Skip to main content
SpringerLink
Log in

Local Investment Incentives for Urban Economic Development: Recent Debates in South African Cities

  • Published:
Urban Forum Aims and scope Submit manuscript

Abstract

The importance of improving the local business environment is an issue of central concern for municipal authorities in South Africa. This article explores debates around territorial competition through the application of local investment incentives. The paper analyses unfolding South African debates concerning the possible introduction of local investment incentives through the policy experience of two South African cities, namely Durban and Cape Town. It is concluded that South African cities must be aware of the key lessons from international experience and formulate carefully crafted or ‘smart’ investment incentive policies. In particular, the introduction of investment incentives should not be a substitute for dealing with other fundamental aspects of the local business environment which impact upon investment decision-making.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Bartik, T. (1995). Economic development incentive wars. Kalamazoo, Michigan: Upjohn Institute for Employment Research.

    Google Scholar 

  • Bartik, T. (2003). Local economic development policies. Kalamazoo, Michigan: Upjohn Institute Staff Working Paper No. 03-91.

  • Bartik, T. (2004). Incentive solutions. Kalamazoo, Michigan: Upjohn Institute Staff Working Paper No. 04-99.

  • Bartik, T. (2005). Solving the problems of economic development incentives. Growth and Change, 36, 139–166.

    Article  Google Scholar 

  • Berry, M. (1984). The political economy of Australian urbanization. Progress in Planning, 22, 1–83.

    Article  Google Scholar 

  • Bradshaw, T. K., & Blakely, E. J. (1999). What are “third-wave” state economic development efforts?: from incentives to industrial policy. Economic Development Quarterly, 13, 229–244.

    Article  Google Scholar 

  • Buss, T. F. (2001). The effect of state tax incentives on economic growth and firm location decisions: an overview of the literature. Economic Development Quarterly, 15, 90–105.

    Article  Google Scholar 

  • Charlton, A. (2003). Incentive bidding for mobile investment: Economic consequences and potential responses. Paris: OECD Development Centre Working Paper No. 203.

  • Cheshire, P., & Gordon, I. R. (1996). Territorial competition and the predictability of collective (in)action. International Journal of Urban and Regional Research, 20, 383–399.

    Article  Google Scholar 

  • City of Cape Town (2004). Report to the Chairperson: Portfolio Committee for Economic Development and Tourism: Request for approval to invite public comments on the draft investment incentive policy and package and business retention measures for the City of Cape Town, 27 July. Unpublished report for the City of Cape Town Economic and Human Development Department.

  • City of Cape Town. (2006). Economic and human development strategy: Part 2—implementation plan. Cape Town: City of Cape Town Economic and Human Development Department.

    Google Scholar 

  • Dawley, S. (2007). Fluctuating rounds of inward investment in peripheral regions: semiconductors in the North East of England. Economic Geography, 83, 51–73.

    Google Scholar 

  • DPLG. (2006). Stimulating and developing sustainable local economies: National framework for Local Economic Development (LED) in South Africa. Pretoria: DPLG.

    Google Scholar 

  • DPLG. (2008). Better business environments for shared local economic growth and development: Improving the local business environment. Pretoria: DPLG.

    Google Scholar 

  • Eisinger, P. K. (1988). The rise of the entrepreneurial state: State and local economic development policy in the United States. Madison, Wisconsin: University of Wisconsin Press.

    Google Scholar 

  • Enterprise Management and Innovation (2004a). Investment incentives policy: Phase 1 report. Report prepared for the City of Cape Town Department of Economic Development.

  • Enterprise Management and Innovation (2004b). Investment incentives policy: Phase II report. Report prepared for the City of Cape Town Department of Economic Development

  • Ethekwini Municipality (2008a). Urban development zones home page, available at www.durban.gov.za

  • Ethekwini Municipality. (2008b). Economic development strategy 2008. Durban: Sustainable Development Cluster Economic Development Unit.

    Google Scholar 

  • Faeth, I. (2009). Determinants of foreign direct investment—a tale of nine theoretical models. Journal of Economic Surveys, 23, 165–196.

    Article  Google Scholar 

  • Fisher, P. (2004). The fiscal consequences of competition for capital. Paper prepared for the Conference ‘Reining in the Competition for Capital’, Humphrey Institute of Public Affairs, University of Minnesota, Minneapolis, 27-28 February.

  • Greenstone, M., & Moretti, E. (2004). Bidding for industrial plants: Does winning a “million dollar plant” increase welfare?, Cambridge, Mass.: Working Paper 04-39, Massachusetts Institute of Technology, Department of Economics.

  • International Finance Corporation. (2006). Simplification of business regulations at the sub-national Level: A reform implementation toolkit for project teams. Washington DC: The World Bank Group, Small and Medium Enterprise Department.

    Google Scholar 

  • Karakaya, F., & Canel, C. (1998). Underlying dimensions of business location decisions. Industrial Management and Data Systems, 98/7, 321–329.

    Google Scholar 

  • Keating, M. (1998). The new regionalism in Western Europe: Territorial restructuring and political change. Cheltenham: Elgar.

    Google Scholar 

  • Keating, M. (2001). Governing cities and regions: Territorial restructuring in a global age. In A. J. Scott (Ed.), Global city-regions: trends, theory, policy (pp. 371–390). Oxford: Oxford University Press.

    Google Scholar 

  • LeRoy, G. (2004). Eight concrete ways to curtail the economic war among states. Paper prepared for the Conference ‘Reining in the Competition for Capital’, Humphrey Institute of Public Affairs, University of Minnesota, Minneapolis, 27-28 February.

  • Loveridge, S. (1996). On the continuing popularity of industrial recruitment. Economic Development Quarterly, 10, 151–158.

    Article  Google Scholar 

  • Markusen, A., & Nesse, K. (2007). Institutional and political determinants of incentive competition. In A. Markusen (Ed.), Reining in the competition for capital (pp. 1–41). Kalamazoo, Michigan: Upjohn Institute for Employment Research.

    Google Scholar 

  • Nel, E., & Rogerson, C. M. (1995). Incipient local economic development in the Eastern Cape 1909–1947. Contree: Journal of South African Urban and Regional History, 37, 1–9.

    Google Scholar 

  • Nel, E., & Rogerson, C. M. (1996). The application of local economic development initiatives in East London, South Africa, 1927–1955. Urban Forum, 7, 69–87.

    Article  Google Scholar 

  • Oakland, W. H., & Testa, W. A. (2000). The benefit principle as a preferred approach to taxing business in the Midwest. Economic Development Quarterly, 11, 154–164.

    Article  Google Scholar 

  • Peters, A., & Fisher, P. (2004). The failure of economic development incentives. Journal of the American Planning Association, 70, 27–37.

    Article  Google Scholar 

  • Pretschker, U. (2004). Subsidies and economic development in OECD countries. Paper prepared for the Conference ‘Reining in the Competition for Capital’, Humphrey Institute of Public Affairs, University of Minnesota, Minneapolis, 27-28 February.

  • Raines, P. (2003). Flows and territories: The new geography of competition for mobile investment in Europe. In N. Phelps & P. Raines (Eds.), The new competition for inward investment: companies, institutions and territorial development (pp. 119–136). Cheltenham: Elgar.

    Google Scholar 

  • Reid, N., & Gatrell, J. D. (2003). Uncertainty, incentives and the preservation of an industrial icon: The case of Toledo Jeep. In N. Phelps & P. Raines (Eds.), The new competition for inward investment: companies, institutions and territorial development (pp. 99–118). Cheltenham: Elgar.

    Google Scholar 

  • Rodriguez-Pose, A., & Arbix, G. (2001). Strategies of waste: Bidding wars in the Brazilian automobile sector. International Journal of Urban and Regional Research, 25, 134–154.

    Article  Google Scholar 

  • Rogerson, C. M. (1996). Image enhancement and local economic development in Johannesburg. Urban Forum, 7, 139–156.

    Article  Google Scholar 

  • Rogerson, C. M. (2006). Local economic development in post-apartheid South Africa: A ten-year research review. In V. Padayachee (Ed.), The development decade?: economic and social change in South Africa, 1994–2004 (pp. 227–253). Cape Town: HSRC.

    Google Scholar 

  • Rogerson, C. M. (2008). Consolidating local economic development in post-apartheid South Africa. Urban Forum, 19, 307–328.

    Article  Google Scholar 

  • Schweke, W. (2004). “You want employment? We will give you employment!” or do better job creation subsidies hold real promise for business incentive reformers. Paper prepared for the Conference ‘Reining in the Competition for Capital’, Humphrey Institute of Public Affairs, University of Minnesota, Minneapolis, 27-28 February.

  • Sinnaeve, A. (2004). How the EU manages subsidy competition. Paper prepared for the Conference ‘Reining in the Competition for Capital’, Humphrey Institute of Public Affairs, University of Minnesota, Minneapolis, 27-28 February.

  • South African Cities Network. (2008). The impact and effectiveness of urban development incentives in selected South African cities. Johannesburg: SACN.

    Google Scholar 

  • Tassonyi, A.T. (2005). Local economic development: Theory and the Ontario experience. Toronto: University of Toronto International Tax Programme Paper 0511.

  • UNCTAD. (1997). Survey of best practices in investment promotion. Geneva: UNCTAD.

    Google Scholar 

  • Valodia, I, Moffatt, S., & Thaver, D. (2001). Investment incentives in the Durban unicity: Outlining the policy parameters. Unpublished Report for the Economic Development Department, Durban Metropolitan Municipality, Durban.

  • Weber, R. (2004). Negotiating the ideal deal. Paper prepared for the Conference ‘Reining in the Competition for Capital’, Humphrey Institute of Public Affairs, University of Minnesota, Minneapolis, 27-28 February.

  • Weber, R., & Santacroce, D. (2007). The ideal deal: How local governments can get more for their economic development dollar. Chicago: University of Illinois Centre for Urban Economic Development.

    Google Scholar 

  • Xu, J., & Yeh, A. G. O. (2005). City repositioning and competitiveness building in regional development: New development strategies in Guangzhou, China. International Journal of Urban and Regional Research, 29, 283–308.

    Article  Google Scholar 

  • Yeung, G. (2003). Scrambling for FDI: The experience of Guangdong province in southern China. In N. Phelps & P. Raines (Eds.), The new competition for inward investment: Companies, institutions and territorial development (pp. 193–212). Cheltenham: Elgar.

    Google Scholar 

Download references

Acknowledgements

Thanks are due to the National Research Foundation, Pretoria for funding support, and to Imraan Valodia and Stanley Visser for inputs for this research. Useful comments were received on earlier versions of this material presented to the City of Johannesburg Economic Development Department. Usual disclaimers apply.

Author information

Authors and Affiliations

  1. School of Geography, Archaeology & Environmental Studies, University of the Witwatersrand, Johannesburg, South Africa

    Christian M. Rogerson

Authors
  1. Christian M. Rogerson
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Christian M. Rogerson.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Rogerson, C.M. Local Investment Incentives for Urban Economic Development: Recent Debates in South African Cities. Urban Forum 20, 437–453 (2009). https://doi.org/10.1007/s12132-009-9072-y

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12132-009-9072-y

Keywords

Search

Navigation