Local economic development, an emerging reality in sub saharan africa

DEDICATION

This work is dedicated to my beloved parents Mr. and Mrs. Akah who through their conscientious efforts brought me to this world and through their commitments gave me the required education which I am proud of today.

ABSTRACT

Local economic development as an emerging reality in South Africa is a recent phenomenon and is gaining much support from the ANC-led government that came to power in 1994. Its emergence has been saluted with a lot of legislations and literature on this field of study. At the same time, municipalities, both urban and rural, are struggling to apply local economic development processes within their municipalities. This is to create robust local economies so as to stem rising unemployment and poverty.

LED has had a difficult birth in South Africa with regards to accomplishing its objectives of job creation and poverty alleviation. This report uses two case studies: a community driven rural local economic development programme – the Hertzog agricultural cooperative, and an urban case study – the Johannesburg Pro-growth Clothing project. Both case studies have improved on the employment situations of these localities yet they cannot achieve acceptable poverty alleviation levels due to massive job losses from other sectors of the economy and the deep rooted distortions created by decades of apartheid reign in the country. More so, there has been mixed results as some LED programmes tend to be pro-growth and not pro-poor oriented.
The research makes use of three theoretical frameworks encompassing the neo-liberal theory, the empowerment theory and the theory on decentralization of government. The concept of good governance is used to project the essence of acceptable code of conduct in applied development within localities.
Though the overall trend of LED is commendable the reality remains that poverty cannot be effectively eradicated within such a short period of active application of LED in SA. This is because poverty is multi-dimensional and needs to be tackled from multi-dimensional approaches, involving all stakeholders in the municipalities.

CHAPTER 1: INTRODUCTION AND PROBLEM FORMULATION

1.1: Introduction

Since 1945 the world has observed over fifty years of unprecedented development policies and remarkable global economic growth. Yet the global polarization is increasing, with the economic gap between states and people growing. Poverty remains widespread and continues to compromise available opportunities to majority of the world’s poorest people. This situation is not only confined to the third world particularly since the 1980’s and 1990’s with the worldwide promotion of the neo-liberal economic policies by global governance institutions. Thus millions of people previously cushioned or protected by the state have been thrown into poverty with the transition to market economy – globalization (Baylis and Smith, 2005: p. 646).
As such, close to one billion people in the world are facing an unacceptable poverty situation and live on less than a dollar per day (Pedro Sanchez et al. pp. 1-2, 2005, online). About 46% of the population of Sub-Saharan Africa (SSA) lives below the poverty line. Between 1990 and 2001, the number of people in SSA living on less than a dollar per day rose from 227 million to 313 million, and the poverty level rose from 45% to 46% (Millennium Project, 2006: p. 1).
Sub-Saharan Africa (SSA) has always been one of the poorest regions of the world despite it favourable land and abundant resources. The gross domestic product growth declined from 6.4% during 1970 – 1974 to 2.5% during 1975 – 1979 and to 1.3% from 1980 – 1984. At the same time, the export oriented development of SSA as primary producers could do no better because of the complex nature of the international trade system, resulting in fall in the prices of their export commodity. The two oil shocks of the 1970’s worsened the situation thereby deepening the poverty situation of the region (Dasgupta, 1998: p. 342 – 344).
Therefore, the world crises that started in the1970’s remains an intriguing phenomenon, due to its intensity and duration which led to rising unemployment, inflation and a general instability in the economic situation. Yet different regions of the world faced similar situations at varying degree and intensity. Accordingly, the macro economic policy instruments put in place after World War II to regulate the economy at national and international level, seemed to have reached inherent limits or protected the interest of dominant nations and powerful world institutions. Since then, the overwhelming changes in the organization of production, the fragmentation of demand, and the continued expansion of international trade have increased the ineffectiveness of nations-states’ regulatory structures and institutions. Countries have been forced to adopt free market policies in the hope of attracting new investments to spur development. Transnational corporations have never been so powerful, while regions, localities and individuals within such setting are looking for or acting to create alternative economic possibilities that suit their needs and protect their local economic interest. Within such circumstances, local economic development (LED) became a vast field of experiments to be explored not only as an alternative economic model but also as a complementary model to overcome the weaknesses inherent in the conventional economic approach which seems to allot economic resources and processes through dominant world interest groups (Demaziere, 1995: p. xii and Baylis and Smith, 2005: p. 646).
Consequently, over the past decades, the world has witnessed a LED movement and local initiatives have become a preferred instrument for economic development in localities and communities around the world. The functional decentralization of business activities, the exclusion of many areas from the geography of new production systems, the failure of top-down national and regional economic restructuring policy to solve the problems of localities, the rise of regional and local autonomy movements, have encouraged local perspectives in tackling problems of local development and underdevelopment in recent era. As a new school, local economic development is compounded with diversities thus leading to terminological ambiguity (Demaziere, 1995: p. 3). What ever these diversities, they still have major objectives which guide their course.
Due to these considerable changes witnessed in the operations of the international political economy, the responsibilities or functions of states and localities have changed significantly in recent decades. Within such an era typified by increasing internationalization and the weakening of state control in many countries of the world, individual localities both urban and rural are bound to pursue locally determined appropriate development strategies for their people. The limited successes achieved by the central government in the regional development strategies have assisted the overall trend towards local economic development. As such, this has resulted in the responsibilities for development planning being devolved reasonably from the institutional cores (the states) to individual localities. The need to address local crises (problems) by capitalizing on local opportunities has encouraged numerous urban and rural areas to assume the responsibilities for development planning which is designed to meet the distinctive situations of localities - bottom up approach (Nel, 1999: p. 1).
Even though local economic development (LED) started gaining grounds into the vocabulary of policy makers and academia in the 1970’s, it achieved prominence during the 1980’s. At this time, sustained economic recession and rising unemployment was having a dramatic impact on many localities and economies in the world. The response at the local level was the emergence of a vast range of initiatives aiming to alleviate the consequences of high unemployment and manage the processes of economic restructuring. There was the need to develop a new policy agenda appropriate to the rapidly changing economic conditions to ensure that such local level actions which attracted considerable interest and recognition could not be undermined. The introduction by OECD (Organization for the Economic Cooperation and Development) of a programme in 1982 aimed at the promotion and evaluation of local employment initiatives, the subsequent development by the European Union (EU) of a local employment development action programme (LEDA) and the introduction in SSA and in other parts of the world of LED has given local level initiatives recognition internationally. The concepts relating to LED issues have become a focus for social sciences and debate as well as an acceptable component in government policy in contemporary world (Syrett, 1995: p. 1 and Nel, 1999: p. 1).
In the above light, the relatively sophisticated LED endeavours in the countries of the North can only be matched with the emerging moves of the countries of the South to develop local self-reliance strategies which are practiced either as traditional forms of livelihood or as local alternatives to overcome poverty (Nel, 1999: p. 1). Thus the move towards LED in South Africa may range from urban case studies in cities like Johannesburg, Cape Town to rural case studies in smaller communities such as Hertzog community and Sodwana Bay community, etc. On the other hand, LED may range from a community initiated venture as in the rural district of Hertzog or externally supported and initiated as the case of Border Corridor. In the former case (Hertzog community) the programme was predicated on the notion that control of the process of development should be vested in the host community and managed by the people from whom the development initiative had its birth. This led to the reestablishment of an abandoned white farmland by the former farm labourers who had lost their jobs because of the closure of the farm. They had the skills as former farm workers and were eager to gain self employment through the establishment of a cooperative and thus overcome poverty (Nel, 1999: p. 217 and Nel et al., 2006: p. 54).
The extent of the challenges of poverty was recognized by the UN in 2000 with the acceptance of the Millennium Development Goals (MDG’s) setting time limits and quantifiable targets with priority being the eradication of extreme poverty and hunger with the target of reducing by half the proportion of people living on less than a dollar a day by 2015. This has witnessed the concerted efforts of majority of governments, intergovernmental organizations and other stakeholders towards poverty alleviation in recent era (Baylis and Smith, 2005: p. 646 - 647). Yet at the recent UN summit in New York in 2008, the world leaders were unanimous on the fact that they are not able to meet with the targets set by the MDG’s. This is overt acknowledgement of the challenges of poverty on the continent.