Local economic development, an emerging reality in sub saharan africa

CHAPTER 3: EMPIRICAL DATA

3.1: Background to LED in the Republic of South Africa (RSA)

The Republic of South Africa (RSA) has the largest economy in SSA, but it is highly dualistic, with the first and the second economies. The first economy (rivaling other developed economies) is very modern with a world class formal economy which produces a bulk of the country’s wealth and is well integrated with the global economy. Mining, manufacturing, services and agriculture, within the first economy are well developed. On the other hand, the second economy is the marginalized economy, which is portrayed by underdevelopment, contributes very little to the GDP, makes up a vast percentage of the population, comprises the poorest of the rural and urban population, is structurally disconnected from the first economy and the global economy thereby incapable of self generated growth and development. Therefore there is no doubt that about 40% of the population in SA is unemployed and relies for survival on welfare grants and the informal sector (Nel et al, July 2006: p.6 & US Department of State, September 2008).
The 1990’s witnessed a remarkable transformation of the South African society and the government from a racially repressive to one of the most liberal on the continent. While this transition has not been devoid of complications, it nonetheless remains one of the most dramatic and momentous transitions in recent decades. The African National Congress (ANC) led-government which came to power in 1994 is determined to redress the deeply entrenched imbalances caused by decades of apartheid policies and at the same time striving to reconcile social harmony within such a multi racial society that was fragmented by apartheid. This is to be achieved by planning an acceptable development strategy in one of the most unequal societies in the world by strengthening grassroots participation and delivery to what it terms developmental local government. This in effect takes development to the people by entrenching a pro-poor development focus on local government (Nel et al, July 2006: p.6 and DPLG, Section B, 1998).
In a bid to modernize the economy by being internationally competitive, there have been massive job losses from the formal economy in some labour-intensive sectors in SA. The number of unemployed people rose from 1.9 to 4.2 million from 1995 and 2002, and by 1999 an estimated 33% of households were living below the poverty line. Though the March 2003 Labour Force Survey of Statistics in SA illustrated that two million new jobs were created in the past seven years bringing the total number of those employed to 11.6 million, this growth rate of over 2.5% a year is unable to keep up with the new applicants into the work force. The government estimated that the economy must achieve a growth rate of at least 6% to counterbalance the current unemployment situation. It is against this background that the RSA engaged vigorously to overcome poverty through a systematic approach by instituting LED as an appropriate tool to strengthen the economic capabilities of municipalities (Nel et al, July 2006: p.6 and US Department of State, September 2008).
Therefore two of the hallmarks of the last half of the 20^th century and the beginning of the 21^st century in terms of the development theory and practice in the world have been the major attention committed to poverty as expressed in the MDG’s and the veracity that, in an era of globalization and decentralization, localities and their authorities are now playing a vital role in applied development at local level – LED (Etienne Nel et al, 2006: p. 1). SA took this golden opportunity to alleviate poverty and bring meaningful development at local level through LED during the political transformation process in 1994 after the first multi-party nonracial democratic elections (Nel et al, July 2006: p. 1).

3.2: Local Economic Development as an Emerging Reality in SA

After the election of the ANC led government in SA in the 1990’s, saw the inevitable emergence of LED as a relatively new concept within municipalities in SA (Nel, 2001: p. 1008).

3.2.1: Overview

Due to the increasing attention attached to poverty and the greater responsibilities given to local governments (LG’s) in the economic, social and political development of localities, LED became an emerging reality in SA. Therefore, LED is attracting a lot of attention in SA and draws considerable interest from the SA government, municipalities as well as within donor communities. The emergence of LED in SA is mostly due to the following reasons: Firstly, SA is pursuing decentralization policies, and as part and parcel of this policy, responsibilities for the promotion of economic development are delegated to local governments. There is hope that governing may be easier at the local level and developmental local government may be feasible since issues such as low national cohesion, ethnic tensions, racial divide on the one hand and overburdening of central government bodies, fragmentation of problems, policies and governmental institutions on the other hand are less of an issue at this level (Meyer-Stamer, 2004: p. 1). SA has suffered from the brunt of apartheid which precipitated limited governance and delivery capacity by the government. With decentralization and the end of apartheid, local stakeholders are now more involved in the promotion of economic activities vigorously at the local level since unemployment and poverty are most urgently felt at this level (Ibid).
The application of LED is a relatively recent phenomenon in SA; having become evident in the early 1990’s, as well as, tremendously gaining credibility and acceptance by the late 1990’s SA became keen to apply LED policies because of the major challenges facing localities. The unique nature of LED in SA as opposed to other African countries is based on the fact that there is significant government endorsement for LED interventions and secondly, the wide spread application of LED interventions within the country (Nel et al, July 2006: p. 1). With such attention attached to LED by the government of SA and the prioritization of the needs of the poor, the country could serve as learning laboratory with respect to policies of LED on the continent (Nel et al, July 2006: p. 1 & DPLG, General, 1998). This therefore makes the case of LED in the country of SA very significance.
In the above light, it became undisputed within public and private spheres that after the political miracle achieved by the country in 1994, what is now needed in SA is an economic miracle with the intention of closing the gap between the two economies thus alleviating poverty (Nel, 2006: p. 1 and Nel, 1999: p. 1). This remarkable opportunity came when the government of SA enacted the “White Paper on Local Government” (WPLG) with the intention of transforming local government to meet up with the challenges in its developmental goals. Here the local government was given a distinctive status and role in building democracy and promoting the socio-economic development of municipalities (Nel, 1998: p 1 & DPLG General, 1998).
There has been a new wave and a significant shift in the economic strategies pursued in the country at the local level. The rationale behind the many LED initiatives becomes obvious as people living within municipalities are concerned about their own future and are bound to determine their own economic destiny through LED initiatives. Rather than being mainly as a result of economic strategies pursued at national level, emphasis for local potential for economic development is resulting more from the many local initiatives taking place within localities (Spilling, 1985: p.1).

3.2.2: Why LED?

LED overcomes market failures and the challenges in the global market structure; it galvanizes the population towards a common objective and sense of purpose. LED stimulates citizens towards participation and entrepreneurial ventures, guarantees suitable conditions for sustainable employment, and promotes favourable environment for human development. It is consistent with the fight against poverty and social inclusion, assures environmental safety and leads to the reorientation of economic and social policies towards “bottom-up” development strategies (Canzanelli, October 2001: p. 7-9 and Helvetas Cameroon and Anembom Consulting, September 2005: p. 12 – 17).
Furthermore, LED combats the traditional model of economic development that gives the task and privilege of producing wealth to a small segment of the population and relies on the unlikely trickle-down effect to get to the poor, i.e. the neo-liberal postulation which promotes globalization and multinational corporations (Catenacci, December 2003: p.26).