Gauteng’s urban space economy

‘Urban space economy’ is shorthand for the distribution of economic activity in space, considering at the same time the question of how space is structured by the dynamic changes in economic activity that occurs within it, and, inversely, how economic activity is in turn structured by spatial form and fabric.

This project aims:

1. To deepen understanding of how the urban space economy of the GCR works, through innovative mapping, analysis of quantitative data, a number of focused, qualitative case studies, and a re-examination of the theory;
2. To interrogate how governments in the city-region have understood the challenge of intervening in the economy of Gauteng over the last two decades, and how it has built institutional arrangements and techniques through which to perform ‘economic development’ functions;
3. Through (1) and (2), to reach conclusions on how governments in the GCR might sharpen future policy and practice on facilitating economic activity through spatial interventions.

Analytical starting points

The entry point for this study is the concept of ‘agglomeration economies’.  The idea has its roots in early economic theory, specifically the work of Alfred Marshall, and has more recently been re-invigorated in economic geography and regional studies. Agglomeration economies refers to the positive externalities of industries co-locating in the same place. Put simply the idea is that when economic activities cluster together spatially there are advantages to all the actors in the cluster in the form of lower input prices, more efficient labour markets, and, in particular, the spillover and intense exchange of ideas in a way that spontaneously increases innovation and productivity (see Turok, 2010: 13; Gonzales, et al, 2011: 7).  In Marshall’s words:

“The mysteries of the trade become no mysteries; but are, as it were, in the air … Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organisation of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; thus it becomes the source of further new ideas.”

In academic work the idea of agglomeration economies has underpinned significant recent research seeking to understand the relationships that give rise to economic innovation, productivity enhances and growth in clusters. For example some work has sought to demonstrate that the locational concentration of firms from the same economic sector produces the biggest gains, because there are greater opportunities for inter-firm collaboration, for instance in addressing common challenges that increase costs.  Others have argued to the contrary that it is competition between the firms, not collaboration, that is key simply by virtue of the fact that one firm’s innovative practices, leading to better results, are more visible to all, spurring continuous innovation across the cluster.

The notion, especially after its re-articulation by Michael Porter, has been behind government efforts to facilitate industry clusters through spatially focused interventions, notably as a tool of regional economic development.

The working hypothesis of this study is that the idea of agglomeration economies is valid and very relevant in our thinking about how to transform urban economies left distorted by apartheid planning, but ideally only as a way to account for the organic ‘bubbling-up’ of economic activities in unique places; when the notion is taken up as part of government’s toolbox of economic development instruments it is far less compelling, as most government facilitated clusters aiming to induce growth in new sectors, or to shift the spatial distribution of economic activity, have limited impact.

Envisaged outputs

This is a two year research project. In year one, the project will deliver four pieces that will lay a foundation for a set of more detailed case studies in the second year. The final output will be an edited collection of case studies, that ideally work together as a journal special edition. 

Year 1 outputs are envisaged as:

1. A critical review of the recent literature on urban space economies / agglomeration together with an overview mapping (based on available GIS data) of how economy is distributed in space in the Gauteng city-region;
2. An overview history, covering the period between 1994 and 2011, of the evolution of spatial economic development thinking, planning and programmatic work by the Gauteng Department of Economic Development;
3. A detailed case study on the thinking behind an Industrial Development Zone (IDZ) around the OR Tambo Airport, an idea being driven by the Gauteng Provincial Government but fortuitously aligning with the notion of an Aerotropolis currently being pushed by the Ekurhuleni Metropolitan Municipality.  The joint project is (partially) premised on the idea of a jewellery cluster to benefit from the natural freight and logistics advantages in the area, and to facilitate upstream beneficiation of minerals usually exported for processing internationally.  While this vision is compelling, it potentially has profound implications for an existing organic cluster of jewellery businesses – called Jewel City – in the Johannesburg Inner City;
4. A detailed case study of the so-called Ethiopian Quarter in the Johannesburg Inner City. This is an organic cluster of loosely associated wholesale and retail trade activities crammed into a few small blocks in the CBD.  The economic intensity of the area has caught the attention of city-planners in recent years, not all of whom have responded positively, not least because the Quarter has begun to encroach upon, and take energy away from, an adjacent Fashion Precinct which is an older spatial intervention where government efforts to sponsor an agglomeration economy over the last decade have had little if any success.