Urbanisation – the concept Presentation to Johannesburg CID Forum – General Meeting 3 March 2015

1 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. Agenda The concept 1Factors influencing migration 2Drivers of urbanisation in South Africa3Impacts and implications of urbanisation 4What urbanization means for a CID 5

2 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. The concept of urbanisation Urbanization is the process of transition from a rural society to a more urban society. It implies the conversion of rural land to urban uses as regional economies transition from agricultural based economies to industry and service based economies “ ” 3 forms of urbanisationHow urbanisation occurs Migration Population growth Government policy Urban natural increase Urban net migration Reclassification

3 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. Factors influencing migration Reasons for migration EconomicPoliticalEnvironmental Push factor A lack of employment opportunities; variations in employment prospects and poverty Political instability, war and fear of prosecution Adverse physical conditions, unfavorable weather conditions, natural disasters and limitations on sustainability Pull factor Perception of increased employment opportunities, areas that have valuable resources (e.g. mining & engineering, creation of a new industry & improved socio economic conditions Political stability & the perception of democracy & freedom Favorable physical conditions & weather climates, improved sustainability conditions & improved living standards & conditions

4 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. Drivers of urbanisation in South Africa The larger cities have always outpaced the rest of the country with regard to economic and employment growth. This is because the larger cities:  are agglomeration economies (more productive with regards to value and efficiency of goods and services produced);  accommodate higher-value functions, higher order public services; and  have historically been the destination for the majority of Foreign Direct Investment into South Africa. The main reason for the migration patterns in South Africa is employment opportunities usually found within the metropolitan municipalities.  Although in recent years the high unemployment rates within these metropolitans have diverted the migrant streams to smaller local towns and dense peri-urban areas. The historically dominant pattern of migration for labour is more recently being met and surpassed by individuals who are migrating for other factors such as:  Access to improved education;  To take up skilled occupations; and  To engage in trade, tourism or other business ventures. As in the majority of situations across the globe, the reasons for rural to urban migration in South Africa is the difference in economic opportunity

5 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. Impacts of urbanisation Positive implications of urbanization Improvements in economic growth and development Accelerated technological innovation A variety of employment opportunities with the potential for increased wages Cost savings due to agglomeration economies and economies of scale Social improvements Negative implications of urbanization The creation of shanty towns or slums Excess supply of labour which leads to increased levels of unemployment and underemployment A strain on available resources and service delivery An increase in costs such as transportation, real estate and infrastructure costs

6 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. Implications of urbanisation A cities’ role in urbanization  A city has the ability to offer the cost reducing advantages of  economies of scale;  agglomeration economies; and  the proximity and number of economic and social externalities (both positive and negative). Excessive forms of urbanization exposes economies to problems such as:  un/underemployment;  poor water supply and sanitation;  urban slums and shanty towns;  inadequate health; Urbanisation has occurred regardless of current state of economic growth or development. In many instances, urbanization in the developing nations occurred during periods of recession, leading to rapid and eventually exceptional levels of urbanization within the cities.

7 © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. What urbanization means for a CID Increased pedestrian footfall and growing markets higher turnovers for retail tenants; increased competition for informal trader space on key pedestrian paths; increased volumes of goods exchanged Pressure on installed public infrastructure physical strain of higher pedestrian loads; design standards exceeded; more frequent operation and maintenance schedules Increased demand for public services = increased need for management increased relevance for organisations that support the state, especially providing public space maintenance Increased demand for well-located housing, likely rental stock high population turnovers; very migrant people; access versus ownership for schools, jobs, amenity, community Changing profile of city user, user behavior and use preferences (Robust systems and processes for managing change Urbanisation translates into increasing pressures on various elements that affect a CID Take a long term view Take advantage of collaboration opportunities Seek creative ways to fund and finance bulk and social infrastructure (anchor for working neighbourhoods) For the property owner

Thank you Presentation by Candy Mazzuchetti and Andile Skosana The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. © 2015 KPMG Service (Pty) LTD, a South African company is a member firm of KPMG International, a Swiss cooperative. All rights reserved. Andile Skosana Associate Director KPMG Cities Centre of Excellence T: E: Candy Mazzuchetti Manager KPMG Cities Centre of Excellence T: E: