Description
Local economic development (LED) should be everybodys business, including local residents, local business people and government.
Local economic development (LED), challenges and solutions: The case
of the northern Free State region, South Africa
Dr Daniel Francois Meyer
North-West University (NWU)
South Africa
email: [email protected]
Abstract
Local economic development (LED) should be everybody’s business, including local residents, local
business people and government. LED is globally, but especially in developing countries, seen as the
solution to improved quality of life, unemployment, poverty and inequality. LED is a relatively new field of
research and policy formulation, planning processes and implementation plans are still evolving with
various alternative theories and approaches.
This article analyse LED theory and approaches with a focus on South Africa, with a case study on the
northern Free State region. Five municipalities in this region were analysed in terms of their LED
approaches, planning and implementation. The research methodology is based on a qualitative approach
which includes a literary review and various interviews with role players in the area. Results include
solutions, lessons learnt and generic strategies for LED. LED processes could achieve its promise of
ensuring improved quality of life if LED strategies are formulated for effective implementation.
Keywords: Local economic development, challenges, solutions, strategies, northern Free State.
1. Introduction
“Suitable economic policies could cure all economic problems by stimulating local
economic development to create better human and financial capital flows” (Reich, 1991).
“Creating new jobs and developing human capacity are not easy tasks. Local institutions
and national policy makers must align local human and natural resources of the
community to match both global and regional markets, and they can strive to create new
jobs that fit both the local people and the place” (Blakely and Bradshaw, 2002).
Globally, academics, development practitioners and stakeholders recognise the
important role of local economic development (LED) in order to create jobs, alleviating
poverty and improvement in quality of life. In order to achieve dynamic local
development, all aspects of local communities such as the economy, social, welfare,
environmental and political issues need to be addressed in an integrated and holistic
manner. A comprehensive strategy therefore needs to be compiled for a specific region to
achieve developmental success (Rogerson, 2009).
According to Rodrigues-Pose (2001), traditional macro-economic policies have in
the past been not being successful in creating an enabling developmental environment at
the local level and LED has provided an alternative to development. Rodrigues-Pose
1
(2001) listed the following advantages of LED over traditional economic policies namely,
LED empowers and ensures local participation, local people can play an active part in
planning their own economic future, LED ensures that local business are involved in the
process and are more open to play an active role in partnerships with local communities.
In addition, LED ensures that local development is locality based and focused on local
comparative advantages, it allows for more resilient local economies and LED could
create local opportunities and local jobs, thereby improving the local quality of life.
South Africa’s current development policy is focussed on “developmental” local
government and with a “pro-poor” emphasis. Local government has been pro-actively
encouraged through the Constitution (1996) to intervene and to play a leading role in job
creation and reduction of poverty through LED. The main constraints in delivering results
in “pro-poor” implementation are poor analysis of local economies, unsustainable
community projects, lack of capacity and lack of resources (Nel & Rogerson, 2005).
Both concepts of “pro-poor” and “pro-growth” need to be addressed as an
integrated LED policy approach. A pro-growth policy could be equated to creating an
enabling environment for economic development while “pro-poor” policy equates to
poverty alleviation through job creation and social-welfare safety nets (Nel & Rogerson,
2005). According to Blakely and Bradshaw (2002), the two main approaches to LED
include a corporate centred approach with a focus on formal business and industrial
development, and an alternative approach with a focus on the poor section of a
community. Whatever the approach, LED policy should focus on an increase in the
number and variety of job opportunities and diversification of economic activities. Local
government need to assume an active role in this process (Blakely & Bradshaw, 2002).
In this article, the functioning of LED at the local government sphere in South Africa
will be analysed. The hypothesis is that if a LED strategy is well formulated and is
effectively implemented, it can facilitate the acceleration of the creation of jobs and
improve quality of life of local people. LED in the northern Free State region (also known
as the Fezile Dabi District Municipality region) will be analysed by means of qualitative
research and an attempt will be made in the formulation of solutions for improved LED
implementation.
2. Local economic development (LED) defined
LED forms part of the micro-economic component of development economics. According
to Lewis (1966), “development economics is not very complicated as the secret to
successful economic development planning lies in sensible politics and good public
administration”. Development economics is focused on the economic, cultural and
political requirements to effect fast institutional reform so as to distribute the benefits of
economic progress to the broadest section of the population, thereby ensuring that the
poverty trap is broken. In order to achieve this, government intervention by means of
policy formulation is needed as a component of development economics. The World Bank
(1991) describes development economics as a process to improve quality of life,
especially of the poor. This calls for higher incomes but also other important aspects such
as better skills and education, higher standards of health and nutrition, cleaner
environment, equal opportunities, individual freedom and rich cultural life, leading to less
poverty. According to Soedjatmoko (1985), “development theorists have paid insufficient
attention to institutional and structural problems and to the power of historical, cultural
and religious forces in the development process”.
2
In the literature there are many definitions of LED. Blakely (1994) defines LED
as the process with which local government or community-based organisations engage to
stimulate or maintain business activity and/or employment. The key role local
government has to play in LED can also be found in the definition of Scheepers and
Monchusi (2002) who define LED as a process managed by municipalities in accordance
with their constitutional mandate to promote social and economic development.
According to the International Labour Organization (ILO, 2006), local economies need to
find solutions and alternatives to improve and strengthen local competitiveness and
comparative advantages to compete on a global scale. The challenge of LED is to find
ways to maximize local resources and local knowledge to benefit all inhabitants within a
specific geographical area. Trousdale (2005) defines LED is a participating process where
local people, from all sectors within a specific area, work together to activate and
stimulate local economic activities, with the aim to ensure a resilient and sustainable local
economy. According to Bartik (2003) LED is defined as the local economy’s capacity to
create wealth for local residents.
Meyer-Stamer (2008) defined LED as the ability of a specific area or locality or
even region to generate increasing income and improve local quality of life for its
residents. LED attempts to remedy market failures such as to remove barriers to enter
markets for small business and availability of information. LED is also about creating
positive conditions for business development (Meyer-Stamer, 2003). According to
Swinburn et al (2006), LED is a process whereby public, business and non-governmental
sectors work collectively as partners to create a better quality of life for local residents
through economic development. To conclude with regards to an LED definition, LED is
the total of all economic activities by all relevant stakeholders within a specific defined
geographical region, working together in partnership to create economic development and
ultimately improvement of quality of life for all residents in the area.
LED has become a global concept that is generally utilized to address poverty and to
create jobs in urban and rural localities. The greatest potential for development support
exists at the local government level, with a focus on attracting investments, creating jobs
and boosting demand. In South Africa, since 1994, local government’s role has expanded
from providers of public goods and basic social services to include LED (Local
Government Support Program in ARMM, 2009).
3. Local economic development (LED) in South Africa
Improved local governance performance regarding LED requires cooperation and
partnerships. The service delivery triangle relating to LED consists of three partners
namely government, private sector and local communities (Meyer, 2013). Figure 1
provides an illustration of the service delivery triangle for LED.
3
Figure 1: Service delivery triangle regarding to LED
Source: Meyer, (2013).
Various pieces of legislation and policy form the foundation of LED in South Africa. The
Constitution (no.108 of 1996) is the foundation and provides for a developmental model
of local government. Local government is not only responsible for service delivery, but
also for socio-economic development of its communities. In terms of Sections 152 and
153 it is stated that “municipalities must provide and manage their administration,
budgeting and planning processes to give priority to the basic needs of communities”
(Republic of South Africa, 1996). In terms of the Constitution, local government needs to
fulfil the following functions (IIED, 2000; Republic of South Africa, 1996):
• Provide democratic and accountable government for all communities,
• Ensure service provision in a sustainable way.
• Promote social and economic development.
• Promote a safe and healthy environment.
• Encourage community participation and involvement in matters of the area.
The constitutional mandate has been strengthened by the White Paper on Local
Government (1998), which formally introduced the concept of developmental local
government. This policy document defines developmental local government as “local
government committed to working with citizens and groups within the community to find
sustainable ways to meet their social, economic and material needs, and improve the
quality of their lives. Furthermore this document makes it quite clear that local
government is not responsible for creating jobs, but instead it is responsible for creating
an enabling environment for development (Triegaardt, 2007). According to Rogerson
(2009) this enablement has laid the foundation for the development of a customised model
to drive LED at local government level.
Another important policy initiative is the 2005 “Policy Guidelines for Implementing
Local Economic Development in South Africa”, which identifies economic growth and
poverty eradication as the key overarching goals of LED (DPLG, 2005). Noteworthy is
the LED framework Stimulating and Developing Sustainable Local Economies which was
released by the Department of Provincial and Local Government in 2006 (DPLG, 2006).
The Framework emphasises that municipalities have a key role in creating an environment
Government
Private
sector
Local
communities
4
conducive for investment through the provision of infrastructure and quality services,
rather than by developing programmes and attempting to create jobs directly.
Within the 5 year Local Government Strategic Agenda and Implementation Plan
(2006), LED has been identified as one of the five key performance areas (KPAs) of local
government. According to Van der Heijden (2008) it is important to realise that LED as
an outcome is strongly interrelated and dependent upon the other four KPAs, namely,
municipal transformation and organisational development, basic service delivery,
municipal financial viability and management and good governance and public
participation.
LED in South Africa is concerned with creating robust and inclusive local economies
that exploit local opportunities, address local needs and contribute to natural development
objectives such as economic growth and poverty eradication. The challenge of LED in
South Africa is that most local municipalities do not have adequate economic growth
strategies in place that are implementable and therefore are unable to address poverty and
unemployment. For LED to be successful there should be a coherent planning process
involving all stakeholders within the local area. The process takes place over time,
involving all sections of the community and covers all matters that affect quality of life in
a local area, particularly those that need most support (Sekhampu, 2010).
In order for LED to be more effective in South Africa, the following principles are
proposed by Meyer-Stamer (2003): the creation of a clear distinction between LED and
community development initiatives, refrain to solve problems by throwing money to the
problem, ongoing analysis of local economic sectors and address market failures,
stimulate entrepreneurship and business development, maximize existing local resources
such as finance, natural resources, and human skills by the utilization of mentors, identify
and implement “quick wins” projects and creation of a strong partnership between public
and private sectors. According to Blakely and Bradshaw (2002), a municipality can decide
to act as a developer and even an entrepreneur, a coordinator, a facilitator or a stimulator.
The views of these LED specialists regarding the role of local government are supported
by ASA-LGP (2005) and DPLG (2003).
Finally, LED success regarding implementation is dependent on six key issues
according to Trousdale (2005):
• Local leadership at local government, local business and local communities.
• An enabling economic environment must exist with access to opportunities for all.
• The local youth must be involved through youth development programmes.
• J ob creation potential must exist, relating to sustainable jobs.
• Good governance.
• Availability of capacity and skills on all levels of the local economy.
• All efforts must lead to poverty alleviation and improvement in quality of life.
4. Case study: The northern Free State region
The northern Free State region has been identified as the case study region to determine
the extent to which LED has been successfully implemented. The study area has been
selected firstly due to its rural character, and secondly due to its strong economic linkages
with Gauteng province. The region consists of the Fezile Dabi District Municipality and
four local municipal areas namely Mafube, Metsimaholo, Moqhaka and Ngwathe local
municipalities.
In an interview with Dr A. Venter, LED manager of Fezile Dabi District
Municipality on 4 April 2014, current challenges regarding LED in the region were
5
discussed. The district municipality has to play a co-ordination role and assist local
municipalities in the area with training and capacity building. The four local
municipalities are currently struggling with political instability and capacity challenges.
LED units are either non-existent or not fully operational and existing LED strategies are
not ready for implementation. Possible provisional solutions to the challenges are LED
skills development and capacity improvement. Existing LED strategies need to be
adjusted for implementation. Improved co-operation and co-ordination between the
district and local municipalities must be facilitated. The district is currently engaged in the
establishment of a regional LED forum for the area to improve coordination (Venter,
2014). The municipal entities are illustrated in Figure 2.
Figure 2: Municipal entities in the northern Free State
Source: Own compilation.
The methodology used in this article is based on qualitative methods. Interviews
were held with all LED managers in the study region and the all the municipalities were
analysed regarding the overall structure, the LED unit structure, functionality of the LED
unit, and weaknesses and opportunities per municipal area. The following section is a
summary of the overview of the municipalities in the study region.
4.1 Fezile Dabi District Municipality
The area known as the northern Free State, is bounded to the north by the Vaal River and
includes natural features such as the Vaal Dam, and the Vredefort Dome area. Main urban
areas include Sasolburg, where the administrative node is, Kroonstad, Parys, and
Frankfort. The region could be classified as a mostly rural area. Municipal departments
include: Office of the Municipal Manager, Finance, Corporate services, Community
health and environment, Project management and Public Works and lastly Social
Development and Tourism. The LED unit is located in the last mentioned department. A
LED unit exists, but needs strengthening. Most of the municipal committees are
operational. Good relations exist with provincial departments and all the local
municipalities. No regional services plans are in place and no marketing or tourism plans
exist. The municipality will struggle to implement the action plans as listed in the LED
strategy due to a lack of funding, lack of capacity and a lack of skills. Improved overall
Fezile Dabi
District
Municipality
Metsimaholo
Local
Municipality
Mafube Local
Municipality
Ngwathe Local
Municipality
Moqhaka
Local
Municipality
6
support and co-ordination is required by the District Municipality regarding the local
municipalities in the region (Meyer, 2013).
Regional government’s roles are to ensure investment in the region, and to ensure
regional-wide cooperation and collaboration. Regional governments (such as district
municipalities) can serve to facilitate LED efforts by acting as an intermediary between
national and local government. Provision of infrastructure and environmental
improvements are important (Swinburn et al, 2006).
According to the 2011/2012 Integrated Development Plan (IDP) of the district
municipality (Fezile Dabi District Municipality, 2012) LED is one of the main objectives
for the district municipality. A new LED strategy has been compiled, taking into account
all the principles of a modern strategy and is currently being implemented. Funding for
implementation is however very limited.
4.2 Moqhaka local municipality (Moqhaka means “crown”)
The area forms the south-western boundary of the study area, while the N1 freeway,
which links J ohannesburg with Cape Town, bisects the area. The municipal headquarters
is located in Kroonstad/Moakeng. Other main urban centres are
Vijoenskroon/Rammulotsi and Steynsrus/Matlwangtlwang urban. The region could be
classified as a rural area, some 2 to 4 hours drive from the closest metropolitan area.
Municipal departments include: Office of Municipal Manager, Financial Services,
Community and Emergency services, Corporate Services, and Infrastructure Services. The
LED unit forms part of the Community Services Department (Meyer, 2013).
LED capacity is very limited and only two officials are responsible for LED. No
marketing takes place within the municipality. Only a few small community projects are
attempted by LED officials. A LED/IDP forum and Tourism forum exist but are not fully
operational. A local business chamber exists and is functional, with good relations with
the municipality. Good relations exist with the district municipality. The LED strategy
was compiled in 2011, but is very generic and not implementable. Services master plans
are outdated and need updating. No marketing or investment plans exist. Huge
infrastructure backlogs exist and local political conflict makes the operation of the
municipality difficult especially with a lack of strong local leadership. The LED section
lacks capacity, skills and sufficient budget to implement action plans. The municipal area
is well located for business and industrial development along the N1 freeway for a mixed
use development zone. The area is also well located for agro processing and industrial
sites are available. Tourism potential also exists in the area. Due to the fact that the area
has a strong agricultural sector, irrigation projects need to be implemented.
In the terms of 2010 COGTA (2010) turn-around strategy, challenges in the
municipal area were listed as ageing infrastructure and lack of funding for maintenance,
lack of technical skilled officials, poor public participation, no performance management
system (PMS), poor relationships between political and administrative leaders, poor
financial management systems, and lack of LED strategy and LED unit. Solutions to
improve the situation include municipal infrastructure grant (MIG) funding, deployment
of technical support by the Development Bank of South Africa (DBSA), finalise a public
participation policy, national assistance with financial management, and COGTA must
assist with the establishment of a LED unit (COGTA, 2010).
In terms of the 2011/2012 IDP, the LED priority sectors are tourism development,
agriculture, mining, manufacturing and commercial transport. Poverty alleviation
strategies include food gardens, small, medium, micro enterprises (SMME) development
and support and cooperatives (Moqhaka LM, 2010). The LED objectives for the area are
7
active farming development projects including agro-processing projects, development of
SMME’s and entrepreneurs, promotion of industrial development, tourism development,
poverty alleviation projects, mining development, and food security schemes (Moqhaka
LM, 2010
. The key strategies included in the LED strategy are spatial integration
strategies, infrastructure development, institutional structures, strengthening of the local
economic base, SMME’s support and development, improve the business environment
and improved quality of life (Moqhaka LM, 2010).
4.3 Mafube local municipality (Mafube means “dawning of a new day”)
The area forms the eastern part of the region, with the Vaal River forming its northern
boundary. The N3 freeway, which links J ohannesburg with Durban, bisects the municipal
area. The municipal headquarters is located in the Frankfort/Namahadi area. Other urban
areas include Villiers/Qalabotjha, Cornelia/Ntswanatsatsi and Tweeling/Mafahleng. The
region could be classified as a rural area, some 2 to 4 hours drive from the closest
metropolitan area. Municipal departments include: Office of the Municipal Manager,
Finance, Corporate services, Infrastructure, Community services, Human Settlement,
Town Planning and LED, IDP and PMS. The LED unit is located in the last mentioned
department. A LED unit does not exist. One IDP/LED Manager is in charge of LED
operations. The municipality is planning to appoint tourism and agricultural officers and
thereby establishing the LED unit. An LED forum is also planned. No formal local
business forum/chamber exists. Good relations between the municipality and the
provincial departments and the District municipality exist. Services master plans does not
exist as well as no marketing plans. The municipal area has poor economic linkages, with
a lack of information, huge housing backlogs and no SMME development plans. Potential
exists for large scale agricultural projects, infrastructure development and tourism
development along the Vaal River. Developmental opportunities also exist at Villiers
along N3 corridor (Meyer, 2013).
In terms of the 2010 COGTA (2010) turnaround strategy, the following challenges
were listed for the municipal area namely poor maintenance of roads and infrastructure,
lack of housing data base and housing development, poor management system for
community development workers (CDW’s) in the area, high turn-over levels of staff, poor
financial management, and lack of an LED unit with development strategies. Solutions are
listed as support by DBSA and MIG funding to development infrastructure, funding to
support ward committees and CDW’s, assist municipality with salary packages for top
employees, national government assistance with improved financial control, COGTA to
assist with set-up of LED unit (COGTA, 2010). The Mafube LED strategy was compiled
in 2012 (Mafube LM, 2012).
4.4 Metsimaholo local municipality (Metsimaholo means “big water”)
The area forms the north eastern part of the region, with the Vaal River forming the
northern boundary. The Vaal Dam is located in this area. The R59 freeway connects the
area with Gauteng province. The municipal main offices are located in Sasolburg. Other
main urban centres are Zamdela, Deneysville/Refengkgotso and Oranjeville/Metsimaholo.
The region could be classified as a “fringe” rural area, some 2 hours drive from the closest
metropolitan area. Municipal departments include: Office of Municipal Manager,
Financial Services, Social Services, Corporate Services, LED and Housing and
8
Infrastructure Services. The LED unit forms part of the LED and Housing Department
(Meyer, 2013).
A LED unit does exist consisting of a manager and only one LED officer. The
Municipal committee for LED is operational. The Business chamber in area is operational
and active. Good relations exist with provincial departments and district. The LED
strategy has recently being compiled and is fully implementable. The LED section lacks
of skills, capacity and leadership. Services master plans are not in place with no specific
marketing plans. Leadership conflict exists within the municipal structures. Large poor
areas still exist with housing backlogs. Potential exists for tourism development along the
Vaal Dam and Vaal River. The municipal area is well known as a manufacturing and
industrial focused cluster which includes Sasol Industries. The cluster needs to be
protected and strengthened.
In terms of the 2010 COGTA (2010) turnaround strategy, the following challenges
were listed for the municipal area namely poor maintenance of roads and infrastructure,
no services master plans, lack of housing data base and housing development, poor
management system for CDW’s and ward committees in the area, high turn-over levels of
staff, poor functionality of portfolio committees, poor financial management, lack of
planning data and lack of an LED unit with development strategies. Solutions are listed as
support by DBSA and MIG funding to development infrastructure, funding to support
ward committees and CDW’s, assist municipality with salary packages for top employees,
national government assistance with improved financial control, and COGTA to assist
with the set-up of the LED unit (COGTA, 2010).
The strategy identifies six general LED themes which needs to be focused on namely
increased investment, creating clusters, promote entrepreneurship, sector development,
neighbourhood renewal, and marketing of the area (Metsimaholo LM, 2011). The strategy
continues on the general trend by the listing of three programme areas as listed below
(Metsimaholo LM, 2011):
• Programme area 1: Business competitiveness.
• Programme area 2: Skills and human development.
• Programme area 3: Community economic regeneration.
4.5 Ngwathe local municipality (Ngwathe means “Renoster River”)
This area forms the northern and central area of the region. The N1 freeway, which links
J ohannesburg with Cape Town, bisects the area and a main physical feature is the
Vredefort Dome and the Vaal River. The municipal offices are located in
Parys/Tumahole. Other urban centres include Heilbron/Phiritona, Koppies/Kwawatsi,
Vredefort/Mokwallo and Edenville/Ngwathe. The region could be classified as a “fringe”
rural area, some 2 hours drive from the closest metropolitan area. Municipal departments
include: Office of Municipal Manager, Financial Services, Community and Emergency
Services, Corporate Services, and Infrastructure Services. The LED unit forms part of
Community Services (Meyer, 2013).
A LED unit exists of an acting LED Manager with two LED officials. A number
of community projects are currently implemented with success and the municipal LED
committee is operational. Business chambers exist in Parys and Heilbron and are very
active. Good links exist between the municipality and the district municipality. The LED
strategy was internally updated during 2013 and is fully implementable. Services master
plans are outdated and need to be updated. No formal marketing plan exists for the
municipal area. Space is currently available for industry development. Potential exists for
commonages development due to the strong agriculture sector. Partnerships, such as a
9
development forum, needs to be created in order to improve coordination and cooperation.
Skills development projects are required. The municipal area is well located along the N1
and R59 freeways. Potential exists for tourism in townships, SMME development and
development of industries in Koppies and Heilbron (Meyer, 2013).
In terms of the 2010 COGTA (2010) turnaround strategy, the following challenges
were listed for the municipal area namely poor maintenance of roads and infrastructure,
no services master plans, lack of housing data base and housing development, poor
management system for CDW’s and ward committees in the area, high turn-over levels of
staff, poor functionality of portfolio committees, poor financial management, lack of
planning data and lack of an LED unit with development strategies. Solutions are listed as
support by DBSA and MIG funding to development infrastructure, funding to support
ward committees and CDW’s, assist municipality with salary packages for top employees,
national government assistance with improved financial control, and COGTA to assist
with the set-up of the LED unit (COGTA, 2010).
The LED strategy listed the following key LED interventions as building of the
institutional capacity in the LED unit, job creation through infrastructure development,
inclusion of the disadvantaged communities in the local economy, creation of an enabling
local economic environment, investment and promotion of tourism and heritage
development, skills development and assistance to SMME’s. Economic sectors of
importance are listed as manufacturing, mining, construction, tourism, agriculture and
SMME development (Ngwathe LM, 2007).
LED units at the various municipalities in the study area lack capacity, funding, skills
and qualified and committed officials. Furthermore, LED units and officials are isolated in
terms of physical locality and institutionally from top management. It would seem that the
LED function at municipalities in the region is an “unfunded mandate”. Solutions are
provided in the next section of the article.
5. Solutions
5.1 General aspects
Local government’s overarching role in development is to provide an enabling
environment for all its residents and businesses to prosper. In order to achieve this
requirement, local government needs to have a LED strategic plan which has a balanced
approach between “pro-poor” and “pro-growth”. LED strategies need to intervene in the
creation of jobs, poverty alleviation and the general improvement of quality of life. LED
is a strategic process which stimulates good governance, cooperation and partnership
development. It can also support management and administrative functions. LED is
“everybody’s business”, including all levels of government, the local communities and
business people, as it is a cross-cutting issue (refer to Figure 1). LED success requires
strong and committed local leaders and local LED “champions”.
Local leadership is critical and essential for LED success. The term “local
leadership” includes members of the “LED triangle” of local stakeholders. Government
leaders are expected to take the lead in coordination and facilitation, but other leaders
from the community and business must contribute. Under the term “local leadership”, two
other terms are also listed namely “local champions” and “local drivers”. Local leaders
and champions must work together as partners to maximize local resources and actions.
Local leaders must make sure the local economy is driven and to create momentum. Local
government must take quick and effective decisions to the benefit of the local community.
Local leaders must put communities first and facilitate participation by all stakeholders.
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Examples of local champions are local government officials such as the municipal
manager, and LED manager, local politicians such as the mayor and ward councillors,
local ward committee members and CDW’s, local business leaders, non-governmental
organizations (NGO’s) leaders and church leaders. Political instability can have a
significant negative impact on LED.
A potential dynamic driving force behind LED initiatives is partnership formation
by local stakeholders. Local developmental projects driven by local business and local
communities have more chance to succeed than projects attempted by government alone.
Local people must play a leading role in local initiatives. Local regional development
occurs through local coordination. Local partnership formation leads to improved self-
governance by communities.
The current municipal LED unit standard structure is insufficient due to the fact
that LED is not a cross-cutting municipal function. The LED function must therefore be
driven by all municipal departments in an integrated manner. This lack of a cross-cutting
approach to LED fails to provide communities with diversified economic opportunities.
Only those LED projects which affects a single municipal entity are attempted to be
implemented. This type of implementation has resulted in small community development
projects, with limited economic impact. The municipal LED process has so far not being
successful in linking “big” business with SMME’s. LED units usually think and plan on a
small scale. The current system of LED implementation has the following implications:
No skills transfer to SMME’s occurs, senior managers are appointed from outside the area
and are not committed to the municipal area because they resides somewhere else,
projects benefit outside people and businesses and not locals, and local communities and
small business becomes antagonistic towards municipal officials as outsiders in their own
back yard (Malefane, 2009).
Local municipalities could make a larger impact on local economies by utilizing
LED as an integral part of their overall planning as part of service delivery (Human et al,
2008). An integrated use of LED by local government was introduced in the White Paper
on Local Government (Republic of South Africa, 1998) as well as in the Municipal
Systems Act (Republic of South Africa, 2000). Figure 3 is a summary of the integrative
process as proposed.
Figure 3: Integration of the LED function at the local government sphere
11
Source: Meyer, (2013).
A progressive policy and legal framework does not however guarantee successful
LED process and implementation. For LED to be effective, appropriate institutional
arrangements must exist within municipalities to take the laws and policies and transform
them into locally meaningful interventions in collaboration with all relevant
stakeholders/actors.
The establishment of LED units at all local municipalities in the region in terms of
capacity, skills and position in the municipal structure is priority. Introductory LED skills
training for all councillors and senior officials to create improved awareness are proposed.
CDW’s are a key component of LED implementation. Such officials need to be more
involved in the LED units and need specialized training. Ward committees, in conjunction
with CDWs need to be fully operational and have to be trained in the basic concepts of
rural development and LED. Municipal LED portfolio committees need to be fully
functional with regular meetings, driven by the LED unit.
Formulation of a
spatial
development
framework (SDF)
as foundation to
guide and direct
development
Formulation of
LED strategies
based on spatial
principle with are
implementable
Compilation of
IDP as integrative
tool including all
municipal
departments and
functions within
the context of the
SDF and LED
strategies
Establishment of a
project
management unit
to ensure
implemetation of
all projects
Establish a
performance
management unit
to ensure monitor
and control
Process must
include all
departments
especially
housing,
infrastructure and
social
development
12
The establishment of an integrative workgroup between the LED unit, the housing
unit and the town planning section is proposed. Spatial planning initiatives such as the
spatial development framework (SDF) need to be part of implementation. This will ensure
focused development nodes and corridors in the region. The compilation of marketing
plans for each of the local municipalities are needed, as no such plans exist. Such
marketing plans should focus on competitive advantages (agriculture, mining,
manufacturing and tourism) to attract, remain and expand businesses, formulation of
incentives regarding land, tax rebates, etc linked to IDZs and annual “early warning
system” (EWS) surveys to determine the needs of local businesses. Local government
must assist in the improvement and strengthening of external business structures such as
business chambers in the area. Facilitate the establishment of a community organizations
forum for the region, including all NGO’s in order to support community projects.
5.2 Generic LED strategies
As a result of ongoing research and practical policy formulation done in the study field by
the author since 1994, the following generic LED strategies are proposed to be included in
any LED strategy. Although a “one-size-fits-all” approach is not promoted, these generic
strategies will give direction to the LED practitioner in both urban and rural settings
(Meyer, 2013).
• Strategy 1: Strengthening of internal and external institutional structures and
processes.
• Strategy 2: Strengthening and support of the agricultural sector.
• Strategy 3: Ensure optimal linkages and support to the mining sector.
• Strategy 4: Strengthening and support of the manufacturing sector.
• Strategy 5: Ensure optimal development of the “Green economy”.
• Strategy 6: Ensure accelerated tourism development.
• Strategy 7: Ensure optimal opportunities for development of the informal sector.
• Strategy 8: Support and development of entrepreneurship and small business
development.
• Strategy 9: Support and development of education and skills development.
• Strategy 10: Ensure infrastructural development.
• Strategy 11: Provision of basic needs and social development.
13
5.3 Enabling environment for LED implementation
One of the main functions of LED is to create an enabling environment for economic
development and for the private sector to prosper. A total of twelve factors were identified
by Meyer (2014) in order to create an enabling local development environment which
include: Public-private partnership creation, clear and implementable developmental
policies, strong local leadership, poverty alleviation and social development initiatives,
economic development initiatives, environmental and spatial development actions,
infrastructure development, human resource development, entrepreneurial development,
transport and access opportunities, agricultural opportunities, and a safe and secure
environment.
5.4 J ob creation and LED
The central theme of LED is the creation of jobs. A job creation plan could include
aspects such as the establishment of a central employment agency with a data base,
mentorship programmes, public works programmes, intensive technical and business
skills training, development of incubators and job centres, youth development
programmes and policy formulation with incentives for job creation.
6. Lessons for LED implementation
The following sessions in LED policy formulation, planning and implementation are
listed:
• Strategic approach: Municipalities have not succeeded in the integration of LED with
the overall IDP processes. SMME support exists on ad hoc basis, but no
comprehensive economic or sectoral analysis exists at most municipalities. Wide and
vague statements such as SMME development, skills development, improve business
conditions are listed with no detail. A concept such as local diversification means
nothing if not grounded with detailed plans.
• Poverty alleviation: In most cases LED is “downgraded” in stature as only poverty
alleviation projects and community projects. Pro-poor focus alone will not lead to
successful LED implementation. A balance is needed between market initiatives, job
creation and pro-poor actions. Poverty alleviation forms more part of social
development than LED.
• Implementation systems: Although strategies are formulated, no implementation plans
or structures are in place. Local business support is only limited to local procurement.
Implementation plans are dependent on human resources and funding. External
funding requires skills and expertise on how to lobby for such funding.
• Partnerships: Successful LED occur where government and businesses work together
to improve the economy of a specific area. Business has not really been included in
IDP or LED in the planning and implementation of strategies. Poor partnerships have
led to limited LED success. Only small community development projects have been
attempted.
• Regional co-operation: No regional or district co-ordination exists between district
municipality and the local municipalities. Regional co-operation and alignment is of
key importance where the economies can complement and support the region.
14
• Project sustainability: Projects have not been started due to lack of funding. Municipal
projects need to focus on LED outcomes. For example, labour intensive projects could
cost more and take more time to complete, without additional income to municipality.
Most projects are therefore not sustainable.
• LED and political considerations: Politicians have a say in the prioritisation of
projects. Projects that are visible with immediate income, outcome, regardless of
sustainability are selected. The most important economic sector, for example
agriculture, is not prioritised.
• Capacity: No real skills development has taken place. Officials are left to manage
projects without business, financial or project management skills.
• Institutionalisation: LED projects are scattered throughout a specific municipality,
with no single department or unit as coordinator. This fact renders most LED
strategies irrelevant. LED strategies need to be spatially grounded.
Finally an LED strategy must be diverse and not based on a few projects. Identified
projects must be based on local demand (Rogerson, 2009).
7. Conclusions
In conclusion, the following challenges exist regarding the LED process from policy to
implementation at the local government sphere. These include that policy doesn’t
automatically lead to implementation, improved skills levels are required, staff and
funding shortages need to be resolved, poor community involvement in the planning and
implementation of LED projects exist and poor monitoring and evaluation (Nel &
Rogerson, 2005). Municipalities in South Africa do not have adequate economic
strategies in place to address the issues of poverty, unemployment and inequality (SACN,
2004). LED is currently still not a priority at most local authorities, and limited funding is
made available from national government. LED strategies lack detail for interventions and
lack monitoring and evaluation. Small rural municipalities especially struggle to
implement LED. The role and functions regarding LED is vague with a lack of
willingness for partnerships with the private sector (Khanya-Aicdd, 2006).
LED is not yet well embedded in municipal structures, which is shown by the lack of
LED units within the five municipalities analysed and also by the limited funds and in
some instances no funds allocated to LED. LED has as its goals to create local jobs, to
ensure economic stability and diversity, build on comparative advantages, assist the poor,
and ultimately strive to improve the quality of life of all local communities. Local
commitment, adequate skills and capacity is however non-negotiables for LED success.
References
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provincial and municipal elected and appointed officials about local economic
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Ngwathe Local Municipality. 2007. Ngwathe Local Municipal LED. Parys.
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17
ANNEXURE F: BUSINESS CHAMBER ANALYSIS 18
doc_956931889.pdf
Local economic development (LED) should be everybodys business, including local residents, local business people and government.
Local economic development (LED), challenges and solutions: The case
of the northern Free State region, South Africa
Dr Daniel Francois Meyer
North-West University (NWU)
South Africa
email: [email protected]
Abstract
Local economic development (LED) should be everybody’s business, including local residents, local
business people and government. LED is globally, but especially in developing countries, seen as the
solution to improved quality of life, unemployment, poverty and inequality. LED is a relatively new field of
research and policy formulation, planning processes and implementation plans are still evolving with
various alternative theories and approaches.
This article analyse LED theory and approaches with a focus on South Africa, with a case study on the
northern Free State region. Five municipalities in this region were analysed in terms of their LED
approaches, planning and implementation. The research methodology is based on a qualitative approach
which includes a literary review and various interviews with role players in the area. Results include
solutions, lessons learnt and generic strategies for LED. LED processes could achieve its promise of
ensuring improved quality of life if LED strategies are formulated for effective implementation.
Keywords: Local economic development, challenges, solutions, strategies, northern Free State.
1. Introduction
“Suitable economic policies could cure all economic problems by stimulating local
economic development to create better human and financial capital flows” (Reich, 1991).
“Creating new jobs and developing human capacity are not easy tasks. Local institutions
and national policy makers must align local human and natural resources of the
community to match both global and regional markets, and they can strive to create new
jobs that fit both the local people and the place” (Blakely and Bradshaw, 2002).
Globally, academics, development practitioners and stakeholders recognise the
important role of local economic development (LED) in order to create jobs, alleviating
poverty and improvement in quality of life. In order to achieve dynamic local
development, all aspects of local communities such as the economy, social, welfare,
environmental and political issues need to be addressed in an integrated and holistic
manner. A comprehensive strategy therefore needs to be compiled for a specific region to
achieve developmental success (Rogerson, 2009).
According to Rodrigues-Pose (2001), traditional macro-economic policies have in
the past been not being successful in creating an enabling developmental environment at
the local level and LED has provided an alternative to development. Rodrigues-Pose
1
(2001) listed the following advantages of LED over traditional economic policies namely,
LED empowers and ensures local participation, local people can play an active part in
planning their own economic future, LED ensures that local business are involved in the
process and are more open to play an active role in partnerships with local communities.
In addition, LED ensures that local development is locality based and focused on local
comparative advantages, it allows for more resilient local economies and LED could
create local opportunities and local jobs, thereby improving the local quality of life.
South Africa’s current development policy is focussed on “developmental” local
government and with a “pro-poor” emphasis. Local government has been pro-actively
encouraged through the Constitution (1996) to intervene and to play a leading role in job
creation and reduction of poverty through LED. The main constraints in delivering results
in “pro-poor” implementation are poor analysis of local economies, unsustainable
community projects, lack of capacity and lack of resources (Nel & Rogerson, 2005).
Both concepts of “pro-poor” and “pro-growth” need to be addressed as an
integrated LED policy approach. A pro-growth policy could be equated to creating an
enabling environment for economic development while “pro-poor” policy equates to
poverty alleviation through job creation and social-welfare safety nets (Nel & Rogerson,
2005). According to Blakely and Bradshaw (2002), the two main approaches to LED
include a corporate centred approach with a focus on formal business and industrial
development, and an alternative approach with a focus on the poor section of a
community. Whatever the approach, LED policy should focus on an increase in the
number and variety of job opportunities and diversification of economic activities. Local
government need to assume an active role in this process (Blakely & Bradshaw, 2002).
In this article, the functioning of LED at the local government sphere in South Africa
will be analysed. The hypothesis is that if a LED strategy is well formulated and is
effectively implemented, it can facilitate the acceleration of the creation of jobs and
improve quality of life of local people. LED in the northern Free State region (also known
as the Fezile Dabi District Municipality region) will be analysed by means of qualitative
research and an attempt will be made in the formulation of solutions for improved LED
implementation.
2. Local economic development (LED) defined
LED forms part of the micro-economic component of development economics. According
to Lewis (1966), “development economics is not very complicated as the secret to
successful economic development planning lies in sensible politics and good public
administration”. Development economics is focused on the economic, cultural and
political requirements to effect fast institutional reform so as to distribute the benefits of
economic progress to the broadest section of the population, thereby ensuring that the
poverty trap is broken. In order to achieve this, government intervention by means of
policy formulation is needed as a component of development economics. The World Bank
(1991) describes development economics as a process to improve quality of life,
especially of the poor. This calls for higher incomes but also other important aspects such
as better skills and education, higher standards of health and nutrition, cleaner
environment, equal opportunities, individual freedom and rich cultural life, leading to less
poverty. According to Soedjatmoko (1985), “development theorists have paid insufficient
attention to institutional and structural problems and to the power of historical, cultural
and religious forces in the development process”.
2
In the literature there are many definitions of LED. Blakely (1994) defines LED
as the process with which local government or community-based organisations engage to
stimulate or maintain business activity and/or employment. The key role local
government has to play in LED can also be found in the definition of Scheepers and
Monchusi (2002) who define LED as a process managed by municipalities in accordance
with their constitutional mandate to promote social and economic development.
According to the International Labour Organization (ILO, 2006), local economies need to
find solutions and alternatives to improve and strengthen local competitiveness and
comparative advantages to compete on a global scale. The challenge of LED is to find
ways to maximize local resources and local knowledge to benefit all inhabitants within a
specific geographical area. Trousdale (2005) defines LED is a participating process where
local people, from all sectors within a specific area, work together to activate and
stimulate local economic activities, with the aim to ensure a resilient and sustainable local
economy. According to Bartik (2003) LED is defined as the local economy’s capacity to
create wealth for local residents.
Meyer-Stamer (2008) defined LED as the ability of a specific area or locality or
even region to generate increasing income and improve local quality of life for its
residents. LED attempts to remedy market failures such as to remove barriers to enter
markets for small business and availability of information. LED is also about creating
positive conditions for business development (Meyer-Stamer, 2003). According to
Swinburn et al (2006), LED is a process whereby public, business and non-governmental
sectors work collectively as partners to create a better quality of life for local residents
through economic development. To conclude with regards to an LED definition, LED is
the total of all economic activities by all relevant stakeholders within a specific defined
geographical region, working together in partnership to create economic development and
ultimately improvement of quality of life for all residents in the area.
LED has become a global concept that is generally utilized to address poverty and to
create jobs in urban and rural localities. The greatest potential for development support
exists at the local government level, with a focus on attracting investments, creating jobs
and boosting demand. In South Africa, since 1994, local government’s role has expanded
from providers of public goods and basic social services to include LED (Local
Government Support Program in ARMM, 2009).
3. Local economic development (LED) in South Africa
Improved local governance performance regarding LED requires cooperation and
partnerships. The service delivery triangle relating to LED consists of three partners
namely government, private sector and local communities (Meyer, 2013). Figure 1
provides an illustration of the service delivery triangle for LED.
3
Figure 1: Service delivery triangle regarding to LED
Source: Meyer, (2013).
Various pieces of legislation and policy form the foundation of LED in South Africa. The
Constitution (no.108 of 1996) is the foundation and provides for a developmental model
of local government. Local government is not only responsible for service delivery, but
also for socio-economic development of its communities. In terms of Sections 152 and
153 it is stated that “municipalities must provide and manage their administration,
budgeting and planning processes to give priority to the basic needs of communities”
(Republic of South Africa, 1996). In terms of the Constitution, local government needs to
fulfil the following functions (IIED, 2000; Republic of South Africa, 1996):
• Provide democratic and accountable government for all communities,
• Ensure service provision in a sustainable way.
• Promote social and economic development.
• Promote a safe and healthy environment.
• Encourage community participation and involvement in matters of the area.
The constitutional mandate has been strengthened by the White Paper on Local
Government (1998), which formally introduced the concept of developmental local
government. This policy document defines developmental local government as “local
government committed to working with citizens and groups within the community to find
sustainable ways to meet their social, economic and material needs, and improve the
quality of their lives. Furthermore this document makes it quite clear that local
government is not responsible for creating jobs, but instead it is responsible for creating
an enabling environment for development (Triegaardt, 2007). According to Rogerson
(2009) this enablement has laid the foundation for the development of a customised model
to drive LED at local government level.
Another important policy initiative is the 2005 “Policy Guidelines for Implementing
Local Economic Development in South Africa”, which identifies economic growth and
poverty eradication as the key overarching goals of LED (DPLG, 2005). Noteworthy is
the LED framework Stimulating and Developing Sustainable Local Economies which was
released by the Department of Provincial and Local Government in 2006 (DPLG, 2006).
The Framework emphasises that municipalities have a key role in creating an environment
Government
Private
sector
Local
communities
4
conducive for investment through the provision of infrastructure and quality services,
rather than by developing programmes and attempting to create jobs directly.
Within the 5 year Local Government Strategic Agenda and Implementation Plan
(2006), LED has been identified as one of the five key performance areas (KPAs) of local
government. According to Van der Heijden (2008) it is important to realise that LED as
an outcome is strongly interrelated and dependent upon the other four KPAs, namely,
municipal transformation and organisational development, basic service delivery,
municipal financial viability and management and good governance and public
participation.
LED in South Africa is concerned with creating robust and inclusive local economies
that exploit local opportunities, address local needs and contribute to natural development
objectives such as economic growth and poverty eradication. The challenge of LED in
South Africa is that most local municipalities do not have adequate economic growth
strategies in place that are implementable and therefore are unable to address poverty and
unemployment. For LED to be successful there should be a coherent planning process
involving all stakeholders within the local area. The process takes place over time,
involving all sections of the community and covers all matters that affect quality of life in
a local area, particularly those that need most support (Sekhampu, 2010).
In order for LED to be more effective in South Africa, the following principles are
proposed by Meyer-Stamer (2003): the creation of a clear distinction between LED and
community development initiatives, refrain to solve problems by throwing money to the
problem, ongoing analysis of local economic sectors and address market failures,
stimulate entrepreneurship and business development, maximize existing local resources
such as finance, natural resources, and human skills by the utilization of mentors, identify
and implement “quick wins” projects and creation of a strong partnership between public
and private sectors. According to Blakely and Bradshaw (2002), a municipality can decide
to act as a developer and even an entrepreneur, a coordinator, a facilitator or a stimulator.
The views of these LED specialists regarding the role of local government are supported
by ASA-LGP (2005) and DPLG (2003).
Finally, LED success regarding implementation is dependent on six key issues
according to Trousdale (2005):
• Local leadership at local government, local business and local communities.
• An enabling economic environment must exist with access to opportunities for all.
• The local youth must be involved through youth development programmes.
• J ob creation potential must exist, relating to sustainable jobs.
• Good governance.
• Availability of capacity and skills on all levels of the local economy.
• All efforts must lead to poverty alleviation and improvement in quality of life.
4. Case study: The northern Free State region
The northern Free State region has been identified as the case study region to determine
the extent to which LED has been successfully implemented. The study area has been
selected firstly due to its rural character, and secondly due to its strong economic linkages
with Gauteng province. The region consists of the Fezile Dabi District Municipality and
four local municipal areas namely Mafube, Metsimaholo, Moqhaka and Ngwathe local
municipalities.
In an interview with Dr A. Venter, LED manager of Fezile Dabi District
Municipality on 4 April 2014, current challenges regarding LED in the region were
5
discussed. The district municipality has to play a co-ordination role and assist local
municipalities in the area with training and capacity building. The four local
municipalities are currently struggling with political instability and capacity challenges.
LED units are either non-existent or not fully operational and existing LED strategies are
not ready for implementation. Possible provisional solutions to the challenges are LED
skills development and capacity improvement. Existing LED strategies need to be
adjusted for implementation. Improved co-operation and co-ordination between the
district and local municipalities must be facilitated. The district is currently engaged in the
establishment of a regional LED forum for the area to improve coordination (Venter,
2014). The municipal entities are illustrated in Figure 2.
Figure 2: Municipal entities in the northern Free State
Source: Own compilation.
The methodology used in this article is based on qualitative methods. Interviews
were held with all LED managers in the study region and the all the municipalities were
analysed regarding the overall structure, the LED unit structure, functionality of the LED
unit, and weaknesses and opportunities per municipal area. The following section is a
summary of the overview of the municipalities in the study region.
4.1 Fezile Dabi District Municipality
The area known as the northern Free State, is bounded to the north by the Vaal River and
includes natural features such as the Vaal Dam, and the Vredefort Dome area. Main urban
areas include Sasolburg, where the administrative node is, Kroonstad, Parys, and
Frankfort. The region could be classified as a mostly rural area. Municipal departments
include: Office of the Municipal Manager, Finance, Corporate services, Community
health and environment, Project management and Public Works and lastly Social
Development and Tourism. The LED unit is located in the last mentioned department. A
LED unit exists, but needs strengthening. Most of the municipal committees are
operational. Good relations exist with provincial departments and all the local
municipalities. No regional services plans are in place and no marketing or tourism plans
exist. The municipality will struggle to implement the action plans as listed in the LED
strategy due to a lack of funding, lack of capacity and a lack of skills. Improved overall
Fezile Dabi
District
Municipality
Metsimaholo
Local
Municipality
Mafube Local
Municipality
Ngwathe Local
Municipality
Moqhaka
Local
Municipality
6
support and co-ordination is required by the District Municipality regarding the local
municipalities in the region (Meyer, 2013).
Regional government’s roles are to ensure investment in the region, and to ensure
regional-wide cooperation and collaboration. Regional governments (such as district
municipalities) can serve to facilitate LED efforts by acting as an intermediary between
national and local government. Provision of infrastructure and environmental
improvements are important (Swinburn et al, 2006).
According to the 2011/2012 Integrated Development Plan (IDP) of the district
municipality (Fezile Dabi District Municipality, 2012) LED is one of the main objectives
for the district municipality. A new LED strategy has been compiled, taking into account
all the principles of a modern strategy and is currently being implemented. Funding for
implementation is however very limited.
4.2 Moqhaka local municipality (Moqhaka means “crown”)
The area forms the south-western boundary of the study area, while the N1 freeway,
which links J ohannesburg with Cape Town, bisects the area. The municipal headquarters
is located in Kroonstad/Moakeng. Other main urban centres are
Vijoenskroon/Rammulotsi and Steynsrus/Matlwangtlwang urban. The region could be
classified as a rural area, some 2 to 4 hours drive from the closest metropolitan area.
Municipal departments include: Office of Municipal Manager, Financial Services,
Community and Emergency services, Corporate Services, and Infrastructure Services. The
LED unit forms part of the Community Services Department (Meyer, 2013).
LED capacity is very limited and only two officials are responsible for LED. No
marketing takes place within the municipality. Only a few small community projects are
attempted by LED officials. A LED/IDP forum and Tourism forum exist but are not fully
operational. A local business chamber exists and is functional, with good relations with
the municipality. Good relations exist with the district municipality. The LED strategy
was compiled in 2011, but is very generic and not implementable. Services master plans
are outdated and need updating. No marketing or investment plans exist. Huge
infrastructure backlogs exist and local political conflict makes the operation of the
municipality difficult especially with a lack of strong local leadership. The LED section
lacks capacity, skills and sufficient budget to implement action plans. The municipal area
is well located for business and industrial development along the N1 freeway for a mixed
use development zone. The area is also well located for agro processing and industrial
sites are available. Tourism potential also exists in the area. Due to the fact that the area
has a strong agricultural sector, irrigation projects need to be implemented.
In the terms of 2010 COGTA (2010) turn-around strategy, challenges in the
municipal area were listed as ageing infrastructure and lack of funding for maintenance,
lack of technical skilled officials, poor public participation, no performance management
system (PMS), poor relationships between political and administrative leaders, poor
financial management systems, and lack of LED strategy and LED unit. Solutions to
improve the situation include municipal infrastructure grant (MIG) funding, deployment
of technical support by the Development Bank of South Africa (DBSA), finalise a public
participation policy, national assistance with financial management, and COGTA must
assist with the establishment of a LED unit (COGTA, 2010).
In terms of the 2011/2012 IDP, the LED priority sectors are tourism development,
agriculture, mining, manufacturing and commercial transport. Poverty alleviation
strategies include food gardens, small, medium, micro enterprises (SMME) development
and support and cooperatives (Moqhaka LM, 2010). The LED objectives for the area are
7
active farming development projects including agro-processing projects, development of
SMME’s and entrepreneurs, promotion of industrial development, tourism development,
poverty alleviation projects, mining development, and food security schemes (Moqhaka
LM, 2010
. The key strategies included in the LED strategy are spatial integrationstrategies, infrastructure development, institutional structures, strengthening of the local
economic base, SMME’s support and development, improve the business environment
and improved quality of life (Moqhaka LM, 2010).
4.3 Mafube local municipality (Mafube means “dawning of a new day”)
The area forms the eastern part of the region, with the Vaal River forming its northern
boundary. The N3 freeway, which links J ohannesburg with Durban, bisects the municipal
area. The municipal headquarters is located in the Frankfort/Namahadi area. Other urban
areas include Villiers/Qalabotjha, Cornelia/Ntswanatsatsi and Tweeling/Mafahleng. The
region could be classified as a rural area, some 2 to 4 hours drive from the closest
metropolitan area. Municipal departments include: Office of the Municipal Manager,
Finance, Corporate services, Infrastructure, Community services, Human Settlement,
Town Planning and LED, IDP and PMS. The LED unit is located in the last mentioned
department. A LED unit does not exist. One IDP/LED Manager is in charge of LED
operations. The municipality is planning to appoint tourism and agricultural officers and
thereby establishing the LED unit. An LED forum is also planned. No formal local
business forum/chamber exists. Good relations between the municipality and the
provincial departments and the District municipality exist. Services master plans does not
exist as well as no marketing plans. The municipal area has poor economic linkages, with
a lack of information, huge housing backlogs and no SMME development plans. Potential
exists for large scale agricultural projects, infrastructure development and tourism
development along the Vaal River. Developmental opportunities also exist at Villiers
along N3 corridor (Meyer, 2013).
In terms of the 2010 COGTA (2010) turnaround strategy, the following challenges
were listed for the municipal area namely poor maintenance of roads and infrastructure,
lack of housing data base and housing development, poor management system for
community development workers (CDW’s) in the area, high turn-over levels of staff, poor
financial management, and lack of an LED unit with development strategies. Solutions are
listed as support by DBSA and MIG funding to development infrastructure, funding to
support ward committees and CDW’s, assist municipality with salary packages for top
employees, national government assistance with improved financial control, COGTA to
assist with set-up of LED unit (COGTA, 2010). The Mafube LED strategy was compiled
in 2012 (Mafube LM, 2012).
4.4 Metsimaholo local municipality (Metsimaholo means “big water”)
The area forms the north eastern part of the region, with the Vaal River forming the
northern boundary. The Vaal Dam is located in this area. The R59 freeway connects the
area with Gauteng province. The municipal main offices are located in Sasolburg. Other
main urban centres are Zamdela, Deneysville/Refengkgotso and Oranjeville/Metsimaholo.
The region could be classified as a “fringe” rural area, some 2 hours drive from the closest
metropolitan area. Municipal departments include: Office of Municipal Manager,
Financial Services, Social Services, Corporate Services, LED and Housing and
8
Infrastructure Services. The LED unit forms part of the LED and Housing Department
(Meyer, 2013).
A LED unit does exist consisting of a manager and only one LED officer. The
Municipal committee for LED is operational. The Business chamber in area is operational
and active. Good relations exist with provincial departments and district. The LED
strategy has recently being compiled and is fully implementable. The LED section lacks
of skills, capacity and leadership. Services master plans are not in place with no specific
marketing plans. Leadership conflict exists within the municipal structures. Large poor
areas still exist with housing backlogs. Potential exists for tourism development along the
Vaal Dam and Vaal River. The municipal area is well known as a manufacturing and
industrial focused cluster which includes Sasol Industries. The cluster needs to be
protected and strengthened.
In terms of the 2010 COGTA (2010) turnaround strategy, the following challenges
were listed for the municipal area namely poor maintenance of roads and infrastructure,
no services master plans, lack of housing data base and housing development, poor
management system for CDW’s and ward committees in the area, high turn-over levels of
staff, poor functionality of portfolio committees, poor financial management, lack of
planning data and lack of an LED unit with development strategies. Solutions are listed as
support by DBSA and MIG funding to development infrastructure, funding to support
ward committees and CDW’s, assist municipality with salary packages for top employees,
national government assistance with improved financial control, and COGTA to assist
with the set-up of the LED unit (COGTA, 2010).
The strategy identifies six general LED themes which needs to be focused on namely
increased investment, creating clusters, promote entrepreneurship, sector development,
neighbourhood renewal, and marketing of the area (Metsimaholo LM, 2011). The strategy
continues on the general trend by the listing of three programme areas as listed below
(Metsimaholo LM, 2011):
• Programme area 1: Business competitiveness.
• Programme area 2: Skills and human development.
• Programme area 3: Community economic regeneration.
4.5 Ngwathe local municipality (Ngwathe means “Renoster River”)
This area forms the northern and central area of the region. The N1 freeway, which links
J ohannesburg with Cape Town, bisects the area and a main physical feature is the
Vredefort Dome and the Vaal River. The municipal offices are located in
Parys/Tumahole. Other urban centres include Heilbron/Phiritona, Koppies/Kwawatsi,
Vredefort/Mokwallo and Edenville/Ngwathe. The region could be classified as a “fringe”
rural area, some 2 hours drive from the closest metropolitan area. Municipal departments
include: Office of Municipal Manager, Financial Services, Community and Emergency
Services, Corporate Services, and Infrastructure Services. The LED unit forms part of
Community Services (Meyer, 2013).
A LED unit exists of an acting LED Manager with two LED officials. A number
of community projects are currently implemented with success and the municipal LED
committee is operational. Business chambers exist in Parys and Heilbron and are very
active. Good links exist between the municipality and the district municipality. The LED
strategy was internally updated during 2013 and is fully implementable. Services master
plans are outdated and need to be updated. No formal marketing plan exists for the
municipal area. Space is currently available for industry development. Potential exists for
commonages development due to the strong agriculture sector. Partnerships, such as a
9
development forum, needs to be created in order to improve coordination and cooperation.
Skills development projects are required. The municipal area is well located along the N1
and R59 freeways. Potential exists for tourism in townships, SMME development and
development of industries in Koppies and Heilbron (Meyer, 2013).
In terms of the 2010 COGTA (2010) turnaround strategy, the following challenges
were listed for the municipal area namely poor maintenance of roads and infrastructure,
no services master plans, lack of housing data base and housing development, poor
management system for CDW’s and ward committees in the area, high turn-over levels of
staff, poor functionality of portfolio committees, poor financial management, lack of
planning data and lack of an LED unit with development strategies. Solutions are listed as
support by DBSA and MIG funding to development infrastructure, funding to support
ward committees and CDW’s, assist municipality with salary packages for top employees,
national government assistance with improved financial control, and COGTA to assist
with the set-up of the LED unit (COGTA, 2010).
The LED strategy listed the following key LED interventions as building of the
institutional capacity in the LED unit, job creation through infrastructure development,
inclusion of the disadvantaged communities in the local economy, creation of an enabling
local economic environment, investment and promotion of tourism and heritage
development, skills development and assistance to SMME’s. Economic sectors of
importance are listed as manufacturing, mining, construction, tourism, agriculture and
SMME development (Ngwathe LM, 2007).
LED units at the various municipalities in the study area lack capacity, funding, skills
and qualified and committed officials. Furthermore, LED units and officials are isolated in
terms of physical locality and institutionally from top management. It would seem that the
LED function at municipalities in the region is an “unfunded mandate”. Solutions are
provided in the next section of the article.
5. Solutions
5.1 General aspects
Local government’s overarching role in development is to provide an enabling
environment for all its residents and businesses to prosper. In order to achieve this
requirement, local government needs to have a LED strategic plan which has a balanced
approach between “pro-poor” and “pro-growth”. LED strategies need to intervene in the
creation of jobs, poverty alleviation and the general improvement of quality of life. LED
is a strategic process which stimulates good governance, cooperation and partnership
development. It can also support management and administrative functions. LED is
“everybody’s business”, including all levels of government, the local communities and
business people, as it is a cross-cutting issue (refer to Figure 1). LED success requires
strong and committed local leaders and local LED “champions”.
Local leadership is critical and essential for LED success. The term “local
leadership” includes members of the “LED triangle” of local stakeholders. Government
leaders are expected to take the lead in coordination and facilitation, but other leaders
from the community and business must contribute. Under the term “local leadership”, two
other terms are also listed namely “local champions” and “local drivers”. Local leaders
and champions must work together as partners to maximize local resources and actions.
Local leaders must make sure the local economy is driven and to create momentum. Local
government must take quick and effective decisions to the benefit of the local community.
Local leaders must put communities first and facilitate participation by all stakeholders.
10
Examples of local champions are local government officials such as the municipal
manager, and LED manager, local politicians such as the mayor and ward councillors,
local ward committee members and CDW’s, local business leaders, non-governmental
organizations (NGO’s) leaders and church leaders. Political instability can have a
significant negative impact on LED.
A potential dynamic driving force behind LED initiatives is partnership formation
by local stakeholders. Local developmental projects driven by local business and local
communities have more chance to succeed than projects attempted by government alone.
Local people must play a leading role in local initiatives. Local regional development
occurs through local coordination. Local partnership formation leads to improved self-
governance by communities.
The current municipal LED unit standard structure is insufficient due to the fact
that LED is not a cross-cutting municipal function. The LED function must therefore be
driven by all municipal departments in an integrated manner. This lack of a cross-cutting
approach to LED fails to provide communities with diversified economic opportunities.
Only those LED projects which affects a single municipal entity are attempted to be
implemented. This type of implementation has resulted in small community development
projects, with limited economic impact. The municipal LED process has so far not being
successful in linking “big” business with SMME’s. LED units usually think and plan on a
small scale. The current system of LED implementation has the following implications:
No skills transfer to SMME’s occurs, senior managers are appointed from outside the area
and are not committed to the municipal area because they resides somewhere else,
projects benefit outside people and businesses and not locals, and local communities and
small business becomes antagonistic towards municipal officials as outsiders in their own
back yard (Malefane, 2009).
Local municipalities could make a larger impact on local economies by utilizing
LED as an integral part of their overall planning as part of service delivery (Human et al,
2008). An integrated use of LED by local government was introduced in the White Paper
on Local Government (Republic of South Africa, 1998) as well as in the Municipal
Systems Act (Republic of South Africa, 2000). Figure 3 is a summary of the integrative
process as proposed.
Figure 3: Integration of the LED function at the local government sphere
11
Source: Meyer, (2013).
A progressive policy and legal framework does not however guarantee successful
LED process and implementation. For LED to be effective, appropriate institutional
arrangements must exist within municipalities to take the laws and policies and transform
them into locally meaningful interventions in collaboration with all relevant
stakeholders/actors.
The establishment of LED units at all local municipalities in the region in terms of
capacity, skills and position in the municipal structure is priority. Introductory LED skills
training for all councillors and senior officials to create improved awareness are proposed.
CDW’s are a key component of LED implementation. Such officials need to be more
involved in the LED units and need specialized training. Ward committees, in conjunction
with CDWs need to be fully operational and have to be trained in the basic concepts of
rural development and LED. Municipal LED portfolio committees need to be fully
functional with regular meetings, driven by the LED unit.
Formulation of a
spatial
development
framework (SDF)
as foundation to
guide and direct
development
Formulation of
LED strategies
based on spatial
principle with are
implementable
Compilation of
IDP as integrative
tool including all
municipal
departments and
functions within
the context of the
SDF and LED
strategies
Establishment of a
project
management unit
to ensure
implemetation of
all projects
Establish a
performance
management unit
to ensure monitor
and control
Process must
include all
departments
especially
housing,
infrastructure and
social
development
12
The establishment of an integrative workgroup between the LED unit, the housing
unit and the town planning section is proposed. Spatial planning initiatives such as the
spatial development framework (SDF) need to be part of implementation. This will ensure
focused development nodes and corridors in the region. The compilation of marketing
plans for each of the local municipalities are needed, as no such plans exist. Such
marketing plans should focus on competitive advantages (agriculture, mining,
manufacturing and tourism) to attract, remain and expand businesses, formulation of
incentives regarding land, tax rebates, etc linked to IDZs and annual “early warning
system” (EWS) surveys to determine the needs of local businesses. Local government
must assist in the improvement and strengthening of external business structures such as
business chambers in the area. Facilitate the establishment of a community organizations
forum for the region, including all NGO’s in order to support community projects.
5.2 Generic LED strategies
As a result of ongoing research and practical policy formulation done in the study field by
the author since 1994, the following generic LED strategies are proposed to be included in
any LED strategy. Although a “one-size-fits-all” approach is not promoted, these generic
strategies will give direction to the LED practitioner in both urban and rural settings
(Meyer, 2013).
• Strategy 1: Strengthening of internal and external institutional structures and
processes.
• Strategy 2: Strengthening and support of the agricultural sector.
• Strategy 3: Ensure optimal linkages and support to the mining sector.
• Strategy 4: Strengthening and support of the manufacturing sector.
• Strategy 5: Ensure optimal development of the “Green economy”.
• Strategy 6: Ensure accelerated tourism development.
• Strategy 7: Ensure optimal opportunities for development of the informal sector.
• Strategy 8: Support and development of entrepreneurship and small business
development.
• Strategy 9: Support and development of education and skills development.
• Strategy 10: Ensure infrastructural development.
• Strategy 11: Provision of basic needs and social development.
13
5.3 Enabling environment for LED implementation
One of the main functions of LED is to create an enabling environment for economic
development and for the private sector to prosper. A total of twelve factors were identified
by Meyer (2014) in order to create an enabling local development environment which
include: Public-private partnership creation, clear and implementable developmental
policies, strong local leadership, poverty alleviation and social development initiatives,
economic development initiatives, environmental and spatial development actions,
infrastructure development, human resource development, entrepreneurial development,
transport and access opportunities, agricultural opportunities, and a safe and secure
environment.
5.4 J ob creation and LED
The central theme of LED is the creation of jobs. A job creation plan could include
aspects such as the establishment of a central employment agency with a data base,
mentorship programmes, public works programmes, intensive technical and business
skills training, development of incubators and job centres, youth development
programmes and policy formulation with incentives for job creation.
6. Lessons for LED implementation
The following sessions in LED policy formulation, planning and implementation are
listed:
• Strategic approach: Municipalities have not succeeded in the integration of LED with
the overall IDP processes. SMME support exists on ad hoc basis, but no
comprehensive economic or sectoral analysis exists at most municipalities. Wide and
vague statements such as SMME development, skills development, improve business
conditions are listed with no detail. A concept such as local diversification means
nothing if not grounded with detailed plans.
• Poverty alleviation: In most cases LED is “downgraded” in stature as only poverty
alleviation projects and community projects. Pro-poor focus alone will not lead to
successful LED implementation. A balance is needed between market initiatives, job
creation and pro-poor actions. Poverty alleviation forms more part of social
development than LED.
• Implementation systems: Although strategies are formulated, no implementation plans
or structures are in place. Local business support is only limited to local procurement.
Implementation plans are dependent on human resources and funding. External
funding requires skills and expertise on how to lobby for such funding.
• Partnerships: Successful LED occur where government and businesses work together
to improve the economy of a specific area. Business has not really been included in
IDP or LED in the planning and implementation of strategies. Poor partnerships have
led to limited LED success. Only small community development projects have been
attempted.
• Regional co-operation: No regional or district co-ordination exists between district
municipality and the local municipalities. Regional co-operation and alignment is of
key importance where the economies can complement and support the region.
14
• Project sustainability: Projects have not been started due to lack of funding. Municipal
projects need to focus on LED outcomes. For example, labour intensive projects could
cost more and take more time to complete, without additional income to municipality.
Most projects are therefore not sustainable.
• LED and political considerations: Politicians have a say in the prioritisation of
projects. Projects that are visible with immediate income, outcome, regardless of
sustainability are selected. The most important economic sector, for example
agriculture, is not prioritised.
• Capacity: No real skills development has taken place. Officials are left to manage
projects without business, financial or project management skills.
• Institutionalisation: LED projects are scattered throughout a specific municipality,
with no single department or unit as coordinator. This fact renders most LED
strategies irrelevant. LED strategies need to be spatially grounded.
Finally an LED strategy must be diverse and not based on a few projects. Identified
projects must be based on local demand (Rogerson, 2009).
7. Conclusions
In conclusion, the following challenges exist regarding the LED process from policy to
implementation at the local government sphere. These include that policy doesn’t
automatically lead to implementation, improved skills levels are required, staff and
funding shortages need to be resolved, poor community involvement in the planning and
implementation of LED projects exist and poor monitoring and evaluation (Nel &
Rogerson, 2005). Municipalities in South Africa do not have adequate economic
strategies in place to address the issues of poverty, unemployment and inequality (SACN,
2004). LED is currently still not a priority at most local authorities, and limited funding is
made available from national government. LED strategies lack detail for interventions and
lack monitoring and evaluation. Small rural municipalities especially struggle to
implement LED. The role and functions regarding LED is vague with a lack of
willingness for partnerships with the private sector (Khanya-Aicdd, 2006).
LED is not yet well embedded in municipal structures, which is shown by the lack of
LED units within the five municipalities analysed and also by the limited funds and in
some instances no funds allocated to LED. LED has as its goals to create local jobs, to
ensure economic stability and diversity, build on comparative advantages, assist the poor,
and ultimately strive to improve the quality of life of all local communities. Local
commitment, adequate skills and capacity is however non-negotiables for LED success.
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