Content Rationale for municipal participation in economic development

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‘Local Economic Development and Municipalities’ Presented by Rashnee Parhanse 4 March 2004


  • Rationale for municipal participation in economic development

  • LED Good Practice

  • Learning from the past……

  • Towards a strategy for LED …….

  • Conclusion

Why should municipalities engage in Local Economic Development?

Macro Economic Challenges

  • The rate at which new jobs are created is insufficient to absorb the increasing levels of unemployment

  • In adequate skills of South Africans to meet the demands of the new economy that is service and knowledge driven.

  • Poverty levels and unemployment remain high

  • The income and skills gap between white and black South Africans remains extremely high - South Africa is still characterized by two parallel economies.

Legislative Mandates

  • Local government sphere closest to the people

  • Municipalities have a constitutional mandate to undertake a developmental approach in implementing policies and programmes

  • Local Government White Paper, Municipal Structures and Systems Act

    • Municipalities are to exercise powers and functions to maximize the impact of social development, meeting needs of poor and ensuring growth of local economy

Primary Responsibilities of Municipalities

  • To meet the basic needs of people

    • Establish an environment (whether directly or indirectly) that will create jobs and alleviate poverty in a sustainable manner
    • Engage actively engage with spheres of government and partners
    • Co-operate and align policies and programmes
    • Cannot perform in a vacuum and assume that external processes (e.g. the changes in the global economy, NEPAD, Growth and Development Summit) are irrelevant to the municipality

Local Economic Development - a local response to global and national economic and social dynamics and challenges

  • Local Economic Development - a local response to global and national economic and social dynamics and challenges

  • The type of response by municipalities is critical!

LED Case Studies in Municipalities: Ekurhuleni Randfontien Oudtshoorn

Ekurhuleni Municipality

  • LED Policy

    • Economic Status of Ekurhuleni
    • LED Vision – An inclusive wealth generating local economy
    • LED Mission
    • Objectives of the Policy
    • Key Policy thrusts
    • Key Principles
  • LED Strategy

    • Strategic Interventions
    • Key Performance Areas
    • Implementation Mechanisms

Ekurhuleni Municipality

  • Key Policy Thrusts

    • Local production for local need
    • A cooperative sector to represent community-based interventions in the local economy
    • A skills development network
    • Develop and sustain urban and commercial agriculture to build food security
    • Promote Waste Recycling and Reusable Energy
    • Build Local Development Capital
    • Ensure Participatory and Integrated Planning
    • Maintain Linkages with the Industrial base
    • Facilitate and Grow SMME’s
    • Affirm Local Procurement

Ekurhuleni Municipality

  • LED Drivers

    • Cooperative Governance
    • Partnership
    • Rapid Response to innovation and investment
    • Sound Intergovernmental Relations
  • Problems

    • planning – IDP not aligned to economic realities
    • Capacity (Understanding of LED and Political Representatives and officials require training)
    • Linkages on Trade and Investment (DTI and Province and local not fully aligned, International relations and investment on aligned)
    • Cooperatives (funding for capacitation limited, Procurement processes needs to be adjusted to include cooperatives)

Ekurhuleni Municipality

  • Comments

  • Policy

    • Challenges of dual economy
    • Securing markets for entrepreneurial development
    • Harnessing local resources and skills in a sustainable manner
    • Qualitative skills development
    • Impact of industries e.g. pollution
    • Co-operative governance and integration
  • Strategy

    • Monitoring and evaluation
    • Linkages to IDP

Randfontein Municipality

  • LED plan linked to IDP

  • LED drivers

    • Prioritizes economic sectors for LED intervention – agriculture, mining, trade and tourism
    • Encourage community participation and ownership
    • Establish Public-Private-Donor Partnerships – partnership with rugby association, DBSA and Mines
    • Support SMME development – bylaws
    • Enhance Co-operative governance
  • Implementation of Credit Controls to increase flow of income to communities e.g. waste management

Randfontein Municipality

  • Comments

    • Challenge - Gradual decline in mining sector - retrenchment of mine workers
    • Tourism – primary or secondary sector
    • SMME Development linkage to market opportunities and business management skills
    • Strong partnerships with business sector and donars
    • Clear linkage of sector plans to LED strategy

Oudtshoorn Municipality

  • Article in Business Times (22 Feb 2004)

  • Renowned as tourist destination (arts festival, ostrich farms, Cango Caves, climate etc) –increased earnings for the farms, festival, hotels and B&B’s

Oudtshoorn Municipality

  • Comments

    • Role of municipality
    • Impact on municipality?
      • Direct benefits for the municipality
      • Number of jobs created
      • Service delivery costs (electricity, water, sanitation)
      • Municipal assests – land, facilities etc
      • Partnerships
    • Currently municipality formulating LED strategy, business plans and establishing partnerships

Learning from the Past


  • Lack of national policy and strategy coherence

  • Functional specialization and uncoordinated actions

  • Lack of dedicated LED institutions

  • Shortage of LED capacity and skills

  • Lack of clear roles and responsibilities

  • Competitiveness of local areas and IDP’s

  • Poor financial position of municipalities

  • Poor access to accurate information

  • Ineffective monitoring and evaluation

  • Project based - survivalist such as brickmaking, poultry farming, hydroponics

  • Consultant Driven to address capacity problems

Towards a strategy for LED - LED Principles

Key LED Principles

  • Linked to current economic realities

  • People focused and mobilises social capital

  • Socio-economic focus- increases income flow to people to creates jobs and alleviate poverty

  • Co-operative governance

  • Alignment and coherence of policies and programmes

  • Market functioning and promote competitiveness

  • Support systems for entrepreneurial institutions e.g. SMME’s, targeted procurement

  • Continued……

Key LED Principles

  • Creates opportunities for human resource development e.g. skills development

  • Building partnerships with business community, community, NGO’s,

  • Ensures sustainable economic outcomes

  • Innovative and creative response

  • Network, listen to and know what's happening!

Designing a LED Strategy:

  • Designing a LED Strategy:

  • Key Elements to consider

Key Design Elements

  • Purpose: To co-ordinate and integrate economic development efforts, resources, role players investments and institutions (internally and externally)

  • Strategy driven by municipality

    • Design and implementation championed by the municipality
    • Housed within the municipality
    • Emanates from the IDP
  • Policy thrusts of strategy to be aligned to national and provincial economic polices

Strategy informed by competitive assessment of local economy (demographics etc)– accurate and updated information

  • Strategy informed by competitive assessment of local economy (demographics etc)– accurate and updated information

  • Thereby prioritizing primary, secondary and tertiary economic sectors

  • Defines the municipal economic vision and objectives

  • Identifies role players and establishes clear roles and responsibilities

  • Utilizes internal departmental relations to integrate and align to other components of municipality (BEE, land reform, housing etc)

Specifies the type of intervention

  • Specifies the type of intervention

    • Establishing Partnerships
    • Cluster and sub-sector cluster development (firms, groups working together)
    • Co-ordinated business support programme
    • Set of special purpose vehicles
  • Strategy identifies and addresses the skills gap in communities to participate in economic development e.g. business management skills

  • Identity's the LED spatial boundary or target area

  • Clear performance areas and comprehensive monitoring and evaluation indicators


  • Good Practice Municipal LED

  • Holistic and Integrated approach

  • Process orientated

  • Partnerships

  • Municipal Driven (not control)

  • Proactive and Dynamic!!!!!!

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