THE performance of the Eastern Cape economy came under the spotlight on this page last Monday
when the MEC for Economic Development, Environmental Affairs and Tourism, Mcebisi Jonas, called on the two metros to lead the way and “become engines of growth and development” for the province.
He stated that the two pillars of the productive economy – agriculture and manufacturing – had stagnated in recent years and needed to be revived through “dynamic partnerships” and a “new growth path”.
The metropolitan cores are vital cogs on which the success of the region depends.
Even rural development and small town regeneration will not happen if the core urban economies fail. International experience shows that rural development is more likely to succeed near dynamic urban centres than stagnating ones.
So how do we move forward?
In local economic development, past successes often provide important clues for future strategies.
Steve Biko was interested in “positive histories” that could shape the future.
So what does the history of the industrialisation of East London and its hinterland tell us are the keys to success and what can we learn from the past to help us imagine the road ahead?
The post war boom
There are two periods in which the local industrial sector in East London and the surrounding areas boomed.
The first was in the decade and a half after World War 2 when the sector grew at more than 10% per annum for a sustained period and consolidated East London as a significant industrial city.
From a small base of 146 firms with 3525 employees in 1928, the East London industrial sector grew to over 284 firms in 1954 with 11299 employees. In the period between 1947-1954, the number of employees in the industrial sector increased by 65% and net output of the city economy by 213% from £2.5-million to £7.5-million .
By 1955, 29% of East London’s economically active male population worked in industry, which was in line with the 32% national average for large urban areas.
The city had come of age as an industrial centre very quickly.
The results also showed that, unlike Port Elizabeth and Uitenhage, which relied heavily on the motor industry, East London had a more diverse industrial sector, incorporating food processing, textile production, chemicals, and the motor industry. The latter started after the war.
So what were some of the factors behind this success story?
Firstly, there was a strong commitment to “improvement” in the region predicated on a desire for rapid modernisation in agriculture, industry and the city.
Secondly, there was positive investment in large infrastructure projects like the massive Laing Dam (completed in 1952) and the West Bank power plant (completed in 1954).
These investments were critical for investor confidence.
In fact, it could be argued that, had the city invested in infrastructure earlier and been less cautious, it might have attracted even more industrialists after the war.
Thirdly, regional economic planning was underpinned by scientific research.
In the 1950s, Rhodes University undertook a huge, multifaceted set of studies into the physical, economic and social dynamics of the so-called Buffalo River catchment area.
Managing the hydraulics and resources of the catchment area were seen as critical to developing the region.
The relative output of the different economic sectors was carefully measured and strategies were devised to improve production.
Fourthly there was a vibrant connection between town and country. Food processing was the largest industrial sector in the city because city factories had a steady supply of agricultural commodities from the rural hinterland.
This stimulated the growth of the textile industry, which, from the 1960s onwards became the largest employer.
Another critical factor behind the boom was the commitment of the city and the region to invest in training skilled and semi-skilled workers.
At this time, the East London Technical College offered a wide range of courses for skilled and semi-skilled white workers in industry. The college played a critical role in ushering in the motor industry after the war and supported its development through training. In the late 1950s the skill levels in the city industrial sector were still regarded as medium to high, on par with Pretoria, Witwatersrand and the Vaal Triangle and also Port Elizabeth.
The second big boom of regional industrialisation came in the 1970s when the South African government offered huge industrial decentralisation incentives for industries to relocate to the homelands.
Subsidy incentives were decided at national level and were driven by political imperatives.
The apartheid government wanted to encourage struggling industries in the larger urban areas to relocate to the “border regions” where they would find abundant supplies of cheap labour. The system took no account of regional economic linkages; it was a one-size-fits-all national scheme aimed to keep Africans out of the cities.
Its implementation produced spectacular results in the Eastern Cape with the creation of new industrial corridors running through the Ciskei and Transkei.
In 1974, for example, there were only 600 industrial jobs in the Ciskei. However, with the opening of new industrial parks at Dimbaza and elsewhere, this figure rocketed to 1542 jobs by 1978 and 12421 in 1984.
Similar levels of industrial growth also happened in Transkei where Butterworth was the focal point of production.
By 1979, there were already 7500 industrial jobs in this homeland and this number increased to 11418 in 1982. Many of the factories here were also in the textile sector.
On the basis of these growth profiles, economic pundits said textile production was now operating on a massively expanded scale and had placed the Eastern Cape on a sustainable development path.
Some analysts suggested that, while the incentives were an important part of the success story, they would, if they could be maintained and the textile sector protected, make the miracle sustainable.
However, the enormous optimism of the analysts in the 1980s started to evaporate when the apartheid state froze and even diminished its economic incentive packages for rural industrialisation. Factories that had been surviving on wage and transport subsidies started to close by 1990.
In the mid-1990s, when the ANC came to power, a decision was taken (wisely or unwisely) to do away with the rural industrialisation programme and its incentives. Within a few years the whole edifice crumbled like a house of cards.
The industrial areas of Butterworth and Dimbaza became ghost towns as hundreds of factories closed and tens of thousands of jobs were lost.
As you drive through these towns today, the stripped skeletons of factories stand as eerie reminders of a policy that did not work. Rural industrialisation created over 30000 jobs in the Eastern Cape between 1975 and 1990, but by the end of the 1990s it had lost them all.
The collapse had been caused by rapid globalisation, which left no tariff protection for vulnerable sectors like textiles, by chaotic urban management in Transkei and Ciskei towns and by the removal of subsidy support.
Lessons for the future
The two experiences outlined above present high-water marks in the history of industrialisation in this region. They highlight significant successes in investment and employment creation and thus constitute “positive histories” in the sense that Biko used the term. But, in the end, they tell two very different stories.
In the first case the impetus towards industrial development was essentially regionally driven, supported by local business and industry, as well as farmers and urban planners. It was based on critical infrastructural investments in projects to supply water and power, a commitment to local research and skills development underpinned by scientific research and training. These factors combined with solid urban planning and a commitment to modernisation produced results.
In the second scheme, the initial success was not locally rooted. The scheme was based on a model of economic exploitation rather than development. The resources that the state was offering industry were tied to reproducing an unskilled, cheap labour economy where infrastructure investment was focused on uncompetitive destinations. The model was not based on commitment integrated regional development, but greed and the extraction of subsidies for short term gain.
As Jonas and his team attempt to rebuild the regional industrial economy they would do well to consider some of the key lessons of the post-war boom.
The most vital is that the rehabilitation of the regional industrial economy will not fall out of the sky. It certainly will be determined to a large extent by the balance of global forces as Jonas has pointed out, but it will also require a series of conversations that involve a variety of local stakeholders, including farmers, engineers, academics and urban planners.