The determination of whether or not Blue IQ Investment Holdings is a success, is not just about how the individual projects progress in the short run, although this is obviously crucially important. In the final analysis, the measure of the success of the company is whether or not Blue IQ Investment Holdings has assisted in shifting the economy of Gauteng into a new economic growth trajectory.

The indices by which to measure this are:

• The composition of the provincial gross geographic product (GGP) and whether the focus areas have made a positive contribution
• The composition of provincial exports
• Labour absorption capacity – is the new economy able to absorb labour more readily and on a more sustainable basis?
• GGP growth – is the economy growing in a sustainable way over time?

International experience suggests that such macro-indices changes will only be noted in 15 to 20 years after realignment policies are in place. The Gauteng Provincial Government is, however, tracking index movements and the trends look positive.

Blue IQ Investment Holdings’ achievements were assessed in terms of the following variables: output growth, labour absorption, investment growth, changing the composition of provincial output, and changing the composition of provincial exports.

Additional criteria included the advancement of BEE objectives and SMME development. 

Blue IQ has shifted the provincial economy to a higher level of development (i.e. higher output, investment, and slowdown in job-shedding). And in so investors have responded to these initiatives, the long term growth rate of the economy has slightly improved by 0.25 percentage points as a result.  At a macro-provincial level, the challenge is to raise the rate of employment. 

A structural econometric model shows that an increase in the growth rate of government expenditure from 2% to 4% leads to an increase in labour absorption from -0.1% to 2%.  The cumulative output impact of Blue IQ Investment Holdings as at 2004 Q4 is R16.64 b. The investment impact is estimated to grow up to R6 b in 2014.  The cumulative impact on private sector investment is R30 b as of 2004 Q4. This large investment impact derives from the interaction between the multiplier and accelerator mechanisms, complemented by the property price channel encapsulated in the investment function.

Furthermore the cumulative employment impact as at 2004 Q4 is estimated to be 81 295. These results, however, assume that government expenditure is consistently raised at 2% per annum.  Over time, as the projects pass the acceleration and maturity phases, the economy will absorb Blue IQ’s impact in a different way.  At this time, each project would be operating in a particular sector that is likely to have different features than the major sectors through which the initial investments were made.

A broad analysis of the direct impact of Blue IQ projects reveal that for every R62 000 spent, 1 permanent job was created in the economy.  Had the funds been redirected towards community services and not infrastructure, it would have required R104 569 to create 1 permanent job.  For every R1 spent by Blue IQ, 23 cents worth of private sector investment was crowded in.  Had the money been redirected towards community services, it would have yielded almost the same investment impact, though slightly above (by less than a cent) the Blue IQ scenario. For every R1 spent by Blue IQ, R1.60 worth of output was stimulated, i.e. Blue IQ’s multiplier was 1.6.  Had the money been put in community services, the multiplier would have been 1.5.

These results concern only the direct impact made by Blue IQ projects, and not the private sector activity that Blue IQ stimulates.  Taking these into account, it has been found that for each R30 000 spent, approximately 1 job was created. For every R1 spent by Blue IQ, R13 worth of private sector investment was crowded in.  For every R1 spent by Blue IQ, R7.23 worth of output was produced. 

In the last quarter of 2004, it is estimated that the output impact has been R16b.  That is to say, output was estimated to be R16b lower in the last quarter of 2004 had Blue IQ projects not been implemented.  The new trajectory, it should be mentioned, is assumed to swivel slowly upwards over time. 

Since the crude arithmetic average multiplier for the whole economy is 1.8 and Blue IQ’s multiplier is 1.6, there appears to be some scope to continually enhance the output impact of the projects by re-aligning expenditure patterns to sectors with the greatest output multipliers. 

Further analysis show that some of the projects, if properly marketed, stand to yield attractive returns on investment.  For example, if all office space is leased out, the Innovation Hub stands to generate approximately R1.5b per annum.  Property prices in the area have since climbed by more than 20% as a result of the project.  In the first year of its operation, Constitution Hill received 83 000 guests, and has stimulated construction and urban development in its surroundings.  Newtown has been receiving more than 12 000 visitors every month since 2005, and in 2004 it recorded 297 048 visitors overall. A number of construction developments have been created and are still in the pipeline for the area.  The Kliptown project has also seen some established private sector players setting up business in the area as a result of the project, with firm commitments from ABSA, FNB and Score. These few examples give an idea as to the impact of the projects in their neighbourhoods.  

Blue IQ is on track in terms of delivering infrastructure to facilitate private activity.  Delivery in terms of output, investment, and employment, though still nascent as many projects are at the lag phase, is already yielding positive results.