The art of seducing private investors has been boosted in recent years as public-sector agencies have pumped billions of rand into catalytic developments such as Constitution Hill in Braamfontein, Johannesburg.
Their aim is to stimulate investment and business activity in areas that need assistance through improved infrastructure and lower costs.
But analysts ask whether these projects are adding value to local economies - and whether state agencies even know how to measure the real spin-offs.
Njabulo Sithebe, chief economist of Blue IQ, the provincial economic project office for Gauteng, says catalytic projects encourage the entrance or expansion of private businesses and investors in targeted economic sectors.
Agencies such as Blue IQ invest in areas where the private sector is scared to tread. "This helps reduce the risk of localised market failure and starts turning around negative perceptions," says Sithebe.
But state agencies should never compete with the investors they are trying to attract. Blue IQ is firm on this point, says Sithebe. "We try hard not to be involved where private capital is abundant without government support."
Centre for Development & Enterprise executive director Ann Bernstein says it's government's job to get the investment environment right through infrastructure, urban management and crime prevention. "Most importantly," she adds, "the state needs to listen - and respond - to the private sector. It's unlikely government will spot opportunities that the private sector hasn't already seen."
Development expert Steve Topham says a good example of increased private investment is the Johannesburg Development Agency's Braamfontein regeneration initiative, which through a R20m investment sparked the multimillion-rand Sappi precinct.
Wesgro, the Western Cape's trade and investment promotion agency, is a different animal from Blue IQ and does not fund catalytic development. Its role is to facilitate major investments, says communications head Lindiwe Mavuso.
The diversity of catalytic projects in SA requires that a range of different performance indicators be used. Some projects succeed simply by attracting people into the area, says Topham.
Though most agree that Constitution Hill (which cost R357m) improves the city landscape, its real value to the urban economy has yet to be tested. At this stage, Blue IQ expects the project to create 1 000 jobs in the next two years.
Others are benchmarked by economic achievements. Take the Gauteng auto cluster, an initiative focused on vehicle manufacturers and allied industries. Few find it aesthetically pleasing, but it's on track to generate 9 000 jobs before 2007, according to Sithebe. For the Newtown precinct, however, quality of life is more important than new jobs. Sithebe points out that confidence levels in the area leapt by 30% from 2002 to 2003.
"There's always a tension between the need to foster a productive city and the need to create a liveable city," says Topham. "And it's a healthy tension."
Commentators agree that some key success factors cut across different types of catalytic development. Projects targeting obvious clusters or specific areas usually get good results - quickly.
The Gauteng auto cluster is a case in point. A dedicated champion of a project is crucial. One example is Gautrain project manager Jack van der Merwe. Adequate funding, political backing and careful planning within a flexible framework are also success factors. "
We have to be alert to global changes," says Sithebe. "And we need to do a lot of scenario planning to stay relevant." Sceptics often don't have a realistic understanding of time frames, says Topham. More complex projects such as Dinokeng, a game reserve project in northeastern Gauteng, take much longer to get off the ground, and it's too soon to start assessing their potential for success.
"As I recall, the Pied Piper was an effective, independent consultant who sorted out a town's rat problem," says Topham. "The deal went wrong when the mayor reneged and tried to save money.
"So you need upfront planning, commitment and buy-in from all parties, enough money to do the job properly - and the ability to listen to your consultants.
