South Africa’s Matlosana hunts for $3bn to clear path after mining slump

South Africa’s Matlosana hunts for $3bn to clear path after mining slump

Maetu Kgaile, the newly elected executive mayor of South-Africa’s Matlosana- situated in the North West province- has an ambitious plan to diversify the local economy, create jobs and soften the blow dealt by a beleaguered mining industry, in what Nigerian local governments can learn from.

 

Mining in South Africa, Africa’s most industrialized nation, is at best a shadow of its self, as low commodity prices, falling productivity and regulatory uncertainty have led to over 70,000 job cuts and forced a slump in the sectors’ contribution to economic output.

 

Kgaile, who spoke at an international trade and investment conference which held in South-Africa between the 11th and 13th of October, appealed to a roomful of investors for an initial $3 billion for investments in transport and energy infrastructure, agriculture and agri-business, tourism and tertiary health services; even mining.

 

The last time such a conference was organized, Matlosana got two new malls, the mayor said, as she waxed lyrical about her expectations from this year’s conference.

 

“Matlosana is an area known for mining but that sector is down, so as a new administration we have developed our own vision which seeks to leverage private investment in rejuvenating the economy and creating jobs,” Kgaile told BusinessDay on the side-lines of the conference.

 

“We have bankable projects that can benefit investors, and that’s why we have organised this conference, to sell those projects to investors,” Kgaile said while guaranteeing the security of the said investments.

 

Matlosana’s economy is hinged on the Services sector which contributes 28.11 percent to output, financial services (27.47 percent), transport and communication (17.26 percent), retail (14.30 percent) and mining (7.75 percent).

 

The mining sector’s contribution has gone from 58.5 peercent in 1996 to a current 7.75 percent.

 

The economy remains vulnerable to mining and the few alternatives to the latter are in infancy stages while growth in other sectors like Trade and Finance have struggled to compensate for the job losses resulting from the downturn in mining activities. Of the 28 mining shafts in the area, only six are in full production.

 

“For us, it is really about local economic development and how do we rejuvenate this city from one that has been heavily reliant on mining to one that can move into new industries such as manufacturing, agri-business especially the agro-processing aspect because this is largely an agricultural area,” said Miller Matola, South-African based consulting firm, Millvest.

 

“Infrastructure is another thing the municipality is trying to attract. The municipality needs to put the right infrastructure in place so that businesses can invest.

 

“But we don’t have all the funds to put in place all the requisite infrastructure, so they are looking at PPP arrangements with private sector to be able to achieve that and see how to leverage the vast land we have to create investment opportunities for investors,” Matola told BusinessDay.

 

Matlosana is equivalent to a local government in Nigeria, and the former’s ambitious step to boost its local economy and create jobs through private capital leaves much to be desired from local governments in Nigeria, reeling from a dramatic decline in Federal allocations.

 

Federal allocations have dipped by more than half since a decline in the price and output of crude oil, Nigeria’s biggest export, slashed government revenues and foreign income by just as much.

 

“It shows how far behind Nigeria is, in this regard, compared to South-Africa,” said Kyari Bukar, chairman of private sector think-tank, the Nigerian Economic Summit Group (NESG).

 

“Only a few states organise such conferences in Nigeria, let alone local governments. It takes resourcefulness, willingness and quality leadership to pull off such a feat,” Bukar said in response to BusinessDay questions.

The worst of an economic crisis came to an end for Africa’s two largest economies, Nigeria and South-Africa, as they emerged from a slump in the second quarter of 2017.

 

South Africa’s economy expanded 2.5 percent in the three months through June, ending its second recession in less than a decade, while Nigeria’s gross domestic product grew 0.5 percent from a year earlier, and came out of its worst slump in a quarter of a century.

 

South Africa and Nigeria together account for almost half of sub-Saharan Africa’s GDP and their recoveries may boost trade and production across the region.

 

The reasons for recovery differ; while Nigeria, the continent’s biggest oil producer, is benefiting from a rebound in crude output, increased agricultural output and stronger retail sales may help drive growth in South Africa.

 

The International Monetary Fund (IMF) expects Nigeria to expand 0.8 percent this year, while South Africa is tipped to grow 1 percent.

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