Urban economic perspective of Cape Town - Essay Example

? Micro and Macro Economics of the of the Number Micro and Macro Economics Introduction The project will throw light on the urban economic perspective of Cape Town, the second most populated city in South Africa. The city is considered to be the legislative capital of the nation. The city is located on the shore of Table Bay. It is in the northern region of Cape Peninsula. History claims that the city was founded by the Dutch East India Company and had served as the supply station of the Dutch ships which used to sail to the east like, in India. The city has a vast land area of about 948 sq miles. Apart from being the legislative capital of South Africa, the country is also the provincial capital of the region. There are many mountains and hills like, Devil’s Peak and Table Mountain, which forms the natural boundaries of the city (“City News”). Figure 1: Political Map of Cape Town (Source: “Statistical Release”) The above map shows the political layout of Cape Town. As recorded in 2011, the population strength of Cape Town was 3740025 (showing an increase of almost 29.3% since 2001). The rate of urbanization in the country has also risen by about 37.5% (from 2001 to 2011) (“Cape Town Overview – 2011 Census”). The gross employment rate of the city is about 76%. The average monthly income of about 47% of them in the city is R.3200. 78% of the individuals in the city live in formal form of dwellings. The city has good access to safe drinking water and sanitation. The infant mortality rate of the city is about 33.2% (“Cape Town Overview – 2011 Census”). The crude death of the city was about 6014, as estimated in 2011. Gold mining is an important industry of the city. South Africa including the city of Cape Town is rich in terms of many natural resources like, coal, iron ore, gold, platinum and copper. Apart from gold mining, the region is also famous for various other types of industrial segments like, iron, steel and food processing. The city is also rich in natural resources like, cotton and wheat. Carrying forward an elaborate history with it, the city has undertaken vast changes to build and enhance its urbanization perspectives over the time (“Natural resources and economy”). Economic Perspectives of the City The City of Cape Town is rich in terms of natural resources. These resources which are available in the city often serve as raw materials for the major industries of the country. Moreover, the gross demand of gold in the global market is increasing with time. This has been beneficial for the city of Cape Town as it possesses the core competence over gold reserves in the world. The city is also rich in terms of agricultural resources and animal husbandry. The available rich natural resources of the city are the underlying factor that holds the city together and sustains it. Theory of agglomeration in urban economy explains that when business industries are clustered together, the cost of production of each firm becomes low. This is because clustered firms often experience economies of scale in production. This is either due to common multiple suppliers or division of labor or specialization of work. Cost Quantity of output produced (Source: Authors Creation) It is due to the above factors that the gross quantity of output raises and simultaneously, the cost of production falls for economies in production. The extent of urban agglomeration rate in Cape Town is 690 (km^2). This good agglomeration rate of Cape Town has helped the city to improve its income thresholds. The annual growth rate of the city from 2005 to 2009 was 4.06%. The city has competitive advantage over manufacturing and extraction, film, media, health and medical services. The formal economy of the city provides about 64% of employment opportunities to the labor force in South Africa. The good degree of agglomeration, core competences and natural resources come together to help the city to become a prominent business location in the contemporary world. Growth Factors Cape Town has turned out to be one of the most important metropolitan cities in the world. As recorded in 2009, the real Gross Domestic Product (GDP) of the city was R 188456 million. A large number of small scale industries push up the majority of the economic growth for the city (75%). Almost 50% of the city’s output is yielded by small scale industries. Figure 2: Growth in Cape Town (Source: “Cape Town’s Economic Environment”) The above graph shows the growth in the city due to agglomeration. The gross population of the city was only 7% (as recorded in 2009) of the total population of South Africa. However, about 10.58 % of the real GDP of the entire country was contributed by this small proportion of individuals. This significant growth rate of the city has made it the second richest province in the country in terms of per capita real GDP. The GDP per capita of the city measured in terms of purchasing power parity was US $15250 (40% more than the average of the country). Figure 3: Lower Income Inequality of the City (Source: “Cape Town’s Economic Environment”) The above bar graph shows that the city has a comparatively lower level of income inequality than other prominent cities in South Africa. This is due to the significant growth rate of the city. By attracting large amount of foreign direct investments, the city has significantly improved its employment level and production capabilities over the years. The tourism industry is a strong business in Cape Town that helps to foster its economic growth. The large number of ports and harbors in the city has also contributed to its growth. Iron ore and gold industries have also conduced the meeting of the growth requisites of the city. Figure 4: Contribution of Different Industries in Cape Town (Source: “Cape Town’s Economic Environment”) However, after observing the above bar diagram, it can be stated that in the current era (2009), finance, insurance, business and real estate sectors are the divisions which have made the maximum contribution towards the economic growth of the city. Public Goods Available in the City In the recent past, the country of South Africa had been a developing nation but now, it is considered as a newly industrialized country. The public authorities of the developing nations like, South Africa undertake various types of welfare maximizing programs for the purpose of growth in their economy. The extent of public goods availability in Cape Town is also large in quantity. The government has tried to enhance the welfare of the city by providing a pack of public good facilities to its members. The Cape Town Spatial Development Framework is an organization in the city that aims to develop and enhance the urban growth. The availability of public good in the city is in more abundance than its gross private requirement of goods. The government authorities of the city have realized that a lack in the proper supply of public goods in Cape Town would cause market failure in its economy. Athlone Secondary School, Harold Cressy High School and Beacon Hill Secondary School are the three public schools that are established in Cape Town. There are a lot of universities under the public control in the city. The authorities have realized that a deficiency in proper education system would also dampen the economic growth of the city in the future. The education system of the city is considered to be better than the national average of the nation. The efficient education system of Cape Town which is guided by the government has helped the city to build a productive labor force with a brighter future. The Cape Peninsula University of Technology and the University of the Western Cape Town are the present famous universities. In order to protect and preserve the environment, the government has also built and modified various industrial and eco-friendly parks within the city premises. Changes due to Upcoming Economic Forces After globalization and liberalization of the economy, South Africa had undertaken various types of changes in terms of economic and urban perspectives. The city of Cape Town has also applied assorted alterations in its urban landscapes with time due to the changes in the economic affairs of the external world. In general, along with the economic growth, the rates of urbanization have also increased in Cape Town. The number of sky scrapers and buildings were seen to increase in the city significantly over the time with a simultaneous increase in its level of population. Figure 5: The Rising Metro Population in Cape Town (Source: “Demographics Scenario”) The above graph shows the rising population of Cape Town over time. This was responsible for the hike in the accommodation rents of the city. Unfortunately, the rise in the urbanization rate of the city has generated an electricity crisis. The global financial crisis in the world economy had been responsible for the loss of the disposable income levels of the individuals in the city. The demand for owned accommodations has also fallen due to this reason. However, the demand for rented accommodations has prominently increased. This has further fostered the cost of rents in the city. Although the crisis in the global markets has raised the cost of urbanization in Cape Town, the city’s urbanization rate has not fallen due to the same. Socio-Cultural Aspects The overall availability of housing stock in Cape Town has improved over time. The number of houses in the city in 1996 was 653716 which had increased to 759765 in 2001. The annual rise in the housing facilities in the city has been about 3.3% p.a. It was also found that the growth rate of housing facilities in the city was way more than the rise in the population. The underlying reason had involved a social factor of the city. It was analyzed by the researchers that the rise in the demand for houses was due to facts like, the young generations who expressed the desire to leave their homes early, the rising life expectancies of the older people and the increase in the number of separations in the city (OECD 102). Figure 6: Rise in the Number of Housing Facilities in Cape Town over Years (Source: “Demographics Scenario”) The above graph shows the rise in the overall housing stock in Cape Town over years. Figure 7: House Construction Pattern in Cape Town (Source: “Cape Town’s Economic Environment”) The above graph explains the construction pattern of the households in the city of Cape Town. As recorded in 2011, the city has the ability to annually adopt a minimum of 25000 new accommodations in its economy. Figure 8: Average Socio-Cultural Perspectives in the different Cities in Cape Town (Source: “Demographics Scenario”) As stated in the above table, the composition of Black Africans in the cities of South Africa is much more than that of the colored and the white individuals. The percentage rise for the male inhabitants has been more than that of the female inhabitants. This can be stated after observing the increasing value of the sex ratio (male-female) in these cities. Figure 9: Working Pattern among the Individuals in South Africa (Source: “Demographics Scenario”) The above table explains the working structure of various cities in South Africa on an average. It shows that a large proportion of individuals in these cities work in the semi-skilled working sector. Figure 10: Class Classification in the Cities in South Africa (Source: “Demographics Scenario”) The above table shows that the majority of the individuals in these cities belong to the intermediate working class. Corruption Similar to most of the modern cities, the relative crime rate in the cities of South Africa like, Cape Town has significantly increased after the first few democratic elections. It is also true that the rise in the level of crime and corruption rate have resulted in the fall of investment levels in the city. This has also generated a loss in the level of skills of the individuals. The murder rate in the city was about 66.2% in 1995 and it had increased to a level of 86.7% in 2002. However, since 2003-2004, the level of murder rate in the city has fallen drastically by almost 1/3 rd of the previous level of percentage (Mehta, “Impact of global economic crisis on financial performance indicators of banking sector in South Africa”). Figure 11: Murder Rates in Cape Town (Source: “Demographics Scenario”) The above bar diagram shows the statistics of different levels of crime at different time periods in Cape Town. Regions like, Nyanga, Helderberg and Blaauwberg, are the various neighborhoods in Cape Town that show a high level of crime and corruption in the city. Transportation Issues The city of Cape Town experiences the benefits of competitive advantage in terms of transport and communication facilities as it is one of the trading hubs of South Africa. Cape Town international airport is the second largest airport in the country. The rail, port, pipelines and transportation facilities of Cape Town are extremely good in nature. However, in the recent times, it has been claimed by the researchers that the port is only being used as a mode of cash generating asset in transit and not for the purpose of economic development. In the phase of increasing competition in the global market, the inactive port renders a big loss in opportunity for the city. Since the last decade, the city has been facing a crisis of funding requirements in order to finance its National Rail Plan which was introduced by the cabinet in 2006 (Tucker 202). Sate of Finance The city of Cape Town can experience a sustainable progress because of its improving economic growth. However, the primary challenge for the city is to generate enough employment opportunities for reducing its impending poverty. The income inequality in the city is high even at this point of time and its industrial sector requires a lot of improvement in order to cope up with the global competition. The city has a highly developed waste management service, tourist service, electricity and water facilities. In the last few years, the city has experienced an increase in the levels of gross domestic product and per capita income. The revenue and profits margins of all the business enterprises in Cape Town have observed a significant progress in the recent past (“World Fact Book”). Successes and Challenges After analyzing different factors about the city of Cape Town, it is possible to state that the city at present experiences various triumphs and challenging aspects. Achievements There has been a rise in the employment level of the city. A rise in the level of employment in Cape Town has caused an increase in its level of per capita income. Rise in per capita income levels in Cape Town has helped to augment the standard of living of the individuals. With an improvement in the level of human development, the aggregate contribution of Cape Town in the country’s overall level of real GDP has been enhanced. Challenges The city still experiences a high level of income inequality. The extent of corruption in the city is increasing with time. The rising population level of the city is responsible for the rise in its poverty level. The average health status of the individuals in the city is declining over time due to the increasing level of poverty. Work Cited “Cape Town Overview – 2011 Census.”. Cape town, Statistics South Africa, 2011. Web. 8 November 2013. “Cape Town’s Economic Environment.” Capetown, 2009. Web. 8 November 2013. “City News.” Capetown, City of Cape Town, 2013. Web. 8 November 2013. “Demographics Scenario.” Capetown, City of Capetown, 2010. Web. 8 November 2013. Mehta, Anupam. “Impact of global economic crisis on financial performance indicators of banking sector in UAE.” Institute of Management Technology, 2012. PDF file. Web.16 October 2013. “Natural resources and economy.” South Africa, JYU. Web. 8 November 2013. OECD. OECD Regions at a Glance 2009. Paris: OECD Publishing, 2009. Print. “Statistical Release.” Statssa, Statistics South Africa, 2011. Web. 8 November 2013. Tucker, Irvin. B. Macroeconomics for Today. Connecticut: Cengage Learning, 2010. Print. “World Fact Book.” CIA, 2013. Web.16 October 2013. Read More