Stimulating & Developing Sustainable Local Economies

Stimulating & Developing Sustainable Local Economies Draft National Framework for Local Economic Development in South Africa South African Cities Network April 2006

Outline of the Presentation • Introduction • Challenges • A Bit about ASGISA • Basis of the LED Framework • Objectives • Outcome • Focus of the framework • Policy Thrust • Strategy • Concluding remarks

Introduction • The National Framework for LED has a long history of discussion and consultation with a number of role players • The predecessor of this document was also presented at a workshop to the Economic and Employment Directors General cluster • Result of previous document - "Guideline for implementing LED in South Africa“ • This framework does not dictate what should happen in different municipalities but focuses on what the state can do to support local leaders, communities, businesses, NGOs, organised labour, and other stakeholders to realise their own and their collective objectives. • It emphasises the need for local people to work together with each other and with external role players to improve their lives. The state should play the role of facilitator, net worker and monitor. • It is no longer just about what government departments do, but it is about how they do, what they do!!

Challenges • Capacity constraints in human resources and skills • Existing LED strategies and plans not linked to the local reality • Lack of participation of important stakeholders in the design of LED strategies and plans • Lack of clear strategies to deal with the informal economy • Reliance on consultants to design LED Programmes • Lack of information on the local economy • Over politicising economic development • National and Provincial Government Spheres parachuting into localities

ASGISA – Binding Constraints • Relative volatility of the currency, and current strength • Cost and efficiency of national logistics system and some infrastructure • Shortage of suitably skilled labour and disjointed spatial settlement patterns • Barriers to entry and competition in sectors of the economy • Regulatory environment and burden on SMMEs • Deficiencies in state organisation, capacity and strategic leadership impacting on delivery

ASGISA – Interventions • Macro-economic issues • Challenge of improving budgeting in government—need to predict income and expenditure better • Need to monitor better implementation of decisions to spend, especially on capex • Infrastructure programmes • Overall government plans for infrastructure spending totals over R370bn over the current MTEF • 50% To be spent by the three spheres of govt • 40% To be spent by State Owned Enterprises. • 5% To be spent through Public Private Partnerships • 3 - 5% To be spent by development finance institutions

ASGISA – Interventions • Sector investment strategies • Focus on sectors with potential for high growth, employment creation and enterprise development • Immediate focus on BPO and Tourism (strategies are essentially complete) • Focus on agriculture/agro-processing for next set of initiatives: • Other sectors include: chemicals; metals beneficiation (including capital goods); creative industries; clothing and textiles; • Education and skills • 2nd economy & SMME interventions • Expansion of EPWP: bigger rural road projects; focus on maintenance; roll out of Early Childhood Development component • Strengthening of microfinance initiatives especially loans between R10 000 and R250000 • Targeted initiatives for women and youths particularly in construction and management of infrastructure projects • All sector strategies must have developmental elements • Public administration issues / delivery

Basis of the Document • The White Paper on Local Government provides the context and the direction for the role of municipalities in economic development. The White Paper says: “Local Government is not directly responsible for creating jobs. Rather, it is responsible for taking active steps to ensure that the overall economic and social conditions of the locality are conducive to the creation of employment opportunities”

Objectives of the Framework • To build a shared understanding of LED in South Africa • To elevate the importance and centrality of effectively functioning local economies in growing the national economy • To wage the national fight against poverty more effectively through local level debates, strategies and actions • To improve community access to economic initiatives, support programmes and information • To improve the coordination of economic development planning and implementation across government and between government and non-governmental actors • To build greater awareness about the importance and role of localities which, globally, are playing an increasingly significant role as points of investment, decision-making and development in a world where the global-local dynamic is emerging as a key hallmark

Outcome of the Framework (5yrs) • All District and Metro municipalities have credible LED strategies, effectively implemented by a dedicated local economic development unit or similar entity • All Local Municipalities have at least one staff member (at least qualified through the LGSETA LED Learnership) implementing its LED activities • Analysis of the 52 district and metro municipal economies undertaken. • The competitive advantage of all District and Metro municipalities are identified, incorporated into its LED strategy and exploited • Appropriate structures exist to encourage and facilitate discussion and joint economic planning among municipalities and with Provincial Government • All municipalities have innovative spatial strategies that links special demarcated areas in place • All municipalities have at least one public private partnership through which an economic activity is being implemented • A national centre for monitoring, learning and research in LED is established and is supported by provincial centres

Focus of the Framework • What the state with all its organs and agencies can do to support and reward citizens who organise locally and operate in local level partnerships to engage in greater economic activity, spreading economic development in a more inclusive and shared manner • How the state can be a platform to facilitate the inclusion of the attempts of all to participate in the economy. This would include rewarding and enabling citizens who form organised communities in response to social and economic rights programming • Improving the competitiveness of the 52 District and Metropolitan municipal regions by providing an approach to developing local economies with the participation of all relevant stakeholders

Policy Thrust Introduction - The private sector, consisting of private enterprises, cooperatives, and community businesses, that operates in municipal regions are the engines of economic growth. Their existence and ability to produce competitively and generate greater levels of income and employment, is dependent on an active State role in generating the appropriate and necessary conditions, stimulus and governance efficiencies. • Public Sector Leadership & Governance -This includes a focus on local governance, effective intergovernmental coordination, infrastructure investment capability, enterprise support, and identification and promotion of competitive advantage of the 52 regions around customized sectors and clusters. • Investing in Communities - The State should partner with communities in order to boost circulation of local income and community organization in 52 economic impact regions (46 Districts & 6 Metros)

Strategy • Improve market and public confidence in municipalities - is a critical first step in attracting investment and building loyalty to local areas. • Identify and exploit competitive advantage of the 52 municipal regions - A better understanding of the opportunities and constraints in local economies should inform a more balanced development path of these regions • Intensify enterprise support – The Small Enterprise Development Agency (SEDA) should be the key vehicle for localised enterprise support. • Sustainable Developmental Community Investment Programming - suggests building community, and thus using a powerful cultural dynamic, as the main vehicle and partner for LED together with the resourcing of organised communities to carry out key local functions, provide services and become important productive units

Strategy 1 – Improve Markets • This strategy will require the LED Unit to focus on a range of existing dplg initiatives (responsibility of municipal finance unit with National Treasury) around the priority of improving local economies. • Activities • Intensify support to municipalities under Project Consolidate • Monitor and Report on Implementation of the Municipal Finance Management Act (MFMA) and Property Rates Act. • Assist municipalities to finalise appropriate spatial policies in their IDPs that are linked to a municipal-wide land-use management system. • Improve infrastructure investment and intergovernmental coordination • Support Municipal- Economic Forums

Strategy 2 – Exploit Competitive Advantage • This strategy will be driven through the IDP/PGDS/NSDP alignment task team that is led by the Presidency and of which the dplg and the dti are a part. • Activities • Undertake analysis of the 52 municipal economies • Target priority growth sectors • Build capability for a knowledge economy • Market the 52 Regions and their Products • Establish Innovative Funding Instruments • Regulatory impact assessment

Strategy 3 - Intensify enterprise support • This strategy is largely a part of the on-going responsibilities of the dti. There are also a number of additional sector-based enterprise support initiatives. • Activities • Implement the new small business development strategy • Improve Access to Finance

Strategy 4 - Sustainable Developmental Community Investment Programming • This strategy will require a special programme to be established. The LED unit will mobilise resources for an appropriate institutional structure to develop concepts and proposals to pilot and replicate sustainable developmental community investment programming • Activities • Crafts • Fresh Produce • Waste Collection • Street trading / Development of Markets • Community Enterprises • Housing • Organise Communities

Concluding remarks • This framework for LED seeks to mobilise local people and local resources, within the framework of the PGDSs and NSDP, to become competitive in both the domestic and international markets. • It augments the range of current sectoral initiatives to deal with the challenge of employment creation • It is intended to build a shared understanding of LED in South Africa and put into context the role of local economies in the national economy. • It also lays the basis for the co-ordination of economic development planning and implementation across government and between key role players. • It lays the basis for deepening community access to economic initiatives, support programmes and information

Stimulating & Developing Sustainable Local Economies