A Metropolitan Region in Decline: Socio-economic Conditions in the Greater Algoa Bay Area

A Metropolitan Region in Decline: Socio-economic Conditions in the Greater Algoa BayArea

W.J. DAVIES*(1)THE GREATER ALGOA BAY AREA (GABA)*(2) is situated in Development Region D which extends over some 150 000 km2 andconsists of the Eastern Cape, Ciskei and the southern Transkei. In terms of population concentration, manufacturing output andgross geographic product (GGP), GABA dominates the economy of this region. Usually referred to as Port Elizabeth/Uitenhage(PEU), it is the smallest of the four officially designated 'metropolitan regions' in terms of the RIDP. Despite its status as ametropolitan region, however, its position in the national context is not significant, and it has experienced an economic stagnationin the 1970s and decline in the 1980s. This decline is attributable to:(i) decades of government neglect of the area in favour of the Ciskei/ Transkei/Border area based on the pursuit of separatedevelopment as a national development strategy, and(ii) an over-reliance/dependence on the motor and motor components industries despite prior signals of the need to diversify itsindustrial base. Recent logical rationalisations in the national structure of the motor industry have caused severe local economictrauma best illustrated by the Ford/Amcar merger and the relocation of most of Ford's activities to the PWV region.

1. The Regional ContextThe population of Region D in 1988 was estimated to be approximately 4,76 million (DBSA, 1989a), of whom almost 60 per cent (2,72million) lived in the Ciskei and Transkei portions (Levine and du Plessis, 1989). The region's urban population in 1988 amounted toabout 1,82 million (DBSA,

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1989a), which yields an overall urbanisation rate of 38 per cent compared to the national rate of 47 per cent.Region D contained some 13 per cent of the total national population (including the 'homelands'), but produced only about 7 percent of the national GGP in 1988. An indication of the region's relative economic depression is that its GGP per capita in 1988 wasonly about one-half that of the national average (DBSA, 1989a). Table 1 reflects the changes which have occurred in thedistribution of population (1980-89) and GGP (1970-84) in Region D, and also shows the relative status of GABA in the regionalcontext.GABA's share of the total regional population increased from 16 per cent in 1980 to 21 per cent in 1989, and its annual growth rateof almost 5 per cent was more than double the region's rate of 2 per cent per annum, indicating considerable migration from the restof the region to its largest urban agglomeration. With about one million inhabitants in 1989 (Urban Foundation, 1989), GABA hadmore than one-half of the region's urban population. GABA consistently produced about one-half of the region's GGP betweenTable 1 Region D and GABA Population (1980-89) and Gross Geographic Product (1970-84)

(a) Population:

Area 1980 1989 1980-89

('000) % ('000) % % p.a.

Eastern Cape and Border 1664 41 2043 43 2,3

Ciskei 678 17 821 17 2,1

Southern Transkei 1668 42 1895 40 1,4

Total - Region D 4010 100 4759 100 1,9

GABA 656 16 993 21 4,7

(b) Gross Geographic Product (at constant 1975 prices):

Region D Component 1970 1984 1970-84

(R mill) % (R mill) % % p.a

Eastern Cape and Border 1405 92 1679 84 1.3

Ciskei 36 2 88 4 6.6

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Southern Transkei 89 6 233 12 5.1

Total - Region D 1530 100 2000 100 1.9

GABA 741 48 982 49 2.0Sources: Black et al., 1986; Levin and du Plessis, 1989; Urban Foundation, 1989.

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1970-84, during which time output increased by about 2 per cent per annum in both GABA and Region D as a whole (Black etal.,1986). GGP growth rates have been the highest in the Ciskei (6,6 per cent per annum) and southern Transkei (5,1 per cent perannum) portions of Region D, largely as a result of the massive increases in government spending that accompanied theirrespective decisions to opt for independence' (Black et al, 1986, p. 13). However, these growth rates are somewhat artificial and areunlikely to be sustained.The relatively low GGP growth rates experienced by the other regional components, including GABA, are a more realistic reflectionof the region's stagnating economic condition.

2. PopulationTable 2 indicates GABA's population growth trends between 1960-89, and shows that the total population almost trebled and theAfrican population more than quadrupled over this period.Table 2 GABA Population Growth Trends: 1960-89

1960 1970 1980 1985 1989Annual GrowthRate 1960-89 %)

White:

Population ('000) 120 151 181 183 191

% of total 34 32 28 22 19

Annual Growth Rate (%) 2,3 1,8 0,2 1,1 1,6

Coloured:

Population ('000) 79 114 147 178 197

% of total 23 24 22 22 20


Asian:

Population ('000) 5 5 7 8 9

% of total 1 1 1 1 1


African:

Population ('000) 146 206 322 446 596

% of total 42 43 49 55 60


Total: 350 475 656 815 993

Population ('000) 100 100 100 100 100

% of total 3,1 3,3 4,4 53 3,7

Annual Growth Rate (%)

Sources: Kruger and Potgieter, 1985; Lenin and du Plessis, 1989; unpublished data from Local Authorities, the Urban Foundation and theHuman Rights Trust.

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Whites as a proportion of the total GABA population declined steadily from 34 per cent in 1960 to only 19 per cent in 1989, whilstthe proportionate share

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of Africans increased from 42 per cent to 60 per cent over the same period. The proportion of the so-called Coloured population hasremained fairly constant at around 20 per cent over the period, whilst Asians have consistently been the minority component ataround 1 per cent of the total. Thus, the principal characteristic of GABA's population is the extent to which it is dominated bypeople who are not White, viz, more than 80 per cent. Moreover, the growth rates of the non-White population, especially theAfrican component, reflect strongly increasing trends compared to that of Whites, which means that the proportion of Whites willcontinue to decline: GABA's population in 2000 is likely to be of the order of 1,6 million, with Whites constituting only about 12 percent of the total (see Table 3).Table 3 Likely Population Growth in GABA, 1989-2000

1989 No.('000)

Assumed AnnualGrowth Rate (%)

2000 No.('000)

2000(%)

White 191 0,6*(3) 204 12

Coloured 197 3,3*(4) 281 17

Asian 9 2,8*(5) 12 1

African 596 7,5(1989-1995)*(6)

4,5 (1995-2000) 1146 70

Total 993 4,7 1643 100

Under circumstances in which Africans and Coloureds are predominantly workers, whilst significant job-creating investment is thepreserve of Whites, these growth trends are cause for some concern. The African population growth rate is particularly significantin this respect, having increased from 6,7 per cent per annum between 1980-85 to 7,5 per cent per annum between 1985-89, the latterbeing virtually double the growth rate in the 1960s and 1970s. This accelerated growth rate is attributable mainly to in-migrationwhich has been facilitated by the recent abolition of influx control. This situation is not unique to GAGA, and is consistent with theview that urban population growth in South Africa at present, and for the foreseeable future, will consist primarily of Africans(Cilliers, 1989, p. 6). Apart from its implications in terms of the need to create more jobs in GABA, this growth in the Africanpopulation has equally serious implications in the light of the critical shortage of affordable African housing in the area.

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3. Economic Development(a) Industrial GrowthGABA is essentially an industrial metropole in which manufacturing production, in 1980, constituted more than 40 per cent of GGP(RDAC, 1985) and employed almost 30 per cent of the labour force (Infraplan, 1987).GABA's manufacturing sector, in turn, has been dominated by the motor and motor components industries for many years, andconstituted more than 50 per cent of the value of the area's manufacturing industry production in 1978 (Black et al., 1986).GABA's relative dependence on the motor and motor components industries, however, has had serious repercussions in terms ofgrowth in both manufacturing production and employment. Structural changes in the motor industry at the national level, broughtabout, inter alia, by the effects of cost premiums associated with the local-content programme and the inability of the industry torealise economies of scale in a relatively small domestic market served by too many producers (Wallis, 1986), have resulted in asubstantial contraction in national vehicle sales with a concomitant decrease in the share of the national market accruing to GAGAvehicle manufacturers. This process has been evident for a number of years, and resulted in GABA's share of national motorvehicle production declining from 58 per cent in 1965 to around 30 per cent in 1986. This decline affected production in a wide rangeof component manufacturing industries such as tyres, electrical systems, headlights, wheels, batteries, spark plugs, brakes,clutches, etc., as well as in other peripheral service industries. Consequently, the output of GABA's manufacturing sector increasedat a lower rate between 1970-76 (14 per cent per annum) than for the country as a whole (18 per cent per annum), and also at a lowerrate than that recorded in any of the other three metropolitan areas (Louis Heyl Associates, 1982). In fact, GAGA entered into a

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long-term period of stagnation during the 1970s and, by 1979, had come to exhibit the characteristics of a depressed region,particularly in the manufacturing sector which reflected an overall decline in employment over the period from 1970-79 (Black et al.,1986).Given the circumstances in the motor industry at the national level, rationalisation was inevitable. The process culminated in theformation of SAMCOR in 1985, which involved a merger between the Ford Motor Company (located in Port Elizabeth) and Amcar(located near Pretoria). This resulted in a shift of most of Ford's operations to the PWV region: the local-content programme hadeffectively reduced the importance of a port location in the motor

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industry, and proximity to the country's principal market area had become relatively more important. For GABA, the effects ofrationalisation were traumatic. Some 5000 Ford workers were retrenched in 1985/86, and several thousand other workers inassociated component manufacturing industries were thrust into unemployment as the effects of decreased demand in the loyalmotor industry made themselves felt. These were mainly hourly-paid, predominantly African, workers who had little opportunity offinding work elsewhere, and whose mobility was, in any case, severely- limited by legislation.It is important to note, though, that GABA's economic stagnation has not been due entirely to the decline in the motor andcomponent industries. A large measure of the area's economic distress can also be attributed to years of government neglect andinappropriate regional development policy. Since the 1960s, when industrial decentralisation emerged as the State's principalmechanism for promoting regional development, GABA has been systematically excluded from any effective benefits andassistance from government sources. In Region D, ostensibly identified as a priority development region in terms of the 1982 RIDP,the implementation of industrial decentralisation policy reflected a clear preference for the Ciskei/Transkei/Border area at theexpense of other places in the region, notably GABA. This was the result of the State's determination to pursue the ideologicalobjectives of macro-apartheid associated with providing support for 'homeland' economies, especially those which, like Ciskei andTranskei, decided to embrace the myth of 'independence'. Given GABA's somewhat fragile industrial structure, end its consequentlimited capacity to generate economic activity with significant and sustainable forward and backward linkages, it has been unableto compete with the artificial comparative advantage accorded to the "industrial development points" (IDPs) declared in theCiskei/Transkei/Border area, and this has steadily eroded its capacity to attract and retain significant industrial developmentinvestment.It is only since 1985, as a result of intense pressure from local business and community interests, that GAGA has been accordedsome measure of industrial decentralisation incentives, although most of these are well below those available at theCiskei/Transkei/Border IDPs, and are unlikely to bring about the kind of scale of economic recovery which is required in GABA.Moreover, the incentives allocated to GABA were not the result of a carefully planned strategy for local economic growth anddevelopment. Instead, they are a reflection of the State's propensity for ad hoc, reactive decision-making bought about by agrowing realisation that its regional industrial development policy has failed. The entire policy has been subjected to an intensive

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scrutiny and evaluation, conducted by the Development Bank of Southern Africa, and has been found to be lacking in terms of itscost-effectiveness, its ability to generate self-sustaining growth, its ability to promote the establishment of an urban industrialbase, and its capacity to facilitate coherent regional development in general (DBSA, 1989b). It is likely that the nature and scope ofthe subsidies available in terms of the policy will be drastically curtailed in the near future (Daily Dispatch, 15/1/1990); and this maywell be of some indirect advantage to GABA in that it could have the effect of reducing the extent to which economic growthpotential in Region D is skewed away from GABA.(b) Selected Socio-Economic Indicators*(7)In this section, a number of indicators reflecting various aspects of socioeconomic circumstances in GABA are discussed. Some ofthese serve to confirm the depressed economic status of the region, whilst others suggest that a mild economy recovery may havetaken place in recent years.Unemployment. The rate of unemployment in GABA has been high throughout the 1980s, particularly since the 1985-86 crisisprecipitated by Ford's relocation decision, and its subsequent ripple effect throughout the local economy. Accurate statistics forthe area are not readily available, and official sources refer only to 'registered' unemployment. However, this is seldom a truereflection of unemployment since many persons do not bother to register because they can see no advantage in doing so; or, afterhaving been registered for several months, they abandon it as a fruitless exercise. Nevertheless, registered unemployment can, atleast, be used as an indicator of recent trends, given that the above caveat is taken into consideration. Hence, Table 4 shows thechange in registered unemployment from 1981 to 1989 for Whites, Coloureds and Asians.A dramatic increase in registered unemployment in 1986 is clearly evident, and reflects the major immediate impact of the motorindustry rationalisation. Note, though, that registered unemployment amongst White, Coloured and Asian workers had increased

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considerably since 1981. This reflects the effects of the period of stagnation which has characterised the GABA economy since thelate 1970s. Subsequent to 1986, there was a decrease in registered unemployment, which suggests that a mild recovery may havetaken

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Table 4 Registered unemployment amongst Whites, Coloureds and Asians in GABA, 1981-89

Period No.

December 1981 2 217

December 1982 4 393

June 1983 5 109

August 1984 4 485

August 1985 7 803

Average First Quarter 1986 10 445




Sources: SAIRR Race Relations Survey for 1982, 1983, 1984; Albany News Agency – Press reports 1986-1989.place. However, this decline is possibly more apparent than real, and could have been the result of an out-migration of unemployedWhites and Coloureds (especially the former whose mobility is unencumbered) in search of employment elsewhere.A partial indicator of employment in GABA's manufacturing sector is reflected in Table 5, which shows the total employee strengthof members of the Midland Chamber of Industries (MCI) between 1979-89.Table 5 Total employee strength of members of the Midland Chamber of Indus-tries*(8),1979-1989

Year Employees*(9)

1979 67 448

1980 69 076

1981 78 963

1982 83 927

1983 73 480

1984 73 351

1985 66 507

1986 61 805

1987 59 335

1988 64 007

1989 69 242

Sources: Annual Report of the MCI Executive Committee, 1985 and 1989. Over the ten-year period, employee strength grew byonly 0,3 per cent per annum, whilst MCI membership declined by almost 10 per cent between 195-89. Employment peaked at almost84 000 in 1982, whereafter it

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declined steadily to a low of less than 60 000 in 1987, which is consistent with the circumstances reflected by the unemploymenttrend in Table 4. The suggestion of a mild economic recovery after 1986/87 is also evident in Table 5, although the 1989 employeestrength was almost 20 per cent lower than the 1982 peak.

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Reliable data on African unemployment in GABA are difficult to obtain because appropriate measures of this critical statistic do notexist. However, recent estimates, based on sample surveys, do provide some idea of the scale of the problem. In these surveys, theAfrican unemployment rate was determined at 56 per cent of the labour force in July 1985, 54 per cent in August 1986 and 46 percent in July 1987 (Levin and Horn, 1987). Whilst this declining trend may also be indicative of a mild economic recovery in GAGA,the sheer dimensions of African unemployment are clearly indicative of an explosive situation. Moreover, in determining theserates, temporarily employed and underemployed workers, estimated to be as high as 25 per cent of the economically active Africanpopulation, were regarded as employed persons. This has the effect of reducing the unemployment rates derived (Levin and Horn,1987: p. 4). It should be noted, too, that GABA's unemployed Africans consist largely of unskilled and semi-skilled workers, andthat the economic situation which has caused their unemployment is structural rather than cyclical. Thus, the likelihood thatunemployed Africans will find work in GABA in the short- to medium term is extremely unlikely, even if there were to be an upswingin the national economy.African population growth in GAGA, and the chronic shortage of land for housing, have led to a situation in which 45 per cent ofthe area's African population lives in informal (shack) settlements in which overcrowding, unsanitary conditions and a lack ofessential services are commonplace.Coupled with the pervasive poverty induced by high unemployment, the situation in GABA is, indeed, explosive. It will take muchmore than a mild economic recovery to resolve the area's predicament.Retail Sales: Annual retail sales in GABA and nationwide for the period 1983-88 are shown in Table 6.Overall, GABA's retail sales grew more slowly (11 per cent per annum) than did the nation's (15 per cent per annum), and reflected anet decrease in 1985 whilst national sales grew by 8 per cent in that year. In fact, GABA was the only principal urban area in thecountry to register a decrease in retail sales. After 1985, GABA's retail sales again increased, at first (1986-87) at a rate substantiallylower than the nation's; and then at a slightly higher rate in 1988.There are two principal reasons for this trend in GABA's retail sales. The

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Table 6 Annual Retail Sales in GABA and South Africa, 1983-88

GABA South Africa

Year Sales (R mill) % change Sales (R mill) % change

1983 946 24 821

1984 1 080 +14 28 318 +14

1985 1 072 -1 30 678 +8

1986 1 181 +10 34 724 +13

1987 1 292 +9 40 799 +17

1988 1 619 +25 49 967 +23

Note: Seasonally adjusted values at current prices.Sources: Quarterly Bulletin of Statistics, vol. 19, no. 2, 1985; vol. 23, no. 2, 1989.first is associated with the general decline in the level of local economic activity, retrenchments, unemployment and theconcomitant decrease in consumer disposable income which characterised the period up to 1985-86, followed by the mild recovery,referred to earlier, which appears to have taken place since 1987-88. Secondly, African consumer boycotts of white retailestablishments in 1985-85 were particularly successful in GABA, and this was probably the main cause for the decline in 1985 retailsales. Consumer boycotts are a manifestation of socio-political conflict in GABA, much of which is attributable to the marginalisedand unequal social, economic and political circumstances under which Africans are required to live.

4. ConclusionThere is little doubt that the rationalisation in the motor industry represents a severe economic setback for GABA. Because of thestructural nature of the change, this industry is unlikely to regain its former position of dominance in the local economy. In terms ofthe imperative for employment creation, this means that either a major new industry must be established in the area to absorb theunemployed, or that the existing elements of the industrial base must expand to the extent that unemployment is substantiallyreduced. Neither of these options appear likely to materialise in the short- to medium term, and GAGA will probably experience aperiod of slow growth in the immediate future, characterised by a chronic unemployment problem.

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Some investment in production expansion was effected by GABA's two remaining motor vehicle manufacturers in 1988, but thesehave not been sufficient to provide a basis for significant economic growth which could make up the number of jobs lost in themid-1980s, let alone create new jobs. The other main manufacturing sectors in GABA are the chemical industry; the metal, metalproducts, machinery and electrical machinery industry; the textile

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and clothing industry; and the food and beverages industry. On their own, none of these reflect a strong growth dynamic. Takentogether, though, they probably do have the capacity for limited but steady growth, which makes them vitally important to the localeconomy. Their location in GABA, however, is one of their main disadvantages because they are far from the main nationalmarkets, probably have a limited export potential and, in many cases, are tied into producing components linked to the ailing motorand motor components industries.The multi-million rand natural gas and petroleum refining project, located at Mossel Bay some 300 km west of GABA, and whereproduction is expected to commence in 1991, has been referred to as the single most important economic development prospect forthe southern and eastern Cape regions. The construction phase has brought substantial fabrication contracts for sophisticatedmodules, piles and pipelines to GAGA. These have provided some jobs and created a basis for increased technical training at localinstitutions. However, these are mainly relatively short-term developments and it is unlikely that the construction phase willcontribute significantly to solving the unemployment problem in GAGA. Moreover, the longer-term sustained benefits of theproject, associated with the refining facility and the servicing and maintenance for the off-shore operations, are more likely toaccrue to the Mossel Bay area than to GABA. On the other hand, GABA will derive some indirect benefits in the form of increaseddemand from a new national market area located much closer to it than the existing ones.GABA's future depends heavily upon the extent to which the local African population is enabled to participate fully and equally inthe process of economic development - not just as workers, however, or as participants in 'small business' and 'informal sector'activities, but as entrepreneurs and employers on a significant scale (Davies, 1989).Finally, it is difficult to assess the extent to which the decline in GABA's economic fortunes is attributable to the effects of nationaleconomic forces, or to unique problems associated with its own economic fragility as demonstrated by the severe repercussions ofthe rationalisation in the motor industry. Clearly, both have had an impact. However, it is perhaps an indication of the relativesignificance of those impacts to indicate that GABA will not necessarily recover as a result of national economic revival andupswing; it will, in addition, require a particular, localised economic prescription. Such a prescription cannot be seen in isolation,however, and it is important that it be developed in the context of an appropriate regional economic development policy (Blacker etal., 1987) in which objectives and strategies are not influenced by the ideological imperatives of macro-apartheid, as is the case atpresent.

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ReferencesBLACK, P.A. DAWIES W.J., WALLIS, J.L., McCARTAN, P.J. and CLAYTON, P.M. (1986). Industrial Development Strategyfor Region D. First Interim Report. Grahamstown: Rhodes University.BLACK, P.A. DAWIES W.J., WALLIS, J.L., McCARTAN, P.J. and CLAYTON, P.M. (1987). Industrial Development Strategyfor Region D. Final Report. Grahamstown: Rhodes University.CLLLIERS, S.P. (1989). Managing Rapid Urbanisation. Occasional Paper No. 13. Stellenbosch: Research Unit for Sociology ofDevelopment, University of Stellenbosch.DAVIES, W.J. (1989). 'Black Entrepreneural Participation in Economic Recovery', Development: The Human Challenge.Pretoria: Development Society of Southern Africa.DBSA (1989a). Annual Report, 1989/89. Halfway House: Development Bank of Southern Africa.DBSA (1989b). Report of the Panel of Experts on the Evaluation of the Regional Industrial Development Programmeas an Element of the Regional Development Policy in Southern Africa. Halfway House: Development Bank of SouthernAfrica.INFRAPLAN (1987). Port Elizabeth Metropolitan Study: Technical Report, Volume 2. Port Elizabeth: Infraplan.KRUGER, G. and POTGIETER, J.F. (1985). Development Region D: A Comparative Study of Socio-Economic/DemographicFeatures Based on the 1970/1980 Population Censuses. Series C - Report No. 3. Port Elizabeth: Institute for PlanningResearch, University of Port Elizabeth.LEVIN, M. and DU PLESSIS, A.P. (1989). DATA D: Demographic Features of Region D. Report No. 2. Port Elizabeth: Unit forStatistical Analysis, Vista University.LEVIN, M. and HORN, G.S. (1987). The Unemployment Rate of Blacks in the Port Elizabeth Metropolitan Area: 1987.

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Research Report No. 7. Port Elizabeth: Employment Research Unit, Vista University.LOUIS HEYL ASSOCIATES (1982). The Economic Growth Potential of the Greater Algoa Bay Area. Pretoria: Louis HeylAssociates (Pty) Ltd.RDAC (1985). An Agricultural Development Plan for Region D. Port Elizabeth: Regional Development Advisory Committee,East Cape Region (Region D).SAIRR (1982, 1983, 1984). Race Relations Survey. Johannesburg: South African Institute of Race Relations.URBAN FOUNDATION (1989). 'Population Estimates for Port Elizabeth/Uitenhage'. Unpublished memorandum. Port Elizabeth.WALLIS, J. (1986). An Analysis of the Manufacturing Sector in the Port Elizabeth/Uitenhage (PEU) Metropolitan Area.Development Studies Working Paper No. 32. Grahamstown: Institute of Social and Economic Research; Rhodes University.

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Endnotes1 Professor of Development Studies, Institute of Social and Economic Research, Rhodes University.

2 The Greater Algoa Bay Area consists of the municipalities of Port Elizabeth, Uitenhage and Despatch, and severalrecently-established local authorities for Africans.

3 Based on the 1980-89 growth rate.



6 Assumes that the 1985-89 growth rate will apply for the period between 1989-95, and that this will decline to 4,5 per cent per annumin the period 1995-2000 (Urban Foundation, 1989).

7 The indicators used here were selected on the basis of data availability. Whilst they do not reflect a comprehensive perspective ofsocio-economic circumstances in GAGA, they are sufficiently indicative of recent trends for the purposes of this paper.

8 The majority of the members are located in GABA. Membership was 546 in 1985 and 493 in 1989.

9 Covers all races at all levels.

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A Metropolitan Region in Decline: Socio-economic Conditions in the Greater Algoa Bay Area