Department of Provincial and Local Government

1. Department of Provincial and Local Government Local Economic Development Policy Re-focusing Development on the Poor Presentation to SA Cities Network, Cape Town November 19, 2002

2. Purpose • Describe current policy thinking on LED • Locate policy within 5 scenarios • Issues for taking city economic development forward

3. Current Draft LED Policy • Pro-poor policy approach aimed at promoting developmental LED interventions by cities • The mix of interventions should take into account the unique context of each city in respect of geographic and physical setting, local economy and employment structure, local population and labour market, and possibilities for social partnerships given the broader political context.

4. Current Draft LED Policy • Economic opportunities and projects should be identified through the Integrated Development Plans (IDPs) of cities • IDP is an intergovernmental planning instrument and should align national/ provincial economic interventions and local priorities and opportunities. • LED Units are emphasised as institutional vehicles for the implementation of LED initiatives.

5. Current Draft LED Policy Developmental LED Interventions Fostering community economic development • Community businesses and cooperatives • Local exchange and trading systems • Savings collectives and informal lending systems • Support community institutions Promoting linkages between wealthy and poor areas • Development permissions linked to requirement to invest in poorer areas Investing in human capital • General and customised education and vocational training • Basic and advanced skill development programmes • Targeted placement • Thinking skills, people skills and self-confidence development • Fast-tracking business and technical skills

6. Current Draft LED PolicyDevelopmental LED Interventions Delivering and maintaining infrastructure and services • Maximise economic linkages • Reliable, cost effective municipal services • Job-creation and enterprise development • Affirmative procurement and BEE Plugging leaks in the local economy • Stem outflow of money from poor areas within city • Fund special events • Promote use of local labour • “Buy local” initiatives Retaining and expanding existing business • Special support for existing businesses • Developing under-exploited sectors • Fast-tracking development applications and permits • Identification and adoption of new markets and technologies

7. Policy Refinement • Institutional integration, roles of other role players other than government in LED and funding framework. • Micro/ Macro-economic development linkages • Policy/ programme linkages • Current Govt funding/financial review of LED • Strategic use of donor support programmes

8. Policy Refinement • LED financing mechanisms: grants/credits/ • SMME support/BEE/ partnerships/ equity issues • Implementation/ Institutional assessment • Donor support, alignment to policy & implementation • Economic development agencies & investment institutions and private sector bodies

9. Policy Refinement • Municipal collaborative governance/govt spheres • Civil society/ Non-governmental participation • Capacity and resource requirements for all spheres • Competency requirements of economic development institutions

10. Policy Refinement • Competency and capacity development mechanisms • Considerations of key instruments such as SETAs in the capacity building of LED • Appropriate synchronisation of donor programmes • Key performance indicators / cycle assessment • M&E Strategy

11. Policy Refinement N/P Gov’t LED Comm./ NGO Private Sector City

12. Five Scenarios for the Future • More of the same • The corporate millennium • Careful communities • Hell on earth • Sustainable abundance Bernard Lietaer, 2001, The Future of Money-Creating new wealth, work and a wiser world, Published by Century

13. Scenario 1More of the same This is unlikely to happen due to four mega trends • Age wave • Information revolution • Climate change • Monetary instability And due to the transformation of money • What money is? • Who creates it? • How people behave towards each other when using it?

14. Scenario 2Corporate Millennium From the information age to corporate millennium • Monopoly over information • The power of advertising • Hyper concentration of wealth • Of the 100 richest economies, 51 are now corporations (Sales by General Motors are greater than the GDP of Denmark) • The world’s 200 largest corporations now control 28% of the global economy, yet need to employ only 0,3% of its population to achieve it. • American corporations pay less in US taxes than they receive in public subsidies from US taxpayers.

15. Scenario 3Careful communities Driven by a collective reaction to retreating to safety Extreme forms of “localism” can occur when there are breakdowns in the financial system Control over local currencies used negatively to lock people into a safety cocoon Globalisation forces fuelling new emphasis on local priorities and local cultural homogeneity

16. Scenario 4Hell on Earth • Instead of people organising themselves in self- contained communities, a highly individualistic “free for all” ensues • A world where there is a lot of work but not enough money around to bring the people and the work together • Vicious cycle of homelessness, joblessness, bankruptcy and financial failure • Having a full-time job at minimum wage does not provide someone a home anywhere in the US

17. Scenario 5Sustainable Abundance A golden age of sustainable abundance within our lifetime is possible: • Balancing financial capital and social capital • Complementary currencies • Developing systems that incorporate the poor and allows the poor to exchange their time and social capital for goods and services • Systems and value approach to development rather than a financial and “affordability” approach. • Developmental LED

18. Government’s 3 Main Policy Thrusts for social and economic development • Establishing a job-creating economic growth path • Embarking upon sustainable rural development and urban renewal • Bringing the poor to the centre of development

19. Finding Synergy between the different approaches to LED Traditional Approach Cities attract external investment as a means of boosting the local economy Endogenous Approach Development from within based on growing skills and mobilising local resources, creativity and innovation

20. Finding Synergy between the different approaches to LED Traditional Approach (Supply-side) • Urban efficiency • Urban attractiveness • Focus on getting the basics right • Incentives to industry • Place marketing Endogenous Approach (Demand-side) • Community empowerment approach • Human resource development • Redistributive and targeting poverty • Unleash and promote local innovation and creativity • Local resource mobilisation

21. Developmental LED vs Non-Developmental LED Developmental LED Local Government and communities working together to find sustainable ways of addressing social, economic and material needs of citizens Non-Developmental LED Social objectives are secondary to investment attraction at all costs

22. Aiming LED at developmental outcomes Policy Thrusts Establishing a job-creating economic growth path Embarking upon sustainable rural development and urban renewal Bringing the poor to thecentre of development Traditional Approaches Endogenous Approaches Developmental LED

23. Developmental LED is the Key

24. What is LED? LED is a process in which local role players and stakeholders engage to stimulate business activity and employment within a specifically defined area. • City scale • Sub-city scale • Ward level • Neighborhood level • Enterprise level • Entrepreneur level

25. City Scale “Macro-economic” management – Managing the city economy • City fiscal policy • City monetary policy? • Revenue generation and expenditure • strategies • Borrowing framework • City-wide planning (IDP), budgeting, • service delivery, monitoring • City industrial policy, SMME policy, etc • Spatial targeting

26. City Scale “Macro-economic” management – Managing the city economy • GGP indicators • Localise national economic information • Localise national/provincial economic • policy • City identity and marketing • Building credibility

27. Ward/Neighbourhood/enterprise Scale • Linking community initiatives with city-wide initiatives • Linking enterprise and entrepreneurs with city-wide plans and initiatives • Community empowerment focus • Creating work for the poor through new forms of exchange (eg. provide poor with bus tokens in exchange for removing rubbish)