CHAPTER FOUR: LED IN SOUTH AFRICA
4.1 WHY LOCAL ECONOMIC DEVELOPMENT?
LED has attracted increasing attention from government and other stakeholders in South Africa (Nel et al 2005 ). LED was born after South Africa‘s Transition to democracy in 1995 and Mandela‘s speech in 1995 spells out the need for LED, he says ―by mobilising resources of urban communities, government and the private sector we can make our cities centres of opportunities for all South Africans within the world economy‖. However there are traces of LED prior to independence (Rogerson 1995b). These efforts were aimed at promoting development and racial reconciliation which was carried over after the verge of democracy in 1994.
Democratic South Africa inherited an economy with a dual economy. South Africa is Africa‘s second most competitive economy ranked 44th in the world behind Tunisia ranked 32nd (World Economic Forum 2008). Despite South Africa being a world class economy 40% of its population is unemployed (Nel et al 2005). Meanwhile the South African Government has pursued a neo- liberal macro-economic agenda, and seeking market-driven economic expansion and growth, facilitating market expansion, with local government having a key role to play in stimulating economic development through investment in infrastructure, to ‗crowd in private investment and
boost short-term economic performance‘ (RSA, 1996b, p.7). In planning for development in one of the most unequal society South Africa is placing emphasis on what it terms developmental local government wherein it increases the role of government agencies in promoting development and growth thus entrenching a pro-poor policy focus (Nel and Rogerson 2005). The government states that ‗the central responsibility of municipalities (is) to work together with local communities to find sustainable ways to meet their needs and improve the quality of their lives‘ (RSA, 1998a, p.17).
Therefore local municipalities are to be the engines of growth and development.
South Africa‘s had an approximate population of 44.8 million in 2001, with 58% being urbanized (approximately 26 million). Of the 58%, 80% lived in the 21 largest urban centers and while 20%
million lived in the 9 largest centers which constitute the SA Cities Network (SACN, 2004).
Statistics of per capita income may give the wrong perception that urban areas are performing well, these generalizations hide specific realities (ibid). There is high concentration of poverty with 24.7%
of the population living below the poverty line in urban areas in South Africa. The Metropolitan areas such as Durban carry a greater proportion of this population. Durban has 4% of the population living below the minimum living level, followed by Johannesburg with 3.7% of the people living below the minim living level. These high levels of poverty are contrasted with high levels of output in these cities. For example the gross geographic product (2001-2004) in the four largest cities is marginally higher than the national average. Thereby implying economic prosperity for all of which is only for a few (SACN 2006). Thus it is the onus of LED to address such imbalances.
LED in South Africa is a discipline still coming into its own with competing strands of argumentation (Bond 2003). In the country LED is interpreted in two ways, which may have the same desired goal but proceed in two different paths. The first path is increasing economic growth through enhancing the competitive advantage of a place, and the second one is the struggle against poverty (Lootvoet et al undated). The question is whether these two paths are compatible and which one is preferred? The question still remains can the privileged and unprivileged benefit in the same way through LED? In this regard South Africa through its various policies and legislation has tried to champion the view that the underprivileged benefit from LED.
LED in South Africa is governed by the constitution (RSA 1996), some laws and policy papers (Nel 1999). The constitution states that the local government must ―promote social and economic
development‖. Apart form the constitution the Reconstruction and Development Program (RDP), the 1998 Local Government White Paper and the 2000 Local Government Systems Act assign responsibilities to Local authorities to implement LED. This legislation determines the developmental role of municipalities; assign developmental powers and enshrine obligations such as the need for participatory development and the need to prioritize communities (Nel et al 2005;
World Bank 2005). The Municipal Structures Act 1998 is also key in LED in that it makes provision for three levels of local government namely;
o Metropolitan Councils, i.e. the large conurbations with multiple business districts, o Municipal Councils, i.e. non-metropolitan local councils, and
o District Councils which oversee groups of municipal councils in urban and rural areas.
The Local Government White Paper (1998) states that local government is responsible for the implementation of local economic development. The local government plays an important role in job creation and in boosting the local economy through the provision of business-friendly services, local procurement, investment promotion, and support for small businesses and growth sectors.
The Municipal Systems Act of 2000 stipulates that municipalities must involve communities in the decision making process. Other legislation and policies which promote LED include the Urban Renewal Programme (2001), Accelerated and Shared Growth Initiative in South Africa ASGISA (2005) which underpins an emerging city agenda on LED and the Spatial Development Strategy which encourages regional economic development (Nel 2000). The Urban renewal programme will be discussed in detail in the next chapter as it impacts largely on the KwaMashu area. Laws such as the Development and Facilitation Act (1995) and Urban Development Framework (1997) also have a bearing on LED .Instruments such as the Integrated Development Planning (IDP) process, which requires an economic and spatial development component, promotion of participation and appropriate institutional and funding mechanism also, have a impact on LED.
In recent years, the main vehicle for the developmental task of local government has been the IDP process. The integrated development plan is a five-year-plan which looks mainly at infrastructure development but also includes LED activities. The preparation of IDP includes comprehensive consultation exercises with local communities, albeit it appears that local business communities are
infrastructure and buildings, not to other typical LED interventions like business networking or business development service programmes (ibid). In essence there is a sufficient legal basis in SA from the constitution up to instruments such as the IDP. In 2006 the Department of Local Government (DPLG) issued out a formal policy on LED called National Framework for LED in SA:
Stimulating and Developing Sustainable Local Economies. The objectives of this framework are listed below:
o To shift towards a more strategic approach to the development of local economies and overcome challenges and failures in respect of instances where municipalities themselves try to manage a litany of non viable projects or start ups.
o To support local economies in realizing their optimal potential and making local communities active participants in the economy of the country.
o To elevate the importance and centrality of effectively functioning local economies in growing the national economy,
o To wage the national fight against poverty more effectively though local level debates, strategies and actions.
o To improve community access to economic initiatives ,support programmes and information
o To improve the coordination of economic development planning and implementation across government and between government and non governmental sectors.
o To build awareness about the importance and role of localities and regions which globally, are playing an increasingly significant role as points of investment, facilitated by supportive national policies.
This policy framework is crucial as it avoids policy confusion and sets out targets which are yet to be examined local government. The policy framework also recommends a number of LED strategies listed below.
o Industrial recruitment and place-marketing;
o Small, medium and micro enterprise (SMME) promotion and support;
o Community economic development;
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.