Annual Forum Papers

Spatial Development Initiatives and Employment Creation: Will they Work?

  • Year: 2000
  • Publication Author(s): Cliff Naude and S.K. McCoskey
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The Spatial Development Initiative (SDI) programme has been in existence since 1995, with the primary aims of generating investment projects in key economic sectors in specific areas of the country thereby increasing employment in these sectors and areas. The key objective of the paper is to provide an assessment of the capacity of the SDIs to restructure the economy and enhance employment creation in South Africa. This will include the extent to which the SDI strategy conforms to economic theory on industrial location and economic development, as well as the extent to which the SDIs have been (and can be) successful in employment creation. The paper includes an overview of the SDI programme, current trends in the South African economy and a review of the economic theory of economic development in a spatial context. Finally, the SDIs are assessed in terms of their success in creating employment opportunities.

The conclusions of the paper are as follows:

  • The capital required by the potential projects of the SDIs are substantial when measured against their potential job creation (e.g. R381 000 per job on average). The issue in this regard is whether key projects should be prioritized in terms of their ability to create jobs in the near future;
  • The bulk of the envisaged SDI projects are focused on the traditional sectors of the South African Economy, i.e. Agriculture, Mining and Manufacturing. Globalization and the "New Economy" might dictate that this emphasis be revised to include sectors which are poised for growth, e.g Tourism, Financial & Business Services and "hi-tech" manufacturing. The case for this would seem to be even stronger if the hierarchy of development is considered (see Meier, 1984), whereby economies become more dependent upon tertiary sectors and less dependent upon primary and secondary sectors for economic growth;
  • Certainly in terms of the location of the SDI areas, it seems that the gradual widening of the SDIs to include more areas of the country has resulted in an alignment of SDIs with those areas which have experienced employment growth between 1980 and 1996. This should ensure that the SDIs are located in areas of economic growth and the core of the economy as opposed to the periphery.
  • The extent to which government can directly influence the decision to invest could be limited because the final decision is a "firm-level" one. However, government could very well play a useful role indirectly in terms of influencing the structure of the firm's decision through infrastructure provision, reduction of transportation costs and enhancement of education levels. For SDIs to be successful, the importance of the legal and institutional framework supporting investment will have be favourable. An example would be the objective of creating 35,000 jobs in the agricultural and related sectors in the context of a land tax and the legal framework pertinent to employment.