LITERATURE REVIEW ON LOCAL ECONOMIC DEVELOPMENT TRENDS IN SOUTH AFRICA
Map 3.1 Map 3.1 Municipal boundaries of the 234 Local Municipalities (shaded areas show municipal boundary changes 2001-2011)
3.6 Contemporary Models of Local Economic Development
3.6.1 The concept of Systemic Competitiveness
The concept of Systemic Competitiveness introduces four analytical levels in order to assist with the comprehension of the complexity of factors that drive the performance of a given economy (Meyer-Stamer, 2008). Factors at each level and their manner of interaction shape the ability of countries and locations to thrive in an increasingly competitive world economy. These levels are applied in the present study and can be applied in the analysis of all case studies. Significantly according to Meyer-Stamer (2008), systemic competitiveness without social integration is a project without prospects and the development of systemic competitiveness, therefore, is a social transformation endeavour involving more than mere adjustment of the macroeconomic framework.
Figure 3.2 summarises the main points that each level addresses while Figure 3.3 indicates the main policies and key factors at each level. The four analytical levels of Systemic Competitiveness are (Meyer-Stamer, 2008):
The micro level, where companies compete in markets, and networks and alliances of companies emerge to sustain their competitive efforts.
The mesolevel, at which selective interventions are present to support companies‘
effort to shape a competitive advantage.
The macro level, including generic institutions, economic policies and framework conditions.
The meta level, comprising basic societal orientations and other slow variables.
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Figure 3.2 Four Levels of Systemic Competitiveness Source: Adapted from Meyer-Stamer, 2008.
Figure 3.3 Determinants of Systemic Competitiveness Source: Adapted from Meyer-Stamer, 2008.
Table 3.11 complements and further expands on Figures 3.2 and 3.3 by addressing factors at different analytical levels and levels of aggregation from the perspective of local development initiatives. The different fields (see numbered description below) assist in the understanding of how factors at other levels influence, shape or limit local level efforts in relation to local communities in this case, uMshwathi, particularly at the micro and meta levels. The macro and meso levels at the national platform are explored in Chapter 3.
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Table 3.11 Factors Determining Systemic Competitiveness: Levels and Aggregation Global National
(South Africa) Regional
(Province) Local (Municipality) Meta Competition
between different types of market economies (1)
National
development model/
innovation systems (2)
Regional identity Strategic capacity of regional actors (3)
Local actors‘
capacity to cooperate/trust, innovative milieu (4) Macro International
financial markets (5)
Macroeconomic framework conditions (e.g.
tax/financial system) (6)
Solid budgetary policy investment capability of government (7)
Solid budgetary policy investment capability of government.
Quality of life (8) Meso EU industrial
policy
EU technology policy
Montreal protocol (9)
Promoting new technology/export promotion/
specialized financing agencies sectoral environmental policy (10)
Regional economic development/techno- logy/demonstration centres/R+D institutes/training institutions/regional environmental policy (11)
Local economic development/
employment promotion, training institutions,
incubators, chambers (12)
Micro Transnational corporations global commodity chains (13)
Medium sized and large corporations, dispersed networks (14)
SME regional
clusters (15) Local cluster, local subcontracting (16)
Source: Adapted from Meyer-Stamer, 2008.
• Meta level: (1) Competition exists between different models of capitalism. South Africa, a mixed market economy, has foreign trade policies which have affected some sectors of the economy negatively e.g. clothing and textile. (2) National Parliament, constituted by the National Assembly and the National Council of Provinces, formulates policy, develops national standards and norms, and rules and regulations, which determine the political and economic pattern of South African society (Section 44, Act 108 of 1996), (see Chapter 3).
(3) In terms of Schedule 4B of the Constitution, the Provincial Government has the responsibility to make provincial laws, including provincial planning. Provinces have concurrent competencies with the National Parliament to draft laws in respect of matters specified in Schedule 4A of the Constitution, including the environment, housing, regional planning and development, and urban and rural development. (4) Neighbouring municipalities display differences in their ability to define a shared development objective.
Hence Local Regional Economic Development (LRED) is a more recent development (Rücker and Trah, 2007).
• Macro level: (5) and (6) The global economic crisis of 2008 and ensuing downturn dramatically affected supranational and national macroeconomic framework conditions which in turn affect opportunities for development at the local level. The (7) regional and
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(8) local macro level is justified by the reality that budgetary policies of Provinces and Municipalities have a major impact on development options as witnessed in the well publicised problems of service delivery country wide, unqualified audit reports, municipalities being placed under administration in terms of Section 39 of the Constitution e.g. Msunduzi in 2010 (COPE, 2010).
• Mesolevel: (9) The Montréal Protocol, an environment protection agreement, lays down a mandatory timetable for the phase out of ozone depleting substances. The Africa Growth and Opportunity Act (AGOA), a tariff-free trade agreement with Africa, was recently extended by the USA beyond 2015. (10 – 12) Within a given economy, it is difficult to determine whether a given meso-policy ought to be executed at the national, regional or local level. For example technology policy is conducted at three levels: national level promotes the development of new generic technologies (IPAP 2013/14-2015/16), provincial government champions their introduction into business and local government manage technology incubators to assist start-up companies interested in the new technology.
• Micro level: Local companies (13) may be integrated into global chains or affiliates of transnational corporations, which entail restrictions on autonomous local action.
Companies integrated into national or regional supplier networks have a specific perspective toward local level development initiatives (14 – 16) e.g. cluster promotion initiatives. Companies whose main driver of competitiveness is the relationship to global buyers or integration into national value chains, may be disinterested in local level initiatives.
Viewing local economic development from this perspective helps to identify both possible fields of action and structural limitations of local initiatives. In the attempt to answer the research questions relating to uMshwathi, attention was focused on the meta and micro local levels in Chapter 5. According to Minister Mufamadi (DPLG, 2006:i):
―In the final analysis, all economic development takes place at the local level and Local Government must influence the shape and direction of local economies if the national economy is to attain the goals set for it and if it is to grow and create a better life for all its residents... Communities of South Africa wish to see evidence of local development and there is an expectation that local government will drive the process. This expectation provides a new challenge
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and opportunity for local government to make a meaningful impact on the lives of its communities. For the opportunity to be seized, local public and private actors must work together in order to create sustainable local economies‖.