Policy Brief 7 - The Role of Targeted Intergovernmental Transfers in Urban Poverty Reduction

The In recent years recognition of cities as engines of economic growth, and their potential role in reducing poverty, inequality and unemployment, has generated a renewed focus on designing and implementing policy to overcome the constraints on maximising the potential of urban economies. In this regard, the Financial and Fiscal Commission carried out research to provide empirical evidence on how the
structure of economic activity (the location of industries and employment) affects the economic performance of South Africa’s urban municipalities, including the metropolitan areas and secondary cities which are touted as ‘engines of growth’. The research found that greater industrial diversity has a positive impact on growth in urban municipal per capita income. The study also found that municipalities with increased human capital, in the form of residents with certificates and graduate degrees, experience higher levels of growth in per capita income.

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