PERSPECTIVES
CHAPTER 4: RURAL ENTREPRENEURSHIP AND LOCAL ECONOMIC DEVELOPMENT IN A SOUTH AFRICAN CONTEXT
4.3 LOCAL ECONOMIC DEVELOPMENT IN SOUTH AFRICA
4.3.2 Local Planning and Legislative Framework for LED in South Africa
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both in nature and approach. Local governments must promote social and economic development, as well as structure and manage their administration, budgeting, and planning processes to prioritise the community’s basic needs and promote the social and economic development of all communities in terms of Sections 152 (c) and 153 (a) of the Constitution of the Republic of South Africa of 1996. Furthermore, the Constitution defines ‘developmental local government’, meaning that the country’s LED objective is not optional or even a local government initiative, but rather a basic obligation for local government (Kamara, 2017; Hofisi, Mbeba, Maredza & Choga, 2013). This clause states that local governments in the country are responsible not just for providing services, but also for promoting social and economic progress and raising the standard of living in all communities. According to Koma (2014), this means that local government is seen as critical to achieving the growth and development goals outlined in new development frameworks such as the National Development Plan (2012), the New Growth Path (2010), the National Spatial Development Perspective (2006), and other provincial growth and development strategies.
4.3.2.2 White Paper on Local Government (1998)
The 1998 White Paper on Local Government enhances the constitutional mandate for local government by officially introducing the concept of ‘developmental local government’.
Developmental local government is described as “local government committed to interacting with citizens and groups within the community to identify sustainable solutions to satisfy their social, economic, and material needs, and to improve the quality of their lives”. The White Paper also lists the characteristics of developmental local government as maximizing social and economic growth, integrating and coordinating, democratizing development, empowering and redistributing, and leading and learning. The White Paper also identifies the expected outcomes of local government development. Among the major benefits are the development of housing infrastructure and services, the creation of habitable, interconnected cities, towns, and rural areas, local economic growth, and community empowerment and redistribution.
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Furthermore, the White Paper states that it is the responsibility of the private sector to create jobs, and that the function of local government, particularly municipalities, is to create an enabling environment for businesses to thrive (Triegaardt, 2007). The White Paper, according to Mathebula (2016), was enacted to guarantee that local governments have a clear legislative mandate on what and how they should do their business in order to be developmental. The concept of developmental local government arose from the amalgamation of the Reconstruction and Development Programme’s (RDP) social interventionist goals and the Growth Employment and Redistribution Policy’s (GEAR) market-oriented economic strategies, the two most important post-apartheid national policies to combat economic growth and the combating of poverty (Kamara, 2017). The Local Governance: Municipal Systems Act 32 of 2000 contains the statutory principles for developing local government (Meyer & Venter, 2013).
4.3.2.3 Local Government: Municipal Systems Act 32 of 2000
According to the Local Government: Municipal Systems Act 32 of 2000, a municipality has executive authority to formulate and enact policies, plans, strategies, and programs, including setting delivery targets, as well as encourage and undertake development within its territory. The Act is the most major piece of law requiring and mandating integrated development planning for local governments. The Act, as modified, requires a municipal council to adopt a single, comprehensive, and strategic plan, known as an integrated development plan (IDP), for the municipality’s social and economic development within a specified time after the municipal council's elected term begins (Koma, 2014). To do this, the Act requires a municipality to engage in developmentally oriented planning in order to ensure that local government objectives are met and that its developmental responsibilities are carried out as outlined in the Constitution. The IDP is the ultimate outcome of this process, which is known as integrated development planning.
The municipal IDP, according to the Act, is the primary strategic planning tool that directs and informs all planning and development, as well as all decisions related to planning, administration, and development in the municipality.
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An IDP must represent the municipality’s long-term development strategy, with an emphasis on the municipality’s most significant development and internal transformation needs, according to Section 26 of the Municipal Systems Act. The IDP should also establish and express development priorities, objectives, and strategies, as well as its LED goals and needs, all of which must be aligned with any national or provincial sectoral plans. The integrated planning approach has aided municipalities in implementing LED at the local government level (Meyer &
Venter, 2013; Rogerson, 2009). According to Mahlalela (2014), this Act is crucial for LED since it provides guidance on how towns can efficiently implement LED processes and programmes.
The Act aims to provide important ideas, methods, and processes to aid municipalities in ensuring the social and economic well-being of local communities.
4.3.2.4 National Framework for LED in South Africa (2006-2011)
The South African National Framework for LED intends to provide municipalities with a strategic framework for better understanding and applying LED in order to improve local economic development (DPLG, 2006). The framework’s objective, according to DPLG (2006), was to understand changing approaches to LED and how such approaches might connect with South African practice, rather than to make policy statements on LED. The framework outlines LED’s objectives, guiding principles, and outcomes, which include assisting local economies in realizing their full potential and making local communities active participants in the country’s economy; waging the national fight against poverty more effectively through local level debates, strategies, and actions; improving community access to economic initiatives, support programs, and information; and improving e-government coordination (Mahlalela, 2014). The national LED framework document acts as a road map for the country's LED implementation.
The framework also emphasizes the importance of towns’ role in establishing enabling environments through infrastructure and service provision, rather than seeking to create jobs on their own (Meyer & Venter, 2013). According to Koma (2014), the framework also provides an overarching context within which different LED stakeholders’ duties and obligations can be placed. According to Du Plooy (2017), a developmental approach includes local government
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structures playing a decisive and unapologetic role in shaping the economic destiny of their localities and the country, as well as creating an environment in which the overall economic and social conditions of the locality are conducive to the creation of employment opportunities.
Mahlalela (2014) argued that the objectives of the framework directly speak to LED and poverty alleviation in which one cannot say whether LED favours pro-growth over pro-poor or otherwise. Overall, the main aim of the framework was to build a common understanding of LED in South Africa and embrace the role of local economies in the national economy with emphasis on poverty alleviation and improvement of communities at local level.
However, as the 2006-2011 framework came to an end, reassessment and the preparation of a new framework received a lot of attention in the 2012-2013 period. The review process, according to Ndaba (2012), began in late 2010 and ended in July 2012 with the issuance of a Draft Local Economic Development Framework for the period 2012-2017. However, a year later, a second document dubbed the 2013-2018 National Framework for Local Economic Development was released. The second document is now South Africa’s most recent policy declaration on LED. Two significant arguments supported the case for revisiting the 2006 LED paradigm. First, the political, economic, and social context in which LED policy operated was continuously changing, and with new policy developments affecting LED, the framework policy itself was continually in need of revision (Ndaba, 2012). Second, despite its acknowledged successes, the 2006 framework was found to have flaws in its implementation (CoGTA, 2012).
CoGTA (2012) identified the following aspects as some of LED’s flaws from 2006 to 2011:
• That the role and relevance of the private sector in LED had been overstated.
• The role of CoGTA (then DPLG) had been ill-defined in the 2006 Framework with the consequence that the Department was reluctant to make a sustained investment in supporting LED.
• Insufficient guidance was offered on how LED should be implemented and particularly it was felt that the roles of various players within Government around LED were ill-defined and how they might be better coordinated.
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• It provided only a limited perception of evidence-based planning and no proposals for monitoring and evaluation systems on assessing what did or did not work in LED.
• It offered no guidance on capacity building for LED or support for LED management issues especially for local municipalities.
• The Framework failed to adequately situate LED within broader service delivery for recognition among a host of municipal priorities.
• Limited focus upon linking LED with national job creation imperatives thus restricting its political appeal.
• Failure to convey through media the broader understanding and importance of LED.
• The scaling of LED within municipal boundaries rather than within appropriate value chains or market outreach of local economies.
• Finally, the 2006 document was viewed as too conceptual and with limited appeal for hands-on LED practitioners who found some of its terminology ‘alien’ to them.
4.3.2.5 Local Government: Municipal Financial Management Act 53 of 2003
The Municipal Financial Management Act (MFMA) 56 of 2003 provides for municipalities to develop a budget to ensure the capacity to use, control, monitor, evaluate and manage the resources and performance channelled towards implementation of LED (Maloka, Mashamaite &
Ledwaba, 2014). The Act aims at securing sound and sustainable management of the financial affairs of municipalities, and other institutions in the local sphere of government by establishing treasury norms and standards for the local sphere of government. According to Hanabe, Taylor and Raga (2017), the Municipal Financial Management Act (MFMA) sets out the local government budgetary reforms that seeks to achieve the following objectives:
a) To ensure that municipal budgets and financial management processes are transparent, aligned to the accountability cycle and facilitate democratic governance accountable to local communities.
b) To ensure municipal budgets generally support the provision of basic services to communities to facilitate social and economic development and to promote a safe and healthy environment in sustainable manner.
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c) To ensure that budget and financial information is reliable and timely and consistent across municipalities and that municipalities, provinces and national government use it in management and policy decision-making.
d) To ensure that each municipality produces a budget document that is aligned to the IDP in the medium-term, that passes the funding compliance test, and which contains accurate financial information backed-up by useful informative narratives. The document should be user-friendly and facilitate engagement with communities and informed decision- making by council.
e) To improve financial governance by clarifying and separating the roles and responsibilities of mayors, executive and nonexecutive councillors vis-à-vis those of municipal officials.
4.3.2.6 Policy Guidelines on the Implementation of LED in South Africa (2005)
The DTI’s Policy Guidelines for LED Implementation, published in 2005, is another key policy initiative. The policy effort aims to address socio-economic issues such as high unemployment and poverty (Hindson & Valerie Vicente-Hindson, 2005). Economic growth and poverty eradication are identified as the key overall aims of LED in South Africa in the Policy Guidelines (Meyer, 2014; Meyer & Venter, 2013; DPLG, 2005). The Policy Guidelines emphasize the creation of strong and inclusive local economies that take advantage of local opportunities, address local needs, and contribute to national development goals including economic growth and poverty eradication (DPLG, 2005). The Policy Guidelines also spell out provinces’ and local governments’ obligations and responsibilities in relation to LED, highlighting the relevance of a province’s Provincial Growth and Development Strategy (PGDS) for the province’s overall economic development (Koma, 2014; DPLG, 2005).Each province is required to create a PGDS, which outlines the general framework and plan for enhancing services and boosting the economy. Additionally, each province has a Spatial Development Framework (SDF) that specifies where and how commercial and residential development should occur, as well as how the environment should be preserved. The guidelines clearly define the role of provincial governments as coordinating national government resources while ensuring alignment with the
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priorities of various IDPs; building municipal capacity to undertake LED and support its implementation; and establishing the LED fora to carry out the work of the National LED Forum and establish dedicated LED units in provincial governments (Koma, 2014; Mbhele, 2013).