PROJECT LOGO GOES HERE IN MASTER SLIDE

DISTRICT CLUSTER WORKING SESSION

February 2006

LGSP is financed by USAID and is being implemented under the technical guidance of Research Triangle Institute, http://www.rti.org.

Local Economic Development (LED)

What is Local Economic Development (LED)

LED is a locally driven process designed to identify, harness and utilise local resources, where possible, to stimulate the economy and create new job opportunities.

LED entails the mobilisation of local role players, resources and interests to realize the economic development opportunities of a local area

Background to Local Economic Development (LED)

LED was development as an approach in response to the pressures brought about by globalisation. Its popularity coincided with the global trend of decentralising power from national to local government

LED was first implemented in developed economies during the 1960s and was only implemented in developing economies in the late 1980s

LED in South Africa – Goal and ObjectivesLED Goal in SA• To maximise economic potential of all localities in the country through increased

economic growth and employment creation • To enhance the resilience of macro-economic growth through LED actions within

the context of sustainable development.

LED Main Objectives:• To create employment.• Co-ordination and integration.• To stimulate economic development.• To stimulate local resources and to utilise connections between the social,

cultural, environmental and economic linkages.• Partnership establishment.• Capacity building.• Broad Based Black Economic Empowerment• Fighting HIV/AIDS.

The Role of the Municipality and Councillors in LED

The White Paper on Local Government reinforces the mandate to municipalities to become involved in LED through the concept of “Developmental Local Government “defined as”

“Local government committed to working with citizens and groups within the community to find sustainable ways to meet their social, economic and material needs, and improve the quality of their lives”

Councillors in their personal and collective capacities can also contribute significantly to LED through:-

» Leadership» Policy maker.» Entrepreneur » Promoter » Catalyst» Lobbyist

LED and Organizational Fit

• This will differ from municipality to municipality.

• It will depend on the IDP of the municipality and the resources, skills, and capacity it has at its disposal.

• In established municipalities, LED may be driven by a separate directorate (e.g. metros)

• In smaller less resourced municipalities LED may be the responsibility of the municipal manager or the IDP manager.

LED definitely requires political support and should become the responsibility of every councillor as he/she goes about his/her daily work.

Why has LED not been as successful as one might expect?

LED initiatives in developing countries suffer from four typical inherent problems:

1. Strategy and a planning-driven approach2. Confusion between community development and LED. 3. An unclear theoretical and conceptual background for LED 4. Good governance of LED:

• A bottom-up, action-driven participatory approach is more promising than approaches which presuppose lots of institution and capacity

• Action-oriented approaches are more promising than approaches which put huge re-sources in terms of time and money into analysis before any implementation happens.

Building Block for LED• Attract

– Production– Consumption– Government & Finance– National Surplus

• Lead– Good Governance– Efficiency– Economic Strategy– Spatial Plan

• Build– Skills & Institutions– Entrepreneurship– Trust & Participation– Information Flows

• Circulate– Buy Local– Cross-subsidise– Linkage– Local Partnerships

Factors Impacting on LED Initiatives

1. Institutional set up of Government Structures and the alignment of Policies and Programs.

2. Balanced LED plans3. Support Systems for Entrepreneurial Institutions4. Information on Economic Development Opportunities5. People and Socio Economic Focus.6. Marketing of the municipality as a haven for investment7. Human Resource Development8. Building Partnerships9. Ensure Sustainable Economic Outcomes10.Innovative and Creative Response11.Financial Position of the Municipality12.Implementation of Monitoring and Evaluation Systems

Strategic Challenges facing LED Initiatives

1. Lack of National Policy and Strategy Coherence 2. Functional Specialisation and Uncoordinated Actions3. Lack of Dedicated LED Institutions4. Shortage of LED Capacity and Skills5. Lack of Clear Roles and Responsibilities6. Competitiveness of Local Areas and IDP’s7. Poor Financial Position of Municipalities8. Poor Access to Accurate Information9. Ineffective Monitoring and Evaluation10.Project Based Initiatives11.Poor LED Integration with Municipal Priorities

BUSINESS RETENTION, EXPANSION AND ATTRACTION

The retention, expansion and attraction of business and industries is one of the most productive ways of creating employment and stimulating the economy

• Retention and Expansion - most productive approach to increase economic base. Local authorities can help create an environment for growth

• Attraction - new businesses help create jobs. Local authorities could provide incentives

INFRASTRUCTURAL DEVELOPMENT

• Business retention and attraction requires a well developed infrastructure.

• Infrastructure development through Expanded Public Work Programmes (EPWP) will further reduce unemployment thus reducing over reliance on governments’ grants.

• Infrastructural development is possible when the role players e.g. Municipal Infrastructure Grants (MIG), Provincial Infrastructure Grants (PIG) are playing a visible role.

MIG AND PIG INVOLVEMENT SHOULD SEEK TO SUPPORT AMONG OTHERS A:

• Consolidated Municipal Programme, in support of internal bulk, connector infrastructure and community facilities to poor households;

• Water Services Capital Fund, in support of bulk, connector and internal infrastructure for water services at a basic level;

• Community based Expanded Public Works Programme, in support of the creation of community assets in rural, historically disadvantage communities.

INFRASTRUCTURAL DEVELOPMENT

• LED Fund, in support of planning, and implementation of job creation and poverty alleviation;

• Building support for Sport and Recreation Programme to sustain sport and recreation facilities within disadvantage communities; and

• Electrification funding in support of addressing the electrification backlog of permanently occupied residential dwellings that are situated in historically under supplied areas.

Promotion and Marketing Legal Considerations and Funding

• Promotion & Marketing - Develop a local marketing strategy whether the function is outsourced or not

• Legal Considerations – Land, planning legislation, zoning, investments, loans / start up / venture capital & health and safety bylaws

• Funding - Funding for development programs initiated by the municipality can be obtained from public and private sources. Proposals should answer 10 vital questions

LED Planning – issues to consider

• Political leaderships • Involvement of stakeholders. • Over dependence or reliance on government programs• Ensure that you have the human resources and

expertise to support the investors wishing to establish in your area.

• Be careful in the selection of your economic activity. • Do not underestimate the potential of women and the

youth in LED initiatives. • Do not confuse LED with community development • Be aware that the concept of LED is relatively new • Do not embark on costly surveys to establish market

needs or local business frustrations • Where possible use existing structures to consult

around LED issues.

LED in Small Towns

Small town development, and its long-term viability is essentially about two key issues.

• The economy• Process – identifying and harnessing local resources

It is extremely important that councillors involve communities in:• Identifying the community's competitive advantage and determining

their aspirations.• Bring money into the community and keep money circulating• Explore and identify new market possibilities• Understand the complexities of existing markets better.• Find new resources and use resources more effectively.• Create strategic alliances between key groups.• Increase the net number, quality and variety of local jobs

Leadership and LED

The most critical factor in determining the growth or decline of rural communities is leadership

Successful economic development initiatives are driven by high energy visionaries

"movers and shakers“ with:-

• A positive attitude towards change & experimentation• A commitment to the mobilisation and involvement of

local people • A commitment to process • The ability to generate new ideas, thinking and

community Involvement

LED Strategies and Investment Tools

Strategies• Enhancing the Attractiveness of the Community to Visitors• Business Community Involvement• Fostering Local Entrepreneurs and New Business Formation• Strengthening the Existing Business Base• Plugging the Leaks in the Local Economy• Improving Infrastructure

Investment tools (instruments) used by municipalities to influence the local economy, and enhance the development potential of the area

• Cost Reduction Tools• Capacity Improvement Tools; and • Market Expansion Tools

LED and Poverty Alleviation

Poverty is characterised by not only a lack of assets and the poors’ inability to accumulate an asset portfolio, but also by an inability to devise an appropriate coping or management strategy.

Steps towards expanding the asset base of the urban poor include:-

• Enhancing access to: water supply, sanitation, refuse removal, drainage, flood protection, local roads, and public transport,

• Employment creation• Security and protection from crime and natural disasters• Co-ordination and integration of both NG0s and private sector

organisations.• Intergovernmental support

Institutional Options for LED

Institutional options offering potential benefits for the management, implementation and monitoring of LED programmes and /or projects.

• Municipal LED units;• Community development trusts;• Section 21 companies; and• Partnerships with other stakeholders

Direct and Indirect Roles of Municipality in LED

Direct roles of municipalities in LED

• Policy formulation and leadership

• Collation and interpretation • Coordination of local

initiatives• Provision of business

infrastructure, • Support to SMMEs, • Development of incentives.

Indirect roles of municipalities in LED

• Creation of an enabling environment

• Improvement of operational efficiency

• Facilitation • Attraction of development

funding • Dissemination of

information.

Promoting Entrepreneurs and SMME’s

• Start-up and Venture Capital• One-Stop Centres• Local Business Service Centres• Tender Reform• Utilising Municipal Land, Buildings and Other

Public Assets• Incubators