Amazonification of Cape Town
“And that is Cape Town. It is the City of unresolved complexes. We do the right thing and then we undermine it. We are the Cape of Storms and the Cape of Good Hope at the same time. We are hostile to outsiders but we are also the most welcoming and assimilating of places. We are generous and mean-spirited. We are innovatively global and insufferably parochial. Unity versus diss.”
— David Schmidt, Dynamic Leadership in Cape Town, Counter Currents. 2010.
I lost my first husband to two tech cities – he’s a digital health R&D consultant living part time between Seattle and San Francisco.
Joining him there briefly, I witnessed the impact of the tech sector on the city fabric. Entire city blocks bulldozed to make way for new developments to house incoming workers from all over the world – the locals not able to supply the skills. My then-husband among the imported skills.
Landlords unable to keep up with the seemingly overnight growth of “startups” – growing from 300 to 600 employees and taking over another floor, another building, another block.
Tent-cities under bridges, and on pavements, for the those displaced to make way.
And of course the campus-like presence of the anchors – the tech “giants” – Google, Microsoft, Apple, Facebook. And, Amazon.
These companies have a mixed track records with cities –
- Googles partnership with Toronto — Sidewalk Labs has failed, amid a lot of controversy about the tech-centred approach (more recently Google have tried to pin it on Covid, but Toronto have said they’re favouring a more human-centred approach).
- Amazon made cities bid to host their second HQ — over 200 cities participated in “the hunger games for cities”, in what was seen as one of the biggest competitions for the “new economy’. New York famously lost to a “more friendly Virginia” due to NYC locals protesting against it — not wanting the impact of the tech giant on the local housing market and social fabric.
- Seattle passed a “head tax” which was nicknamed the “Amazon tax” — a tax on large firms for each employee, which would be used to support homeless services in the City. The tax was repealed a month later when large employers’ petitioned their staff to join a “citizen movement” against the tax.
As we’ve seen Amazon grow in Cape Town, I’ve had mixed feelings. Their story brings a lot of bragging rights:
- We built Amazon Web Services right here in Cape Town.
That's some strong bragging rights in the global sphere. Apart from the bragging rights, the links of AWS into the local ecosystem have helped along innovations in our banking, insurance, public sector, non-profit health care and startup space.
- Many South Africans have used Amazon as their career launchpad.
Watch out for them — they tend to get snobby about it over Champaign breakfasts “do you know, I started in the call centre!”. My opinion is very similar to large parts of the Business Process Outsourcing Industry and Call Centre Industry — it can seem bland on face value, but a job at Amazon can offer more than a steady salary — its a chance at career diversification.
Amazon is not only employing software engineers. Be it as call center operators, joining their human resources team, events team, support team etc., once you’re in you can move around. How many of us know people who have built careers into other businesses, or gone on as entrepreneurs? For many South Africans — landing that first job at Amazon has been a literal golden ticket (and for several others, an actual plane ticket… perhaps good for them, not so great for us).
- Enhancing economic complexity and adjacent possibilities
Those who follow my blog know I’m a fan of economic complexity theory when it comes to pathways to development. And Amazon is bringing it! They’re linking us from AWS, to call centres, to data centres, now to energy grids in the Northern Cape, and each of these has an infinite number of pathways off of them into diversified offerings and opportunities — if we have the know-how to take up the opportunity.
A new campus for Amazon
Amazon outgrew their first offices in Constantia and moved to town, then outgrew that building and into a series of buildings around the Wembley Square precinct, now they are planning a move to the highly controversial River Club development.
There are plenty of opinion pieces about the merits of that particular development. You can download the full rezoning approval here. It articulates:
- the River Club current site is primarily an golf course and a man-made canal
- the site is well within the City’s densification zone targeted for densification within the Metropolitan Spatial Development Framework
- there are few sites of this scale and location where a private developer is willing to invest in the enabling infrastructure to develop this amount of new bulk
- the developer has engaged with one group of First Nations representatives who have expressed support for the development’s intentions to include various heritage elements such as an indigenous garden, cultural, heritage & media centre, heritage-eco trail, amphitheater, commemoration initiatives including naming of internal roads after indigenous leaders. (Authors comment: This remains a controversial aspect with other First Nations groups opposing the development. Furthermore, these commitments are a “social compact” with no clear manner in which the developer can be held accountable, or long-term operational plan)
- while the development is primarily an office park, there is a small residential component and the developer has committed to 20% of this being “affordable” (Author’s comment: although there is currently no legislative environment through which to hold the developer to this commitment, or clear definition of “affordable” or how it will be allocated).
- objections received on the basis of risk of flooding are rejected due to comprehensive studies and plans submitted by reputable engineering firms and specialist consultants, and no counter data or evidence submitted by objectors
Please note this is a very crude summary of a document of 159 pages! Some groups are still adamant to stop the development from going ahead.
Why can’t they build somewhere else?
I was asked this question on response to my Amazonification piece, by a person concerned about the “flooding risk”.
How have other City’s handled Amazon’s growth?
Amazon’s growth is clearly at a point that warrants a proper “pause and reflect” around the “Amazoninfication of Cape Town” and what the “greater we” want out of this anchor tenant in our city.
Seattle has been in a constant attempt to regain control of its city. The “head tax” I wrote about above its most recent failed attempt. This is not to say that its all a negative story — while housing prices have risen, jobs have been created. Seattle’s quirky grunge culture has been eroded, but Amazon has done some philanthropy stuff.
Their presence doesn’t come without significant externalities. We tend to focus on the “positives” — jobs created, tax revenue etc. And I’ve touched on these above.
But “tech giants” growth in other cities has without any doubt also led to increased inequality, displacement (when combined with an inability of the local housing market to keep up with growth, and an inability of the local economy to absorb all people — features we certainly have) and pressure on infrastructure and services, including contributing to congestion. Many people have written about these impacts, below is a good summary example with pretty data.
The downsides of being a tech hub: Housing disruption and inequality
Dublin, Seattle and the San Francisco Bay Area are three well-established tech hubs. Although their tech sectors are…
Despite this, when US cities bid for Amazon’s second HQ, most took a “race to the bottom” approach in terms of who could offer the biggest incentives — tax rebates, discounted land and infrastructure chief among them. But what Amazon was really looking for was offers that addressed constraints to their ability to do business in that city — infrastructural and skills constraints, mostly. And, ultimately, they’ll locate where employees want to live. (We already know this — so much of Amazon Web Services was built in Cape Town because Chris Pinkham wanted to move back to Cape Town, simple as that).
Five economic development takeaways from the Amazon HQ2 bids
Amazon's decision to cancel its New York headquarters investment has led to intense debate among academics…
No bidding Cities had support from any environmental groups, affordable housing groups, and only a handful from labour groups. Additionally, only a few had a regional approach.
This doesn’t strike me as a “whole of city” bid.
What’s our plan?
Amazon are here. Their employees are Capetonians. Some of them use taxis, trains or shuttles and some drive BMWs to get to work. More will be hired — some trained up from our very own homes, and some flying in from all over the country, continent and globe.
Here are some ideas:
Drastically reduce the emphasis on cars, fund public transit
In Seattle, Amazon actively encourage the use of public transit by paying employee’s full fare to reduce their impact on congestion.
Our situation is … slightly more complex given the failing state of public transport. However, the site has good access to Observatory train station, among others, and with 6000 anticipated workers on site — this could be a hefty injection into public transport if a deal can be struck. If each of those 6000 employees were subsidised R350/month, that would be R25,2m a year. As far as I know, that’s roughly half the operating deficit of MyCiti. Of course, its not a zero-sum game. But R350/employee is also pretty generous compared to what they’re probably paying for parking in town right now…
(Here’s hew the current design will kill cyclists… yay? Where is the City’s NMT team on this?)
EDIT: I’ve since learnt that the site has a potential connection the MyCiti route between Woodstock & Paarden Eiland. UPDATE: The ROD notes that the developer “may want to” investigate connecting to MyCiTi and GABS networks as they develop different precincts. This is a missed opportunity to impose a condition in the record of decisions. Amazon are already spending money on shuttles for call centre staff, encourage them to invest in the City’s collective solutions here.
Ramp up skills development
Let’s make sure that if the tech industry is growing, our kids are able to take up the opportunities.
This does not mean being unwelcoming to newcomers, who bring with them other forms of cultural, academic and business know-how; but we have to ensure that a critical mass of the new jobs are taken up locally, to prevent a widening of inequality for the next generation.
We have quite a number of privately and publicly run digital skills development programmes — let’s collectively pump more resources into these, and be sure we are choosing the ones where graduates are hired (i.e. the ones that have clear outcomes).
I’ve seen Amazon employees floating around at “women in tech” industry events, but am unclear to what extent they have real cash in the game of skills pipelines in Cape Town? (They offer a few bursaries for CompSci students— unclear how many — and are content partners in this Data Science programme, but that's paid for by students).
Some will believe the more sinister rumours about party-funding kickbacks (when DO they declare?), connections between the River Club developers and local mafia/gangs, and all sorts of things you always tend to hear in these controversial moments. I’ll leave those to investigative journalists, not bloggers with interests in city-making.
Part of why SidewalkLabs failed was the breakdown in trust — what did they really want in the city? What did they really want with all that data?
Amazon’s expansion plans seem to be pronounced upon us — now they’re into energy grids! I mean, it makes sense: From AWS into data centres — the key constraint to that was our insecure national energy supply, they found a workaround: their own energy grid. Its pretty mega though! On the one hand: exciting — it opens up opportunities for others to do the same. On the other: what else are they going to do?
Are we going to have Amazon water infrastructure? Amazon private security companies? Amazon CCTV — where will that be permitted and who will have access to the data? Does that exist already? Amazon health care?
For this to be a long-lasting “anchor tenancy”, there needs to be a “whole of city” transparency in where we are going, together.
With regards to who leads us in these negotiations, I’m less sure.
I’m reminded of a scene I witnessed — watching a ward councilor and local activist shouting at each other from opposite sides of a street. The ward councilor making somewhat incoherent statements about jobs and the new economy of warehousing and delivery — making it blatantly clear he had absolutely no idea what type of business Amazon in South Africa was even in. And the local activist loading every NIMBY reason available to him on the metaphorical table (well, the street).
In this context, I’m not quite sure who leads and who guides through any form of negotiation. Bring on the Amazonification….
*I have not included anything about housing prices in “the plan” because I believe Cape Town’s housing crises is so much more complex than the impact of Amazon. Overtime, the tech industry will have an impact. It is the role of the City to ensure that new housing supply can be added fast enough that we do not have rampant price growth — but even that might not prove sufficient if we become a so called “hedge city” where the pace of capital-store and speculation outstrips real tenancy. In terms of the current “moment”, I am not sure if Amazon own any their current buildings around Wembley — if they do, perhaps they can be convinced to do a nice affordable residential conversion, symbolically more than anything.