CHAPTER FOUR: LED IN SOUTH AFRICA
4.2 LED IN THE FREE STATE PROVINCE
o Export promotion;
o Business retention and expansion; and
o Investment Attraction designed to alleviate poverty, support small business and
o Expand business development (DPLG, 2000b).
These strategies have been implemented in various provinces and municipalities. The range of LED initiatives varies, with the metropolitan areas in a better position to promote LED due to their better resources as compared to the smaller centers (World Bank 2005).The section below describes the case studies, lessons learnt, challenges and best practices in LED are identified.
compared to R17164 for South Africa and 32 356 for Gauteng (Center for Development support CDS 2005). Moreover there is a high unemployment rate of 38, 9%.Its level of development is slightly lower than the national average, with it having a Human Development Index of 0.67, which is just below the national average of 0.69 (ibid). The free state seeks to achieve economic growth, high levels of development and reduce employment through placing more emphasis on the key economic sectors such as tourism, agriculture and manufacturing; developing and expanding the SMME sector, provision of infrastructure and social services.
4.2.1 Lessons Learnt From the Free State
LED in the Free State still faces major impediments to its successful implementation .This has been observed from various evaluation studies on LED by the Center for Development support (CDS 2005) University of Free State, Marais et al., (2002), Ingle (2003), Marais and Botes (2002) and The Premiers Economic Advisory Council (PEAC). These evaluations all point to a limited value of LED projects due to a number of problems as identified below.
From evaluations carried out on LED in the Free State very few programs have been a success.
Successful initiatives are those in which the local government has little if any involvement, for example, tourism in Clarens and Smithfield. The most successful projects are those which are market-related and generally initiated by the private sector (or the church in Smithfield and the Municipality in the Goldfields). Tourism and various business operations, some of which have international linkages, are clearly the most successful (Center for Development Support (CDS 2005). It appears therefore that there is little evidence of successful LED programs in the Free State (The Premiers Economic Advisory Council (PEAC2004).
The Premier‘s Economic and Advisory Council (PEAC) commissioned an in-depth study into LED approaches. PEAC‘S study finds out that the outcome of LED initiatives in the Free State has been most disappointing. In fact, clear successes, of which the study briefly documents two (Clarens and Smithfield) have been the exception:
“few, if any projects have become sustainable; few if any permanent jobs have been created; there are concerns over projects mismanagement; there is a lack of adequate business planning and the lack of training inhibits success. In addition, projects seldom involve the private sector and poverty is not really being addressed” (PEAC 2004).
The study lays the blame of this ineffectiveness of LED programs on piecemeal commitment by municipalities with their actions often deterring or impeding investments. Moreover there is no clear distinction between LED as economic development facilitation and LED as poverty alleviation, both are necessary, but each demands a different approach. Municipalities not only lack business and management skills to plan or implement projects, but many suffer from acute financial constraints, while most of them have in the past few years faced a politicisation of development efforts (which often led to the exclusion of important partners, like private sector). DPLG and local government projects have almost all failed, as the secondary literature indicates (PEAC 2004).
Evaluations by the Center for Development support (CDS 2005) University of Free State, Marais et al., (2002), Ingle (2003), Marais and Botes (2002) point to a limited value of LED projects due to a number of problems considered below. In several municipalities, reluctance to answer questions regarding LED projects was noted and information from various officials was often contradictory which just adds on to the confusion regarding LED. In many cases, the business plans for projects did not link those projects effectively to the real needs of the community. Moreover, the viability of many project applications has been questioned. Business planning was found to be inadequate and the reasons why government released funds under such conditions have been called into question. Many projects have an agricultural focus thus there are concerns as to whether an agricultural approach (over half of all LED investments) can be the basis for effectively diversifying the provincial economy (Marais et al, 2002).
SMME development on the other hand, is seen as a lead sector, even though it has performed dismally as an LED approach. According to Marais et al’s (2002), very few SME‘s were established in the Free State as a result of LED initiatives. Most of the SME‘s are not economically competitive and lack proper market research which is required if they are to penetrate the global value chain. In addition LED-targeted funds were incorrectly absorbed into general municipal accounts. Thus
municipal financial arrangements are not geared to manage entrepreneurial projects Marais et al.
(2002). In some cases, LED Funds could not be accounted for. Nevertheless SME‘s have created employment even though most tend to be short-term jobs. Ingle (2003) was not able to find a single long-term job created in the LED Fund projects which he investigated. Despite an investment of over R15-million in the 16 projects only 95 long-term jobs (all in agriculture) had been created. No long–term jobs were created in other sectors (ibid). The failure to generate any long-term jobs in critical areas such as manufacturing and tourism is clearly cause for concern in the Free State.
There is also lack of synergy between government departments, horizontally and vertically which does not help the smooth implementation of LED and also may lead to project duplication.
Moreover it appears that government departments seem indifferent to experiences gleaned from other projects, which leads to a repetition of failure in subsequent programs.