An Inquiry into Cities and their Role in Subnational Economic Growth in South Africa

South Africa is characterised by significant inequality in spatial economic activity. Whether future growth and development on a sub-national level in South Africa will be such as to reduce this inequality may depend on the economic growth and development of South Africa's largest cities. Our local economic growth empirics show some indications of conditional convergence in output between poorer towns, as well as overall between all cities and towns. Between 1990 and 2000 some limited sigma convergence was found, but this was driven by declines in the standard deviation of per capita income amongst the poorest quintile of towns. An estimate of conditional beta convergence of 1.2% over the period 1990 to 2000 confirms that overall convergence has been taking place. From an estimation of the determinants of economic growth on a local level, using a dataset on 353 local areas in South Africa between 1990 and 2000, we found the most significant determinants to be stocks of human capital and distance from harbours and markets. Human capital's effect on economic growth was strongly associated with the presence of large cities, as one would predict from endogenous growth theory. Copyright 2003, Oxford University Press.