1. Industrial restructuring

In the South African context restructuring means the adjustment of the productive sector from a highly protected towards a liberalised outward oriented one, based on increasing price competitiveness (Maasdorp, 1996 and IDC, 1997: 1). From 1985 to 1991/2 average import tariffs went down from 45 per cent to 27.5 per cent, while for manufacturing protection decreased to 20 per cent in 1994 and 11 per cent in 1996 (Holden, 1996: 191; IDC, 1997: 1). The latter percentage is in line with that of other upper middle-income economies.

Non-tariff barrier coverage in South Africa declined in 1985-95 from 22 per cent to 5 per cent. Declining nominal and real effective exchange rates have lent some support to South African exporters. Nevertheless, the bulk of the burden has to be carried by increasing efficiency, which has resulted in a general striving to lower real labour costs and intensity (IDC, 1997:1; SA Institute of Race Relations, 1998). This has led to the jobless growth model of the post apartheid era, which may hardly be considered as sustainable.

Recent international research has shown that the exclusive orientation on international price competitiveness and export performance may not be the correct strategy to solve this problem. First, a consistent causal relationship between increasing exports and growth has not been identified for ten African economies (Chanthunya and Murinde, 1998: 109-29). Second, the reallocation of production factors among sectors seems to be more important for the generation of growth and should be considered a key-factor in the development process (Naqvi, 1996). Improved economic performance and export growth is probably determined by structural change, and not the other way round (Dodaro, 1991; Yaghmaian, 1994). Third, government targeted interventions will be needed for both social and economic motives (Naqvi, 1996; Stiglitz, 1999; Chanthunya et al. op.cit.). Fourth, for the development of structural competitiveness in a broad sense the strengthening of internal market linkages is also necessary (Esser et al., 1995).

From these four broad outcomes one may deduce that the start of a virtuous circle of growth, income generation and job creation needs a two pronged strategy where wealth generation through export markets should be linked to targeted productive development of the internal market. The purpose of this paper is to demonstrate that in industrialised, but unequally developed areas such as LekoaVaal, the present export orientation strategy has not been able to create sufficient employment opportunities for its townships. To develop the local internal market targeted interventions for job creation within these locations are urgently needed.

The arguments will be developed in the next four sections. In section 2 an overview of the local productive structure and the location of the activities in the towns and townships of the area will be presented. Section 3 discusses the nature and historical development of the productive specialisation in LekoaVaal and its consequences for the local labour market will be examined in section 4. The present policies aiming at the creation of productive employment will be assessed in section 5. The possibilities to strengthen productive linkages in the area are discussed in section 6. The last section 7 gives some conclusions and recommendations.

2. The productive structure

In 1998 a total of 8530 registered companies and public institutions were active in the LekoaVaal area, which includes three small towns and eight townships.[3] According to the Finance Department of the LekoaVaal Metropolitan Council about 11 per cent of this number or 966 manufacturing companies generate 60 per cent of the local output. More than 40 per cent is produced by less than 500 basic metal and metal products companies that can be considered as the productive nucleus of LekoaVaal. Other important sectors are more than 3300 trade and 3100 private service businesses, counting for respectively 25 per cent and seven per cent of the local turnover. It is also worthwhile to note that within the trade sector, 550 garages and spare-part dealers have generated more than six per cent of the area's turnover. Twenty-three banks come next with 3.5 per cent of the total output. In the 1990s, little has changed in the relative weights of the different economic sectors, except agriculture (table 1). The share of manufacturing in real terms had declined somewhat in favour of private services and finance. Most sectors have grown until 1996 and stagnated somewhat thereafter. Total business turnover in the post apartheid period increased by about 6 billion rands or 41 per cent in nominal terms, but declined by 7.2 per cent in real terms.

1. Deflated by producers and consumers price indices (deflation of construction by CPI of housing, which may be excessive, so the decline may be less.
2. Incl. energy.
3. National and local government and public bodies.
4. Incl. 22 not classified companies.
5. Prices of 1993.

Based on:
Finance Department LekoaVaal: Data base (1998);
LekoaVaal Metropolitan Council (1997);
South African Reserve Bank (1998: S 135, 137): Prices

In the small agriculture sector, there are 238 mixed farms. Mining includes coal for power production, clay for brick manufacturing, sand pits for construction and dolomite mining as raw material for the chemical industry. Machinery, building materials and chemical industries are also important input manufacturers. The secondary sector is completed by construction and energy production, which achieved some advantages through the social housing programmes of the Reconstruction and Development Programme (RDP) in the region and increasing electricity and water demand from the Johannesburg area.

When formal economic activities in the different urban locations are considered some changes could be observed in the 1990s (table 2). In the towns, the share of Vanderbijlpark decreased to 45 per cent, Meyerton and Vereeniging increased to 11 per cent and 44 per cent respectively of the total turnover in the region. Because of the decline over the last years, Vanderbijlpark lost out in real terms, while the two other towns could still grow at 1993 prices. However, the majority of townships saw their very small share in turnover almost continuously decline. In the 1993-98 period the total participation of the eight townships has almost halved from 0.81 per cent to 0.44 per cent. In the new South Africa there has been a considerable decline in registered productive activities of the townships of LekoaVaal.

1. Absolute amounts do not exactly match those of table 1, because we could not allocate alle companies spatially

Based on:
Finance Dept. LekoaVaal: Data base (1998);
LekoaVaal Metropolitan Council (1997: 2-5).

In 1998 most townships were, even in nominal terms, worse off than in 1993 (the exception is Roshnee, where turnover in the period had increased two per cent above the inflation rate) (see table 2). The strongest declines could be observed in Evaton, Sharpeville and Sebokeng, where there had been the highest concentration of unemployed (see next section). This makes it difficult to expect that formal activities could have been substituted by informal unregistered economic employment. When we look at the type of activity in the townships, we could not be optimistic about this. Primary sector businesses are absent, except one stagnating farm in Sebokeng. Eighteen small to very small manufacturing companies are located in Evaton North and Sebokeng. About 60 very small construction businesses are spread over almost all townships. But about 75 per cent of all registered output in the townships come from 380 small trading businesses. The second biggest sector is personal services where 208 businesses have 15 per cent of the total formal turnover. Finally, practically all government institutions are located outside the township areas. This means that productive employment and income generation is virtually absent in the townships, while linkages with urban industries are also non-existent.

3. Productive specialisation

The foundation of towns in LekoaVaal was very much related to the exploitation of coal mines and the establishment of iron and steel works by the Union Steel Corporation/Iron and Steel Corporation (USCO/ISCOR). At the end of the 19th century, huge coal deposits were discovered near Vereeniging, which became the location of the first African smelting industry for scrap metals. At the present rate of exploitation, there will still be coal reserves for the coming 400 years. New iron and steel plants gave birth to nearby Vanderbijlpark in 1941 and Meyerton later, while the chemical giant Sasol brought Sasolburg into being in the 1950s.

The increase of gold mining and commerce in the related area of Witwatersrand also stimulated the economy of LekoaVaal. The Vaal is part of Gauteng the largest economic region in South Africa, and its share in the provincial product increased steadily to 9.1 per cent in 1980, but has declined since then. Today it is about 8 per cent, which is at the level of the early 1970s. However, the industries of the area have maintained an important role as suppliers of intermediate inputs to the rest of Gauteng.

Past economic development had been accompanied by the creation of corresponding black labour force reservoirs on the urban boundaries. The oldest township Evaton was created in 1904, Sharpeville in 1941, Sebokeng in 1965, Bophelong and Boipatong in the Vanderbijlpark area in 1955, while Zamdela and Refengkotso appeared near Sasolburg in the 1970s. Extensive road systems linked the central economic areas of Vereeniging, Vanderbijlpark and Meyerton with the sources of labour and other inputs, as well as with the markets near Johannesburg.

Forced and voluntary migrations and increasing net birth rates transformed the townships into urban centres where a majority of more than 80 per cent of the almost 900,000 population of the area is concentrated.[4]

From this evolution it can be expected that the current strength of the local economy still lies in its minerals-energy and associated manufacturing and finance complex (MEC). At the national level this MEC had been the basis of industrial development (Fine et al., 1996). It includes a core set of industrial sectors with strong linkages between each other and weaker ones with the rest of the economy (Fine et al., 1996: 91). Among others the iron, steel and non-ferrous metal basic industries, non-metallic mineral products, basic chemical and chemical products belong to this industrial core. Increasing price competitiveness and outward orientation of these core sectors did not create sufficient linkages with other sectors of the economy and could therefore not generate sustainable growth. It is convenient to look in more detail at the LekoaVaal variant of this MEC and its local consequences.

Ten giant enterprises dominate the economy of LekoaVaal (see table 3). Today they generate more than 40 per cent of the turnover and more than 30 per cent of the total wage sum of the area. This indicates a lower labour intensity in comparison with smaller companies. The base metal giant Iscor/Yskor located in Vanderbijlpark and Vereeniging counts for a quarter of the total turnover in the area. The second biggest enterprise, Samancor base metal industry near Meyerton, is much smaller with 4.5 per cent of the total. Seven out of the ten are manufacturing (including energy) companies. The others are ABSA Bank and the two trading companies Vantim and Shoprite Checkers. The local tax generating capacity of this top ten is also high. In fact, the shares of the giants could be bigger since we have not counted the smaller subsidiaries and daughter companies of these.

The two-digit market share of nine companies varies between 40 and 100 per cent, indicating their important market power vis-à-vis their local competitors. Exception is the metal products company, Consolidated Wire at the ninth place, which controls 'only' 12 per cent of its 2 digit local market. Using the classification from the Ministry of Economic Affairs, we analyse the importance of big companies in the different sectors and sub-sectors of the economy of LekoaVaal.[5]

Based on: Finance Department LekoaVaal: Data base (1998)

Of about 8000 enterprises of which information was available, 272 representing 3.4 per cent of these are big ones.[6] All of the big companies are located in the towns: Vereeniging 136, Vanderbijlpark 103 and Meyerton 33. In turnover they have on average a weight of 75.8 per cent varying from 61.6 per cent in Vereeniging, 87.4 per cent in Vanderbijlpark to 83.5 per cent in Meyerton. As in the case of the giants the wage share of the big companies is lower, but still they generate 60 per cent of the total wage sum in LekoaVaal. Apart from the earlier mentioned base metal and metal products subsectors, these big firms control other subsectors in manufacturing, like chemical products, machine industry, energy and bricks, etc. In trade they appear mainly in agricultural and other implements, garages/spare-parts and wholesale trade. Also the concentration in the banking sector is considerable.

The region is clearly specialised in the core sectors of the MEC: iron and steel and non-ferrous basic metals, energy, a strong financial sector and specific for the area, the metal products industry. When the Vaal Triangle economic region is considered one should add also the basic chemical industry of Sasolburg. Most of the industries are important input providers to the rest of the country.

4. The generation of employment and unemployment

In table 4 sectoral formal employment in the LekoaVaal area in 1998 is compared with 1993. The negative trends are now much stronger than in the case of real output presented in table 1 (except for the small primary sectors). It appears that more than 46,000 jobs had been lost or 28 per cent of the total 1993 formal employment within the area. The decrease had been present in practically all economic sectors. In absolute numbers manufacturing and trade lost together almost 33,000 jobs which is 70 per cent of the total loss. Relatively the energy sector was also one of the big job losers, although small in absolute terms.[7]

1. Incl. government, private services and others

Based on:
Vaalmet, Vol. 1 (1994), p. 29 adjusted with information of Table B2;
Slabbert (1998), p. 20 adjusted with info of p. 6

Manufacturing and trade have kept their relative role as major job providers in LekoaVaal. In 1993-98 their joint share decreased from 60 per cent to 57 per cent of total employment.

Comparing the changes in employment with that of business turnover in real terms of the period, one may observe that there had been, in terms of percentage, four times stronger employment than real output decline in the formal sector (table 1). Output elasticity in LekoaVaal seems to be much higher than the average of 0.7 at the national level (ref. Mbeki report), which could indicate a much stronger substitution rate of labour at the local level. The only sectoral increases of output in real terms could be found in Finance and Services. But the declines in employment figures that also occurred in these two sectors indicate the presence of labour substitution in both sectors. In table 5 we compare the change in sectoral labour intensity in LekoaVaal by showing the average numbers of employed per sector.

1. Employment per firm. The 1993 figures include the Sasolburg area.

Based on: Table 4 of this paper; Vaalmet, Vol. 1 (1994): 29.

Average employment intensity by company as a whole has decreased with 50 per cent in LekoaVaal from 28.1 persons in 1993 to 14.1 persons in 1998. This is the result of structural changes where on the one hand small enterprise sectors like trade and (private) services increased more or decreased less than the others. As shown before, township businesses have a below average employment generating capacity (see discussion around table 2). On the other hand, sectors with bigger companies in terms of labour in 1993 as mining, energy and manufacturing, became much less labour intensive on average, which is related to the industrial restructuring strategy (table 5). However, manufacturing and energy together still have maintained their high share in both regional turnover and wages of 58 per cent and 46 per cent respectively. It seems that both, temporal and structural causes that hamper the creation of productive employment opportunities in the region must be addressed.

Table 6 gives data on the geographic distribution of the supply and demand of labour that could be compared with the location of the formal economic activities and job opportunities in 1998. Because of data problems informal sector workers and those working outside the region could not be separated. This gives an idea of the relative concentration of jobs in the three towns and of the (insufficient) numbers of people from the townships employed in towns and outside the Vaal.[8] However, the disequilibrium becomes enormous when compared with the distribution of the formal economic activities in the area. The generation of turnover and wages is for 99 per cent concentrated in the three towns. From about 115,000 employed in the five townships a minimum of 28,000 (24%) are working in the informal sector, 17,000 (15%) at the most are working outside LekoaVaal and some 70,000 or slightly more than a quarter of EAP in the townships have jobs in the formal sector of this region. Supposing that formal job losses since 1993 had been at the same rate as average in the area, a maximum of only 6,600 or 2.6 per cent of EAP will be employed in the same townships and the remaining 63,400 in the three towns. In 1998 formal job opportunities were literally absent in the townships where the great majority of the (black) population lives.

1. Total number of businesses in LekoaVaal in 1998 is 8,530. For some companies there was no specification of the precise location.
2. From this total a minimum of 15% is employed outside LekoaVaal and 24% is in the informal sector.

Based on:
Slabbert (1998): see Table 1 for method;
Finance Department LekoaVaal: Database (1998) Turnover and wages

It could also be observed that the number of jobs in the five townships have a share of only 3.7 per cent of the formal employment in the area, while their collective formal wage share is not more than 0.5 per cent. This means that wage rates are significantly lower than in the towns. Productivity or turnover per worker is also much lower than in the towns, while the number of workers per formal establishment is below the average in the area. In 1998 there seems to be significant labour market segmentation between towns and townships in LekoaVaal (Pelupessy and Slabbert, 1999). We may have somewhat underestimated the informal sector, but the growth of this sector and corresponding jobs are probably related to activities in the formal sector. The creation of formal businesses and other economic activities within the townships of LekoaVaal should therefore have the utmost priority of both the public and private sector.

The difference between the economically active population[9] and those employed (including in the informal sector and outside the region) gives the number of unemployed that is about 145,000 persons or a total unemployment rate of 45 per cent of EAP. From table 6 it can be deduced that unemployment is highly concentrated in the townships, about 139,500 or 96 per cent of the unemployed. Most of them can be found in the townships Sebokeng 76,100 (56% of its EAP), Evaton 41,300 (53% EAP) and Sharpville 14,700 (57% EAP). The high unemployment rates and small size of the informal sector implies that the latter had been no alternative for formal employment. One cannot deny that the townships of LekoaVaal suffer from a great lack of employment opportunities, which causes a serious mismatch between supply and demand of labour.

5. Policies and opportunities for change

What are the possibilities to improve the employment situation significantly and to reverse the trend of job losses in the region? A number of policies have been designed to stimulate the creation of new jobs at macroeconomic, local and sectoral levels. The main national policies may be found in the GEAR programme, the more recent 1998 Mbeki Report and the Department of Labour's Report about creating jobs. We will only treat these policies briefly because they mostly do not target specific regional development, let alone that of townships.

The government's GEAR (Growth, Employment and Redistribution) policy emphasizes the need to increase employment within a stable macroeconomic framework, which implies the promotion of mainstream restructuring strategies described in section one. The Mbeki Report gives more attention to labour market segmentation and the problems for job creation and argues for more targeted sectoral policies without becoming concrete. The informal sector is correctly identified with the working poor, while self-employed may be even worse off. Location is identified as one of the poverty characteristics, besides race, gender, and age. The Department of Labour, some months later presented a detailed employment strategy framework in which the results of research on the potentials for sectoral employment creation were included. Among the interesting instruments for our purpose, one could mention the special employment programmes (among others, clean cities campaigns, municipal infrastructure, and welfare programmes), assistance to firms confronting tariff decreases and support to key sensitive subsectors in manufacturing and to the construction sector. There were also different programmes to stimulate agglomerations, clusters, exports, service industries, cost reducing investments and promotion of linkages between larger firms and small, medium and micro-enterprises (SMMEs) by Local Business Service Centres, entrepreneurial/vocational training institutions and access to finance. For better employability a broad range of measures to improve labour market efficiency to support vulnerable groups and to increase labour skills and education are proposed. The Umsobomvu Fund is established to finance key programmes on job creation, training and youth employment.

This brief review of national employment creation policies makes clear that only a small number of measures have the capacity to target directly unemployment in the townships. Most instruments are not specific enough. A considerable number of measures aim at win-win situations, combining for instance stimulation of efficiency with job creation, while daily practice often gives trade-offs and sometimes inconsistencies between policies (Pelupessy, 1997). The strong segmentation of the labour market and the entry-barriers of formal employment for township dwellers are insufficiently recognized.

At the local level there appear to be additional investment incentives to promote economic development and employment. These could range from infrastructural upgrading of local areas to the provision of economic support, to large and small businesses. However, economic space for local government is more restricted because of increased service responsibilities, administrative costs and salary pressures, while operating funds and experienced personnel have been reduced (White Paper, 1998: 109-27). A recent review article on local economic development concluded that 'LED [local economic development] policy is developing effectively in anticipation of the reality' (Nel, 1997).

For LekoaVaal possible instruments are the funds of the Gauteng provincial programmes for urban regeneration, Vusani Amadolobha and Gauruds, which could finance a wide range of non-productive and productive projects (Vusani Amadolobha, 1997). Also local councils offer a small number of incentives. The LekoaVaal Metropolitan Council has a budget to foster economic development on a project basis. Vereeniging Kopanong gives, on an ad-hoc basis, reduced electricity rates and land prices, as well as the postponement of rates and taxes for a certain period.[10] The Western Vaal Metropolitan Local Council provides reduction of different percentages on building plan fees, rates and taxes, and water and sanitation fees. The interesting point of this scheme (valid 1/10/98 till 30/9/2002) is that it is to be granted to investors in townships for industrial purposes.[11] Condition is a minimum extension of 1000 square metres of the business area. However, straightforward job creation capacity might be a more appropriate criterion.

There are actually three concrete local projects related to revitalisation of townships that are worth mentioning; two directed by local government and one by the private sector. The first, Vusani Amadolobha project, is executed in zone 14 of Sebokeng, and tries to regenerate the area around the municipal theatre. The second aims to develop the Sharpeville Memorial Site, which is not yet in the implementation stage. The third and most developed (so far) project involves the creation of the Boipatong Development Company, an initiative led by the big enterprise Cape Gate, employer of a considerable number of workers from the township. Stakeholder representatives from the township community, labour unions, local government and business are participating. A small trade centre with small service and commerce businesses has been established. But the sustainability of the centre is not yet guaranteed because businesses are very small, while customers, financial resources, and economic linkages to nearby industries are lacking. It can be concluded that even at the local level one can not identify job creation in townships as a first priority target. Administrative goals seem to be more important for municipalities. Since most formal small businesses are located outside the townships under white ownership, non-targeted SMMEs support programmes may not necessarily develop the townships. Despite the disappearance of formal red-lining policies of private banking, it will still be difficult, if not impossible, to get finance to start or extend productive businesses in LekoaVaal townships. Increasing crime rates may even cause the closure of small businesses in the locations (Holden, 1996).

6. Towards a townships oriented development strategy

From the preceding sections it will be evident that for township citizens there are insufficient employment opportunities within and outside the townships, which have a high concentration of unemployed and are not productively integrated into the local economic system. Deeply rooted structural imbalances prevent the elimination of the segmentation between towns and townships in the area. Labour cost-saving restructuring of local core industries leads to retrenchment of personnel. These people will 'disappear in the labour market' as one Vaal big entrepreneur stated, but most probably will also appear in the unemployment figures of the townships. Following Schoeman et al. (1999) one may say that embedded structural constraints are still stronger than the factors leading to both demands for labour in the formal sector and those to build-up the informal one. Among the constraints one should consider are, on the one hand, factors related to the quality of labour supply in the townships such as lack of education and health care, one-parent families, and cultural problems. On the other hand there are factors related to the demand of township labour, such as low labour intensity, inadequate infrastructure (including transport and public safety) and geographic distance (Schoeman et al., 1999 apply a similar reasoning although not only for townships).

This means that we may propose that local policies should aim explicitly to integrate the locations into the formal productive system. The Hirschman linkage analysis may give indications of existing and potential development opportunities and constraints. We will discuss four kinds of linkages and their significance for local development: the backward, forward, fiscal and consumption linkages. The usual input-output backward and forward linkages, as well as the employment and income multipliers of each of the different sectors of the Vaal economy give an indication of the key sectors to be developed for sustainable employment creation.

Manufacturing has strong backward linkages, mainly within the same sector, with mining and agriculture. About 85 per cent of the inputs come from the Vaal region. An increase in manufacturing production will therefore lead to growth in employment opportunities, not only in the manufacturing sector, but also in the local sectors supplying inputs to manufacturing. An increase of R1 million in final demand of the manufacturing sector could create 43 new job opportunities, which is much more than 26 at the national level. Similar linkage strength can be observed in the sectors of energy, trade and transport, with employment multipliers of twice the national values or more.[12] It is to be expected that, in general, input-output relations are denser at the local level. However, the magnitude of these differences may indicate the more industrialised nature of LekoaVaal with trade and transport as necessary supporting sectors.

The local forward linkages of the manufacturing sector are weak, because most of the inputs produced are exported to places outside the region. The manufacturing sector of the Vaal contributes 17.4 per cent of the industrial inputs in Gauteng province. In this regard, there is much scope for value-added production and employment possibilities in LekoaVaal. Strong forward linkages could be developed with new industries in the Vaal, if for example the manufacturing of more final steel, metal and chemical based products in the Vaal could be stimulated. The importance of the manufacturing sector in employment creation and income generation will also be greater when the possibility of 'import' substitution is considered.

Specific case studies could indicate which linkages might be relevant for the townships. Given the actual state of factors of production in townships, it may not be very realistic to assume the creation of many input industries in these areas. Forward linkages may be more promising as wage-goods producing industries could be created based on local industrial inputs from the towns. With this in mind, the manufacturing sector can be regarded as a key-sector for employment and income generation in the townships. Taking into account that smaller industries have the potential to create relatively more employment opportunities than large ones, the development of SMMEs should be stimulated. A type of co-operative organisation that can help the small manufacturer in increasing access to inputs on the one hand, and to markets for his final products on the other hand, will be useful. Also training and technical assistance to SMMEs will enhance their efficiency in the manufacturing sector of the townships in LekoaVaal.

The construction industry has strong backward linkages with manufacturing, other construction activities, finance and professional services. Its local forward linkages for other non-tradables such as energy, trade, finance and other services are also strong. This sector has a high employment multiplier, indicating that an increase of R1 million in final demand could lead to the creation of about 48 new job opportunities in the local economy. The use of local contractors should increase employment creation as well as household income in the townships of LekoaVaal. A local contractor, in comparison with a non-local contractor, may generate about R3.34 additional household income for each Rand paid in wages. This is the only input-producing sector that may depend on demand generated in the townships, because of the RDP housing activities.

The trade sector has strong backward and forward linkages to manufacturing, other trade activities, finance, and professional services in LekoaVaal. For this reason the trade sector has the highest employment multiplier in LekoaVaal. But it has to be seen if the trade sector could be of great importance to the townships. As indicated in the discussion of table 2, much of the trade turnover occurs in the towns and very little in the townships because trade and transport are highly complementary to manufacturing activities that are still mostly concentrated in the towns.

The trade sector could be a key-sector for employment and income generation in the townships, once there are productive activities here; otherwise trade may raise inefficiencies and transaction costs. SMMEs have the potential to generate more employment opportunities than larger retail enterprises. Existing SMMEs in the trade sector of the townships should be assisted to supply products to households in the townships in a manner that would attract households to buy 'locally'.[13] Although the Vaal contributes 42.3 per cent of the GGP (Gross Geographic Product) contribution of water and electricity in the Gauteng province, weak backward linkages exist to other sectors of the local economy. Forward linkages of these sectors may give an important push to the creation of new businesses in the townships. Finally, we could mention the small agriculture sector, which could be developed into urban agriculture in the townships when certain conditions are met (disposability of water and agronomic training for dwellers).

In a local version of Hirschman's fiscal linkages we refer to the effects of taxes of the relative capital intensive companies of LekoaVaal, which may be spent to stimulate private businesses and government investments in townships. The latter could refer to infrastructure or the removal of decentralised government offices from the towns into the townships. This could create a crowding-in effect of small private businesses, direct employment and income creation, and a decrease in transaction costs of public services, since most of its clients live in the townships.

The consumption linkages refer to the stimulus of the production of consumer goods by the demand from newly earned (wage) income. This may also become important for townships once newly established businesses will develop there or income enters from outside jobs, provided income leakages to the towns will be reduced by adequate retail trade systems. The present state of shebeens and spazas should be improved.

7. Concluding remarks

Industrial restructuring in South Africa has two main dimensions. The first is the historical transformation of the mineral energy complex (MEC) into a more diversified modern secondary manufacturing industry. As demonstrated in the excellent work of Fine and Rustomjee (1996), this process includes also the development of a South African (English and Afrikaner) capitalist class, which in our opinion also includes an emerging black counterpart. It was argued that this development is based on the privatisation of large public enterprises, characterised by high capital-intensity, market concentration, many forward linkages and the production of non-tradables or import substitutes rather than exports (Fine et al., 1996: 4).

The second dimension of restructuring is related to actual liberalisation, elimination of protective barriers and export orientation. International research has proved this strategy to be insufficient to generate sustainable development. Especially when the basic instrument utilised to develop both dimensions has been the reduction of labour costs. Jobless growth in the 1990s is one of the negative results at the national level.

The local productive structure in LekoaVaal resembled the general MEC system, albeit showing a higher developed metal products sector producing inputs for industries outside the region. Related trade and services activities also showed some development. However, labour market segmentation detrimental to the local townships did everything but disappear. As a result more than half of the economical active (or almost 140,000 persons) are unemployed in these locations. Due to the characteristics of the supply of labour and demand in and outside the townships, unemployment in these areas has been rising in the post apartheid period. Executed and planned retrenchments of personnel of big core MEC industries as ISCOR had devastating multiplier effects. At the same time the already scarce job opportunities within the townships have been declining because of problems with input provision, infrastructure and public safety. Existing national and local policies are too general and insufficiently targeted to reverse these trends. Sometimes they are contradictory and economically not viable.

Therefore we have come to the conclusion that the creation of formal productive employment in the townships should have utmost priority. Interventions should strengthen the linkages with the big wealth creating export industries outside the townships. This integration could be between informal and formal sectors as proposed by Schoeman et al. (1999), but should aim at the creation of formal private and public activities in townships in the first place.

In this paper we have indicated the possibilities and constraints of backward, forward, fiscal and consumption linkages for this kind of local development. Emphasis has not been laid on the technical analysis, but more on the institutional and other conditions creating aspects to transform opportunities into reality.

[1]. With research assistance of Elisabeth van Tilburg

[2]. Linkages in the Hirschmanian sense: economic activity inducement mechanisms resulting from interactions between technology, ideology and institutions

[3]. See table 2 for a complete list of these. Sometimes the analysis is extended to the Vaal Triangle which includes also the Sasolburg municipality and corresponding townships, which form part of the Free State

[4]. In the 1990s population growth in LekoaVaal has been generally above the national growth rates.

[5]. Big companies have an annual turnover > R10 mln. in manufacturing, energy and services; > R15 mln in trade, > R7.5 mln in mining; > R 5 mln in Construction and > R 2 mln in agriculture. The giant companies are included in this category.

[6]. Exactly the number included is 7967 or 93% of the total 8530 existing companies in the area.

[7]. The basic information used included the employment figures of Sasolburg, which was corrected by its sectoral participation in GGP. The observed trend does not change by considering the original figures including Sasolburg. An additional 6,500 formal jobs were lost in and around this town, of which half could be atributed to the services sector (incl. government) and 1/6 to the mining sector.

[8]. Informal sector is counted as employment.

[9]. Those potentially active less who are unable or not willing to work. The EAP in the region is underestimated here. Because of data problems 3 smaller townships were not considered

[10]. Written Communication Director Economic Development and Marketing, 5/11/98.

[11]. Recommendations Western Vaal Metropolitan Local Council of 6/11/98.

[12]. Differences are far less for the primary sectors, construction, services and for finance the national multiplier is higher than the local one.

[13]. The major part of groceries and other consumption activities are spent in the towns, outside the townships (see Slabbert, 1998: 23).

Chanthunya, C.L., V. Murinde. Trade regime and economic growth. Ashgate. Aldershot UK, 1998.

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Paper presented at the African Studies Association of Australasia & the Pacific 22nd Annual & International Conference (Perth, 1999) New African Perspectives: Africa, Australasia, & the Wider World at the end of the twentieth century

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