L Msengana-Ndlela: Eastern Cape Local Government Summit

23 August 2006

Programme Director, Mr Sigabi
Honourable Acting Premier of the Eastern Cape, Mr Thobile Mhlahlo
Honourable Members of the Executive Council (MECs) responsible for Housing and
Local Government, Public Works, Education, Sports, Arts and Culture, Transport,
Environment and Economic Affairs
Honourable Members of the Provincial Legislature and Chairpersons of Standing
Committees
Representatives of organised local government, South African Local Government
Association (SALGA)
Representatives of the provincial House of Traditional Leadership, led by Nkosi
Matanzima- A! Ngangomhlaba!!
Honourable Mayors, speakers and councillors
Representatives of development agencies, educational institutions and the
private sector
Municipal managers and colleagues from the three spheres of government

Ladies and gentleman

I would like to extend my appreciation to the Eastern Cape Provincial
Government for inviting our department to present our perspectives on Local
Economic Development (LED) and Service Delivery. We congratulate you on
convening this important summit at this opportune time, especially five months
into the new term of local government (2006 to 2011) and just the second month
of the 2006/07 municipal financial year.

Clarity of purpose and focus on the implementation of Government policies by
the collective of Eastern Cape leaders represented here today stands to benefit
our people. It is with this imperative in mind that I would like us to discuss
the development opportunities available to the people of the Eastern Cape
Province, as the three spheres continue to solidify inter-governmental
relations and support to the local sphere of government.

Economic growth and development

In 2004, Government set a target to halve poverty and unemployment by 2014.
Notwithstanding the progress made in economic and local development, we must
recognise that a large number of South Africans still live in poverty. The
faster implementation of government policies and programmes such as the
Accelerated and Shared Growth Initiative for South Africa (AsgiSA) is critical
to addressing poverty eradication and development. Achieving the target of a
minimum economic growth rate of 6 percent per annum, is necessary to meet the
2014 targets.

Through AsgiSA, a set of economic initiatives has been identified to serve
as catalysts for the higher levels of growth that can be shared throughout
society, particularly the poor. These economic initiatives will be complemented
by an enabling management of fiscal and monetary policy, more focused
industrial policy framework, supporting sector policies and legislation and a
range of initiatives in the economic cluster of departments. This is the
context within which the Ministry and Department of Provincial and Local
Government has introduced the Framework for Local Economic Development (LED) on
14 August 2006.

The national LED framework

The Framework addresses four main strategies:

* Improving good governance, service delivery, public and market
confidence
* Spatial development planning and exploiting the comparative advantage of
districts and metros
* Enterprise support and business infrastructure development
* Community investment programming.

We will briefly discuss these four strategies in turn:

* Improving good governance, service delivery, public and market
confidence

Improving public confidence in municipalities is a critical first step in
attracting investment and building loyalty to local areas. It will therefore be
important that we increase the pace and quality of services in the Eastern
Cape, particularly with regard to basic water, sanitation, electricity/energy
and housing services.

Equally important will be the stabilisation of both the political and
administrative components of each and every municipal council. This means that
municipal councils must attend to, amongst other things, the filling of vacant
positions within the allocated budget for this financial year. For example, out
of the 45 municipalities in the Eastern Cape, there are approximately 12 (27
percent) municipalities that have not filled the position of a municipal
manager.

The same analysis can be done for the next levels of administration in each
municipality. It will therefore be important that the provincial and municipal
councils attend to these matters with urgency, utilising the enabling
regulations on performance management that were published by national
government on 1 August 2006. The regulations provide clarity on basic
competencies required for the filling of such positions and supporting
documentation on how organisational and individual performance should be
managed periodically.

Why are we referring to the appointment of Municipal Managers, Chief
Financial Officers and other key managers, when we are talking about Local
Economic Development? Is there a contradiction between the two? Why do we refer
to good governance and service delivery when we are setting our sights on
accelerated and shared growth?
I would like to argue that we draw attention to good governance when we talk
about economic development, precisely because the manner in which these local
institutions are governed is a key determinant for economic development.

With regard to infrastructure spending, since the Municipal Infrastructure
Grant was introduced in 2004, there has been good progress in some
municipalities whilst in others there remains room for improvement. For
example, in the Eastern Cape and in the 2005/06 municipal financial year, out
of the 45 municipalities, a total of 42 (93 percent) were able to spend their
MIG allocations. The remaining three (seven percent), must utilise the current
supporting environment within the context of Project Consolidate to improve
their infrastructure spending levels.

Chairperson, throughout the world, particularly in developing countries like
South Africa, the provision of basic infrastructure and services as well as the
creation of sustainable communities brings impetus to investment and an
improved micro-social environment.

You will also remember that government has announced what some refer to as
an ambitious infrastructure spending programme of about R370 billion over the
next three years. Most of this spending is about infrastructure development in
local geographical spaces. The economic climate is encouraging and I would like
to refer to today�s Business Day (23 August 2006), which had an article that
was a response to the release of economic growth figures in the second quarter
by Statistics South Africa:

�Economic growth accelerated above expectations in the second quarter of
this year, surging to 4,9%�

�A Reuters poll of 15 local economists had forecast growth of 4,3% quarter
on quarter.�

According to JP Morgan economist, Marisa Fassler, quoted in the same
article, �Government�s planned infrastructure programme would also provide
support for growth�

The climate is indeed positive. But this also means that we will depend a
lot on the performance contribution of the local and provincial spheres of
government.

* Spatial development planning and exploiting the comparative advantage of
Districts and Metros

The second element of the LED Framework deals with the responsibility of
local leadership with regard to spatial development planning and reaching
distributional choices that take into consideration the comparative advantages
of districts and metros.

* Enterprise support and business infrastructure development

The third element of the LED Framework focuses on business development
interventions that should be linked to targeted economic sectors, skills
development and innovation networks. Within this context, business development
for co-operatives, which is different from private enterprises, can also be
considered.

In all, noting the facilitative role of government in economic development,
a consolidated approach on enterprise and infrastructure development would add
value in addressing market limitations.

* Community investment programming

This fourth element of the LED Framework suggests that it is important that
we build resident local and community capacity as an important strategy for
attaining economic development. The role of the institution of traditional
leadership, non-governmental organisations (NGOs), and faith-based
organisations (FBOs) cannot be over-emphasised.

Municipalities can therefore play an important role through provision of
infrastructure and services, by-laws, land-use planning and procurement
policies in stimulating the local economy. Effective infrastructure planning
and provision can involve local suppliers and assist in building local
competencies.

Some of the interesting lessons from South Africa�s municipalities

As we have indicated before, in previous public pronouncements, empirical
evidence suggests that a significant number of South African local economies
are demonstrating some levels of economic potential. As you will be aware, due
to the differential nature of South African municipalities, these areas do not
contribute equally to the national economy.

For example, data from the Council for Scientific and Industrial Research
(CSIR) reflects that, the economies of 13 municipalities grew consistently
above the national average of 2,5 percent, per annum over an eight year period
from 1995 to 2003. The strongest growth was represented by the following:

* uThungulu District (Empangeni, Richards Bay in KwaZulu-Natal Province) at
5,8 percent
* Bojanala Platinum District (Rustenburg, Moretele, Koster, Brits in North West
Province) at 4,7 percent
* Tshwane Metro in Gauteng Province at 4,6 percent
* Johannesburg Metro in Gauteng Province at 4,2 percent
* Frances Baard District (Kimberley, Barkely-West in Northern Cape Province) at
3,7 percent
* Eden District (George, Knysna, Plettenberg Bay in Western Cape Province) at
3,5 percent
* Waterberg District (Elisras, Warmbaths, Potgietersrus in Limpopo Province) at
3,4 percent
* Nkangala District (Middelburg, Witbank in Mpumalanga) at 3,0 percent
* Nelson Mandela Metro in the Eastern Cape Province at 2,9 percent
* Sedibeng District (Heidelberg, Vereeniging, Vanberbijl Park in Gauteng
Province) at 2,9 percent
* Kgalagadi District (Kuruman, Kudumane in the Northern Cape Province) at 2,8
percent
* Ethekwini Metro in KwaZulu-Natal at 2,8 percent
* Central Karoo District (Beaufort West, Laingsburg, Murraysburg, Prince Albert
in the Western Cape Province) at 2,5 percent.

Smaller (Local) municipalities

Ndlambe is a small municipality lying on the south-eastern coast of the
Eastern Cape Province including the towns of Bathurst, Port Alfred, Alexandria
and several smaller centres. It is heavily reliant on commercial agriculture
and tourism. The ongoing case of LED in kwa-Ndlambe is of interest because of
partnerships between the community, and the agricultural and tourism sector,
working together with government. The two key enterprises in this regard are a
pineapple pulp processing factory and a brick-making works. These arising
lessons from kwa-Ndlambe demonstrate that community-based projects can be
competitive in the open market and government should continue to focus on
skills development, access to finance and a supportive regulatory
environment.

The Ingwe Municipality in the midlands of KwaZulu-Natal province is a small,
largely rural municipality centred in the town of Creighton. The municipality
has prioritised addressing poverty in its Integrated Development Plan and
identified an innovative range of mechanisms to achieve this, the most
important being around tourism. The municipality is rated as one of the best
performing in the country in terms of a national awards scheme. The tourism
intervention has focused on job creation reviving the local railway-line as a
tourist attraction, driven by a partnership involving the municipality, the
rail and tourism authorities as well as local community groups. Lessons from
this municipality demonstrate the importance of partnerships, effective
marketing and support by local government.

Secondary cities

The city of Umhlatuze is one of the country�s key ports and industrial
nodes, and incorporates the primary core of Richards Bay as well as Empangeni.
The District and Local municipalities, working together with the local private
sector have focused on growth initiatives and initiatives targeting the second
economy. The results of these efforts are evident in the 5,8 percent economic
growth rate that was recorded between 1995 and 2003.

Metros

The six metropolitan municipalities alone contribute 55,4 percent to the
national Gross Value Add (GVA) of our country.

From an economic perspective Johannesburg can arguably be referred to as the
most important city in sub-Saharan Africa. The city�s growth strategy provides
for support measures which directly and indirectly facilitate economic growth
in the poorer sections of the community.

The Johannesburg Fashion District initiative is an example of a catalytic
project, which has significantly pro-poor growth implications. The initiative
has involved some 1 000 clothing micro-manufacturers and has encouraged a focus
on niche markets, out-sourcing and integration of migrant workers.

In addition the city has now tarred all roads in Soweto, the biggest
township in South Africa. The city is engaged in a number of programmes in
respect to inner city development such as:

* Joburg 2030 Vision
* Johannesburg Inner City Regeneration Strategy
* Better Buildings Programme
* Urban Development Zone Tax Incentive
* Informal Trade and Development Programme
* Closed Circuit Television to alleviate crime
* Area Based Renewal Initiatives (e.g. Constitutional Court, Newtown Cultural
Precinct).

Ekurhuleni is reported to have the largest industrial concentration in
Africa. The city is engaged in a number of innovative programs:

* supporting the sustainability of the manufacturing sector to grow and be
competitive
* linking municipal procurement to the local economy
* upgrading and revitalising commercial areas for exchange of commodities. This
intervention seeks to address the economic infrastructure of the townships in
the Metropolitan region. More specifically it delves into how to consolidate
apartheid�s legacy of white commercial business districts and black township
informal economies into one sustainable urban area
* mainstreaming environment affairs as a key principle of the LED policy
* restructuring of local state assets for greater efficiencies and the
realisation of black economic empowerment: in this option the programme
commences with the Fresh Produce Market, of the Ekurhuleni Metropolitan
Municipality, which provides a marketing service to the agricultural
sector
* developing agricultural exports (flower growing and medicinal herbs) and
stimulating food production
* facilitating skills development to grow the economy and achieve sustainable
development.

The role of provincial government

Our President, Mr T Mbeki, in his State of the Nation Address (2006),
committed government to have realistic Integrated Development Plans and
credible Local Economic Development Programmes, with the support of Provincial
Government. Equally, the Five Year Strategic Agenda for Local Government
emphasises the co-ordination role of the provincial sphere of government.

At this point, I would like to emphasise only two aspects of the role of
provincial government and these relate to a clear Provincial Growth and
Development Strategy or Plan (PGDP) and the support to district Growth and
Development Summits (GDS).

The content of a PGDP

The refinement of the PGDP in this province will also provide impetus to
developmental efforts of municipalities. What should be contained in this
refined Provincial Growth and Development Plan?

The PGDP should, at the minimum, consist of four key components, namely:

* a strategic analysis, priority setting and spatial development
perspective
* a spatial growth and investment strategy
* a clear implementation framework focusing on leadership and
co-ordination
* the identification of critical resource capabilities and capacities required
for the implementation of the PGDP.

The District Growth and Development Summits

The second supportive role of provincial government should be on district
Growth and Development Summits. These summits are intended to facilitate and
build partnerships on practical programmes that will be engaged with social
partners in each district and metropolitan municipality. The summits should not
be treated as once-off events but should become part of a continuous process of
social partner mobilisation in economic and social development.

In conclusion, Honourable Chairperson, once again let me congratulate the
province and the organisers for convening what promises to be a landmark event
in the Eastern Cape Province. We wish you all the best and we hope that your
deliberations will bring us closer to an improvement in the quality of life for
the people of the Eastern Cape.

I thank you

Issued by: Department of Provincial and Local Government
23 August 2006
Source: Department of Provincial and Local Government (http://www.dplg.gov.za)