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The Urban Challenge and the Role of the NT
The CSP builds on the National Development Plan, which highlights the importance of space, and the spatial relations between where people live and work in urban areas, as being a key hindrance to economic growth and poverty reduction (NPC 2013). Metros currently account for approximately 57 per cent of economic activity (Gross Value Added, GVA), 56 per cent of formal non-agricultural employment and 50 per cent of all employment.
The CSP also responds directly to the Sustainable Development Goals (SDGs), in particular to Goal 11: Making cities and human settlements inclusive, safe, resilient and sustainable.
The MTSF 2019 – 2024 : The theme of the new MTSF is “Integration for Spatial Transformation & Spatial Justice” and hence provides a good foundation for the CSP programme as a whole and the CSP2 specifically, with its focus on supporting an enabling environment for spatial transformation in the metros and this being a requirement for inclusive economic growth. Of the 7 priorities shaping the MTSF 2019 – 2024, the CSP work is in support of mainly priority 4 (Spatial Integration, Human Settlements and Local Government) and to some extent priority 1 ( Economic Transformation and Job Creation)
The CSP and the Integrated Urban Development Framework (IUDF), CoGTA 2014: The views of the NDP are reinforced in the IUDF, which argues that the long-term prospect of having a more equal and labour absorptive economy will depend on how well its urban economies perform. Improving the productivity and incomes of urban consumers is important because rural economies depend on urban consumers in the supply and demand chain (IUDF, p12).Well-managed urbanisation has the potential to address the high unemployment within South Africa, through driving up productivity and competitiveness in the formal sector of urban areas and ensuring greater dynamism in the informal and small business sectors. However, urban centres need to improve their performance to optimise the potential for growth, productivity and innovation (IUDF, p12).
This requires that our cities are well governed, and operate within a broadly enabling policy, regulatory and fiscal environment in order to directly address their development challenges – particularly related to spatial form. However, this has not been the case in all instances. Cities are impacted on by the political dynamics that play themselves over the administrations causing a lot of instability. Most metros are entrapped in a blurred political administrative interface that requires leadership to delineate.
Major fiscal challenges are accumulating as the impact of the recurrent operational cost of sectoral policies (transport, housing, zones) that are decided at the national level, falls on the metros. The tight fiscal constraints faced by many cities limits their abilities to close the infrastructure gap and to provide basic services in an equitable manner. Urban local governments are subject to a range of forces that create upward pressure on local government spending. The combined impact of policy decisions across different urban functions can pose a long-term cumulative fiscal risk for cities. The areas of housing and urban public transportation warrant attention, as extensive financial involvement of national and provincial departments and agencies in these areas may limit the ability of urban local governments to maintain fiscal balance.
Cities, however, cannot thrive without effective and importantly, resilient network infrastructure, such as water and sanitation, energy, solid waste, public transport and roads, as well as regulatory and administrative capability. Climate change presents risks to the financial sustainability of cities as local government has to fund repairs to infrastructure damaged by climate impacts. Similarly, as citizens turn to off-grid renewable energy and decentralized water sources, impacts are felt in municipal revenue streams which are used to cross-subsidize service delivery to indigent households.The National Treasury is required to maintain a keen interest in the performance of the largest municipalities and their urban centres. These jurisdictions are sites of intensive economic activity and platforms for future economic growth. They also make a significant contribution to the national tax revenues that finance national development programmes, including in non-metro and rural areas.
Metro municipalities are also important fiscal actors in their own right, with significant own revenues and expenditures, beneficiaries of significant national fiscal transfers, large and growing balance sheets, and with the potential to extensively leverage both public and private investments. Their performance influences perceptions of the investment climate, the public sector at large and municipalities in particular. The long term fiscal sustainability of the metros is essential for overall national fiscal stability and development progress, and therefore falls squarely within National Treasury’s fiscal and financial mandate.
Furthermore, within the framework of the IUDF, the National Treasury has an important role to play in enabling intergovernmental collaboration on urban development in large cities. Key National Treasury responsibilities (such as budget coordination), provide a valuable platform for coordinated action on urban development issues (such as investment prioritisation and sequencing) across spheres of government and State-Owned Enterprises (SOEs). This requires that National Treasury ensure that urban policy and practise are financially and fiscally sustainable, at both metro and national levels.
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