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company and incorporated in terms of Companies Act 61 of 1973 (Lawrence, 2013; Malefane, 2011). Secondly a LEDA may be registered as a service utility established via by-law or, lastly a LEDA can be multi-jurisdictional service utility, established by written agreement between more than one municipality. The nature of establishment varies from context to context but its role must be incorporated in the IDP’s LED policy. District and local municipalities have the liberty to choose between the three different types of municipal institutions. However for purposes of this study we shall focus on the LEDA established as an external mechanism and incorporated hence a private company (Lawrence, 2013).
LEDAs in South Africa were established during a time where the country was faced with problems of weak economies capacity and limited institutional support to unlock economic potential in municipal areas. These challenges were linked to the early 2000s, where various implementation challenges emerged and local government was marked with transformation.
Common issues around this time related to issues of service delivery and infrastructural backlogs. This challenged the municipalities to strike a difficult balance between service delivery and focussing on creating an enabling environment for effective development (Lawrence, 2013).
LEDAs were hence established to practice a variety of services on behalf of municipalities.
Between 1999 and 2003, a partnership between the United Nations Development Program, the United Nations Office for Project Services, and the Department of Trade and Industry underpinned the establishment of a series of LEDAs in various parts of South Africa (Pretorius
& Blauuw, 2008). The focus areas for the first South African LEDAs were Limpopo, Mpumalanga, Northern Cape and Eastern Cape provinces. By the year 2000 there existed more than 20 development agencies in the country that were IDC funded, each one of these agencies are unique in their own way and independent of each one another. Agencies exist both at district, metropolitan and local municipality levels, in some district there is an agency both at the district level and within that district there also exists a local municipality development agency and in some cases even all the way down to a town level (Pretorius & Blauuw, 2008; Lawrence, 2013).
However for purposes of this study we shall focus on development agencies operating at district level.
Two main legislation underpin the establishment of LEDAs, the Municipal Systems Act (MSA) (No. 32 of 2000) and the Municipal Financial Management Act (MFMA) (No. 58 of 2003)
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(Lawrence, 2013; Malefane, 2011). It is these pieces of legislation that give LEDAs the identity as external mechanisms that has separate legal entity, which can be either a private company and incorporated in terms of Companies Act 61 of 1973 (Lawrence, 2013; Malefane, 2011).
Secondly a LEDA may be registered as a service utility established via by-law or, lastly a LEDA can be multi-jurisdictional service utility, established by written agreement between more than one municipality. The nature of establishment varies from context to context but its role must be incorporated in the IDP’s LED policy. District and local municipalities have the liberty to choose between the three different types of municipal institutions. However for purposes of this study we shall focus on the LEDA established as an external mechanism and incorporated hence a private company (Lawrence, 2013).
2.4.1 Structure and operation of Local Economic Development Agency is South Africa 2.4.1.1 Introduction
LEDAs are established by politically driven structure and therefore are politically accountable for LED and as a result are not mandated to make policy on behalf of political leaders but may recommend policy (DPLG, 2006b: 5, cited by Lawrence, 2013). This section will look at structure and organogram of LEDAs and their functions in South Africa localities. This it shall do by firstly stating the organogram, then the section shall discuss the basic operational cultures of LEDAs and the last section will look at the debates within its operation.
The general structure of LEDAs is thus represented in figure 1.1 below, this structure is relatively common: a general assembly, head of the LEDA, board of directors and a local manager and team. The board of directors is composed of representatives from the public and private sectors, civil society institutions, universities and local administrations, meeting at least twice a year. The main function of the board of directors is to advise the Administrative Board.
The main aim of board of directors is to institute co-operation between different stakeholders and thereby increase regions’ “social capital”, i.e. norms of reciprocity, trust and networks (Koçak, 2010).
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The general assembly consists of the mayor (of the central province in each region, which rotates annually), who represents the LDA. The difference in the composition of Administrative Board between one province (or metropolitan) regions and the rest is that developed metropolitan regions give more access to the private sector and the civil society in the decision-making process. The law justifies this by citing that policies in developed metropolitan regions will emphasise private sector- led development focusing on high technology and innovation, whereas in other regions economic development will be more led by public sector investments. The main functions of the Administrative Board include the approval of annual programmes, revision of the LDA’s budget and the selection of projects and activities to be supported (EUSG, 2006, cited by Koçak, 2010).
Figure: 2.1: General Structural organogram of LEDA.
Specific activities for LEDAs include but are not limited to championing LED strategy implementation, fundraising for specific projects, coordinating and monitoring services available
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in the area and promoting regional activities through collective marketing (DPLG, 2006b, 6, cited in Lawrence, 2013; McKibbin, Binns & Nel, 2012). Municipalities on the other hand are responsible for public funds, and the municipalities ought to be aware of the government LED policy and the LEDA can only recommend policy (DPLG, 2006a:7 & b: 5, Lawrence, 2013).
Therefore the responsibilities of the agency are divided such that, the municipality is responsible for LED and the agency for implementation. It is this balance that is imperative for effective management of LED. It is for this very function that they were established, with local government realising that it lacked capacity to comprehensively address implementation of their plans; LEDAs were in a position to do what municipality could not (McKibbin, Binns & Nel, 2012).
The kinds of functions for LEDAs are dependant therefore on the district municipalities’
expectations and needs. “In Africa, LEDAs in Mozambique, Angola and South Africa have extreme poverty high on the agenda. This poses the challenge of empowering local people, especially those marginalised from the regional and national economy” (Canzanelli & Ditcher, 2001, cited in Pretorius & Blauuw, 2008). Therefore the activities performed by LEDAs in a country like South Africa characterised by poverty, high unemployment and minimal entrepreneurial spirit, the kind of initiatives performed by agencies are likely to be directed to firstly poverty alleviation directly.
LEDAs is challenged, further, by several factors including local economic potential, capacity and resource challenges and the institutional readiness of both the agency and parent municipality to manage local development outcomes. Even in the SA context LEDAs are one of the most questioned and least understood areas of LED (Trah, 2004) and most unexplored for its local economic development potential (Lawrence, 2013). The challenges that LEDAs experience are shared by many LEDAs, even abroad. These challenges have been highlighted in international experience mentioned above and are, there is a lack of acceptance from government, and a general lack of understanding of LEDAs and their value added into LED. The following subsection will look LEDAs and their business community (inclusive of municipality) the partnership which exists in the presence of LEDAs.
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This section discussed LEDAs in the South African context, discussing its how it is formed and its organisational structure. The last part saw a breakdown of some of the challenges involved in the operation of a LEDA, which helped to further support the importance of the selected objectives for the study. When looking at the above discussion it appears that mix-correlation with LEDAs and their community is a common phenomenon in LEDA practice. The following section will therefore look at partnership and local economic development in order to fully understand what dynamic exist that may be resulting in this mix-correlation.