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Joburg: edging the Top Ten
24 November 2008

Joburg is getting a fair amount of recognition internationally, particularly in its placing near the top of the table of the first MasterCard Worldwide Centres of Commerce™: Emerging Markets Index.

Prominent city man Neil FraserWHILE I was in Rotterdam a couple of weeks back, the former mayor of Washington DC, Anthony Williams, visited the university where I was lecturing and gave a talk to the students about the DC "turnaround".

During question time, one of the students asked him which city in the world he would consider to have the most potential. Without hesitation, and I think much to the students' surprise - and my delight - he said, "Johannesburg".

Recently, MasterCard published the results of its first Emerging Markets Index, which looks at Worldwide Centres of Commerce. This does not measure potential but "actual and current impact and reach". Remember that it is focusing on emerging, not established markets.

Well, we came 11th overall (out of 65) with an index value of 55,42. The first 10 were Shanghai, with an index value of 66,01 followed by Beijing, Budapest, Kuala Lumpur, Santiago, Guangzhou, Mexico City, Warsaw, Bangkok and Shenzhen. So an African city almost made it into the top 10! Two other South African cities featured in the index - Cape Town in 33rd place and Durban in 37th. A number of other cities on the African continent - Tunis (40th), Cairo (44th), Casablanca (53rd), Nairobi (63rd), and Dakar (65th ) - also featured.

So what does the index mean?

Benchmarking
Well, before looking at this particular MasterCard index, something generally on the measurement or "benchmarking" of city performances and perceptions: here I'm going to refer to a paper by Greg Clark, Identifying successful cities globally. Based in London, Clark is an internationally recognised city "fundi" and has done work with Gauteng Province and locally through the Johannesburg Development Agency.

He points out that there are a number of institutions, companies and research bodies that produce reports, benchmarks or indices of cities in certain countries and/or internationally. Each of these offers an insight from one or another point of view of how communities view cities in a globalising world. While each, taken by itself, provides a partial view of cities from the viewpoint of the purpose of the research, "in synthesis it is possible to get a more holistic picture".

Clark warns that one must be clear on the reason for the research as it may be tailored to a particular client base or have a "spin" put on the data. Thus, most public bodies would undertake such research to broaden the knowledge and appreciation of aspects of cities while, if private-sector driven, they could be to provide clients with a base for taking business decisions, or to raise their own profile, but often "either to promote their business interests or as a way to enter a new field".

On why benchmarks are used, he says: "As globalisation continues apace, cities and regions are becoming increasingly important actors within the world economy. Cities are no longer bounded with ‘nation state' regional systems and urban hierarchies, and increasingly have to compete on an international scale. Cities are inevitably coping differently with these changes, and some are performing better than others. Benchmarks, reports and [indices] provide particularly useful tools in today's globalised economy."

Analysis
He then analyses some "28 reports, composite benchmarks and more narrowly defined [indices]" which are grouped under three headings:

  • Reports on cities in the global and European economies;
  • Composite city-regional benchmarks; and
  • Singular city indices.

Clark synthesises the measures of success that can be drawn from all these indices as to what makes a successful city.

A good image - the power of brand - and a sense of wellbeing
Cities that have a good image appear to attract more investment and interest from business based on a perception of what the city is and could be. This can be highly divorced from the reality.

Good transport links - connectivity, internal and external
Cities need good connections between themselves and their hinterlands, other major urban centres and within the city boundary. Those cities with better connections do better on quality of living, knowledge economy, social and environmental justice indicators, and business and governance performance. Ease of movement aids all members of society, and those cities that make transport equitable do well in a number of more people-focused indices.

An attractive business climate - open - business friendly - skills and talent - productive, competitive
Cities in which urban managers and national governments encourage business activity and make efforts to encourage investment perform better economically, and in terms of highly skilled labour's quality of living. Some cities have such a huge sway over national and regional economies, they become the drivers of growth in many countries. Where the climate is good, investment is high and the subsequent development of amenities for transnational workers is high. Where local and/or national government is ineffective or has no capacity, or external threats are great, the city falls down on indices.

Presence of global players - multinational companies and major institutions
Cities that have high numbers of multinational companies see greater quality of living, higher investment, more tourism and greater recognition. They are able to seek better and grander image-making activities and compete for major sporting and cultural events (even if the economic benefit is less than the political benefit). Having headquarters or subsidiary offices of major service companies is important, particularly in the developed world, in driving the knowledge economy and cementing a city into global capital flows.

Security, safety and transparency
Security - from terrorism, social unrest and violence, natural disasters, corruption and other threats - is increasingly important as cities, particularly in the developed world, become symbols of extreme inequalities across scale. The riots in Paris and bombings in London, Madrid and Moscow all demonstrate that the urban is the new battleground of ideas, and hence secure, safe cities are likely to be more successful in the long run.

Je ne sais quoi (the power of brand)
Ultimately, many indices argue that a city relies in the end on that special, mythical something that cannot be created. London, Paris, New York and Barcelona may always be iconic, important places, and hence can rise above the scrapes between the second and third tiers, where Frankfurt, Milan, Los Angeles, Mumbai, Johannesburg and Rio fight over image, capital flows and other recognition.

I'm not sure that I agree with the Johannesburg comment - I think Johannesburg does have "a mythical something" that raises its position in the pecking order. Maybe we should spend some time in analyzing where we are positioned within these six success factors, but that is for another day.

Emerging markets
For the moment, back to MasterCard's Emerging Markets Index looking at Worldwide Centres of Commerce.

A note in the document draws attention to the South African cities: "With three cities in the Emerging Markets Index, South Africa had better representation on the list than any other non-BRIC nation. [BRIC nations are Brazil, Russia, India and China]. Furthermore, its urban centres - led by number 11 overall Johannesburg, followed by number 33 Cape Town and number 37 Durban - exhibited some unexpected strengths among their counterparts.

"It's probably too early to declare South Africa a new member of the BRICs, especially given the turbulent political climate in much of Africa. However, with nearly 50 million people, a third of whom are under 14 years of age and 60 percent of whom are urbanised, South Africa is clearly on the move and worth watching. South African cities serve as important gateways to other African markets and will grow in value as Africa becomes more open to Western companies and products."

In the geographic ranking of "Asia Pacific, Middle East and Africa", Johannesburg was placed seventh, reflecting "the growing economic strength of South Africa and its strong financial and commercial institutions".

"Economic and commercial environment" is measured by country-level rather than city-level indicators (which include measures of time and cost involved in building a standard warehouse, registering a property and exporting and importing cargo). This index also includes measures of corruption and foreign bond ratings. The three South African cities came fifth with Santiago first.

No South African cities are reflected among the top 10 in the "Economic growth and development category" - again a largely country-level measure based on gross domestic product, inward foreign direct investment, international trade and urban population growth.

The South African cities are collectively first in the category "Business environment" - again a country-level measure looking at ease of entry, exit, corporate tax burden, contract enforcement, and ease of closing a business.

City measures
In the first of the true city measures, Johannesburg is in third place for "Financial services environment", measured by total value of equities trading; total value of bond trading; total number of derivatives contracts; total number of commodities contracts; financial services network as measured by the presence of leading international banks, insurance companies and securities dealers; and measures of banking services and currency exchange regulations.

No South African cities feature in the first 10 under "Commercial connectivity", which is based on measures of connectivity of the city to other world and regional commercial centres by air; passenger volumes; the presence of foreign consulates and embassies, and international hotels, conventions and meeting facilities; and international trade at country level.

Nor do we feature in the first of 10 under "Education and IT connectivity", which measures the intensity of education activities as well as national levels of internet and telecommunications connectivity. All 10 positions are occupied by Chinese cities!

Cape Town is number nine under "Quality of life", based on limitations on personal freedom and media and censorship; medical and health considerations; public services and transport; recreation and culture; and measures of climate, mortality and the presence of world heritage sites. Budapest, Warsaw, Buenos Aires, Mexico City, Montevideo, Santiago, Brasilia and Tunis are all before Cape Town.

Durban and Cape Town are jointly fifth under "Risk and security"; Johannesburg is eighth. This measure is derived from indicators that look at diverse aspects of personal freedom, personal physical safety, natural disasters, and measures of the political and social environment.

Cities lead
Finally, the survey says: "A powerful built-in premise of the Emerging Markets and Worldwide Centres of Commerce indices is that cities lead their national economies. Because of their role as leading indicators, they provide useful insights even when businesses are primarily interested in the country-level developments.

"For example, it could be inferred that cities and countries with currently strong economic and urban population growth are likely to have considerable momentum and capacity to withstand current and potential economic shocks. Further, cities that possess strong educational institutions and infrastructure are likely better positioned to navigate rough economic waters.

"Urban areas with solid public services and infrastructure and high quality of life are also likely to continue to attract and retain their most precious resource - highly qualified people. Additionally, those cities with varied and dense networks of airline connections will likely maintain or even expand their share of economic activity, which is increasingly people-driven and needs the continuous fostering of personal connections."

Regards, Neil

PS: On my way from the city to Rosebank on Friday, at the traffic light at the intersection of Oxford and Riviera roads, I saw a Johannesburg metro police officer open his window and toss a cooldrink bottle on to the centre island. Apart from not knowing the meaning of "zero tolerance", the metro police also do not appear to know the meaning of "leading by example"!

Bus tour: Saturday, 29 November
Heidelberg - Junction City
Long before the town of Heidelberg was founded, the site at the foot of the Suikerbosrand Nature Reserve was a trading post, at the crossroads to coastal and inland destinations.

After proclamation of the town, Heidelberg became the seat of the Boer provincial government during the War of Independence. The gold boom on the Witwatersrand further fostered its dominance when the Transvaal Mining Commissioner set up headquarters, and 18 hotels housed fortune seekers.

Though the affluent days have passed, the town remains busy, yet quaint, with a wealth of heritage, adjacent to an abundance of wildlife and indigenous fauna and flora.

Meet Deanna Kirby and Pascale Petit at the Sunnyside Park Hotel to depart at 8am. The cost is R400 for members of the Parktown and Westcliff Heritage Trust, and R450 for non-members. Booking is essential and is through Computicket , on 083 915 8000 or 011 340 8000, or through the Computicket website.

For more information, telephone Eira Bond on weekdays from 9am to 1pm on 011 482 3349.

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Last Updated on 07 March 2012