Small towns overly reliant on single anchor industries risk being trapped in economic decline as de-industrialisation takes hold. They will continue to de-industrialise unless national policy is better aligned with local government realities, according to a new report.
“South Africa’s de-industrialising towns are trapped in a cycle of coping and fragile adaptation. Without functional institutions to foster collective agency and channel resources towards transformative projects, these communities cannot break the ‘peripheralisation loop’ that traps small towns in cycles of economic and institutional decline,” said the report, compiled by strategic advisory firm Frontline Africa, and presented by the South African Chamber of Commerce and Industry (Sacci).
The launch of the report was co-hosted by the Lesedi Black Business Forum (LBBF) and Sacci in Heidelberg this week.
Addressing the impact of de-industrialisation on small towns, Danny Vengedasamy, chamber services manager at Sacci, said: “The withdrawal of anchor industries or the collapse of industrial activity does not only impact business operations, it affects families, disrupts livelihoods and reshapes entire communities.”
Disconnect
The report found there was a “profound disconnect” between the National Industrial Policy Framework and on-the-ground municipal realities. It argued that key economic development policies, such as the department of trade, industry & competition’s (DTIC) sectoral Master Plans and Reimagined Industrial Strategy, were built on assumptions of capable municipalities, reliable infrastructure, and cohesive value chains, which are often absent in many small towns.
“What we’ve had over a very long time is that national government creates policies and applies them uniformly throughout the country,” said Zamokwakhe Somhlaba, head of research at Frontline Africa.
“The reality is that these municipalities differ in terms of capacities, in terms of revenue size, in terms of the skills base, the industrial base.”
The reality is that these municipalities differ in terms of capacities, in terms of revenue size, in terms of the skills base, the industrial base.
— Zamokwakhe Somhlaba, head of research at Frontline Africa
To ensure small towns are less vulnerable to de-industrialisation, Somhlaba said a bottom-up approach needs to be implemented. “What is needed is to bring local government very close to policy-making. They can talk about their realities on the ground, so that at the end, whatever national policy comes from the national level speaks directly to those issues.”
Thami Klassen, director of regional industrial development at the DTIC, said that misalignment was part of the problem for small towns, since “we still need to deepen our alignment or our collaboration between the three spheres of government”.
Authors of the report cited the relocation of the Clover factory in Lichtenburg in the North West, and the decommissioning of the Komati coal-fired power plant in the town of Komati in Mpumalanga as examples of towns hit hard by de-industrialisation, which has left both towns facing declining employment, crumbling infrastructure, and heightened social vulnerability.
Heidelberg
Lesedi mayor Mluleki Nkosi said a recent downsizing of British American Tobacco’s factory in his town of Heidelberg had contributed negatively to the area, reducing municipal revenue derived from taxes and levies, from about R18m per month to just R2m, putting the municipality under serious financial strain.
The report urged policymakers to protect small towns from de-industrialisation by prioritising basic services, reducing reliance on a single employer, investing in skills and training, and other measures.
Somhlaba highlighted the district development model (DDM), a government initiative aimed at improving service delivery and strengthening integrated development across 44 districts and eight metropolitan municipalities, saying it could become a framework for co-ordinating planning, budgets, and resources effectively from national to local government.
He said the model could be strengthened using Marshallian development theory, which focuses on linking local businesses, workers and suppliers into “industrial commons” to support each other and strengthen the local economy.
Klassen said through “operationalisation of the DDM, we are also able to bring all the different state organs, agencies and departments, to work together to address the very critical issue, which is economic development”.
Additionally, Somhlaba cited special economic zones — which offer tax incentives to attract investment — as another way to encourage private sector participation.
“From a tax incentive point of view, we can make some concessions as a state to say you’ll pay maybe 5% less than other companies elsewhere. So basically, you’re saying to them, continue operating in that environment while we work on a longer-term solution,” he said.
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