRIORITY ECONOMIC SECTORS IN AMATHOLE With no official data on employment at the sub provincial levels, the approximations used by Global Insight (2006) are presented below. The RSS 2006 survey gives an indication of the proportion of households earning an income of less than R1500 per month. According to Global Insight, unemployment has increased between in all areas. Buffalo city has the lowest level of unemployment (45%) while Ngqushwa (77%), Mbhashe (76%), Nkonkobe (66%) and Mnquma (65%) report the highest levels. Apart from Buffalo City (55%) and Nxuba (62%) the remaining areas report two thirds and more of households who earn less than R1500 per month. This is a clear reflection of the currently limited local economic activities and livelihood options within these areas. TABLE 16: UNEMPLOYMENT & HH INCOME FOR THE EASTERN CAPE AND AMATHOLDE DISTRICT Unemployment Rate (expanded definition) HH Income less than R1 500/month % % % Eastern Cape Amathole Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: Global Insight, 2006 In the context of the very high unemployment and poverty rates mentioned above, there is clearly an urgent need for new investments to create jobs and improve livelihoods in the Amathole District. Based on existing economic activity, market opportunities and present resource/assets/skill bases the particular industries offering potential include: Livestock farming; Irrigated horticulture; Forestry; Manufacturing; Construction; Trade and Business Services/ICT; Tourism. Each of these industries requires a detailed Action Plan, specifying investments to be packaged, timelines and milestones, stakeholders and responsibilities. Preparatory work has already taken place for all these industries in the Amathole District, and the main challenge is to galvanise industry role-players to ensure accelerated and shared growth, and good quality investments. It is notable that only 16% of the district s working age population have matric or above. This points to the critical importance of education and training to future employment growth. Each of the seven industries listed above is briefly profiled in the following sections: 29

30 Livestock farming Animals and animal products are the dominant farming activity in the District, accounting for 72% of agriculture value added. There is potential to improve livelihoods from livestock in the former Bantustans through livestock improvement programmes (marketing, branding, genetic improvement etc). There is scope for improved co-operation between communal livestock farmers, commercial farmers, Provincial Department of Agriculture and Municipalities in this regard. Agriculture s competitive advantage in the district is enhanced by: Proximity to markets; Product diversity (across agro-ecological zones); Business services/ict/logistics network. TABLE 17: OPPORTUNITIES FOR AGRICULTURE IN AMATHOLE Enterprise Product Potential Exists In Local Municipal. Sheep (Extensive) Mutton Wool Nxuba,Nkonkobe,Amahlathi, Mbhashe Mnquma Beef (Extensive) Beef Mbhashe, Mnquma, Great Kei, Buffalo City, Nkonkobe, Nxuba, Amahlati, Ngqushwa Management & Technical Enterprise Employment Creation (Jobs) Processing Infrastructure Required Medium 1/100ha Existing agents & Abattoirs Medium 0.8/100ha Existing agents & Abattoirs Markets Local (mutton) Export (wool) Market Potential Dairy (Irrigated) Fresh Milk Buffalo City, Great Kei, Ngqushwa High 1/35 cows No Local Good (seasonal surpluses) Boergoats (Extensive) Game Meat Nxuba, Nkonkobe Low 1.2/100ha Existing agents & Abattoirs Hunting, Live game, Tourism Nxuba, G. Kei, Nkonkobe, Ngqushwa, Amahlati Poultry Broilers Buffalo City, Amahlathi, Great Kei, Mnquma, Mbhashe Poultry Eggs Buffalo City, Amahlathi, Great Kei, Mnquma, Mbhashe Local Local Good Good Good Medium 0.3/100ha No National Export Good (Forex related) Very High 1/2000 birds Abattoir Local Good High 1/5000 birds Packaging Local Good Field Crop Maize Grain Mnquma,Mbhashe Amahlati Low 8/100ha Existing Milling Local Good Field Crop Dry Bean Vegetables (Open irrigated) Hydroponic Production(Tunnels) Dry Sugar Beans Mnquma,Mbhashe Amahlati Low 8/100ha Packaging Local Good Vegetables All (Isolated areas) Medium 2/ha No Local Good (Limited & seasonal Tomatoes Buffalo City, Great Kei, Mbhashe,Mnquma Ngqushwa Citrus Fresh fruit Nkonkobe, Ngqushwa, Great Kei, Amahlati Pineapples Fruit for canning Source: ADM Agricultural Materplan Buffalo City, Ngqushwa, Great Kei, Mnquma Very High 12/ha Packaging Existing (EL) Local National High 0.8/ha Pack shed Local Export Medium Existing (East London) Export Good (Limited Local) Medium (Quality & Forex related) Medium (Forex related) 30

31 Broadscale Agricultural Potential Source: DoA Irrigated horticulture and field crops Horticulture accounts for 21% of the value added of the district s agricultural sector, and is the second most important agricultural subsector (after livestock). Horticulture is concentrated in the well-watered coastal belt and in the valleys of the district s many rivers. Important crops include vegetables (tomatoes and cabbages), citrus, pineapples and subtropical fruits. Other possible high-value crops are listed in the table below. Income from horticulture in 2002, per hectare, was twelve times that of field crops, even though the areas under field and hortcultural crops were very similar. However, costs for horticulture are also much higher than for dryland cropping as irrigated horticulture is both capital and skills intensive. The growth of the sub sector will clearly require bankable projects, experienced management and thorough training. The profitability and marketability of this sub sector is demonstrated by the very rapid expansion of tomato tunnels in Buffalo City in recent years. The district contains nine irrigation schemes of the former Bantustan governments (including Keiskammahoek, Tyefu and Kat River Irrigation Schemes). These schemes are being rehabilitated and cover 2215 hectares, and 1000 smallholders (2.2 ha per smallholder). In addition there are 276 private irrigation schemes with 21ha per farmer. 31

32 Field cropping potential in the district is limited due to shallow and erodible soils and low rainfalls in the inland areas in the western half of the district estimates were that 50% of the area suitable for field crops was under cultivation. Dryland field crops (mainly maize) accounts for only 5.3% of the district s agriculture value added. This is being supported in the communal areas by PGDP s Massive Food Programme, driven by the Provincial Department of Agriculture. In addition the Department is driving the Siyazondla Programme to increase food production from homestead and other (schools, clinics etc) gardens. Municpalities need to work with the Provincial Department and commercial farmers to increase the impact of these programmes. The district should also participate in the AsgiSA driven bio-fuels programme which offers significant potential for including marginal and underdeveloped areas and communities into the agriculture and agro-processing sectors. TABLE 18: POSSIBLE HIGH VALUE CROPS Local Municipality Area Limitations Possible High Value Enterprises According to Agro-ecological Climates Nqgushwa, Buffalo City, Great Kei, Mnquma, Mbhashe Coastal Areas Soils are poor other than dolerite outcrops Avocado, Chicory, Coffee Arabica Garlic, Macadamia Nuts, Peppers Nkonkobe, Ngqushwa, Buffalo City, Great Kei Mnquma, Mbhashe, Amahlati Nkonkobe, Ngqushwa, Buffalo City Great Kei, Mnquma, Mbhashe, Amahlati Valley bushveld Steep slopes, limited areas along the river access to Eskom & sufficient Water irrigation Chicory, Citrus Coffee Arabica, Paprika Thornveld areas Veld, poor, water irrigation Chicory, Coffee Arabica, Garlic Amahlati, Nxuba High lying high rainfall areas Harsh winters Apples, Cherries, Walnuts Amahlati, Mnquma, Mbhashe Sourveld Poor soils except dolerite outcrops Chicory, Garlic, Pyrethrum as cut flowers & essential oils Source: ADM Agricultural Masterplan Analysis Report Source: ARC,

33 Forestry Forestry activity in the district presently exists in three local municipal areas which include Amahlathi, Mnquma and Mbhashe (refer to the map). Although the forestry areas are limited, there is neverthless scope to increase the areas under forestry, particularly in communal areas. The nature fo the forests in the Amathole mountain areas, includeboth commercial pine and indigenous forests. Constraints to the development of this sector lie in the slow pace of land and forestry sector reform processes, the limited size of the available resource, and the lack of skills and investment for beneficiation. Nevertheless, there may be opportunities for low volume, high end furniture production from indigenous forest already exploited in a very small way in furniture manufacturing in Nxuba) and pine for construction, mass market furniture, and processed wood products such as chipboard from commercial forests. Where forests are not suitable for commercial exploitation, they have huge potential benefit in resources for traditional and alternative medicines, and for tourism. This sub sector will be supported by an AsgiSA Forestry intervention programme. Source: NSBA,

34 Manufacturing The manufacturing sector is the second most important sector of the district economy in terms of employment. Ninety per cent of the district manufacturing employment is located in Buffalo City. While all manufacturing sub sectors are present, the leading subsectors are automotive, food processing and clothing, with automotive being the growth sector, on the basis of the expansion of DaimlerChrysler and its suppliers and the MIDP. The sector has been through a period of consolidation following the withdrawal of subsidies to the former homeland industries. The sector is particularly sensitive to the type of exchange fluctuation that took place from 2001 to However, the resulting decline in employment and size of the sector should not be interpreted as a sign of a sector that cannot be grown. On the contrary, there is potential to become a net jobs creator and to become the economic engine of the district. The requirements for increasing the competitiveness of this sector include: Infrastructure investment including local infrastructure that impacts on production and distribution of goods; Infrastructure connecting the city to the rest of the world, particularly the upgrading of the Port of East London (see section on infrastructure below); infrastructure linking the city to the national economy, including the upgrading of the rail to Gauteng to allow the transportation of vehicles, the upgrading of the R72 to cope with high freight volumes and the development of a high-speed freight link to the Port of Durban; telecommunications infrastructure capacity and technology upgrade to allow for a wi-fi network in East London (at least); electricity supply stabilization, possibly through development of local generation capacity using alternative energy technologies. The IDZ must succeed in its mandate to attract manufacturing investment. The activities of the IDZ must be supported and complemented by other agencies, such as the Municipality, ECDC, SEDA etc; Improvement of communication, feedback and monitoring between enterprise and government such that there is effective problem-identification and problem-solving by all stakeholders in manufacturing industry expansion (and also in all other job creating sectors and sub sectors); Improvement in the investment climate through the reduction of red tape, improved marketing, reduction in the cost of doing business and other issues which increase the cost and complexity fo dong business; Support to manufacturing in development and implementation of BBBEE models Employment-related education and training alignment with the needs of local industry addressed at City/district level (with all SETA s). 34

35 Construction Formal sector employment in the district is low, accounting for only 3.4% of all formal/regular jobs. Contract employment can boost this figure significantly. This sector is likely to become a net jobs creator on the basis of both increasing fiscal allocations for public infrastructure investment (water, sanitation, housing, roads, schools etc) and increased private property development (retail, residential, tourism and industrial developments etc). The primary challenges for this sector are: the availability of sufficient capacity and competence locally to absorb government tenders and the dramatic increase in home building activities; The shortage of suitable construction materials. The focus for this sector must therefore be local capacity building initiatives, and support to resource investigation at a regional level. The employment impact of increasing public infrastructure spending will be optimized by the thorough implementation of EPWP. A district-level EPWP plan (together with monitoring and evaluation capacity) is required. New property development is presently most buoyant in Buffalo City. However the City could perhaps be more proactive in developing and catalyzing a major property development project pipeline, and a (financially-enabled) construction sector boom. There may be some lessons from the NMMM whch the Buffalo City Development Agency could explore. Proper land-use planning, release of unutilized government land and setting of appropriate standards for development are critical to ensure an enabling environment and to minimize developments that have a negative impact on: the competitive advantage of the city and the district, namely the lifestyle and environment; the future cost of running the city services. Trade and Business Services/ICT In the modern world linkages are not only a function of good transport infrastructure, but of high speed, low cost and latest technology telecommunications and e-communications. Ensuring e-connectivity for the district, including rural areas, will open up opportunities for commercial information flows, non-cash banking and commerce, co-ordination and targeting of tertiary service provision (including health, education and government services), logistics improvement, improvement in rural security, and a multitude of other issues which increase competitiveness. Amathole has an advantage in its service backlog because new infrastructure can be of the latest technologies, without requiring write-off of obsolete technologies. Improved transport and telecoms / e-communication infrastructure will increase the viability of decentralized production (eg: agriculture and agro-processing), promoting spatial development and economic integration between the rural areas, small towns and the city. Employment in this sector could also be boosted by new investment in Business Process Outsourcing and call centres. District agencies need to work with AsgiSA to ensure that this takes place. ICT services support profitable business/co-operative growth in all other sectors. The primary challenge for the tertiary sector in the district is the current lack of suitably located land for development of service areas, lack of business accommodation and telecoms / IT support. 35

36 Tourism In the absence of reliable statistics, it is nonetheless evident that tourism in the district has grown considerably over the last decade and now accounts for a significant portion of district value-added and employment, perhaps as much as 10% district value-added and 20,000 existing jobs/incomes. New tourist facilities, such as B&B s, backpackers and game farms have sprung up in many parts of the district. The district is fortunate in having a diversity of attractions in relatively close proximity to each other, that bring back tourists, time & again: Wild Coast; East London/Buffalo City (vibey small city, full of contrasts); Sunshine Coast; Heritage sites (all over; interesting for enthusiasts); Amathole Mountains Escape Route; Friendly N6; Nature reserves, some of which have potential for increased commcercialisation. These include Doubledrift, Dwesa-Cwebe, Mpofu and Fort Fordyce. Municipalities can play an important role in tourism development through, for example, supporting local tourism organizations, improving signage, upgrading access/information to important heritage sites and town beautification. Currently most IDPs in the district identify the tourism sector as one with significant potential. However, projects are often not optimally planned, co-coordinated nor given sufficient priority in budget allocations. One of the reasons for this is the absence of strategic planning in tourism, particularly at the local municipal level. The development of a District Tourism Master Plan is critical to ensure that local municipalities can link into a coordinated vision and action agenda for the tourism sector in the /district. Such a master plan will also provide the basis for ensuring district co-ordination of: Branding and marketing; Accommodation supply; Spatial clustering of tourism initiatives based on district nodes (defined according to assessment of tourism experiences, local competitive advantages and tourism infrastructure). Access to the district is provided by East London Airport and the N2 and N6, & the attractions are all-season traveling, close-by each other. This is an added advantage for local tourism in terms of safety and transport costs as well as being conducive for promoting the district s infant film industry. Critical to expanding the tourism sector in the district will be to ensure greater air transport access particularly for foreign tourists. The R64.3 million that has been allocated to upgrading the Bhisho airport is critical in this regard. The PGDP project, the Wild Coast Meander, should become a major attraction, with consequent livelihood opportunities. 36

37 BUSINESS DEVELOPMENT SERVICES The Amathole District Municipality should strengthen partnerships with the Small Enterprise Development Agency (SEDA), the ECDC and with other development agencies in the delivery of non-financial support to SMME s. A well-advertised and adequately resourced one-stop business development centre should be established in each major centre of the district to promote entrepreneurship. As a minimum, the following products and services should be offered at these centres: Information, advice and referrals; Business registration; Business plans; Tender Information and advice; Import and Export training; Trade Information; Business assessment and technical support; Business mentoring; and Market access and business linkages. In addition, there are BDS facilitators who support BDS providers by, for example, developing new services, promoting good practice, building service capacity and building market awareness amongst small enterprises. BDS facilitators are development-oriented institutions whose objective is BDS market development and typically include non-government organisations, industry and employer associations, local government agencies and others. The ADM needs to strengthen its involvement in supporting the BDS market, facilitating greater entrepreneurship growth and development. The ADM should provide funding and can play a role in facilitating and strengthening BDS. In the case of local government the key additional role is to provide the enabling policy, legal and regulatory environment within which BDS markets can flourish. Small enterprises constitute the demand side of the market for BDS. They include micro, small and medium enterprises that are primarily profit-oriented. BDS providers constitute the supply side of the BDS market. They are individuals, private commercial firms, and other agencies providing services to small enterprises.

38 THE CHALLENGE OF JOBS CREATION The estimates for Job creation targets in this section are based on AEDA projections using mainly Global Insight (2005) data. It must be noted that the Global Insight data is based on projections and estimates of formal and informal sector employment. As such the overall projections presented below must be viewed with caution since they are extremely rough estimates. There is currently no official employment data for the sub-provincial level (district and local municipalities) forcing economic planners to use sources such as Global Insight. The diversity of the Amathole economy and the range and depth of the socio-economic challenges in the district, mean that there is no single sector of focus, no magic bullet that can transform the economy and create the requisite jobs needed to halve unemployment by The current number of formal sector jobs in the district is approximately 194,000 (75% of employment), with a further estimated 63,000 (25% of employment) informal jobs. According to the expanded definition of unemployment, a further 330,000 people would like to be employed. To reduce unemployment by 50% by 2014 therefore requires 160,000 new jobs. To assess the potential for specific sectors to contribute to job creation requires an assessment of the existing sectoral contribution to jobs, the cost of creating jobs in the sector and the potential for development of the sector. The table below shows the current and potential areas of job creation, with a short summary of the interventions and investments required to achieve these targets. TABLE 19: CURRENT EMPLOYMENT BY SECTOR IN AMATHOLE, ESTIMATES OF TARGETS AND ANTICIPATED INTERVENTIONS AND INVESTMENTS REQUIRED TO MEET TARGETS Sector Current job numbers Possible target Required interventions and investments Manufacturing 29,400 (15%) (50% increase, 9% of required increase) Agriculture and agro-processing 14,500 (7.5%) 14,500 (100% increase, 9% of required increase) Tourism Tertiary and service sector (excluding government) 6,800 (estimated direct employment 3,5% of district employment) 6,800 (100% increase, 4% of required increase) 45,800 9,000 (20% increase, 5,6% of target) Port expansion, upgrading of rail link to Gauteng, upgrading of R72 and R63, High speed rail link to Mthatha, High speed e-connectivity, Improved technical skills, Stable electricity supply, Reduced red tape, Improvement of human capital/social conditions. Improved road and rail linkages (R63, R72, N2), Commercial production on communal land, Settling of land claims such that production is maintained, Investment capital, Skills development and retention, Security improvement, Improvement in competitiveness and linkages to markets, Investment in agroprocessing facilities Investment in locality development and tourist facilities, Packaging of tourist products, Reduction in travel and accommodation costs, Increase in competitiveness with KZN, overseas localities, Increase in foreign and leisure tourists, Quality and service improvements, Sector collaboration and coordination, Investment in facilities and systems for sports tourism. Land release for development of commercial property, Improved telecoms and e-commerce facilities, Improved distribution infrastructure and logistics, Improved service and product range. 38

39 Sector Current job numbers Possible target Required interventions and investments Health 17,600 3,500 (20% increase, 2% of target) Education 30,700 6,000 (20% increase, 3,8% of target) General government 20,900 No increase Other sectors 7,300 1,400 (20% increase, 0,8% of target) Household (Note: this sector is not a priority sector, but is included due to the significant employment it represents. Increases are anticipated growth and interventions are defensive measures in a sector where employment is extremely vulnerable) 21,000 2,000 (10% anticipated increase, 1,2% of total) Totals 194,000 57,900 (3% increase in jobs, 36% of target) Source: AEDA projections based on Global Insight, 2005 Additional healthcare facilities, Improved range and cost of products, Attraction and retention of skills, Increased efficiency of government health programmes. Expansion of range of courses, Quality improvement, Improved student nonacademic facilities. Improved service standards, Improvement in infrastructure, Skills improvement, Security increase, Improved e-commerce facilities. Improvement in status of domestic service providers, Increased commercialisation/co-operative development of domestic services, Improvement in quality, range, convenience and cost of domestic services, Linking of domestic service to skills improvement programmes (as in EPWP). From the table above it is clear that job creation in the district will require extensive public investment in people and infrastructure, as well as improved private sector competitiveness. The latter is crucial to growth, as improvement in the locality and the human capital, while necessary, is not a sufficient condition for growth. From the target of 160,000 jobs by 2014, and the current 194,000 jobs in the district, it is clear that GGP for the district would need to be increased by 80%, or R13 billion (at constant 2000 prices), to create these jobs. This would imply an investment of close on R40 billion in production capacity, and probably a similar amount in infrastructure and human capital. Even assuming that this massive public and private investment can be achieved then, the number of direct jobs which can reasonably be created is insufficient to meet the target of halving unemployment by It should be noted that the table above does not include all indirect and induced labour creation effects. These are the multiplier effects that are derived because more people in the economy are able to purchase housing, vehicles, other goods and services. This multiplier, which varies from sector to sector, can have a significant effect on creating additional growth and employment. While no modelling has been done for Amathole specifically, models of the national economy indicate that an estimate of 120,000 jobs can be derived from investment in production of this order. In short, while positioning the district for jobs creation requires massive investments, the resultant impact could be significant in terms of employment creation. 39

40 BUILD & MAINTAIN INFRASTRUCTURE Provincial Department of Education Infrastructure development is clearly a critical factor in a locality s economic competitiveness as well as the quality of life of residents of that area. As such infrastructure and infrastructure-related services need to be prioritized in any growth and development strategy for Amathole. This section of the district profile attempts to summarise the physical infrastructure development plans that have been planned and/or budgeted for over the medium term that are likely to contribute to a more enabling social and economic environment in the Amathole District. Like all other regions in the province, Amathole District suffers from acute backlogs in social and economic infrastructure. The vast natural resources that exist within the district, if linked with the development of appropriate social and economic infrastructure could clearly provide the basis unlocking the growth and development potential of the district. These infrastructure programmes must however be well-planned, prioritized, strategic and be accompanied by appropriate investments if these development goals are to be realized. PROVINCIAL DEPARTMENT INFRASTRUCTURE EXPENDITURE PLANS FROM 06/07 08/09 IN THE AMATHOLE DISTRICT MUNICIPALITY The total infrastructure spend directed towards the Amathole District by the Eastern Cape provincial government departments amounts to a whopping total of approximately R2.5bn over the current medium term expenditure cycle. This represents significant public sector infrastructure investment that will hopefully crowd in private investment. Education is a key element of social and economic development. The Provincial Department of Education has planned and budgeted close to R765m on education infrastructure in the Amathole District over the current medium term expenditure cycle (06/07 08/09); The Provincial Department is spending R165m in 06/07, R250m in 07/08 and over R349m in 08/09, representing slightly above 27% of total departmental education infrastructure investment over the current medium term cycle; The bulk of the spending is targeted at rehabilitation and upgrading (R430m), with recurrent maintenance budgeted at R113m, emphasizing a focus on improving the quality of the education infrastructure. Up to 217 schools and FET institutions have been targeted in the district for this upgrade through provincial government funding, involving the eradication of mud-structures and general routine maintenance of existing concretestructures. Therefore a shift towards quality as opposed to quantity (quantity has been the norm for previous medium term expenditure cycles); These upgrading and maintenance amounts are crucial in two respects, 1) by maintaining and protecting existing assets thereby ensuring returns well into the future, and 2) direct and indirect cash injections boost local economies, as routine maintenance activities are generally labour-intensive; A total of approximately R222m over the medium term is budgeted for New Construction of two public special schools in King Williams Town Fundisa Special School and Special Youth Reform Centre; Provincial government education infrastructure spending per capita in the Amathole District over the three year period, in total, is R402 per person. 40

41 Provincial Department of Health The provincial health department has planned and budgeted for a total health infrastructure spending of R440m in the current medium term expenditure cycle for the Amathole District rising from R100m in 06/07 to R155m in 07/08, and further rising to R185m in 08/09; This provincial health infrastructure expenditure in Amathole amounts to approximately 20% of total health infrastructure spending by the provincial government over the medium term cycle; The allocation to the district is divided into new construction (R90m) for the revitalization of 20 clinics and 3 hospitals, rehabilitation and upgrading (R257m), and routine and recurrent maintenance (R93m). Rehabilitation and upgrading will involve 16 clinic revamps and 6 hospital revitalizations within the district; The allocation for new construction will target 18 clinics and 6 hospitals. These large allocations to relatively few health institutions in the district suggests a strategic shift to focus more on improving the quality of health services, as opposed to improving access to health services. So the issue is one of quality, not necessarily access; The provincial health infrastructure spending per capita in the Amathole District over the medium term amounts to an approximate R232 per person. Provincial Department of Agriculture Over the current medium term period (06/07 08/09), the Provincial Department of Agriculture will spend approximately R52m on infrastructure in the Amathole District, representing 26% of the total infrastructure spend (R200m over the medium term) by the provincial department in the district; The allocation rises from R16m in 06/07 to R18.5m in 07/08 and then down to R17.5m in 08/09 and is targeted largely at irrigation systems (R38m), and then fencing, storage and shearing sheds, tunnels, dip-tanks, and soil conservation works (R14m) over the three year cycle; The Provincial Agriculture infrastructure spend per capita amounts to approximately R27 per person in the Amathole District. Provincial Department of Public Works The Amathole District is set to receive up to R75m from the Provincial Department of Public Works; This amount represents about 17% of the total provincial allocation to all districts and the Metro; The per capita spending on public works amounts to R39 per person; It is not clear what projects the budgeted money will be spend on. The Amathole District has quite significant untapped agriculture, forestry and water resources, and these resources are at the heart of any sustainable growth potential and economic activity in the district; Given this existing natural resource base, the Provincial Department of Agriculture plays an important catalyst role in promoting subsistence farming (food security) and small and large scale commercial agriculture; 41

42 Provincial Department of Roads and Transport Another key element of required infrastructure development in the district is the road network. The Amathole District suffers from quite significant road and rail infrastructure backlogs given the rural character of large parts of the district; In light of these backlogs, and recognising the key enabling role that transport infrastructure has for economic and social development, the provincial roads and transport department has allocated approximately R1.1bn to road and rail infrastructure in the Amathole District area, declining from over R400m in 06/07 to R392m in 07/08 and then a drop to just under R352m in 08/09; This total allocation over the medium term represents approximately 22% of the total provincial allocation towards road infrastructure, and represents a per capita spend of R579 per person in total over the medium term expenditure framework; The Kei Rail project accounts for R334m this amount is spent jointly between OR Tambo and Amathole; The major transport projects envisaged in Amathole, besides the Kei Rail, are listed below (R485m): TABLE 20: AMATHOLE TRANSPORT PROJECTS Mdantsane Urban Renewal Programme: Uprading of internal streets Amathole Municipalities Buffalo City N2 To Kei Mouth Road Adelaide to Fort Beaufort Idutywa to Engcobo (Section 1-Gibb) Middledrift to Alice Alice to Fort Beaufort Dimbaza to Middledrift Amathole Municipalities Amathole Municipalities Amathole Municipalities Amathole Municipalities Amathole Municipalities Amathole Municipalities Upgrading of existing gravel roads to surfaced standard Great Kei Surfaced road 43 km Nkonkobe Surfaced road 36 km Mbhashe Surfaced road 30 km Nkonkobe Surfaced road 23 km Nkonkobe Surfaced road 25 km Nkonkobe Surfaced road 23 km Peddie to Bira Cintsa East Bridge East Coast Resorts Amathole Municipalities Buffalo City Municipality Buffalo City Municipality Source: Department of Roads & Transport Ngqushwa Municipality Surfaced road 25 km Buffalo City Bridge Buffalo City Surfaced road 25 km Some of the other spending on road infrastructure in Amathole by the Provincial Department will be on recurrent and routine maintenance (including the Vukuzakhe labour-intensive road maintenance programme) of R288m. Provincial Department of Sport, Recreation, Arts and Culture The total Provincial Department allocation to Amathole amounts to just under R33m over the current medium term expenditure cycle; The Amathole District is set to receive R7.3m in the 06/07 financial year for 1) Butterworth Library (R1.3m), 2) Bhisho stadium (R1m), and 3) a Sports Academy in Buffalo City (R5m). An amount of R11.5m is allocated for 07/08 for the continuation of the Bhisho Stadium renovations (R2m), the continuation of the Buffalo City Sports Academy (R5m), as well as an allocation of R2.5m and R2m for the Keiskammhoek Cultural Centre and the Butterworth Swimming pool, respectively. Finally, in 08/09, an amount of R14m is allocated for the completion of the Buffalo City Sports Academy (R10m), and R4m for the Umtiza Campsite in Buffalo City; The Amathole allocation of the Department s infrastructure budget represents 42% of total departmental infrastructure spending throughout the province; The infrastructure per capita spending for the department in the district amounts to R18 per person of the infrastructure spend. 42

43 Provincial Department of Social Development The provincial department has allocated almost R19m in infrastructure spending over the current medium term expenditure cycle to the Amathole District. The expenditure is targeted at, 1) the Bedford Service Centre (R2m), 2) Peddie Community Development Centre (R1.2m), 3) the Dutywa Multi-purpose Centre (R4.5m), 4) Butterworth Old Age Home (R6.6m), and 5) Service Offices in Middledrift, Butterworth, Alice, and Khalethemba at a total cost of R4.1m. A further R0.3m is allocated for maintenance and upgrade of parkhomes, and routine maintenance of existing social development infrastructure. The total infrastructure spending in Amathole represents 30% of total Social Development infrastructure spending in the province. The social development infrastructure per capita spending over the medium term is approximately R10 per person. Provincial Government Infrastructure Expenditures: Conclusions These significant provincial infrastructure expenditure plans in the ADM will provide a meaningful platform for social and economic development given the opportunities such spending opens up in both the first and second economies; Relative to other districts and the Metro in the Eastern Cape, ADM, in total provincial infrastructure spend, will receive approximately 19%, second only to OR Tambo District (22%); It is important for social and economic infrastructure to complement each other, thereby mutually reinforcing the sum total of benefits derived from the infrastructure expenditure and its economy-wide linkages; It is necessary, but not sufficient, to just build new infrastructure. Maintenance of existing infrastructure needs to also be prioritised. Currently, maintenance of the Department s immoveable assets is poor inevitably leading to rapid deterioration of buildings and other assets. Maintenance funds have always been, and may probably remain limited. Much of the limitations with respect to maintenance can be attributed to poor levels of definition with respect to the responsibility for maintenance budgeting; The distinction between levels of responsibility between Public Works and User departments as reflected by the infrastructure plans will go a long way towards regularizing maintenance planning; Finally, it is commendable that a paradigm shift is evident through the infrastructure allocations, with the focus on the quality of infrastructure and services, as opposed simply to the quantity, especially in education and health. The District Infrastructure Plans The Amathole Infrastructure budget over the MTEF amounts to R71.6m. TABLE 21: AMATHOLE DISTRICT INFRASTRUCTURE INVESMENTS OVER THE MTEF 2006/ / / Source: Amathole District Municipality,

44 CRITICAL ECONOMIC INFRASTRUCTURE East London IDZ At the heart of industrial development in ADM, and indeed beyond, is the growth and success of the East London IDZ. The concept of the ELIDZ was introduced to establish a defined industrial zone in which unique support measures would apply, is associated with a major harbour and/or airports, and where manufacturing would be encouraged to respond to, and meet the needs of, the growing international market. The absence of an Industrial Strategy National Regional IDZ support infra-structure: Port Airport Road Rail Link With the achievements over the 2006/07 period the ELIDZ can now boast the following: The IDZ s internal bulk infrastructure has been completed; An amount of close to R300m has already been invested in infrastructure in the ELIDZ including logistics infrastructure, industrial space, and social infrastructure. These funds have largely been sourced from the provincial government through the ECDC. In addition, there are current infrastructure initiatives that are underway or have been completed, and include; Construction of the Automotive Supplier Park Construction of nursery Construction of a waste transfer & sorting station Feasibility studies for Business Support Centre Feasibility studies for SMME & Skills incubator Pursue Investor pipeline in Bio-fuels Pharmaceutical sector Develop and operationalise One-stop Shop Government Services Window Critical constraints faced by ELIDZ include the following: Absence of IDZ Specific Incentives Complex Institutional framework and lack of clarity on IDZ Regulation Financing 44

45 The first cluster in the zone, the Automotive Supplier Park was completed within six months ensuring that suppliers could meet Daimler Chrysler requirements for their W204 model; 7 component manufacturers have invested in the zone, all of which are already occupying their premises; The total number of investors in the IDZ now stand at 11 representing a total investment of R755 million more than double the investment of R300 million; These investors will together result in the creation of 1180 jobs with some 2000 jobs already created through the construction. The East London Port Expansion Initiative The East London harbour expansion is critical to the regional economy of the Eastern Cape Province as well as the Amathole region. An investment of at least R5bn is required to stimulate economic activity, but more importantly, to protect the existing economic base. The port expansion would provide the strategic infrastructure needed to secure the future of existing economic sectors (particularly the automobile sector) as well as providing the basis for unlocking new priority sectors such as agroprocessing, tourism, forestry and timber. There are already significant investments in sectors which will rely on the capacity of the East London harbour. The potential of any of these initiatives in the former homeland areas (second economy) of the province will rely on the East London harbour as their link to the global economy. The potential economic impact of the expansion of the East London Port What follows below is an idea of some of the projects and sectors which would rely on the East London Port expansion: Auto sector The Current OEM, DCSA and the lifeblood of the East London economy is likely to downscale its operations reverting back to producing only for the domestic market. The competitiveness of DCSA in relation to sister companies internationally competing for models would be eroded and the existing skills base built up through years of investment in skills development would be wasted. Some R500 million in wages would be lost to the local economy and the impact on associated suppliers would be disastrous. In short the East London economy would be decimated; 45

46 A second Asian OEM has already decided against setting up a production plant due to the harbour constraints; Given the expansion, other Gauteng automotive manufacturers may well utilise the port, given the limits to expansion and current delays at the Durban port. Biofuels Biofuels is a new ASGISA priority sector and one which has been identified as having significant potential for the Eastern Cape, particularly in the former homeland (second economy) areas of the province. A number of Biofuels initiatives are currently being planned in the province. The East London Industrial Development Zone (ELIDZ) has reserved a site for a biofuels mill and refinery. This could induce investment in farming infrastructure required to produce feedstock. The project will result in 100,000 tons of oil, in the first module, being exported and a potential job creation of between 10,000 and 15,000 workers. container volumes currently destined for East London are handled by other ports East London Port Expansion: Conclusions Ultimately the question emerges as to why the expansion of the East London port has not been identified as a strategic investment to promote economic growth and job creation? It is aligned to national, provincial and local development priorities, it is clearly an important staircase between the first and second economies, there is significant private sector interest in investing in and around the port in priority sectors and there is significant potential that can be unlocked through upgrading the port. The sad truth is that the failure to include the East London harbour as a key priority investment will actively erode the existing economic base of East London and lead to economic stagnation in the region. Forestry, wood and furniture The current investment by Steinhoff in Ugie has potential linkages to the port expansion. In addition the Forestry icon project, one of the ASGISA priority projects will see some 100, ,000 hectares of forest planted and harvested within the next ten years. The forest areas will include a combination of Eucalyptus (harvestable within ten years) and pine (which would take somewhat longer). The potential for Amathole is about 10, 000 hectares of new commercial afforestation. The port and Kei Rail will play a critical role in this sector. Other Port Opportunities Currently in the balance due to the constraint of the harbour The current port has deterred a number of investors from the ELIDZ and is likely to continue unless the capacity of the port is improved Transnet alone will not be able to finance such a megaproject and therefore strategic partnerships, structured finance and lobbying is required. KEI DEVELOPMENT CORRIDOR Kei Rail, an Eastern Cape provincial flagship project, represents an integrated development plan to stimulate and sustain socio-economic growth and development of the corridor between East London and Mthatha and beyond. The long-term vision is to develop a high speed modern and proven state of the art railway line in this Kei Development Corridor, fully integrated with other PGDP and mega projects of scale and impact, to facilitate a demand responsive and cost effective alternative mode of transport in regard to freight and passenger services between East London and Mthatha and beyond. 46

47 Kei Rail addresses rail traffic and feeder roads, and pursues an integrated freight and public transport dispensation in this transport corridor. Initially, emphasis is placed on rail freight services, which is regarded as very important in the context of socio-economic development. Kei Rail has as its focus the sustainable development of the resources of the former Transkei and Ciskei in the interest of the people of that region. Objectives of Kei Development Corridor 1. To integrate the strategic development and rehabilitation of the infrastructure in the corridor; 2. To alleviate poverty through targeted sector development, specifically focusing on the agriculture, tourism, manufacturing and transport industries in the region and as a result increase employment opportunities; 3. To provide equitable access to markets for the local entrepreneurs; 4. To increase the access to social amenities and economic opportunities by diversification and value adding to the productive base; 5. To utilise natural resources on a sustainable basis and consolidation of local land use development; 6. To identify and design strategic projects in priority sectors; 7. To promote spatial economic linkages at local level; 8. To integrate the regional economy with the main economic base of the Eastern Cape. The conservation and efficient utilization of Kei Rail can only succeed as a partnership between local communities, government and the private sector. Growth and development in the East London to Mthatha corridor will succeed if it is government driven, private sector funded, labour conscious, community based and environmentally friendly. Economic Diversification through Key Infrastructure Investments Assuming that the necessary linkage infrastructure can be established, a number of initiatives are proposed to diversify the economy spatially. The benefits of this are reduced congestion and competition for livelihoods, education, housing and facilities in the urban area, linked to increased utilization of existing facilities in small towns. The initiatives include: 1. The R63 tourism corridor based on a wide range of possible tourist experience, including struggle history, frontier history, pre-history, adventure tourism, agro-tourism and health tourism; 2. The Kat River / Nkonkobe / Keiskammahoek horticultural and livestock development node; 3. The Peddie / R72 horticulture and dairy development node; 4. R72 holiday resorts promotion and development; 5. The Wild Coast Meander; 6. The Great Kei / Stutterheim urban markets agricultural corridor; 7. The Mnquma and Mbhashe livestock and field crop commercialization initiative. Common elements in all the above initiatives include public-private partnerships and collaboration, local level co-ordination of the cooperation of national, provincial and local government, government investment in pubic infrastructure and skills development, resolution of land claims, commercialization of agriculture in communal areas, investment in agro-processing, and most importantly, support for development of and access to markets. 47

48 FIGHTING POVERTY THE HUMAN DEVELOPMENT INDEX (HDI) The HDI Development index is a measure of development which includes life expectancy, literacy and income. It thus provides a composite index of development presenting these three dimensions in one indicator. Overall the HDI for the Amathole District suggests that there have been some improvements in the quality of life of residents within the district between the period with increases recorded in all local municipalities. The urban centre of Buffalo city indicates the highest score in terms of the HDI while the poorer (former homeland) areas of Mbhashe and Great Kei, in particular, report the lowest scores. This suggests that the historical inequalities between the local areas in the district continue to be reproduced and the challenges of uneven development largely remain, requiring interventions targeted at the most vulnerable and poor. TABLE 22: HUMAN DEVELOPMENT INDEX (HDI) FOR AMATHOLE Mbhashe Mnquma Great Kei Amahlathi Buffalo City Ngqushwa Nkonkobe Nxuba Source: Global Insight, 2006

49 NUMBER OF PEOPLE IN POVERTY SOCIAL GRANT DEPENDENCE The number of people in poverty is an indicator of household members who reside in households whose total income falls below a particular level. The level used here is based on Global Insight data which uses the Bureau for Market Research (BMR) Minimum Living Level (MLL) that ranges from R893 for a single person household to R3314 for an eight person household. Based on this measure, the levels of poverty (an economic measure of household income) in Amathole have actually increased significantly between Buffalo City again recorded the lowest percentage of people in poverty (50%) with the remaining local municipalities recording two thirds and more of household members living in poverty. TABLE 23: PROPORTION OF PEOPLE IN POVERTY IN AMATHOLE Mbhashe 68.6% 77.9% Mnquma 62.3% 75.0% Great Kei 56.1% 79.5% Amahlathi 59.0% 75.3% Buffalo City 41.5% 50.1% Ngqushwa 64.1% 80.2% Nkonkobe 55.9% 69.2% Nxuba 56.6% 80.3% Household grant dependence is higher in Amathole (66%) than the average for the Eastern Cape (64%) as a whole. Only Buffalo City (53%) and Nxuba (59%) fall below the district and provincial averages with remaining local municipalities recording two thirds and more of households which depend on at least one social grant. TABLE 24: WHETHER HOUSEHOLD MEMBER IS RECEIVING SOCIAL GRANT Yes No % of HH Members % of HH Members Eastern Cape Amathole DC Mbhashe Local Municipality Mnquma Local Municipality Great Kei Local Municipality Amahlati Local Municipality Buffalo City Local Municipality Ngqushwa Local Municipality Nkonkobe Local Municipality Nxuba Local Municipality Source: RSS, 2006 Source: Global Insight,

50 CONCLUSION: TOWARDS AN INTEGRATED DISTRICT GROWTH & DEVELOPMENT STRATEGY The growth and development challenges facing Amathole are a microcosm of the challenges facing the Eastern Cape as a whole. The industrial heartland of the district - Buffalo City - is heavily dependent on three sectors - the auto sector, food processing and clothing. The auto sector is dominant in the local economy with the clothing sector increasingly under threat from international competition. The rest of the district is rural and underdeveloped. This rural hinterland itself reflects the divide between commercial private farmlands to the west, focused on commercial livestock farming and high-value horticulture, contrasted with communal subsistence farming, focused on traditional livestock farming and field crops, to the east. Services delivery, infrastructure challenges and human underdevelopment continue to reflect the historical spatial, development and investment policies, as do the challenges of urbanisation and urban renewal. In short the two economies are nowhere more markedly contrasted than in Amathole. In order to ensure that the two economies collectively overcome the challenges of uneven development, will necessitate an integrated district strategy for growth and development which ensures that the industrial economy does not become disembedded from the fortunes of the rural hinterland. In fact Buffalo City needs to be seen as a critical artery which extends even beyond the borders of the district the Kei Rail initiative is one critical example of this, as is the import and export of grain to Gauteng / Zimbabwe and the Free State respectively. GROWTH AND DIVERSIFICATION OF THE URBAN ECONOMY The auto sector continues to be the core of the economy of Buffalo City. The auto sector represents an important platform for further diversification and growth. The ELIDZ is already beginning to realise this through the establishment of an auto-cluster. Significant potential exists for further development of component manufacturing as well as luring new OEMs to the city. The ELIDZ is not only critical for the auto-sector but also a critical vehicle for diversification and building new sectors. The ELIDZ has already been identified as a strategic site for biofuels for example. The need to diversify the economy beyond its current concentration on the automotive sector and government includes support initiatives to stimulate new economic sectors. These include: Creative arts - design, popular literature, music, drama and dance, film and made for TV productions; Hi-tech, low material use industries; Innovation sectors - technical and product design; Marine and aqua-culture. The programme of support would include dissemination of information on long-term global economic trends, incubators, support to research capacity, promotion of innovative products, partnership with business and research institutes to develop capacity. Conceivably elements of such an integrated vision for growth and development include the following: 1. Growth and diversification of the urban economy 2. Development of the rural economy and strengthening of linkages between the urban and rural economies 3. Services delivery 4. Building Municipal Capacity and Co-operation Initiatives to diversify the district economy must be accompanied by ensuring the retention and strengthening of existing sectors. Interventions needed for retention and strengthening of existing sectors could include: Land release for commercial development; Development of infrastructure; Removal of red-tape blockages to growth; 50

51 Reduction of compliance requirements; Responsiveness to expressed support needs; Marketing of products from the district; and Attraction of similar industries to promote economies of scale. Critical to consolidating and diversifying the Buffalo City economy, as mentioned above, are a number of critical infrastructure initiatives. These include the following: The Buffalo City Port expansion; The East London - Gauteng rail link; The Kei development corridor; The East London Nelson Mandela Bay rail link. The port expansion is particularly important since it will ensure the survival and diversification of existing sectors such as the auto sector but also provides the basis for new developments such as the proposed water front, the recent proposal for a yacht basin as well as enhancing the tourism potential for the district. Development of the rural economy and strengthening of linkages between the urban and rural economies The underdeveloped rural hinterland in the district has significant potential for the development of agriculture, agro-processing and tourism. Critical to ensuring that development within these sectors is accelerated and shared will require a concerted effort to deal with land issues in the district - finalizing land claims, implementing the Communal Land rights Act and supporting community trusts. This must be accompanied by a strategy which ensures that the linkages between rural and urban economies are encouraged. A number of irrigation schemes and underutilised dams such as the Sandile dam in Keiskamma provide the basis for energising the underdeveloped agricultural sector and for entering the emerging biofuels sector. The potential for livestock production, which already accounts for almost three quarters of district farming activity, is significant and if coupled with small farmer support programmes such as the Nguni cattle programme could result in even further expansion. In fact, a major spin off from the biofuels sector would be the oil cake which can be used for cattle feed. There are thus significant linkages within the sector that need to be exploited as well as ensuring that the rural and urban economies become integrally interlinked. Linkages between Buffalo City, the heart of the district economy, and the smaller towns are critical to ensure circulation of economic opportunities and benefits throughout the district. Furthermore, the city s status as one of only two large industrial urban centres in the province means it impacts well beyond the boundaries of Amathole district. Linkages between the city and the national and international markets are an important stimulus to the whole eastern half of the Eastern Cape. Some of the critical economic and linkage infrastructure projects discussed above will. The revitalisation of many dying rural towns will be greatly enhanced through the development of agriculture, tourism and other associated activities, such as milling and other secondary processing of agricultural produce. The tourism sector within the rural hinterland offers significant potential particularly when linked to infrastructure initiatives such as the Wild Coast Meander. Improved transport and telecoms/e-communication infrastructure will increase the viability of decentralized, promoting spatial development and economic integration between the rural areas, small towns and the city. 51

52 Services Delivery Building Municipal Capacity and Co-operation The challenge for services delivery in the district is immense. Existing backlogs and targets for eradicating backlogs will in many instances not be met unless significant additional resources are invested and directed to areas of greatest need. At the same time the job creation potential, of particularly infrastructure development, needs to be maximised. The district is ideally placed to leap-frog over obsolete technologies in it s quest to meet its development targets. Examples of areas of potential development include modern or alternative: energy sources for domestic and business use; water supply, sanitation and housing technologies; settlement layouts to reduce transportation costs, health costs, service costs and negative social impacts of highdensity developments; automotive / transport technologies. IDP Alignment Amathole District Municipality has a functional IGR System in place. This, coupled with a Municipal Support Programme makes it possible for it to have a comprehensive programme for capacitating constituent local municipalities. However, specific municipalities under Amathole are still faced with capacity challenges. For the successful implementation of GDS outcomes and resolutions, targeted support programmes will have to be developed and rolled out accordingly. During the 2005 IDP Hearings, specific actions were recommended to Amathole aimed at enhancing its support to local municipalities. In preparation for the GDS, an evaluation of progress was made regarding those actions which would be useful in establishing gaps that may hamper implementation of GDS outcomes and resolutions. The district, in partnership with business and scientific institutions, will need to embark on a long-term process of identifying, piloting, promoting new and alternative technologies. This will require a process of change management with appropriate information, education and provision of incentives. Specific areas could be: Attraction and retention of identified scarce skills at local municipalities; Improvement as a result of Project Consolidate (Siyenzamanje) at the three targeted local municipalities; State of readiness of the local municipalities with regards to the implementation / roll out of the National LED Framework. 52

53 With regards to the implementation of the five-year local government strategic agenda, ADM will have to develop a plan together with OTP, DHLGTA and SALGA-EC. The agenda aims at: Mainstreaming hands-on support to local government to improve municipal governance, performance and accountability; Addressing the structure and governance arrangements of the State in order to better strengthen, support and monitor local government; Refining and strengthening the policy, regulatory and fiscal environment for local government and giving greater attention to the enforcement measures; and The development, implementation and monitoring of this plan (especially for the KPA on LED) will complement the GDS and its expected outcomes. Municipal-Business Co-operation Some of the key issues that have emerged are: Lack of communication between business and local government which impedes access to information to existing business opportunities. There is a clear need for a business-local government-labour forum to share in a joint vision and strategy to tackle the growth and development challenges in the district; Insufficient basic infrastructure e.g. roads, public toilets, cleanliness; Lack of a clear and simple incentive strategy for new businesses, and support for informal traders; Avoidable delays in land servicing and preparation for housing development, and uncertainty around land claims and land use; Lack of effective policing, and a lack of coordinated strategy towards combating crime; Supply chain management policy does not create a conducive environment for business (e.g. surety), and is hampered by long periods to wait before bids are awarded, a lack of understanding of statutory requirements for procurement, and a perception of the lack of transparency in the awarding of bids/tenders. Municipal-provincial Department/ Agencies co-operation Among the key issues raised at the Amathole IDP Engagement workshop on 15 January 2007 is the limited participation of provincial government in the IDP planning processes. The exceptions are the Department of Agriculture and the Department of Sports, Recreations Arts and Culture. Efforts to build participatory intergovernmental relations at the local level are seen to be undermined by the province often sending junior officials with limited decision making powers to meetings. The district expressed concern about the role of the Department of Housing, Local Government and Traditional Affairs. This revolves around the department not providing adequate support and guidance to municipalities. Other key issues that emerged were the provincial government s inability to plan spatially (DMs and LMs) and the absence of alignment with respect to planning, budgeting and implementation between the two spheres. These need to be addressed urgently since they constrain the ability to accelerate service delivery. 53

54 Conclusion The close cooperation between spheres of government remains critical since the delivery of social services is not an exclusive local government competence but depends on the performance of other spheres. The current Provincial IDP Engagement process is clearly a step in the right direction. However, the challenge will be to factor the outcomes of the district GDS s and IDP engagements into the planning and review of both IDP s and the PGDP. Municipal-National Departments/ SOE s Co-operation In the case of Amathole District, the Department of Land Affairs, Department of Housing, Department of Labour, Department of Roads, Department of Agriculture and the Department of Trade and Industry are key national departments that the district needs to work with. Although the Department of Water Affairs and Forestry has by and large participated at local government level, the scale and pace of eradicating water and sanitation backlogs in the district leaves a lot to be desired. In order to address the huge electrification and telephone backlogs particularly in the former homeland areas, close cooperation with Eskom and Telkom remains critical. The Amathole District Municipality is clearly grappling with very entrenched problems of poverty and unemployment, and progress seems to have been quite slow so far in addressing these problems. While public and private sector investments are clearly increasing, these levels are currently insufficient to address the growth and development challenges faced by the district. The Summit is potentially very important for setting in motion processes to improve municipal planning and management capacities, particularly with respect to co-operation with other arms of Government, and with Business. The private sector, business-support agencies and the municipalities need to work together to develop detailed priority industry action plans. The outcome of the Summit should be the development of a Framework Agreement that outlines institutional roles and responsibilities to accelerate growth and development in the district. This agreement should also suggest the mechanisms and processes for monitoring progress on the decisions reached and the governance framework for ongoing dialogue and feedback among the social partners. The district GDS presents a unique opportunity for constructing partnerships and harnessing the collective energies and contributions of a range of actors and role players with a view to enhancing accelerated and shared growth. The district GDS provides us wit an opportunity to unlock the potential of all localities, and ensure that all sectors of society identify their role and contribute to the common national objective to build a better life for all. 54

55 GLOSSARY ABET AEDA ADM ARC AsgiSA Adult Basic Education and Training Amathole Economic Development Agency Amathole District Municipality Agricultural Research Council Accelerated and Shared Growth Initiative for South Africa DPLG DWAF ECAC ECDC ECD Department of Provincial and Local Government Department of Water Affairs and Forestry Eastern Cape Aids Council Eastern Cape Development Corporation Early Childhood Development ASSA B&B BBBEE BDS BPO Capex CASP CSIR CBD DBSA DCSA DEAT DHLGTA Actuarial Society of South Africa Bed and Breakfast Broad Based Black Economic Empowerment Business Development Services Business Process Outsourcing Capital Expenditure Critical Agriculture Support Programme Council For Scientific and Industrial Research Central Business District Development Bank of Southern Africa Daimler Chrysler South Africa Department of Environment and Tourism Department of Housing Local Government and Traditional Affairs ECSECC EIA ELIDZ EMIS EPWP FET GDS HDI HH HIV HSRC ICT IDP Eastern Cape Socio Economic Consultative Council Environmental Impact Assessment East London Industrial Development Zone Education Management Information System Expanded Public Works Programme Further Education and Training Growth and Development Summits Human Development Index Household Human Immunodeficiency Virus Human Science Research Council Information and Communication Technology Integrated Development Plan DM District Municipality IDZ Industrial Development Zone DME Department of Minerals and Energy IGR Inter Governmental Relations DoA Department of Agriculture LED Local Economic Development DoE Department of Education LM Local Municipality DoH Department of Health MIDP Motor Industries Development Programme DoL Department of Labour MIG Municipal Infrastructure Grant DORA Division of Revenue Act MLL Minimum Living Level 55

56 MTEF NSBA NGDS NGO OEM OTP PGDP PPP RDP Medium Term Expenditure Framework National Spatial Biodiversity Assessment National Growth and Development Summits Non Governmental Organistions Original Equipment Manufacturers Office of the Premier Provincial Growth and Development Plan Public Private Partnerships Reconstruction and Development Programme SALGA-EC South African Local Government Association Eastern Cape SEDA Small Enterprise Development Agency SETA Sector Education and Training Authorities SMME Small Medium and Micro Enterprises SOE State Owned Enterprises StatsSA Statistics South Africa STI Sexually Transmitted Infections TB Tuberculosis VIP Ventilated Pit Latrine RIDS Regional Industrial Development Strategy WSDP Water Services Development Plan RSS Rapid Services Survey conducted by FISER (Fort Hare Institute For Socio-economic Research) for the Office of the Premier 56

57 NOTES 57

58 NOTES 58

59 This document is published in partnership with ECSECC. eastern cape socio-economic consultative council Tel.: +27 (0) Fax: +27 (0) Internet:

60 Amathole District Municipality, 40 Cambridge Street, P O Box 320, East London, South Africa. Tel: +27 (0) Fax: +27 (0) info@amathole.gov.za website: 2boyz [J5610