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3.

ECONOMIC ANALYSIS

The vast majority of people from the Zululand District, including those from Ulundi approach development from a base of weakness. This is clear from the socio-economic analysis. Poverty, poor health, low educational levels and high levels of unemployment contribute to a situation of disempowerment. However the overwhelming majority of the people have a unified and strong cultural and moral base as proud Zulu people (Zululand Regional Plan, 1998). The following quotation is particularly applicable to Zululand and Ulundi: All over the world towns grow and die as a result of changing nature of economic activity, investment trends, and consequent population migration patterns. In South Africa however, the current strategy is not to allow this natural process to take place, but rather to massively increase the administrative responsibility of local authorities already overloaded and strained by significant lack of capacity, in order to attempt to bring economic development to the more movement-constrained and economically-dependent peri-urban and rural population. These communities are by their nature unable to contribute to the revenue requirements of such increased delivery responsibility, and are unable to stimulate any demand for fixed direct investment into the area. The solution can only lie therefore in reversing the current trends of decline in the primary economic sectors of these areas in order to grow the economic pie. (Vryheid Economic Regeneration Study, Riel Associates, 2001). This statement is applicable to Ulundi, as the administrative responsibility of the Municipality has increased. It now includes large underdeveloped communities with no formal income who demand the provision of services but are, at the same time, unable to contribute to the revenue of the Municipality. Furthermore these communities do not have mobility and require the provision of services close to were they live. This puts strain on the Municipalitys ability to deliver services and causes the development of a spatially dispersed urban area. In the following section the economic sector of Ulundi Local Municipality is investigated to determine the current realities and identify what challenges the IDP will be faced with. Most of the information for this section of the report was obtained from the Ulundi Local Economic Development Plan, 2000. 3.1 SPATIAL ECONOMY

Although the settlement pattern follows the main routes R66 and P700, the population of the entire Municipal area and some adjacent rural areas depend on Ulundi for most basic services. A large number of people reside in Melmoth and commute into Ulundi town on a daily basis due to the limited residential opportunities and accommodation. Other notable commuter movements are from Vryheid and the daily arrival and departure of government officials and business people either by air or private vehicle. They earn their money within the Municipal area but spend it outside the area, indicating a possible leak in the economy. A specific local economy has established itself in the deep rural areas. Due to the lack of transport and the lack of road infrastructure a typical bakkie market has been established. Goods are bought in the main centres such as Ulundi and transported by smaller trucks (bakkies) to the rural areas. These goods are then sold in tuck shops. The tuck shop facility is a very important outlet to the rural community and the only access to consumer goods. Only small purchases are made from tuck shops to cater for daily or weekly needs, as transport and finances are not available to purchase items on a monthly basis. Most households do not have access to electricity and therefore also cannot store fresh produce for more than a couple of days. People in the rural areas therefore tend to live from day to
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day. Subsistence farming is also very prominent in the rural areas. The cultivation of the land provides for the rural communitys daily needs, such as vegetables, dairy products and meat. The main concentrations of population, economic development, infrastructure and income are situated in Ulundi town centre, making it an important centre in the provincial urban hierarchy, and one of the two major centres in Zululand (the other being Vryheid). The Zululand Regional Plan identified three development corridors, namely: The primary Coal Line corridor that runs from Richards Bay and Empangeni along the R34 through Vryheid to Piet Retief and on into the coal mining areas of Mpumalanga. The railway line from Gauteng and Mpumalanga that passes through Ulundi en route to Richards Bay. Secondary development corridors that run from Vryheid through Louwsburg and on to the N2; and along the R66 from Pongola through Nongoma and Ulundi to the R34. Ulundi is the located on the latter some 19 km from the intersection of R66 and R34 (Local Economic Development Plan, 2000). THE SIZE OF THE ECONOMY

3.2

The KwaZulu-Natal Provincial Government does not view Zululand as a major economic growth area, due to a scarcity of natural resources, decline in the mining sector, relatively poor soils, low levels of skills and the distance from markets. However the potential for development of the tourism sector was identified as a focus area. The following table indicates the Gross Geographic Product (GGP) figures for each of the former magisterial districts that now fall within the Ulundi Municipal area (more recent information is not available).
Gross Geographic Product (GGP) 1998 Sector R (Million) Agriculture, Forestry, Fishing 7,8 Mining, quarrying 0,6 Manufacturing 1,2 Electricity, water 0 Construction 1,6 Trade 0,9 Transport, communication 1,8 Finance, real estate 1,5 Government and community 22,0 services Other 1,1 Total 38,5
(Local Economic Development Plan, 2000)

% 20,3 1,6 3,1 0 4,2 2,3 4,7 3,9 57,0 2,9 100

The table illustrates the weakness of the economy due to the lacks of diversification. Only the government/community services sector and agriculture sector contribute significantly to the GGP. This leaves the Municipal area vulnerable to external economic and political influences such e.g. commodity prices, political crisis etc.) Ulundi is heavily reliant on the government services currently supported by government policy. Ulundis locality is favourable to serve as a service centre, due to vast distances from Metropolitan areas such as Durban and Pietermaritzburg. A change in government policy could however be detrimental to Ulundi.

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3.3 3.3.1

KEY ECONOMIC ACTIVITIES AND SECTORAL TRENDS GOVERNMENT

This sector contributes 57% to the GGP. Ulundi plays a central role in the public service sector, which employs 5 130 people. Certain Departments were however relocated to Pietermaritzburg, resulting in a move of employees out of Ulundi. A negative decision with regards to the Legislature would be detrimental to Ulundi's economy and efforts should be made to diversify Ulundis economic base. 3.3.2 AGRICULTURE

Agriculture contributes 20% to the GGP, which makes it the second largest sector in the economy. Forestry, sugar cane, sub-tropical fruit, livestock and farming are the dominant agricultural activities in the area (Ulundi Local Economic Development Plan, 2000). Most commercial farming occurs within the Babanango area to the west of the Babanango town. This area is considered to be an excellent farming area. Very little commercial farming occurs in the tribal authority areas and the usual technical weaknesses of subsistence farming are evident. Promotion of agriculture creates downstream investment opportunities in the manufacturing sector. 3.3.3 TOURISM

No figures are available for the tourism sector. This sector makes a small contribution to the GGP. This sector is however as underdeveloped in light of extent to which cultural resources are not capitalised on. A number of tourism activities are located in and around Ulundi. These include game reserves, historical/cultural sites, cultural events and guest lodges. A tourism authority is positioned at Ulundi and is co-ordinated by the Zululand District Municipality. The intention of the authority is to establish a common marketable product for the area. The main focus to date is the cultural significance of the area, with a homogeneous population (Zulu culture), which consists of a number of monuments and historic trails. Game reserves in the area include: Hluhluwe-Umfolozi Park, Ophathe Game Reserve, Emakhosini (Valley of the Zulu Kings), The planned Emakhosini-Ophathe Conservancy, which will include a number of historical sites, and ThakaZulu Game Reserve.

Historical/cultural sites include: Nodwengu (King Mpandes residence and grave), Ulundi Battlefield, Ondini KwaZulu Cultural Museum, and Dingaan Stat/ Piet Retiefs grave etc.

Currently access to the Umfolozi Park via the P700 is not ideal and is mainly suited for 4X4 vehicles, leading to a number of losses of opportunities for the Municipality. The upgrading of the P700 is on the five-year budget of the Provincial Department of Transport but is considered to be a very high priority for Ulundi and Zululand, justifying a higher ranking at provincial level. The hotels and guest lodges in the area offer quality accommodation for
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upper income tourists. However no bed and breakfast facilities have been established in the town of Ulundi. According to the Local Economic Development Plan, the fastest growing tourism sub-sector worldwide is eco- and cultural tourism. According to the KwaZulu-Natal Tourism Authority, approximately 25% of all foreign tourists who visit the province visit a Zulu cultural village. The concentration of historical sites in and around Ulundi as well as its central location in relation to pristine game reserves provides the opportunities for Ulundi to become the tourist gateway to the Zululand region. 3.3.4 TRADE

Trade contributes only 2% to the GGP and the town of Ulundi acts as a regional service centre to the surrounding rural hinterland. Large wholesale stores dominate the commercial and retail sector, which distribute goods to villages in the hinterland through the bakkie market. The trade sector has potential for further growth but this will depend upon greater levels of diversification. The following table illustrates the economic activities by sector in Ulundi town (no information in this regard is available for the rest of the municipal area).
Sector Mining & quarrying Manufacturing Construction Commercial ECONOMIC ACTIVITY BY SECTOR Category Quarry depot Engineering Building General retail Food Furniture Wholesale Motor vehicle Personal Professional Finance & insurance No 1 4 14 17 8 6 4 14 24 17 15 3 5 132

Services

Transport Utility services Total

(Local Economic Development Plan, 2000)

The Plan on the overleaf indicates the location of local shops and tuck-shops throughout the Municipal area. 3.3.5 INFORMAL SECTOR AND SMMEs

No figures are available on the contribution of this sector to the GGP, but on average it is estimated that this sector adds another 12% to the formal economy (Ulundi Local Development Plan, 2000). Activities occur throughout the Municipal area but are concentrated within the Central Business District (CBD) and modal transfer points. A large informal market component is present in the CBD. Certain facilities have been provided for adjacent to the taxi rank. This leaves the Municipality with the option to manage the informal sector, whilst providing increased opportunities for trade. More areas of this nature are needed where informal businesses are not in direct competition with the formal business area. 3.3.6 CONSTRUCTION
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The construction sector contributes 4% to the GGP and has grown only minimally. It therefore remains underdeveloped. Growth in this sector will depend on providing emerging contractors with the necessary technical and managerial skills and assisting them to gain access to bridging finance. Land tenure options and global influences have limited private investment in the past. Public investment is visible but uncoordinated. 3.3.7 BUSINESS AND FINANCE

Business and finance contribute less than 4% to the GGP. Access to these services, located in the CBD of Ulundi, is one of the main reasons for people visiting the CBD. Leakages to other areas for business services indicate that there are potential gaps in this market that can be taken advantage of. The hierarchy of economic linkages is non-existent within the Ulundi urban complex as well as in the remainder of the Municipality. This implies that a tertiary economy is present that directly links with the survival economy. The gaps between the survival economy and the tertiary economy are very large with no secondary sector (manufacturing). There are very little forward and backward linkages between the primary sector and the secondary sector to facilitate movement of goods produced in the area. 3.3.8 TRANSPORT

The transport sector is the third largest contributor to Gross Geographic Product (5%). Public transport is dominated by mini-bus taxi operations. There are also a number of bus companies operating in the area, but these remain a small part of the sector. The airport at Ulundi also contributes to this sector. Development opportunities in this sector include transportation of agricultural products, passengers and goods to and from the airport and tours. An airport study was undertaken to determine the future of the Mangosuthu Airport and the potential opportunities for the economy. The airport service was found to be under-utilised and uncoordinated, with major airlines serving the metropolitan areas. 3.3.9 MANUFACTURING

The manufacturing sector in Ulundi is poorly developed, contributing only 3% to GGP. It is dominated by small-scale activities such as metal work and furniture production. Opportunities to expand this sector could be linked to the agricultural activities, creating stronger forward and backward linkages within the economy 3.4 RESOURCES AND ASSETS

The Ulundi Local Development Plan identified the following strengths in the economy of Ulundi. This provides various attributes that can be capitalised on to stimulate the economy. Ulundi town has developed into a well-established town with physical infrastructure and high level of administrative activities in the urban centre. Ulundi has a well-equipped airport, which is under-utilised with considerable potential. The town of Ulundi is regarded as the heart of the Zulu culture, which presents a comparative advantage in terms of tourism potential. Ulundis proximity to the Hluhluwe-Umfolozi Park and the planned developments of Ophathe and Emakhosini constitutes an opportunity.
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The KwaZulu-Natal Legislative Assembly and seat of the Zululand Regional Council, attracts people on a daily basis and gives status to the town. Ulundi is located 19 km from the main corridor between Richards Bay and Gauteng. The intersection of the R66 and R34 is a strategic location, which should be exploited. The main railway line passes through Ulundi and is under-utilised. Local leadership in Ulundi is strong.

The weaknesses in the local economy that are discussed in the LED, include: A perceived lack of commitment to the development of Ulundi, because of the uncertainty about its future as the provincial capital. Leakages from the local economy and missed opportunities, including the loss of provincial government jobs to Pietermaritzburg, limited residential opportunities, lack of diversified shopping facilities, commuting of government officials to and from Ulundi, cultural events that only attract local participants, the lack of recreational facilities and the lack of corporate financing institutions. Lack of higher order and recreational facilities such as a multi-lingual school, technical college, technicon, medical centre, swimming pool, gym, restaurant and business service centres. Negative perceptions about Ulundi it is seen as an African town in a rural setting and not well developed. Lack of co-ordination between local role players.

There is limited economic information about the remainder of the Municipal area but the following points are noted: The rural areas have an established network for distribution of goods referred to as the local bakkie market. The population has access to fertile land through the Tribal land tenure practices to support substance farming. Concentrations of social infrastructure in densely populated areas provide opportunity for market places to be established, particularly in Babanango and Ceza. On the weaker side is the lack of road infrastructure and maintenance of existing roads as a big economic constraint. There is no formal structure in trade areas, which can support public and private investment. SUMMARY OF ECONOMIC ISSUES

3.5

The sub-region around Ulundi has developed as a peripheral economy and is largely dependent on Ulundi. Ulundi is the centre of economic activity, being the only urban area of the Municipality. The population of Ulundi is highly dependent on public transport and is subject to high levels of commuting. A significantly large number of government officials commute to and from Ulundi, due to the lack in good housing facilities. Some of these commuters utilise the airport facilities on a daily basis. There is a lack in raw materials and resources. The lack in infrastructure in the rural areas is a big constraint.
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The market is limited to the local community, with few opportunities in the national and international markets. Many people conduct their shopping in Vryheid and areas outside of Zululand. The area has a large labour force, but with low levels of education and skills. The competitive advantage of the area is limited to the large labour force and tourist related natural resources. Government and commercial services contribute to more that half (57%) of the GGP (57%). This is indicative of the lack in diversity of the economy and leaves the economy vulnerable to external shock. Agriculture contributes the second largest proportion to the GGP (20,3%). It is mostly extensive in nature with timber and livestock as the main products. All other sectors of the economy are underdeveloped. Ulundi is located on the Coal Line which is the main coal rail link between Mpumalanga and Richards Bay. This provides for some economic opportunities for the transport sector. The main provincial corridor, the R34, passes through the area. The urban area of Ulundi is however located on a secondary corridor, the R66. The intersection of the R66 and R34 presents some opportunities for the development of a transportation node and tourist facilities. Tourism presents the biggest opportunity for development, as the Municipality is adjacent to the Hluhluwe-Umfolozi Park and many historic and cultural sites. The upgrading of the P700 route to the Hluhluwe-Umfolozi Park will provide an injection to the tourism sector. Currently the tourism sector remains undeveloped.

IDP CHALLENGE: The Ulundi area is clearly endowed with various resources, which, to date have not yet been fully developed. The IDP challenge is to draw on those resources and through creative and visionary means implement measures that will result in the economic regeneration and upliftment of the area. The Ulundi Local Municipality need to create an enabling environment that will stimulate investment interest and maintain the momentum this may create. In terms of their own competencies there is a need to address skills training, adult education and increased access to job opportunities. This in turn means implementing the necessary educational programmes as well as encouraging local economic activity. From a sectoral point of view, the extension of the primary sector and the development of a secondary sector in conjunction with this needs to be emphasised. Specific attention is also required to the encouragement of the tourism sector by embracing the potential opportunities of the many game parks and cultural sites within the area. The role of tourism and its growing contribution to the local economy should be explored and developed.

Vuka Town and Regional Planners Inc Report: TRP_446_Rpt168 April 2002

Integrated Development Plan Situational Analysis