Programme Director,
The MEC for Cooperative Governance and Traditional Affairs, Ms Nomusa Dube,
The MEC for Agriculture and Environmental Affairs, Dr Meshack Hadebe,
Members of Parliament Present,
Mayors Present,
Heads of Departments Present,
Dignitaries Present,
Ladies and gentlemen,
All protocol observed.
It gives us pleasure to be part of this occasion where we are meeting to look at ways of ensuring that local economic development in our province becomes the driver of economic growth and development.
Programme Director, we wish to start by thanking the Cabinet of KwaZulu-Natal, including my colleagues, MEC Dube and MEC Hadebe, for having the foresight and the vision to conceptualize this idea that as government departments we should come together to look at strategies to ensure that local economic development becomes the engine of growth and development in our province.
Such collaborative efforts by our departments are not only important if we are to defeat the triple challenge of unemployment, poverty and underdevelopment, but they show that government can only register accelerated success if government departments work in a collaborative and coherent manner.
While our department has been given the stewardship role in driving economic development and tourism, however, the reality is that local economic development happens at the level of municipalities and the department of environmental affairs and agriculture also has a big role to play. It is because of this reason that we have joined forces and pooled resources to host this second edition of the Regional Local Economic Development Summit.
The time of departments operating in silos and working in a fragmented fashion when they are working towards a common objective is over. Likewise this is meant to be a platform for all social partners, as well as development practitioners, to come together and craft a way forward in terms of local economic development in our province.
Programme Director, in discussing this critical topic of Local Economic Development, we believe that we need to start from the basics and ask the rudimentary question: what is local economic development? While preparing for this address we came across many definitions, however, there is one which we thought was apt by the World Bank which describes Local Economic Development as such:
“The purpose of the local economic development strategy is to build the economic capacity of a local area to improve its economic future and the quality of life for all. It is a process by which public, business and non-governmental sector partners work collectively to create better conditions for economic growth and employment generation.”
In our view a sound local economic development strategy should look at, among others, the following issues:
- Ensuring that the local investment climate is functional for local businesses
- Supporting small and medium sized enterprises
- Encouraging the formation of new enterprises
- Attracting external investment (nationally and internationally)
- Investing in physical (hard) infrastructure
- Investing in soft infrastructure (educational and workforce development
- Institutional support systems and regulatory issues)
- Supporting the growth of particular clusters of businesses
- Targeting particular parts of the city for regeneration or growth (areas based initiatives)
- Supporting informal and newly emerging businesses
- Ensuring that municipal resources are deployed in such a way that they have a catalytic effect in the local economy.
Ladies and gentlemen, we are sure by now you are all familiar with the global economic recession and subsequent European debt crisis which has had a domino effect across the world. We do not wish to reiterate this here, but allow us to illustrate the significance of these developments for KwaZulu-Natal.
Global economic output growth has been forecast by the International Monetary Fund (IMF) to average 3.3% in 2012. While this is naturally an improvement on growth rates experienced in 2009, it represents a drop from the world GDP growth rate of 5.3% that was recorded in 2010.
Indeed 2010 appear to have been a false dawn for global economic recovery. Expected increases in the growth rate in 2011 and 2012 have failed to materialise as a result of uncertainties in Europe. Growth has been particularly slow in industrialised nations, who remain our major trade partners. This sends ripple effects through South Africa and our regional economies and as a result the country’s growth forecast for 2012 is a modest 2.7%.
Ladies and gentlemen, this analysis is not complete unless one unpacks its implications for the economy of the province. The national GDP growth rate for the 2nd quarter was recorded at 3.2%, exceeding the 2.6% forecast for the entire year. KwaZulu-Natal’s economy, however, performed more modestly, recording a growth rate of only 2.1% down from 3.7% in the previous quarter.
The root cause of this decline is the poor performance of the manufacturing sector, which contracted at a national level by -1% and at a provincial level by -1.1%. This can be interpreted as being a result of depressed global demand, especially by our main trading partners, for our manufactured products. While the province’s manufacturing sector did not do much worse than the national manufacturing sector, the implications are greater for the provincial economy.
This is because KwaZulu-Natal is the most industrialised province in the country. It can be said that manufacturing is a comparative advantage sector for the province, contributing around 20% to Gross Domestic Product (GDP) provincially compared to only 15% nationally. This makes the province more vulnerable to declines in this sector and by implication more vulnerable to global economic uncertainties.
Policy developments
Ladies and gentlemen, the policy terrain in South Africa is rapidly evolving with the formulation of robust economic strategies and plans which are geared to obliterate the frontiers of poverty, inequality and joblessness. The recent unveiling of the National Development Plan which outlines a 2030 long-term vision for the country demonstrates government’s commitment to mobilise and marshal all South African citizens towards a common goal.
The New Growth Path and Industrial Policy Action Plans (IPAP) remain the bedrock of South Africa’s economic policy to support the National Development Plan (NDP) and enable government to achieve the aforementioned development imperatives. The emphasis of these policies is on expanding manufacturing capabilities in order to be globally competitive and create sustainable jobs.
In KwaZulu-Natal (KZN), the Provincial Growth and Development Strategy (PGDS) was formulated as a plan to enable the province to embark on a sustainable growth and development trajectory. The KZN Industrial Development Strategy and Provincial Spatial Economic Development Strategy (PSEDS) are the economic anchor strategies to bolster the implementation of the PGDS.
Furthermore, the province has established partnership vehicles to mobilise all social partners towards the implementation of these above mentioned strategies. These institutions include the Growth Coalition, Provincial Planning Commission, B-BEEE Council and KZN Economic Council. Effective implementation of these strategies is envisaged to advance local economic development in the
province.
Regional industrial hubs as catalyst for local economic development
Ladies and gentlemen, the department places industrial development at the apex of economic development in the province and the entire country at large. As such, the department has over the years has endeavoured to develop industry oriented interventions to stimulate the local economy. These include, inter-alia, various sector development programmes, Richards Bay industrial zones and other industrial stimuli.
Regional industrial hubs and Special Economic Zones (SEZs) are industrial development instruments our department is deploying in its attempt to develop a globally sustainable and resilient regional economy in South Africa.
In this regard, we have identified potential industrial hubs in all district municipalities. These were identified based on the districts’ comparative advantages. The district industrial hubs are critical to address the province’s key spatial developmental aspirations such as job creation and economic growth and remain critical to the overall economic development in the province.
These hubs are envisaged to build backward and forward linkages with or feed into the proposed provincial SEZs. We view the regional industrial hubs as tools that can catapult economic development in our regional economies. The success of this seemingly ambitious but indispensable industrial development programme hinges primarily on sound stakeholder coordination.
We are pleased to report that work on the implementation of regional industrial hubs is at an advanced stage, with the department finalising the process of appointing specialist teams to guide the establishment and operationalisation of these regional industrial hubs.
Programme Director, the role of government is to be the enabler, the catalyst and to intervene in the economy. However, in order for local economic development to be a success the private sector and all other stakeholders in society need to play their role. As government we have made it clear that we will endeavour to ensure that while we adhere to all the regulatory issues, however these should not be an unnecessary hindrance to business development.
We have also recognised the fact that a significant proportion of businesses with local, national and international interests are located at central and accessible points throughout the province and not just in and around the main centres. In this regard we have identified the ‘missing’ links in the province including the establishment and/or upgrade of key transportation routes.
These have be aligned with the accessibility matrix in order to identify central points along these routes which should be identified for growth and development. In the process this will lead to the provision of opportunities which currently do not exist in many of the rural areas of the province.
In this regard we have identified the following issues as critical for the successful implementation of local economic development:
- There is increasingly a need for spatial and economic planning to take into account the ‘bigger picture’ on a cross boundary and provincial basis
- In order to achieve improved functionality in most (if not all) of KwaZulu-Natal’s Centre a major investment is required in integrating the previous formal towns with the townships. Investment in integration will mean infrastructure upgrade, opening up of new areas for development and ultimately improved accessibility accompanied by sustained economic growth.
- The manner in which capital investment and development has taken place in the province since the 2007 PSEDS (and earlier) does not appear to support previous policies associated with investment in pre-selected corridors and nodes.
- It is therefore important that the identification and emphasis of investment in selected centres is driven by spatial planning principles associated with ‘performance’, ‘improved accessibility’, ‘public good’ and ‘equity’.
- Common across all municipalities is the ongoing provision of ‘basic’ services to disadvantaged rural communities. Whilst the on-going need is recognised, the current approach to services backlogs provision by municipal and provincial governments has proved to be unsustainable. It is therefore important that a rational coordinated approach is pursued to provision of services on a hierarchical basis in central locations which ensure equity in access to services. This approach needs to be linked to policies which deal with levels of service for rural households which locate outside of defined service areas.
- It is important to recognise that ecological linkages are critical to sustainability, and that unmanaged exploitation of natural capital and serious loss of biodiversity will constrain future economic growth and development in the province.
Programme Director we believe that these issues are important for local economic development to gain foothold. However, we believe that there need to be a significant mind shift in all stakeholders in order for local economic development to thrive. For example, we believe that given the challenges of our times, municipalities can ill afford to be only concerned with being the purveyors of service delivery, but they need to be engines of growth and developments.
They must begin to ask themselves questions such to what extend are they deploying their capital budget in a manner that promotes local economic development. We also believe that municipalities should all have local economic development strategies which identify specific sectors which are potential game-changers in that locality.
Capacity Building and LED
Programme Director, one of the challenges that militates against our collective efforts to promote local economic development is the shortage of requisite skills required at local level to facilitate and enable local economic development.
It is because of this reason that our department has entered into a service level agreement with University of KwaZulu-Natal (UKZN) to provide capacity building interventions with an aim of building capacity in Local Economic Development and R17, 4 million has been set aside for this undertaking to stretch for the next four years. The department in collaboration with UKZN has accepted and registered 47 students for LED Postgraduate programme for the academic years 2012/2013. This is fully funded directly by the department through its own budget vote for 2012/2013 financial year.
At the end of a four year contract between the two partners, it is intended for the programme to become self-sustaining and become one of instructional offerings of the graduate school of business and leadership within University of KwaZulu-Natal going forward. This programme is targeting LED officials, Managers, LED activists and practitioners in NGOs and CBOs and as well as those active in local business chambers.
Collaborative agreement between Cooperative Governance and Traditional Affairs (COGTA) and Department of Economic Development and Tourism (DEDT)
Programme Director we are pleased to announce that our department and Cogta have agreed to supplement each other’s efforts for better realisation of common goals in the area of regional and local economic development. Accordingly, DEDT and KZN COGTA have crafted a collaborative agreement in order to jointly achieve their respective objectives in KwaZulu-Natal province.
The collaborative agreement defines the responsibility of each department. The two departments have agreed to work jointly and/or in collaboration in developing and implementing key regional and local economic development projects recommended by Municipalities within their areas and accepted by both DEDT and KZNCOGTA as being aligned to their strategic plans and consistent with provincial and national policies and strategies.
In conclusion Programme Director, this summit has once again proven that local economic development is critical for the overall growth of our economy. In this regard such platforms where we meet to look at how we can align our strategies at all levels of government are important. The reality, Programme Director, is all development happens within a particular locality.
Therefore, all development is local economic development. This means that we all need to shift from the mentality that local economic development is about some small project taking place in a far flung municipality.
We need to integrate local economic development in everything we do as government. Placing local economic development at the apex of all our economic development strategies is a good start. We wish this summit a success and have no doubt that it will emerge with strategies that will elevate local economic development in our province.
