Chapter 10: Conclusion and Recommendations
2.7 LOCAL ECONOMIC DEVELOPMENT (LED)
One of the core components of the IDP is an indication of the council‟s priorities and objectives for the elected term, including its local economic development aims and its internal transformation needs (Municipal Systems Act 32 of 2000). This provision mandates the municipality to have a clear programme of how it will promote economic development in the area. Following the demise of apartheid, the Government of National Unity took over LED as part of its developmental approach to local government (Hologram, 2003: 145). The basis for the LED policy framework was set down in the Constitution, and then further emphasised and elaborated various policy documents and legislation dealing with local government. According to Phutiagae ( in Van der Waldt, 2007: 132), it was the Freedom Charter that provided a basis and a vision of a South Africa with an economy that meets the needs of all the people in a more equitable manner.
According to the World Bank definition, LED is about people working together to achieve sustainable economic growth that brings economic benefits and quality of life improvements for all in the community. As a result, LED offers local government, the private sector and the local community an opportunity to work together to address
economic challenges and improve their economy (Phutiagae in Van der Waldt, 2007:
133 and www.worldbank.org). Nel (in Atkinson & Reitzes, 1998: 152) defines LED as a process in which communities and local authorities work together to manage their resources in order to create new jobs and stimulate economic activity in their area.
This assertion is supported by Sing (in Reddy, Sing & Moodley, 2003: 58) who maintains that LED assists in poverty alleviation, creation of jobs and the distribution of resources to residents. The National Local Economic Development Framework (2007) maintains that “LED is an outcome of actions and interventions resulting from good local governance and the constant improvement and integration of national and programs in local spaces”.
What this implies is that the extent to which local economic conditions can change is highly dependent on the governance of municipalities. Local government is expected to play a significant role in promoting the local economy. This is because each community has its own economy that is manifested in both the informal system and the formal system (Swanepoel & De Beer, 2006: 12). It is therefore the responsibility of the local government to understand how the economic environment is structured in order to develop interventions to strengthen its potential and address its challenges.
To assist local government to discharge its mandate, several policies have been developed to provide a framework for municipalities. One of these frameworks is the National Local Economic Development Framework, which was adopted in 2007. The framework maintains that any LED programme should recognize that communities (people, business and governments at local level) are best located to change economic situations. This will enable the municipality to stimulate growth that can create jobs and thereby reduce poverty. According to the framework, the South African government‟s vision for local economies is to create strong and inclusive local economies by using local opportunities, real potential and competitive advantages, addressing local needs and contributing to national developmental objectives. It is important to note the following guiding principles for LED as provided by the framework (National Local Economic Development Framework, 2007):
Local government is responsible for the creation of an environment that results in the creation of employment opportunities. This could be achieved through
Emergence of locally owned appropriate strategies that support national frameworks and promote sustainable development and sustainable human settlements.
Authorities should acknowledge that people are the greatest resource that should be included in all development initiatives. Furthermore, their skills should be increased as this will lead to increased opportunities required to stimulate local economies.
Local authorities should aim to harness local initiative, energy, creativity, assertive leadership and skills that would ultimately unlock the economic potential in the economy.
The framework provides a blueprint of what should be done to facilitate local economic development. In addition to providing the guiding principles outlined above, the framework goes further to indicate government‟s strategy for promoting LED, the main actions to be undertaken, as well as how this programme will be funded.
Of note is the fact this framework puts local government at the central point of facilitating economic growth. One of the principles, for example, is that municipalities must establish spatial policies and land-use management systems that integrate small and informal traders in business zones (National Local Economic Development Framework, 2007). This is an important point considering the contributions made by informal traders to job creation and poverty alleviation. Taking into account these provisions, this study aims to provide recommendations for the development of a policy for managing informal businesses, in a way that would enable the Polokwane Municipality to promote social and economic development.
The other policy directive worth mentioning is the Five Year Local Government Strategic Agenda (2006-2011). National government, through Department of Provincial and Local Government (now renamed Department of Cooperative Governance and Traditional Affairs), has developed a five-year strategic agenda for local government (2006-2011). This framework has identified five key performance
areas (KPAs) that each municipality must focus on for the 2006/11 term of local government. One of the five KPAs is local economic development.
In terms of this strategic plan (as far as LED is concerned), all municipalities should strive towards:
Thriving and vibrant local economy and neighbourhoods.
Ongoing programme of contributing to the development of an employable, educated and skilled citizenry.
Facilitation of job creation and business opportunities.
Continuous and positive interactions with all key economic anchors and actors.
Phutiagae (in Van der Waldt, 2007: 134) suggests that some of the strategies that a municipality can use to promote the local economy: support to SMMEs, adopting regulations , policies and by laws that stimulate, as opposed to hindering, economic development as well as procuring goods and services locally.
This implies that in developing any policy that has an impact on the local economy (such as a policy for managing informal business), the principles as listed above should be central in such policies.