Annexure 3: District Profile Eastern Cape Chris Hani ... · Area (ECDMA13). The DMA extends over 133.52 km2 and is home to approximately 87 people While the District has a low urbanisation

Annexure 3: District Profile Eastern Cape Chris Hani District Municipality (DC13) Programme of Support to Local Economic Development in the Eastern Cape Eastern Cape Competitive Advantage Assessment And Training Support Project Produced by Melinda McCann For European Consultants Organisation (ECO)

EC FRAMEWORK CONTRACT AMS/451 – LOT N°9 MISSION N°2005/109496

Annexure 3: District Profile: Chris Hani District Municipality (DC13)

Contents 1 District Profile: Chris Hani Municipality (DC13) _________________________ 1

2 The District Development Framework: Chris Hani District Municipality (DC13) ____ 7

2.1 Key Elements of Municipal Competitive Advantage ___________________ 7

3 The Local Development Framework: Inxuba Yethemba Local Municipality (EC131) 10

3.1 Key Elements of Municipal Competitive Advantage __________________ 10

4 The Local Development Framework: Tsolwana Local Municipality (EC132) ______13

4.1 Key Elements of Municipal Competitive Advantage ___________________13

5 The Local Development Framework: Inkwanca Local Municipality (EC133) _____ 16


6 The Local Development Framework: Lukhanji Local Municipality (EC134) ______ 19

7 Key Elements of Municipal Competitive Advantage _____________________ 20

7.1 Infrastructure and Services __________________________________ 20

7.2 “Rules of the Game” (Institutional Environment)_____________________ 20

7.3 Economic Indicators _______________________________________ 21

7.4 Capacity _______________________________________________ 21

8 The Local Development Framework: Intsika Yethu Local Municipality (EC135) ___ 23


9 The Local Development Framework: Emalahleni Local Municipality (EC136) ____ 26


10 The Local Development Framework: Engcobo Local Municipality (EC137) ____ 29


11 The Local Development Framework: Sakhisizwe Local Municipality (EC138) __ 32



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1 District Profile: Chris Hani Municipality (DC13) 1

The Chris Hani District Municipality (CHDM) is a landlocked district stretching across the northern portion of the province, bordered by the Northern Cape and by the Eastern Cape districts of Cacadu, Amatole, Ukhahlamba and OR Tambo (refer to 1.3). Chris Hani, one of the four ISRDP nodes in the Province, includes the former administrative areas of Transkei, Ciskei and Cape Provincial areas. The natural environment similarly ranges from semi-arid Karoo in the west to moist upland and mountain grassland in the east. The District extends over 36,963.82km2 and incorporates sixteen former magisterial districts into eight local municipalities and the Mountain Zebra National Park District Management Area (ECDMA13). The DMA extends over 133.52 km2 and is home to approximately 87 people While the District has a low urbanisation rate, at 30.96%, there is a significant range from 0.56% (Intsika Yethu) to 76.84% (Inkwanca) and half of the local municipalities have substantially passed the 50% urbanisation mark. Chris Hani is classified as a Category C2 municipality, indicating a largely rural character and low urbanisation rate, as well as limited municipal staff and budget capacity. Intsika Yethu, Emalahleni and Engcobo are classed as Category B4 (rural, mainly subsistence), and Inxuba Yethemba, Tsolwana, Ikwanca and Sakhisizwe as B3 (small towns, agricultural) municipalities, similarly reflecting limited institutional capacity and areas characterised by small centres, limited SMMEs and market opportunities, greater dependence on public support and LED activities that are principally at the level of the small project. Lukhanji is one of only three Category B2 (large core town/s with surrounding agricultural areas) municipalities in the Province, reflecting reasonably adequate budgets and staff, urban centre(s) with associated resources where LED activities are emerging into strategies and programmes to take advantage of economic potential, as well as substantial numbers of SMMEs, considerable market opportunities, but limited private sector business development services. Queenstown, in Lukhanji, is the administrative and economic centre of the District, as well as being centrally situated. Lukhanji accounts for around one third of the District’s GDP (37.22%) and formal employment (31.93%). The level and depth of poverty in the CHDM is considerable, with 76.81% of the population living in poverty and a poverty gap of R1.34m, amounting to 14.99% of the Provincial poverty gap. The HDI for Chris Hani is low, at 0.47, with only Inxuba Yethemba and Lukhanji rating at, and above, the provincial HDI (0.52). The district is home to 13.29% of the provincial population, but contributes only 6.51% to provincial GVA and 9.03% to provincial employment. It follows that unemployment (60.91%) is higher than the Eastern Cape average (55.41%). The District’s principal sectoral employer (42.51%) and contributor to GVA (43.11%) is community services. This pattern of reliance on government and community services as principal employer is reflected across all but two local municipalities (Tsolwana, Inkwanca) where agriculture is the principal sectoral contributor to both GVA-R and employment.

1 Sources: MDB 2003, Global Insight 2005, ECSECC 2002-2005, ECDC 2003, Department of Social Development 2005


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There are good road and rail linkages between Queenstown and Buffalo City, as well as between the Inxuba Yethemba towns of Cradock and Middelburg and the Metro. In short, the most developed transport infrastructure takes one out of the district to the primary and secondary provincial centres, rather than across the small centres of the district. Greater intra-district flows may develop given the status of the R61 – which runs across the length of Chris Hani through the main towns of five local municipalities – as a national road.


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1.1 Baseline District and Local Municipal Statistics B3 B3 B3 B2 B4 B4 B4 B3 C2

Categories 2004

Inxuba Yethemb

a Tsolwan

a Inkwanc

a Lukanji Intsika Yethu

Emalahleni

Engcobo

Sakhisizwe

Chris Hani DM

Area (km2) (MDB)2 11,594.6

3 6,024.78 3,583.68 4,259.55 3,613.95 3,238.42 2,258.78 2,256.5236,963.8

2Population (No.) 63,082 13,706 21,214 167,904 177,452 211,360 181,755 75,417 911,890Urbanisation Rate (%) 73.86 63.49 76.84 66.81 0.56 28.65 8.82 27.83 30.96Density (people/km2) 5.42 2.52 5.85 50.32 57.83 33.57 69.90 26.71 23.49

Black 53.58 77.46 89.00 90.33 99.91 98.98 99.82 98.07 93.96White 11.66 8.88 7.10 4.50 0.01 0.61 0.06 1.34 2.20Coloured 34.70 13.60 3.89 4.91 0.06 0.38 0.09 0.50 3.76

Demographics (%)

Asian 0.06 0.06 0.01 0.27 0.02 0.02 0.03 0.09 0.08Female 50.46 51.12 51.93 52.02 54.57 54.08 54.27 52.96 53.40Gender (%) Male 49.54 48.88 48.07 47.98 45.43 45.92 45.73 47.04 46.600-4 9.05 9.53 9.03 9.02 12.57 10.51 13.44 11.72 11.175-19 29.88 31.88 34.82 33.91 41.45 40.43 41.45 40.36 38.6420-64 54.89 51.23 48.98 50.82 38.34 41.79 39.10 41.16 43.41Age (%)

65+ 6.18 7.36 7.17 6.25 7.65 7.28 6.01 6.77 6.79HDI 0.52 0.44 0.46 0.53 0.45 0.47 0.42 0.46 0.47HIV Prevalence (%, 2003)

3 27.30 Functional Literacy (%) 57.35 45.49 49.44 68.44 51.77 53.87 45.32 56.62 55.26

None 11.02 16.42 12.96 7.51 11.57 11.65 16.14 9.94 11.55Grade 12 13.64 7.25 8.95 17.62 4.92 10.40 8.16 8.88 10.50

Education Levels (% age 15+) Tertiary 6.95 5.30 4.99 6.92 4.31 4.96 3.10 5.04 5.06

R0-200 4.85 5.99 3.64 6.19 10.50 7.98 8.50 7.62 7.86R201-1000 23.48 33.24 29.59 24.79 33.11 28.34 32.95 31.84 29.55

Household Monthly Income Levels (%)

R1001-2500 27.33 29.97 29.96 26.70 27.82 28.31 30.71 28.81 28.39

2 Municipal Demarcation Board – Global Insight’s geographic areas used for other categories for internal integrity 3 EC Department of Health


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GDP per capita (R'000)4 16.68 10.35 13.18 13.14 3.52 4.08 2.32 4.51 6.50Unemployment (%)5 43.08 40.98 58.28 56.10 68.37 60.53 78.46 62.16 60.91Dependency Ratio 1.50 2.11 1.90 2.10 5.44 4.30 4.58 3.89 3.41Financial Grant Dependency6 10.95 35.71 34.33 19.29 98.02 21.16 50.04 40.84 169.16

Water 90.33 55.31 91.52 76.87 20.12 34.46 11.67 52.34 45.77Sanitation 73.76 47.51 51.30 77.58 39.29 35.29 32.24 67.51 52.17Electricity 82.39 85.12 72.72 72.39 30.82 46.61 20.40 57.64 50.76Refuse 77.50 26.31 76.35 52.01 2.53 11.64 3.83 30.93 27.17

Access to basic services (% Households, 2001) Housing 97.92 93.61 91.77 89.31 97.79 97.42 95.47 89.57 94.41

4 GDP by Region (GDP-R) at Current Prices 5 Expanded definition 6 % of municipal 2002/03 budget constituted of grants/subsidies and transfers/allocations


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1.2 The District Space Economy

Conceptual map providing overview of socio-economic context and of spatial linkages and surfaces across the district


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1.3 Competitive Advantage Profiles The elements of municipal competitive advantage are explored below for the District and Local Municipalities.


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2 The District Development Framework: Chris Hani District Municipality (DC13)7

Chris Hani envisions a “well capacitated Municipality, characterised by a good quality of life and a vibrant, self-sufficient economy driven by skilled communities living in a safe and healthy environment.” Identified key development priorities are: capital infrastructure, and economic development with more emphasis on former homelands (through tourism, agriculture, and SMME’s). The District has allowed an R8.6m budget to alleviate poverty and pursue LED. The industrial economy in the area, especially in the former homeland areas, is underdeveloped and deterioration of the manufacturing, agricultural and mining sectors has resulted in economic decline. Municipal expenditure on capital infrastructure aims to create jobs as well as provide basic services to the poor population, and it is hoped that this spending will stimulate private investment and grow the local economy. Due to the high number of residents who run their own businesses the District has prioritised SMME support. The expansion of the tourism industry is a potential due to numerous natural and cultural attractions. A number of major routes, such as the “friendly N6” and the N10, have helped many American and European tourists access hunting and eco-tourism spots.

2.1 Key Elements of Municipal Competitive Advantage 2.1.1 Infrastructure and Services

Chris Hani’s Infrastructure and Services Index captures a range of development across the District. Inxuba Yethemba emerges as the most developed local municipality with eastern areas tending to be less developed. Overall, the District fares better on measures of Quality of Life than Communications and Economic Infrastructure. The extent of road surfacing is below the Provincial average throughout, but the District’s relative proximity to the Province’s major economic centres tends to buoy the Communications score and the area of cellular network coverage is favourable. Telephone access is likely to increase, while investment in water, sanitation and roads will enhance the area’s performance. Chris Hani’s status as an ISRDP node, its inclusion in the PGDP-related Fish River Irrigation and Karoo Agro-Tourism Corridors, together with the District’s MIG allocation, which averages R151.06

7 Sources: IDP 2005; MDB 2003; Cacadu District Report November 2005


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per capita, may further enhance the infrastructure and services, as well as economic, performance of the area.

2.1.2 “Rules of the Game” (Institutional Environment) Overall, the District has a low urbanisation rate (30.96%), ranging from only 0.56% (Intsika Yethu) to 76.84% (Inkwanca) and the most prominent form of settlement is tribal (61.33%) then urban (26.05%). More than half (57.68%) of all households own their own properties, of which the majority (87.41%) are fully paid-up owners. Of the 260 unsettled land claims in Chris Hani, the majority (178) are for financial compensation and the remaining 82 claims are for land for subsistence (76), livestock (2), and maize (1) farming, and for housing (3). The ratio of police stations to population is favourable, although average geographical coverage is comparatively low. The District crime rate is substantially lower than the Provincial average and has decreased dramatically (-11.18%pa) over the past three years, with a marginal increase in one local municipality. The District economy, as a whole, is more diverse than the individual local economies, with the exception of Inkwanca, but considerably more concentrated than the Provincial economy. Community services is the overwhelmingly dominant sector in terms of contribution to both GVA (43.11%) and employment (42.51%). The cost of doing business in the District compares favourably to the Provincial average with generally lower transaction costs arising through distance, and travel time, to major economic centres and lower expenditure on travel, finance and communication. Municipal regulatory capacity tends to be poorly developed and access to finance and business service providers limited, with exceptions provided by Inxuba Yethemba and Lukanji.

2.1.3 Economic Indicators Chris Hani has a very youthful population, with half (49.81%) of all residents aged below 20 years. The rate of unemployment (60.91%) and of dependency (3.41) is higher than the average provincial rates (55.41% and 2.51, respectively), while poverty is both deep and pervasive, where the majority (76.81%) of residents live in poverty and where the District accounts for 14.99% of the Eastern Cape’s poverty gap compared to its 13.29% share of the total Provincial population. Chris Hani’s average per capita income (R10220.07 per annum) falls below that of the Eastern Cape and the District reflects the second highest dependence on social welfare grants. Chris Hani has, however, evidenced somewhat lower rates of increase in both poverty gap (10.40%pa) and poverty indicator (3.85%pa) than the Province, from 1996 to 2004. Comparative advantages in terms of GDP and employment contribution are reflected for the sectors of Agriculture (dominated by the Agriculture and Hunting sub-sector) and Community Services (centred on Education). A comparative employment advantage is also reflected for Households, with further comparative GDP advantages in Construction and Trade (dominated by the Retail sub-sector).


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The District falls largely within the Eastern Cape tourism regions of the “Friendly N6: and the Karoo Heartland. The District includes various game and nature reserves, notably the Mountain Zebra National Park, and presents a range of outdoor and adventure activities as well as historical, cultural and geological attractions. The District has high agricultural potential and generally good veld quality and fertile soils. Potential exists for a range of irrigated and dry land agricultural production, including Aloe Ferox, as well as for forestry and animal husbandry and for value-added processing associated with all primary products. Opportunities to enhance potential may be furthered by the District’s inclusion in the PGDP Fish River Irrigation and Karoo Agro-Tourism Corridors Coridors.

2.1.4 Capacity Chris Hani claims an HDI (0.47) below that of the Eastern Cape (0.52) and also claims a comparatively higher proportion of child-headed households. Access to education professionals is higher than the Provincial average, while access to health professionals is below average. The District’s HIV prevalence rate (27.30%) is comparable to that of the Province (27.10%). Chris Hani has a low skills base, considering functional literacy (55.26%), the qualification rate of over 25 year-olds (7.76%) and proportion of residents with at least a matric (15.57%), which all fall below Provincial average rates. The ratio of women to men, at 1.15, reflects a higher presence of women in the area and women make up 50.02% of the EAP, which has increased at a similar rate (3.81%pa) to that of the Province (3.88%pa) over the past eight years. The rate of women’s unemployment (67.91%) is substantially higher than the Provincial average (61.80%), and growth in women’s unemployment (5.91%pa) is high, but below the Provincial growth rate (6.10%pa). Finally, District Municipal capacity is modest, considering the limited number of functions performed with capacity. Some capacity is evidenced by high managerial experience, moderate ratio of municipal employees to population, a staffed LED Unit and the presence of local tourism and planning staff.


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3 The Local Development Framework: Inxuba Yethemba Local Municipality (EC131)8

The Inxuba Yethemba Local Municipality is 11,594.63km2 in extent, consists of 9 wards and will have 17 councillors. The vision for the Municipality is “to enhance the quality of life of all the inhabitants of Inxuba Yethemba”. Key development priorities are identified as: Infrastructure; Tourism Development; Housing; Education; Cooperation and Communication and Safety and Security. This Municipality’s IDP assigns priority to the development potential of the tourism industry and states that any development that is to take place should not alter the rural character of the area since it is this natural environment that is the key asset for economic growth, through tourism. Agriculture also contributes considerably to the local economy. Access and collector roads in newly planned areas are in urgent need of upgrading. It should also be noted that major income and living condition inequalities still exist, particularly between the areas of urban residential settlement and surrounding peri-urban and rural areas of Inxuba Yethemba.


Inxuba Yethemba’s Communications (transport and telecommunications) infrastructure is reasonably well developed, with operational rail, municipal airport and other air transport facilities, and a moderate percentage (36.57%) of residents with direct access to telephones, although the extent of road surfacing (11.03%) is limited. The Municipality is traversed by the N10 which provides a strong physical link between Inxuba Yethemba and the relatively proximate Provincial economic centre of Port Elizabeth. On Quality of Life, Inxuba Yethemba is one of the top performers in the Eastern Cape, including above average access to basic services (water, electricity, sanitation, refuse removal) and adequate shelter, as well as above average access to schools and health care facilities.

8 Sources: IDP 2002; MDB 2003


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The Municipality fares rather poorly on the measure of Economic infrastructure, with six commercial banks, six post offices with banking capability, and three ECDC properties – two institutional and one residential.

3.1.2 “Rules of the Game” (Institutional Environment) The Municipality is overwhelmingly urban (73.86%) and 39.93% of households own their properties, of which 67.03% are fully paid-up owners. Forty-five of Inxuba Yethemba’s 46 unsettled land claims seek financial compensation while the remaining claim is for land for subsistence farming. The Local Municipality performs rather poorly in respect of Crime owing to the higher than Provincial average crime rate (70.10 crimes per 1000 people) and the least favourable police coverage by geographical area in the Province. However, police coverage by population is high and the crime rate has declined substantially (-5.75%pa) over the past three years. Livestock and business related crime are closely comparable. The local economy is concentrated, dominated by the Community Services sector in terms of both GVA and employment. The cost of doing business in the area is lower than the Provincial average, considering the presence of a Telkom service branch and favourable distance, and travel time, to the major economic centre of Port Elizabeth. Expenditure on communication and finance is above Provincial average, but is favourable on transport. Further considerations are moderate access to business service providers and development and financial support institutions, and comparatively high municipal regulatory capacity.

3.1.3 Economic Indicators The Municipality reflects the most balanced age structure in Chris Hani, with the lowest proportion of people aged under 20 years (38.94%) and the second largest proportion of people aged over 64 years (6.18%). Moreover, Inxuba Yethemba is home to the lowest rates of poverty (51.82%) and dependency (1.50) in the District and to the second lowest rate of unemployment (43.08%). Inxuba Yethemba’s low Productivity score results from below Provincial average performance on measures of GDP per worker (formal and informal), and low growth in value creation relative to employment and labour remuneration. By contrast, the Municipality is the top performer in the District on skills available to the local economy. Inxuba Yethemba falls into the top third of all municipalities in the Province on Formal Economy Performance, bolstered by a positive trade balance and the lowest level of financial grant dependence in the District. Performance is limited by the concentrated local economy and low growth performance of both GDP and employment generation. The local economy performs least favourably on Economic Absorption Capacity considering low buying power in spite of moderate total disposable income, together with the negative income-expenditure balance and limited employment multiplier. Capacity is buoyed


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slightly by the high capacity of the informal sector to create economic opportunities relative to the performance of the formal sector. The local economy claims a comparative advantage, for both employment and GDP contribution, in Agriculture (exclusively in the Agriculture and Hunting sub-sector at 19.84% GVA and 28.89% employment) and Community Services (centred on Public Administration at 19.80% GVA and 14.22% employment). A further GDP comparative advantage is in Construction (4.15%) and an employment advantage is evidenced for Households (16.14%). Leading products in the area include game, sheep and goats, with opportunities for expansion of wool, mohair and meat processing. Strong potential for the development of irrigation schemes presents opportunities for lucern and dairy, as well as sugar beet (which is already prioritised around Cradock). The area falls within the natural growing area for Aloe Ferox, while good veld conditions favour goat farming. Tourist attractions include the expanding Mountain Zebra National Park and private game farms, Cradock Spa sulphur hot springs, historical and cultural sites, centred around Cradock, and various outdoor, sports and adventure activities, including the annual Fish River Canoe Marathon.

3.1.4 Capacity Inxuba Yethemba reflects above average Resident Participation Capacity, with good access to health professionals, above Provincial average access to teaching professionals and a comparatively low proportion of child-headed households, along with a moderate HDI (0.52). The Municipality falls into the top half of all municipalities in the Province on Municipal Capacity with a high ratio of municipal employees to population, a high number of functions performed with capacity (including all priority 1 functions), and the presence of LED, local tourism, trading, regulatory and planning staff. Managerial experience is modest, although financial management experience within the Municipality is high. Functional literacy (57.35%) is low in Inxuba Yethemba, while the qualification rate (9.66%) and the proportion of residents with at least a matric (20.59%) is high. Women’s Economic Participation is moderate, where women form a slight majority in the Municipal population and constitute 45.74% of the EAP, but face substantially higher rates of unemployment and of growth in unemployment than their male counterparts.


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4 The Local Development Framework: Tsolwana Local Municipality (EC132)9

The Tsolwana Local Municipality extends over 6024.78km2, consists of 5 wards and will have 10 councillors. The vision for the Municipality is to “Provide basic services to the communities of Tsolwana with emphasis on economic growth, rural development and agriculture (sic) sustainability.” Key development priorities are identified as: Unemployment and local economic development; Housing; Roads; Land, and Education. Priority has been assigned to the creation of employment opportunities and the facilitation of economic development. The majority of the local population is said to be living below the Minimum Living Level (MLL). Agriculture is currently the most significant employer in the Municipality and local economic development is aimed at job creation based projects in rural areas with emphasis on agriculture, as well as at tourism based projects for the creation of employment opportunities.


Tsolwana’s Communications (transport and telecommunications) infrastructure is poorly developed, with low percentage surfacing of all roads (9.59%) and moderate percentage population with direct access to telephones (25.10%). However, the Municipality has favourable cellular coverage and does have air transport facilities, in addition to being well placed to access both Provincial economic centres of Port Elizabeth and East London. On Quality of Life, Tsolwana scores above the Provincial average across all measures but access to sanitation services, where municipal refuse services are especially inadequate. Access to health and particularly education facilities is comparatively high in relation to the Province. Economic infrastructure is underdeveloped, and is comparatively poorly represented in respect of business support institutions, when considering its one commercial bank (FNB in Tarkastad), three post offices with banking capability, and three ECDC Small Business Centre properties.



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4.1.2 “Rules of the Game” (Institutional Environment) The majority (61.35%) of the population is resident on tribal land and only one third (33.58%) of all residents own their properties, of which 80.17% are fully paid off. Only one unsettled land claim remains for Tsolwana, where the claimants seek land for subsistence farming. The ratio of police stations to the local population is the highest in the Eastern Cape, although average geographical coverage is below Provincial average. Although the rate of crime has declined significantly (-3.42%pa) over the past three years, the Tsolwana crime rate is high (100.54 crimes per 1000 people). Stock theft is somewhat more prominent than business-directed crime. The local economy is the most concentrated in the Eastern Cape, dominated by the agricultural sector in terms of both GVA and employment. The cost of doing business in the area is high, considering transaction costs arising principally through distance, and travel time, to major economic centres and the absence of a Telkom service branch in the area. Further considerations are moderate expenditure on transport, communication, and finance, along with moderate access to business service providers and development and financial support institutions. Municipal regulatory capacity is limited, although Tsolwana does have an LED Forum.

4.1.3 Economic Indicators Of all Economic measures, the Municipality performs best on the Poverty and Dependency score, with lower than average rates of unemployment (40.98%) and dependency (2.11). The proportion of people living in poverty (69.45%) falls between the Provincial and District average, while the representation of people aged under 20 (41.42%) is comparatively low and representation of people over 64 (7.36%) is comparatively high. The Municipality’s low Productivity score results from low GDP per worker (formal and informal) and low growth in value creation relative to employment and labour remuneration, whereas skills available to the economy are higher than District average and somewhat lower than the Provincial average. The relatively low Formal Economy Performance score reflects particularly on the low GDP and employment growth performance, as well as on the highly concentrated local economy and, to a lesser extent, the negative trade balance. The local economy has experienced a negative shift in share for both GDP and employment contribution, where growth rates for GDP (0.09%pa) and employment (0.56%pa) for the period from 1996 to 2004 have fallen substantially short of the District and Provincial rates. A positive contributory factor is the comparatively low financial grant dependence. Tsolwana’s Economic Absorption Capacity is very limited considering low total disposable income and buying power, and negative income-expenditure balance, although economic multipliers and informal sector capacity to generate economic opportunities relative to formal employment is comparatively high. The local economy claims a comparative advantage in Agriculture, for both employment and GDP contribution, where the sub-sector of Agriculture


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and Hunting is the only active sub-sector, generating 63.50% GVA and 57.70% employment. Tsolwana also claims an employment advantage in Households (16.40%). The Municipality claims a range of leading and potential products, including sheep, goats, beef, lucern and sugar beet, and the high number of sheep in the area presents opportunities for expansion of the wool industry. The area falls within the natural growing area for Aloe Ferox and is identified as suitable for forestry, while high grazing potential favours livestock farming. Land is under-utilised, presenting high potential for further agricultural development and potential exists for irrigation schemes. In addition, potential is identified for the further development of game, agro-tourism and eco-tourism. Tourist attractions in the area include, amongst others, Commando Drift Nature Reserve and private reserves, bushman paintings and Boer war battle sites, as well as a range of outdoor and adventure activities.

4.1.4 Capacity Factors contributing to low Resident Participation Capacity in Tsolwana are the low HDI (0.44), and comparatively high proportion of child-headed households, and, in spite of above average access to education and health facilities, access to education and particularly health professionals is below Provincial average. Resident Skills Capacity is relatively limited based on low rates of functional literacy (45.49%) and qualification (7.37%) as well as on the modest proportion of residents with at least a matric (12.54%). Tsolwana reflects moderate Municipal Capacity considering high managerial experience, the favourable number of municipal employees relative to population size and the presence of development, building regulatory and planning staff, although the number of functions performed with capacity is low. Women’s Economic Participation is fairly limited, where women form a slight majority and constitute 43.90% of the EAP and face considerably higher unemployment (58.50%) and rate of growth in unemployment (7.32%pa) than their male counterparts.


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5 The Local Development Framework: Inkwanca Local Municipality (EC133)10

The Inkwanca Local Municipality covers 3583.68km2 and will have 6 councillors. Inkwanca envisions “A municipality that provides an equal opportunity for material and social upliftment without discrimination for its residents through sustainable economic growth, integrated stakeholder involvement, multi-skilling of communities, good governance, transparency and provision of efficient and quality services.” Key development priorities are identified as: Poverty and HIV/AIDS; Roads and Storm water; Land and Agriculture. High poverty levels mean that very few people are actually able to pay for basic services such as maintenance of roads or health clinics. Road conditions, for example, are at present considered to be a risk to the lives of the people in many areas. Due to this lack of resources and numerous empty posts within official staffing, the municipality seems unable to deliver on statutory mandates or develop the areas of high potential, said to include coal mining, agro-farming and tourism. Even though there is ample available land, much is not conducive to high volumes of crop production as the terrain is extremely rocky and arid. Small-scale farmers therefore lack land for both commercial and subsistence purposes.


Inkwanca’s Communications (transport and telecommunications) infrastructure is moderately developed, with operational rail and air transport facilities coupled with very limited surfacing of all roads (8.65%). Further, Inkwanca reflects high cellular network coverage and above average (29.92%) direct telephone, while the N6 traverses the Municipality and provides a good link to the secondary Provincial economic centre of East London. On Quality of Life, Inkwanca scores well above the Provincial average across all measures, including access to basic services (water, electricity, sanitation, refuse removal), adequate



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shelter, health and education facilities. By contrast, Economic infrastructure is poorly developed, with two commercial banks and two post offices with banking capability.

5.1.2 “Rules of the Game” (Institutional Environment) The Municipality is overwhelmingly urban (76.84%) and most households (64.70%) own their properties, of which 94.64% are fully paid-up owners. Of Inkwanca’s nine unsettled land claims, five seek financial compensation while the remaining claims are for land for housing (3) and for livestock farming (1). The Municipality performs relatively well in respect Crime owing to the lower than average crime rate (37.00 crimes per 1000 people), which has declined substantially (-4.09%pa) over the past three years, together with favourable police coverage by population size, although police coverage by area is below average. Stock theft is somewhat more prominent than business related crime. Inkwanca claims the most diversified local economy in the District, centred on Agriculture in terms of both GVA and employment. The cost of doing business in the area is slightly lower than the Provincial average, considering favourable distance, and travel time, to the economic centre of East London and lower than average expenditure on transport, communication and finance. Further considerations are the absence of a Telkom service branch and limited access to business service providers and development and financial support institutions, together with modest municipal regulatory capacity.

5.1.3 Economic Indicators Inkwanca is home to a fair proportion of people aged under 20 (43.85%) and a relatively high proportion of people aged over 64 (7.17%) years, coupled with a high proportion of people living in poverty (79.74%). Unemployment (58.28%) is higher than Provincial, but lower than District, average and the dependency ratio (1.90) is relatively low. The Municipality claims among the highest Productivity scores in the Province with the highest growth in value relative to labour remuneration (equalled only by the Metro) coupled with high growth in value relative to employment and above average measure of skills available to the local economy. On the measure of GDP per worker (formal and informal), Inkwanca performs above District, but below Provincial, average. The Municipality falls into the top half of all municipalities in the Eastern Cape on Formal Economy Performance, bolstered by the relative diversity of the local economy and positive growth performance of both GDP and employment measures. In addition, the level of financial grant dependence is below average. Economic Absorption Capacity is middling, with low buying power and total disposable income and a negative income-expenditure balance. Capacity is buoyed by favourable economic multipliers, particularly for employment and by the moderate capacity of the informal sector to create economic opportunities relative to formal sector employment.


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The local economy claims a comparative advantage, for both employment and GDP contribution, in Agriculture (exclusively in the Agriculture and Hunting sub-sector at 30.11% GVA and 39.19% employment) and Transport (dominated by Post and Telecommunication at 11.35% GVA and 3.69% employment). A further GDP comparative advantage is in Trade, dominated by the Wholesale and Commission sub-sector (15.28%), while an employment advantage exists for Households (13.48%). Leading products in the area include sheep and cattle, with opportunities for expansion of livestock and sheep (Dorper) farming, pig and chicken farming, and value-added wool and meat processing, where a local abattoir is available and the market for meat high. Inkwanca also includes the home of Ouma Rusks (Nola Industries) in Molteno. The climate lends itself to the production of onion seeds, herbs and spices, while the landscape lends itself to game and eco-tourism opportunities. The Municipality falls into the “Friendly N6” tourist region and includes historical and geological sites, as well as Khoi/San rock art and various outdoor activities, including game-viewing, hiking and riding.

5.1.4 Capacity Factors contributing to low Resident Participation Capacity in Inkwanca are the low HDI (0.46) and low ratio of health professional to local population. Access to education professionals is below District average, but higher than the Provincial average. Inkwanca falls into the top half of all municipalities in the Eastern Cape on the measure of Municipal Capacity principally on the basis of high managerial experience and the presence of LED, local tourism, trading regulation and planning staff, while the number of municipal employees relative to population size is moderate, as is the number of functions performed with capacity. Resident Skills Capacity is relatively limited based on low rates of functional literacy (49.44%) and qualification (7.40%) as well as on the modest proportion of residents with at least a matric (13.93%). Women’s Economic Participation is fairly limited, where the ratio of women to men stands at 1.08 and women constitute 50.19% of the EAP but face considerably higher unemployment (69.55%) and rate of growth in unemployment (6.19%pa) than their male counterparts.


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6 The Local Development Framework: Lukhanji Local Municipality (EC134)11

The Lukhanji Local Municipality, 4259.55km2 in extent, consists of 24 wards and will have 48 councillors. The vision for Lukhanji is that the “Municipal area is to become a stable, affordable and socio-economically self-sustainable area, working in partnership with its community in delivering affordable essential services and infrastructure whilst optimising resources at their disposal. All the inhabitants must enjoy better standards of life through community involvement.” Key development priorities are identified as: Water; Roads; and Economic Development (tourism and agriculture). Poverty alleviation and rural development are priorities, while housing is a key concern since urbanisation and depopulation of the rural areas results in massive overcrowding in towns. Agriculture is the biggest GDP generator and the lack of access to water and adequate roads accordingly needs to be addressed as both issues directly affect the sector’s ability to excel. A further constraint to agriculture is the harsh climate. There is currently a road line linking Lukhanji to East London, Cape Town and Johannesburg, which transports around 700 people each day. In order to maximise economic potential LED initiatives will need to create a marketing plan for the municipality, encourage alliances with potential investors, develop a plan for tourism and agriculture and develop micro-industries.



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7 Key Elements of Municipal Competitive Advantage

7.1 Infrastructure and Services Lukhanji’s Communications (transport and telecommunications) infrastructure is reasonably well developed, with operational rail and municipal airport facilities, favourable cellular coverage and a moderate percentage (35.36%) of residents with direct access to telephones, although the extent of road surfacing (12.63%) is limited. Lukhanji is traversed by the N6, which provides a strong physical link to the relatively proximate economic centre of East London. On Quality of Life, Lukhanji scores well above the Provincial average across all measures, including access to basic services (water, electricity, sanitation, refuse removal), adequate shelter, health and education facilities. On Economic infrastructure Lukhanji falls into the top quarter of all municipalities in the Eastern Cape, with three commercial banks, 14 post offices with banking capability, a SEDA-affiliated Kei Business Link, Business Partners (Specialist Investment Group), Mvula Trust and 87 ECDC properties: 10 residential; 63 industrial; eight commercial and six other properties, including an ECDC regional office in Queenstown.

7.2 “Rules of the Game” (Institutional Environment) The Municipality is largely urban (66.81%) and over half of all households (54.86%) own their properties, of which 77.80% are fully paid-up owners. Of Lukhanji’s 36 unsettled land claims, 21 seek financial compensation while the remaining 15 claims are for land for subsistence farming. Although the coverage of police stations by area and population size is considerably better than for the Eastern Cape and the District, the crime rate is higher (41.06 crimes per 1000 people). However, in the Province, Lukhanji reflects the greatest decline (-20.10%pa) in crime over the past three years. Business-directed crime is somewhat more prominent than stock theft. The local economy is concentrated, dominated by the Community Services sector in terms of both GVA and employment. The cost of doing business in the area is favourable, considering lower transaction costs arising through distance, and travel time, to the major economic centre of East London, and moderate expenditure on transport, communication and finance. Further considerations are the presence of a Telkom service branch and reasonable access to business service providers and institutional and financial support institutions, including three economic development structures. An LED Forum is in the process of being established and the Municipality claims fairly high regulatory capacity,


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although it is noted for “red tape”.

7.3 Economic Indicators Lukhanji reflects higher than Provincial average unemployment (56.10%), but lower than average rates of dependency (2.10) and poverty (65.46%). In the Provincial context, the representation of people aged under 20 (42.93%) is low and the representation of people over 64 (6.25%) is high. The Municipality is among the top third of all municipalities for Productivity, where GDP per worker (formal and informal) and growth in value creation relative to employment and labour remuneration is higher than District average and where skills available to the economy are higher than both the District and Provincial averages. The relatively high Formal Economy Performance reflects particularly on employment growth performance, comparatively low financial grant dependence, and to a lesser extent on growth and contribution of GDP to the Provincial economy. Lukhanji emerges as a leading economy, both nationally and Provincially, in respect of formal employment growth performance. The local economy has experienced a positive shift in share for both GDP and employment contribution, where growth rates for GDP (1.88%pa) and employment (1.60%pa), for 1996 to 2004, are higher than the District rates. Lukhanji’s Economic Absorption Capacity is favourable considering high economic multipliers, relatively high total disposable income and buying power and moderate informal sector capacity to generate economic opportunities relative to formal employment, but a negative income-expenditure balance. The local economy claims a comparative advantage, for both employment and GDP contribution, in Trade (centred on Retail at 11.49% GVA and 9.73% employment) and Community Services, where Health and Social Work contributes 13.05% GVA and Education dominates employment contribution (16.16%). Lukhani also claims a GDP advantage in Construction (2.63%) and an employment advantage in Households (13.92%). The Municipality claims a range of leading products, including sheep, goats, beef, lucern and sugar beet, and potential exists for further expansion of goat (Boer) production as well as for value adding in meat and leather processing. Potential in the area is further enhanced by good marketing structures noted for Lukhanji. The area falls within the natural growing area for Aloe Ferox and is identified as suitable for dry land maize and various irrigated horticultural and field crops, including cabbage, green maize, and sugar beet. Tourist attractions in the area include, amongst others, private game reserves, historical and geological sites, as well as a range of outdoor and adventure activities.

7.4 Capacity Lukhanji is a top performer on Resident Participation Capacity considering higher than average HDI (0.53) and access to health professionals together with the highest representation of education professionals in the Eastern Cape. Functional literacy (68.44%) is higher than average, as is the qualification rate (10.53%) and proportion of residents with at


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least a matric (24.54%). Women’s Economic Participation is comparable to the Provincial average, where the ratio of women to men stands at 1.08 and women constitute 51.10% of the EAP but face considerably higher unemployment (63.33%) and rate of growth in unemployment (5.85%pa) than their male counterparts. While the number of municipal employees relative to the population size is relatively low, Lukhanji performs well on Municipal Capacity considering high managerial experience, the high proportion of functions performed with capacity (including all priority 1 functions), and the presence of LED, tourism, regulatory, trading and planning staff.


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8 The Local Development Framework: Intsika Yethu Local Municipality (EC135)12

The Intsika Yethu Local Municipality is 3613.95km2 in extent, consists of 23 wards and will have 46 councillors. Intsika Yethu envisions “a dynamic Municipality that strives to improve the quality of life for all its citizens informed by the IDP in a sustainable manner, in its area jurisdiction and also endeavours to promote responsible citizenry”. Key development priorities are identified as: Eradication of poverty; Boost LED and Job creation; Ensure spatial rationale and sustainable development. This municipality is intending to achieve its development priorities though LED programmes focussed on expanding and sustaining the agricultural sector, SMME’s and the tourism sector. The area consists of a gently sloping landscape encompassed by hills, rivers and four dams. However, the soils are said to be some of the most erodable in South Africa and not ideal for farming practices. Nevertheless, agriculture is currently the backbone of the local economy and there is high potential for agricultural production, but appropriate technology is required. The area also contains two active tourism units and the Sabalele and Keiland Caves, which could be further exploited following improvements.


Intsika Yethu’s Communications (transport and telecommunications) infrastructure is underdeveloped, with no rail, air or water port facilities coupled with very limited surfacing of all roads (5.65%) and low percentage direct access to telephones (14.27%). However, cellular network coverage is favourable and the Municipality is relatively proximate to the Provincial secondary economic centre of East London. On Quality of Life, Intsika Yethu scores well below the Provincial and District averages across all measures of access to basic services (water, electricity, sanitation, refuse removal) but adequate shelter. By contrast, access to clinics and schools is comparatively high, while the measure of access to hospital beds falls between the Provincial and District averages.



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The Municipality performs comparatively well on Economic infrastructure, with a First National Bank, six post offices with banking capability, a Multi Purpose Community Centre, Farmers Support Centre and five ECDC economic properties – two industrial and three commercial.

8.1.2 “Rules of the Game” (Institutional Environment) The overwhelming majority (95.77%) of the population is resident on tribal land, with an urbanisation rate of only 0.56%, yet the majority (73.58%) of all households own their properties, of which 91.74% are fully paid up owners. Intsika Yethu has the highest number (70) of unsettled land claims in the District, although most (64) are for financial compensation while the remaining six claims are for land for subsistence farming. The coverage of police stations relative to geographical area and population size is lower than for the Eastern Cape, yet the crime rate stands at almost one third (13.24 crimes per 1000 people) of the Provincial rate and has declined more significantly (-3.39%pa) over the past three years. Intsika Yethu reflects a greater rate of stock theft than business-directed crime, which is understandable given the area’s overwhelmingly rural character. The local economy is concentrated, dominated by the Community Services sector in terms of both GVA and employment. In spite of the absence of a Telkom service branch, the cost of doing business in the area is lower than the Provincial average, considering lower transaction costs arising through distance, and travel time to a major economic centre, and lower expenditure on transport, communication and finance. Other considerations are the limited access to development and financial support institutions and particularly business service providers together with limited municipal regulatory capacity.

8.1.3 Economic Indicators Intsika Yethu is home to high levels of poverty (84.44%) and unemployment (68.37%), coupled with the highest dependency ratio (5.44) in the Province and a very youthful population, with more than half (54.01%) of the population aged under 20 years. An indication of the depth of poverty in the area is revealed by the Municipality’s share of the Provincial poverty gap (3.36%) compared to its share of the Provincial population (2.59%). The Municipality’s low Productivity score points to the low GDP per worker (formal and informal), a relative shortage of skills available to the economy, and low growth in value creation relative to labour remuneration and especially employment. Intsika Yethu’s low Formal Economy Performance reflects particularly on the concentrated local economy and extremely high financial grant dependence, but is bolstered by the positive growth performance of both GDP and employment measures. Intsika Yethu emerges as a leading economy, both nationally and Provincially, in respect of formal employment growth performance. The local economy has experienced a positive shift in share for both GDP and employment contribution, where growth rates for GDP (1.59%pa) and employment (2.69%pa), for 1996 to 2004, are higher than the District rates.


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Economic Absorption Capacity is fairly low considering moderate informal sector capacity, total disposable income and buying power, against low economic multipliers and the negative income-expenditure balance of Intsika Yethu. The local economy claims a comparative advantage, for both GDP and employment, in Community Services (dominated by Education at 26.71% GVA and 40.15% employment) and Agriculture, where the contributing sub-sectors are Agriculture and Hunting (10.30% GVA and 9.81% employment) and Forestry and Logging (10.64% GVA; 5.04% employment). Further GDP advantages are reflected for Construction (6.13%) and Trade, dominated by the Retail sub-sector (13.62%), while a further employment advantage emerges as the Households sector (12.16%) The Municipality claims a range of leading products, including sheep, goats, beef, maize and general irrigation (particularly vegetables). Land is under-utilised, presenting high potential for further agricultural development, particularly for maize production and for hemp. The area falls within the natural growing area for Aloe Ferox and potential exists for irrigated horticultural and field crops, while high grazing potential favours livestock farming. Tourist attractions in the area include, amongst others, historical and geological sites, caves, water bodies and forests, together with an associated range of outdoor, sports and adventure activities.

8.1.4 Capacity Factors contributing to low Resident Participation Capacity in Intsika Yethu are the low HDI (0.45), below average access to education professionals and particularly health professionals, and a comparatively high proportion of child-headed households in the Eastern Cape. Functional literacy (51.77%) is low, as is the qualification rate (6.43%) and the proportion of residents with at least a matric (9.23%). Intsika Yethu performs poorly on Municipal Capacity considering the very low ratio of municipal employees to population, limited managerial experience and the lowest number of functions performed with capacity by any local municipality in the Province, although Intsika Yethu does have a staffed planning function. Women’s Economic Participation is limited, where women form a considerable majority (54.57%) and constitute 50.49% of the EAP but face significantly higher unemployment (70.76%) and rate of growth in unemployment (5.64%pa) than their male counterparts.


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9 The Local Development Framework: Emalahleni Local Municipality (EC136)13

Emalahleni consists of 14 wards, extends over 3238.42km2, and will have 27 councillors. Emalahleni envisions a “municipality that is able to meet all the basic needs of the community by fostering economic growth and sustainable development to create self - sufficiency and independence”. Key development priorities are organised into three clusters: Infrastructure Programme; Institutional Programme; and Poverty Alleviation and Gender Equality. The latter aims at redistribution through local economic development targeted at women, the youth and elderly. A key challenge to all development initiatives is low affordability levels. The potential growth of Emalahleni’s economy is to be orchestrated through programmes encouraging community based tourism initiatives and agriculture expansion (especially wool and irrigation schemes). In addition, there is an untapped resource planned for exploitation near Indwe, namely low grade coal deposits. The Government and Social Services sector is the main employer in the area, yet unemployment remains high which may be due to the local population being made up of settled rural people who would not find it easy to enter mainstream formal employment.


Emalahleni’s Communications (transport and telecommunications) infrastructure is reasonably well developed, with operational rail and air transport facilities, and with favourable cellular network coverage. However, a low percentage (19.16%) of residents have direct access to telephones and the extent of road surfacing (13.74%) is limited. The Municipality is relatively proximate to the Provincial secondary economic centre of East London. On Quality of Life, Emalahleni scores well below average across all measures of access to basic services (water, electricity, sanitation, refuse removal) but adequate shelter. In addition, access to schools is limited and access to health facilities (clinics and hospital beds) is the lowest in the Province.



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The Municipality fares best on Economic infrastructure, including four commercial banks, 10 post offices with banking capability, RULIV and five ECDC properties: one industrial; three commercial and one other property.

9.1.2 “Rules of the Game” (Institutional Environment) Emalahleni is largely rural, with an urbanisation rate of only 28.65% and the majority of people live on tribal land. Just over half (51.23%) of all households own their properties, of which most (91.31%) are fully paid up owners. Of the 58 unsettled land claims, 23 seek financial compensation while the remaining 35 claims are for land for subsistence farming. The ratio of police stations to the local population is below that for the Eastern Cape, although average geographical coverage is favourable. The crime rate is among the lowest in the Province (10.83 crimes per 1000 people) and has further declined significantly (-10.53%pa) over the past three years. Stock theft is somewhat more prominent than business-directed crime, which is understandable given the area’s overwhelmingly rural character. The local economy is highly concentrated, dominated by the Community Services sector in terms of both GVA and employment. In spite of the absence of a Telkom service branch, the cost of doing business in the area is lower than the Provincial average, considering lower transaction costs arising through distance, and travel time, to a major economic centre and lower expenditure on transport, communication and finance. Other considerations are the fairly limited access to business service providers and development and financial support institutions, while municipal regulatory capacity is modest.

9.1.3 Economic Indicators Emalahleni has a youthful population, with around half (50.94%) of all residents aged under 20 years, and is also home to a high proportion (7.28%) of people aged over 64 years. The Municipality has higher than Provincial, but lower than District, average rates of unemployment (60.53%) and poverty (73.86%), while the local dependency ratio (4.30) is higher than both the District and Provincial average. An indication of the depth of poverty in the area is revealed by the Municipality’s share of the Provincial poverty gap (3.18%) which is somewhat greater than its share of the Provincial population (3.08%). The Municipality’s low Productivity score points to the low GDP per worker (formal and informal), a relative shortage of skills available to the economy, and low growth in value creation relative to labour remuneration and employment. Emalahleni’s low Formal Economy Performance reflects particularly on the highly concentrated local economy and extremely high financial grant dependence, but is bolstered by the positive growth performance of both GDP and employment measures. Emalahleni emerges as a leading economy, both nationally and Provincially, in respect of formal employment growth performance. The local economy has experienced a positive shift in share for both GDP and


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employment contribution, where growth rates for GDP (1.37%pa) and particularly for employment (2.12%pa), for 1996 to 2004, are higher than the District rates. Economic Absorption Capacity is fairly low considering moderate informal sector capacity and buying power, low economic multipliers and the negative income-expenditure balance. A favourable factor is that Emalahleni’s total disposable income is the highest in the District. The local economy claims a comparative advantage, for both GDP and employment, in Community Services (dominated by Education at 28.12% GVA and 31.92% employment) and Agriculture (dominated by Agriculture and Hunting at 6.13% GVA; 15.80% employment). A further GDP comparative advantage is reflected for Trade, dominated by the Retail sub-sector (15.00%), and an employment advantage is reflected for Households (13.09%). The Municipality claims a range of leading products, including sheep, cattle, maize and dry land sunflower production, and the high number of sheep in the area presents opportunities for expansion of the wool industry, while the relatively large local market presents meat processing opportunities. The area is identified as suitable for forestry, with potential for irrigated horticultural and field crops and very high potential for further maize production.

9.1.4 Capacity Factors contributing to low Resident Participation Capacity in Emalahleni are the low HDI (0.47), below average access to health and education professionals, and a comparatively high proportion of child-headed households in the Eastern Cape. Functional literacy (53.87%) is low in Emalahleni, as is the qualification rate (7.88%) and the proportion of residents with at least a matric (15.36%). Emalahleni performs poorly on Municipal Capacity considering the very low ratio of municipal employees to population, moderate managerial experience and the modest number of functions performed with capacity, although some capacity is evidenced by staffed local tourism, building regulation and planning functions. Women’s Economic Participation is comparable to the Provincial average. The ratio of women to men stands at 1.18 and women constitute 52.65% of the EAP but face higher unemployment (66.89%) and rate of growth in unemployment (5.54%pa) than their male counterparts.


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10 The Local Development Framework: Engcobo Local Municipality (EC137)14

Engcobo consists of 15 wards, extends over 2258.78km2 and will have 29 councillors. Engcobo envisions “A well-capacitated, clean, safe and friendly municipality characterised by vibrant agriculture and tourism sectors with skilled and empowered communities.” Key development priorities are to provide services for social development and infrastructure for social, economic and institutional development. Engcobo faces high levels of poverty, unemployment, illiteracy and infrastructure backlogs, including roads and housing. Other challenges are identified as crime, HIV and TB prevalence, and poor management, organisation and integration across civic, private and public bodies. In addition, a thorough analysis of the local financial sector is required since it has been experiencing a major revenue decline of late. The population is overwhelmingly rural and most land is communally owned and fertile, yet only a small portion is fully utilised. Forestry (especially pine), agriculture and tourism (agri-tourism and cultural tourism, including arts and crafts) are said to be key for the areas economic stimulation. Other identified strengths and opportunities include: local resources (natural, human and information); potential for new businesses and community-private-public partnership; availability of local technical expertise; non-political and resourced NGOs and CBOs that provide aftercare; and a taxi industry and route between Umtata and Queenstown.


Engcobo’s Communications (transport and telecommunications) infrastructure is underdeveloped, with no rail, air or water port facilities coupled with very limited surfacing of all roads (8.79%) and low percentage (16.65%) of direct access to telephones by the local population. Engcobo has favourable cellular network coverage and is situated close to Umtata, but is some distance from the Provincial secondary economy of East London. On Quality of Life, Engcobo fares poorly with low measures of access to all basic services (water, electricity, sanitation, and refuse removal) but adequate shelter, and with low access to schools. Access to health care facilities is comparable to the Provincial average, but below District average.

14 Sources: IDP 2004/05; LED Strategic Plan 2004/05; MDB 2003


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Economic infrastructure is poorly represented, with two commercial banks, seven post offices with banking capability and three ECDC properties.

10.1.2 “Rules of the Game” (Institutional Environment) The overwhelming majority (95.07%) of the population is resident on tribal land and more than half (55.24%) of all households own their properties, of which the majority (93.85%) are fully paid up owners. Of Engcobo’s 13 unsettled land claims, 11 are for financial compensation while the remaining two claims are for land for livestock (1) and maize (1) farming. The coverage of police stations relative to geographical area and population size is lower than for the Eastern Cape, yet the crime rate stands at less than half (15.36 crimes per 1000 people) of the Provincial rate. However, Engcobo is one of the few municipalities in the Province to experience a growth (0.05%pa) in crime over the past three years. The prevalence of livestock and business-directed crime is roughly equivalent. The local economy is highly concentrated, dominated by the Community Services sector in terms of both GVA and employment. The cost of doing business in the area is relatively high, principally on the basis of transaction costs arising through distance, and travel time, to a major economic centre (East London), while expenditure on transport, communication and finance is moderate. Further considerations are the absence of a Telkom service branch, poorly developed municipal regulatory capacity and limited access to business service providers and development and financial support institutions. However, various economic development structures are represented in the area, including a business chamber and LED forum.

10.1.3 Economic Indicators Engcobo claims the most youthful population (54.89% aged under 20 years) as well as the highest rates of poverty (88.93%) and unemployment (78.46%) in Chris Hani, coupled with a high dependency ratio (4.58). An indication of the depth of poverty in the area is revealed by the Municipality’s share of the Provincial poverty gap (3.79%), which is substantially higher than its share of the Provincial population (2.65%). The Municipality’s low Productivity score points to the low GDP per worker (formal and informal), a relative shortage of skills available to the economy, and low growth in value creation relative to labour remuneration and especially employment. Engcobo’s low Formal Economy Performance reflects particularly on the concentrated local economy, relatively high financial grant dependence and GDP performance, but is bolstered by positive employment growth performance. Engcobo emerges as a leading economy, both nationally and Provincially, in respect of formal employment growth performance and has experienced a positive shift in share of employment, but a negative shift in share for GDP contribution from 1996 to 2004.


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Economic Absorption Capacity is fairly low considering the negative income-expenditure balance against a higher than average employment multiplier as well as moderate informal sector capacity, total disposable income and buying power. The local economy claims a comparative advantage, for both GDP and employment, in Community Services (dominated by Education at 26.51% GVA and 33.47% employment). Further comparative advantages, in terms of GDP contribution, are reflected for Agriculture – centred on Forestry and Logging (5.94%); Construction (2.83%) and Trade – centred on the Retail sub-sector (12.32%). A further employment advantage emerges as the Households sector (18.46%). The Municipality claims a range of leading products, including sheep, goats, cattle, sunflowers and maize, where the latter is identified as having very high potential. Dry land potential exists for maize and beans, and the area is identified as suitable for forestry. Potential exists for further expansion of goat (Boer) production, while the high number of sheep in the area presents opportunities for expansion of the wool industry and the relatively large local market presents meat processing opportunities. Engcobo falls into both the “Friendly N6” and Wild Coast tourism regions, with attractions centred on the natural environment and related outdoor activities.

10.1.4 Capacity Factors contributing to low Resident Participation Capacity in Engcobo are the low HDI (0.42), below average access to education and health professionals, and a comparatively high proportion of child-headed households in the Eastern Cape. Functional literacy (45.32%) is low, as is the qualification rate (4.92%) and the proportion of residents that have gained at least a matric (11.26%). Women’s Economic Participation is marginal, where women account for 54.27% of the population yet constitute 48.87% of the EAP and face substantially higher unemployment (83.27%) and rate of growth in unemployment (5.79%pa) than men. Engcobo reflects poor Municipal Capacity considering the very low ratio of municipal employees to population, moderate managerial experience and limited number of functions performed with capacity. Engcobo has been recommended, in the National Capacity Report (MDB, 2005), for assistance based on past poor performance, although some capacity is evidenced by the presence of LED, local tourism, trading and building regulation staff.


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11 The Local Development Framework: Sakhisizwe Local Municipality (EC138)15

Sakhisizwe extends over 2256.52km2, consists of 6 wards and will have 11 councillors. The vision of the Municipality is “Sustainability through unity” and the key development priority is economic development through growth of the tourism and agriculture sectors. The Municipality lies at the foothills of the Drakensberg and the natural environment is the basis for the rural economy through tourism and agriculture. As such, any development strategies need to ensure that environmental integrity is not compromised. Challenges include high unemployment and reliance on public sector employment, poverty, slow economic growth, and the duplication of basic social services and infrastructure provision to two nodes resulting in the Municipality being financially stretched. Agricultural limitations include shallow soils, low rainfall, temperature variation and lack of irrigation water, as well as lack of security on farms due to armed robbery, stock theft and murder. Agriculture is the second largest contributor to employment and GVA and there is growth in small businesses (mainly in the retail and service sector) in Cala, yet Elliot is noted as having a declining business sector. Mondi has established in the area, having bought out many farms and planted them to timber, although their regional offices and staff are housed in neighbouring Ugie (Elundini EC141).


Sakhisizwe’s Communications (transport and telecommunications) infrastructure is modest, with operational rail facilities and an air transport facility, limited road surfacing (11.63%) and a low percentage (24.52%) of direct access to telephones. Sakhisizwe is fairly close to Umtata but is a considerable distance from the Provincial secondary economy of East London. On Quality of Life, Sakhisizwe reflects poor access to health and education facilities and below Provincial average access to sanitation, particularly municipal refuse services. Access to adequate shelter is moderate, while access to water and electricity is substantially higher than Provincial and District average. Economic infrastructure is poorly developed, with three commercial banks, four post offices with banking capability, and two industrial ECDC properties.

15 Sources: IDP 2003; LED Strategy 2003/04; MDB 2003


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11.1.2 “Rules of the Game” (Institutional Environment) Sakhisizwe is largely rural, with an urbanisation rate of only 27.83% and the majority of people living on tribal land, although the majority (65.04%) of all households own their properties, of which most (92.44%) are fully paid up owners. Of the 27 unsettled land claims, nine seek financial compensation while the remaining 18 claims are for land for subsistence farming. The coverage of police stations by area and population size is less favourable than the Provincial average, yet the crime rate is somewhat lower (30.22 crimes per 1000 people) and has declined appreciably (-11.54%pa) over the past three years. The local economy is highly concentrated, dominated by the Community Services sector in terms of both GVA and employment. The cost of doing business in the area is relatively high principally on the basis of transaction costs arising through distance, and travel time, to a major economic centre and considering the absence of a Telkom service branch in the area. Expenditure on transport, communication and finance is slightly more favourable than the Provincial average while access to institutional and financial support institutions and particularly business service providers is limited. However, economic development structures, including an LED Forum, are established in Sakhisizwe and municipal regulatory capacity is rather high, with staffed local tourism, regulatory, trading and planning functions.

11.1.3 Economic Indicators Sakhisizwe has a youthful population, with over half (52.08%) of the population aged under 20 years, and claims higher than Provincial and District average rates of unemployment (62.16%), dependency (3.89) and poverty (84.66%). An indication of the depth of poverty in the area is revealed by the Municipality’s share of the Provincial poverty gap (1.35%) compared to its share of the Provincial population (1.10%). The Municipality’s low Productivity score points to the low GDP per worker (formal and informal) and low growth in value creation relative to labour remuneration and especially employment. However, Sakhisizwe claims higher than District average skills available to the economy. Sakhisizwe’s low Formal Economy Performance reflects particularly on the highly concentrated local economy, negative trade balance and limited GDP and employment growth performance, but is buoyed somewhat by moderately low financial grant dependence. Sakhisizwe emerges as a leading economy in the Province, but not nationally, in respect of formal employment growth performance although there is no appreciable shift in share of employment, whereas the local economy has experienced a negative shift in share for GDP contribution from 1996 to 2004. Economic Absorption Capacity is limited considering moderate informal sector capacity against the negative income-expenditure balance, low economic multipliers and modest total disposable income and buying power. The local economy claims a comparative advantage, for both GDP and employment, in Community Services (dominated by Education at 25.90% GVA and 27.78% employment) and Agriculture (dominated by the Agriculture and Hunting sub-sector at 4.63% GVA and 24.39% employment). A further GDP advantage is reflected for Trade, dominated by the


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Retail sub-sector (22.70%), while employment advantages are evidenced for Households (15.32%) and Electricity (centred on Electricity supply at 0.86%). The Municipality claims a range of leading products, including sheep, goats, cattle, sunflowers and maize. Forestry and tourism are important sectors. Additional products identified as sustainable include a full range of grain, nuts, fruit and vegetables, as well as fodder and processed meat. Land is identified as suitable for forestry and as under-utilised, presenting high potential for further agricultural development, particularly for dry land maize, potatoes and beans as well as irrigated maize. Potential exists for local production and marketing of vegetables, while high grazing potential favours livestock farming. Sakhisizwe falls within the “Friendly N6” tourism region and is closely tied to the Maloti (Lesotho) Route, geared at tourism opportunities around the theme of Xhosa culture, while the landscape of the area is identified as an opportunity for game and eco-tourism.

11.1.4 Capacity Resident Participation Capacity in Sakhisizwe is moderate, with access to health professionals falling between the District and Provincial averages and with good representation of education professionals, but a relatively high proportion of child-headed households. Functional literacy (56.62%) is low in Sakhisizwe, as is the qualification rate (7.89%) and the proportion of residents that have gained at least a matric (13.92%). Women’s Economic Participation is limited, where the ratio of women to men is 1.13, yet women constitute 49.24% of the EAP and face higher unemployment (68.88%) and rate of growth in unemployment (6.36%pa) than their male counterparts. In spite of a low ratio of municipal employees to population, Sakhisizwe falls into the top half of all municipalities in the Province on Municipal Capacity considering high managerial experience, the high number of functions performed with capacity (including all priority 1 functions), and the presence of LED, local tourism, trading, regulatory and planning staff.

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Annexure 3: District Profile Eastern Cape Chris Hani ... · Area (ECDMA13). The DMA extends over 133.52 km2 and is home to approximately 87 people While the District has a low urbanisation