N Hangana: Developing Local Government conference

15 August 2006

Programme Director
Distinguished guests
Ladies and gentlemen

It is indeed an honour for me to do the closing remarks at this very
important consultative conference.

As you have heard over the past day and a half, global competitiveness, the
age of consumer choice, more sophisticated work, rapidly rising costs of goods
and services, and the slow growth of our “second economy” can prevent us from
achieving the six percent growth needed to achieve the Millennium Development
Goals. As has further been implied, a more flexible economy, facing intense
global competition means that there is less security for workers. Job security,
because of globalisation, has unequivocally been reduced in the recent
decades.

It has also been implied that a sophisticated economy requires sophisticated
workers. But it is increasingly clear that we really need a broad set of skills
that can enable workers to make decisions, even at low level.

The question that needs therefore to be asked is, "How can Local Economic
Development as discussed at this Consultative Conference, hope to address the
challenges that South Africa face in the global economy?"

The four strategies proposed in the framework are a good start which would
allow government to focus its efforts in its fight to create a better life for
all the people in the country. Let me once again remind you what the strategies
are:

* Improving market and public confidence in municipalities. I am sure we all
realise that this is a critical first step in attracting investment and
building loyalty to local areas.
* Identifying and exploiting comparative and competitive advantage of the 52
municipal regions. We believe that a better understanding of the opportunities
and constraints in local economies should inform a more balanced development
path of these regions.
* Intensifying enterprise support. It has been shown all over the world that
the development of small and medium enterprises is a huge creator of jobs. Our
efforts as government through Small Enterprise Development Agency (SEDA) and
the industrial development policies you heard of yesterday, is part of the
strategy to support enterprises.
* Sustainable Developmental Community Investment Programming. By introducing
this concept, we hope we would get people to think outside the box. Empowering
and developing communities is probably the biggest investment government can
make in the development of local economies.

This conference has also shown us some important and practical processes
that will allow us to start tackling some of the problems mentioned
earlier.

Firstly, marketing local economies and growing internal markets are
critical. Vigorous growing markets are a major source of productivity growth
because they stimulate capital investment and technological advances. Our
“second economy” does not really have markets where poor people can sell their
goods. It is therefore not about production in the “second economy” but rather
about “where we can sell the goods we produce”. At this stage, it is very
difficult for people in the “second economy” to sell any goods in the “first
economy”. This is a major problem. By growing internal markets, where ever they
may be (in a rural or urban area) we would go a long way in starting to address
the problem.
Another aspect of this point is the ability of local government to lead and
govern the locality. Too often the inability to govern and weak leadership
result in investors avoiding the locality and sometimes even disinvesting. This
consultative process has made it clear that a lot of the problems affecting the
local economy will be eliminated if the leadership and governance of the
locality is of such a nature that it inspires confidence. Who would not want to
invest in such an environment?

Secondly, inequality is unproductive. Inequality of income undermines growth
because it weakens the demand for goods and services as well as the ability to
save. The gap between richer and poorer families is fast widening. Inequality
of income also undermines people's ability to invest in themselves through
education and healthcare. Such inequality probably also undermines the optimism
of South Africans and the faith in the fairness of the economic system. If we
do not address it adequately it may result not only in apathy of the community,
but also in political dissent. The process of shared growth which we are
embarking on through the Accelerated and Shared Growth Initiative for South
Africa (AsgiSA) programme is one way of starting to address the problem.

Thirdly, there is a strong case for public investment. It is clear that the
economic basis for public investment is widely accepted by most mainstream
economists. Markets cannot solve all problems of scarcity because some goods,
public goods, produce benefits well beyond the business or individuals that
invest in them. Education/skills development is a good example. An individual
will benefit from her or his education, but so will society at large. Classic
public goods also include transportation, infrastructure development, research
and development etc. How we implement these infrastructure development
processes is an important component of how we develop our local economy.

Municipalities will therefore have to focus on providing good local
governance, reliable and effective services and sound administration. The
requirements for this are clearly spelt out in policy and legislation and the
local government system.

Fourthly, there is also a strong case for investing in communities. For us
to really progress economically, we need to allow communities to take their
economic destiny into their own hands. From what we have heard during the last
day and a half, communities are an important player in the development of local
economies. The supply driven service delivery process of the past clearly does
not fit with the new thinking within local economic development. A true process
of partnering with communities must therefore be the way that we deal with
economic issues.

However, we understand that due to the Apartheid past, there might be
limitations to the ability of communities to form adequate partnerships. It is
therefore important to invest in and build competent communities that can
explore and act on their environment in a positive manner. Unless we do this,
service provision will always be supply sided and we will only create dependent
communities. We definitely do not want to go back to the old ways of doing
things.

An important fifth issue is sustainable use of natural resources. Very few
of us have actually thought of the process of sustainable local economic
development as it was presented yesterday. Municipalities should therefore ask
themselves what they will do to ensure that resources are used in a sustainable
way. For example, have the infrastructure projects that are being implemented
by municipalities taken into account the sustainable use of resources or do
things continue as usual. It has been shown that the sustainable use of our
natural resources, not only leads to long-term sustainability, but also turns
out to be a much cheaper option. It just takes a bit more thinking outside the
box.

Lastly, the gathering of precision and empirical evidence, precision and
empirical evidence can play a greater role in the future of local economic
development in South Africa. The underpinning of the work done in the field of
local economic development will develop greater credibility with government,
the development community, private sector and economist working to guide South
Africa’s macro economy if it can become a little more rigorous in its approach.
It seems that all too often Local Economy Development (LED) strategies are
based on intuition and guesswork rather than evidence from the field that
reflects the true nature of the local economy.

Another area where a more empirical approach to LED will bring benefit is in
the monitoring and evaluation of interventions designed to support the local
economy. Simply put, government needs to know if taxpayer’s money is being put
to good use when used to support local economic development. This conference
has told us that there are plans at both national and provincial level to
establish centres that will monitor, evaluate and disseminate progress and
experiences in local economic development.

In closing, I wish to state that our fight against poverty and
underdevelopment needs to be further intensified. Our responsibility as
government is to ensure the quality of life of all who live and work in South
Africa is improved. This consultative process has shown that there is a growing
awareness that unemployment can be fought and development promoted when local
players reach an agreement to work together to find economic solutions for
their own locality.

I look forward, at the next National Local Economic Development Conference,
to hearing of positive progress in the drive to develop local economies.

With these few words, I wish you all well and thank you for coming and
giving us your perspective of developing local economies.

I now declare this consultative conference closed.

Issued by: Department of Provincial and Local Government
15 August 2006