Infrastructure development at the municipal level plays a crucial role in attracting new investment and retaining existing ones. This central theme was discussed by a panel of experts during a recent webinar titled "Empowering Local Economies: Trade and Investment Promotion Strategies for Municipalities,” organised by ECSECC.
The panel featured ECSECC’s Local Government Planning Specialist, Fezeka Maqwati; ECSECC’s Economic Development and Investment Promotion Specialist, Nandipa Bam; Senior Advisor for Municipal Trade and Investment at the South African Local Government Association (SALGA) Vailet Mukotsanjera-Kowayi; and Director of the School of Economics, Development, and Tourism at Nelson Mandela University, Professor Ronney Ncwadi.
The webinar was moderated by ECSECC’s Chief Operations Officer, Akhona Tinta. More than 80 stakeholders attended, reflecting strong interest in exploring trade and investment promotion strategies for municipalities.
The webinar shared lessons learned from an ECSECC/ECDC trade and investment promotion and facilitation pilot project with four rural municipalities in the Eastern Cape: Nyandeni, Port St. John, Enoch Mgijima, and Matatiele. Fezeka and Nandipa highlighted best practices for municipalities on how to effectively package and market key projects to attract investment. They were followed by Vailet and Professor Ncwadi, who discussed strategies and interventions for supporting businesses and investors at the local level, addressing barriers to trade and investment.
Throughout the discussion, speakers emphasised the importance of robust infrastructure as a foundational element for fostering economic growth and strengthening local economies.
Challenges in infrastructure and prioritisation of economic development
The panel highlighted several key challenges in addressing infrastructure gaps, such as water, sanitation, and roads, which are crucial for attracting investment. A notable issue raised was the tendency of municipalities to prioritise social infrastructure over economic infrastructure. While social infrastructure was essential, the panel stressed that economic infrastructure – such as roads and transportation – was equally important as it supports both economic and social services. For instance, roads built for economic activities, such as transporting goods, also benefit social purposes.
A critical consequence of failing to attract investment, especially in rural municipalities, was also discussed during the webinar. Speakers said without sufficient investment, rural areas experience outward migration to urban centres, increasing the demand for services in those areas. This exodus leaves rural municipalities with fewer people and reduced budgets, further compounding the economic challenges. Such demographic shifts negatively impact local economies, leading to reduced private sector investment and diminished service delivery.
The impact of declining populations on municipal finances
The webinar heard that outward migration results in a reduced population base in rural areas, which not only affects the demographic dividend but also leads to smaller government funding allocations for these municipalities. As a result, municipalities with declining populations struggle to provide essential services and develop infrastructure. Speakers stressed that if economic development is not prioritised, municipalities will continue to depend solely on their allocated budgets for social infrastructure, limiting their ability to support economic growth and hindering long-term development.
The role of trade and investment promotion in economic growth
The webinar identified effective trade and investment promotion as key drivers of economic growth, job creation, and increased municipal revenue. The webinar heard that these outcomes, in turn, allow municipalities to meet their service delivery mandates and generate positive impacts for their communities. The webinar recommended that municipalities create a conducive environment for investment by making trade and investment promotion and facilitation a cross-departmental effort, involving collaboration between planning, finance, infrastructure teams, and not just the local economic development (LED) units.
Strategic planning and infrastructure development
Acknowledging the challenges faced by rural municipalities, speakers highlighted the importance of strategic planning, improved infrastructure, and active engagement with the business community. Key areas for improvement identified in the webinar included investments in physical infrastructure such as roads, ports, and airports as well as soft infrastructure, like skills training and business advisory services.
Investment promotion was identified as a key lever that can drive economic productivity, create employment, reduce poverty, and increase municipal revenues, all while enhancing service delivery. Municipalities were encouraged to foster a positive investment climate by focusing on factors such as market size, business costs, infrastructure, and investor incentives.
Developing a value proposition for municipalities
Speakers also discussed the importance of developing a strong value proposition for municipalities. This includes highlighting strengths like strategic location, regional economic hubs, and proximity to key infrastructure, which can attract investment by showcasing the municipality’s benefits.
Lessons from case studies: the push and pull factors for businesses
The webinar heard that SALGA had conducted studies which identified factors that influence businesses to relocate, such as poor service delivery, inadequate infrastructure, and governance challenges. The case of Clover, which moved from Topola municipality in North West to another province due to poor service delivery, exemplified these push factors. Other examples include companies like VW in Gqeberha and Famous Brands, which relocated due to issues such as unreliable electricity and water supply.
These relocations resulted in the loss of investment, leading to job losses, reduced municipal revenue, and economic decline. SALGA’s recommendations in the study focused on improving infrastructure, enhancing service quality, and reducing bureaucratic barriers to better retain businesses and attract new investments.
Governance and capacity building for efficient investment utilisation
Speakers emphasised that effective governance, transparency, and capacity building are essential to ensure investments are utilised efficiently, leading to both economic and social benefits for municipalities.
Addressing youth migration through investment in job creation
Lastly, the issue of youth migration due to unemployment was raised. The panel stressed that creating job opportunities through investment, particularly in entrepreneurship, is crucial to retaining young people in local areas, thus fostering a more sustainable and prosperous future.
In conclusion, the webinar heard that infrastructure development at the municipal level played a critical role in attracting and retaining investment, which was essential for economic growth, job creation, and improving service delivery. By addressing infrastructure gaps, prioritising economic development, and engaging in strategic planning, municipalities could create an environment that attracts investment and supports long-term prosperity.
You can watch recording of the webinar here
You can access speakers' presentations here
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