“Working Towards Good Practices in the Local Economy”
Good Practice Scheme is Good
Congratulations! That's what I first want to say! To all of you! The Commonwealth Local Government Forum (CLGF), South African Local Government Association (SALGA), the national local government associations of the other participating countries, the municipalities taking part in the Good Practice Scheme, the donor organisations and any other agency involved in the Good Practice Scheme!
This is a very good, sensible, practical, productive way of bringing municipalities from different countries together to learn from each other and develop their capacity to improve service delivery and development.
Obviously, I can't fully tell how successful your three-year programme that now draws to a close has been. This Seminar is, of course, meant to evaluate the program. But I can't think that a programme like this, whatever its failings, would have served little value. And it seems to me, the concerns of this Seminar would be to get a very good sense of just how effective the programme has been, what lessons can be drawn from the experiences of these past three years of the programme and, most importantly, how future Good Practice Scheme programmes can be improved.
I like the 'dissemination' in the title of your meeting: “National Dissemination Seminar on the Good Practice Scheme Project”.
It’s very good that the focus of the South African programme was on LED (Local Economic Development). And the projects on tourism through joint marketing and city lighting initiatives; promoting inward investment; supporting small scale farmers; and encouraging small to medium enterprises through municipal supply chain management processes are all relevant to our needs in this country, and no doubt the countries of the other municipalities participating in the programme and other countries too.
For the biggest challenges we all face, especially since the 2008 global financial and economic crisis, are economic growth and job creation. The International Monetary Fund (IMF) reported last week that over 40 million jobs have been lost since 2008.
In this country we have lost over a million jobs. In the last quarter in our country we lost over 174 000 jobs. This in the year of our launch of our programme to create 5 million jobs over the next 10 years! There are significant concerns globally that the developed world is in on the verge of a second economic depression, with its knock-on effects for the developing world.
The crisis in Europe, where we have our main trading partners, is likely to have serious consequences for us. So LED and municipal job-creation have never been more important.
Of course, the main responsibility for economic growth and job-creation resides with the national government, but local government, without exaggerating the prospects, can and should do more. In any case, every contribution to economic growth and job-creation, however small, is important and necessary.
LED is Important as Part of a Developmental State:
As those of you here from South Africa will know, our local government system is developmental. This is clear even in our Constitution. For example, section 153 sets out the “developmental duties of municipalities” as:
A municipality must-
a. structure and manage its administration and budgeting and planning processes to give priority to the basic needs of the community, and to promote the social and economic development of the community; and
The 1998 White Paper on Local Government states:
Developmental local government is local government committed to working with citizens and groups within the community to find sustainable ways to meet their social, economic and material needs and improve the quality of their lives.
The economic development of residents is an important part of the developmental role of municipalities, and should be part of a municipality’s Integrated Development Plan (IDP). LED is the key expression of this economic development.
There are two relatively recent national developments that should, over time, encourage LED. The first is the establishment of the National Planning Commission (NPC) and the commitment of the government to a national development plan for the country for the period until 2030, the first draft of which will be ready by November this year. The second is the recent adoption of the New Growth Path.
LED is not sufficiently catered for by the NPC or in the New Growth Path, but CoGTA is engaging to ensure that this happens.
LED has Value:
It seems to me that all three spheres of government do not take LED sufficiently seriously. LED is not a specific constitutional function of local government and municipalities sometimes see it as an unfunded mandate. Overall, our successes in LED have been limited. Yet there is significant potential in LED.
As CoGTA we too should be doing more. We see LED basically as the cooperation of municipalities, the private sector and civil society to ensure economic growth, job creation and development in a municipal area. The “local” in local economic development serves to highlight the importance of the political jurisdiction of local government as a major site of economic intervention.
A 2000 LED Manual of our department notes that “LED is an outcome based on local initiative and driven by local stakeholders. It involves identifying and using primarily local resources, ideas and skills to stimulate economic growth and development. The aim of LED is to create jobs, alleviate poverty, and redistribute resources and opportunities to the benefit of all local residents”.
Another CoGTA document notes that “LED is taken to include all activities which local governments and other stakeholders at local level engage in to enhance growth, incomes and livelihoods, specifically including that of poor people.
However, a local economy may well also ‘develop’ as a result of a range of devolved governmental grants and private sector investments.”
A World Bank definition suggests that LED is “the process by which public, business and nongovernmental sector partners work collectively to create better conditions for economic growth and employment generation. The aim is to improve the quality of life for all.”
CoGTA sees LED as offering local government, the private sector, the not-for-profit sectors and the local community the opportunity to work together to
Improve the local economy. The aim is to enhance competitiveness and encourage sustainable growth that is inclusive.
There isn’t, of course, a single approach to LED that will work in every municipality. Each municipality has to develop its own LED, identifying its competitive advantages. For example, one municipality may be able to use its harbour as a key aspect of its LED strategy, another its tourist features, and yet another its fertile land.
An important part of LED is the growth of local businesses and SMMEs. LED, we think, should foster the growth of cooperatives. LED should also empower local community members with the necessary skills to participate in the economy. LED should serve too to encourage domestic and foreign investment in a local economy. For LED to be effective, it must be linked to national and provincial economic policies, strategies, plans and programmes. LED must also contribute to building the capacity of municipalities to provide quality services to the people.
Our 2006 LED Framework identifies the aims of LED as:
- To shift towards a more strategic approach to the development of local economies and overcome the failures of municipalities in trying to manage a litany of non-viable projects or start-ups.
- To support local economies to realise their optimal potential and make local communities active participants in the economy.
- To elevate the importance 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 of localities and regions which globally are playing an increasingly significant role as points of investment facilitated by supportive national policies.
LED is Part of the National Economy:
Effective LED can make a significant contribution to the national economy. It is noteworthy that SMMEs contribute 35% to South Africa’s Gross domestic product (GDP), and together with the informal sector, 50%. The challenge is for municipalities, in cooperation with national and provincial government, to create more space for the development of SMMEs and informal businesses.
In a sense, municipalities inevitably play a role in LED. They employ people, buy goods and services, develop infrastructure and regulate the development of land. All of this, of course, impacts on the local economy.
As highlighted in the LED Framework, municipalities are encouraged not only to align their LED strategies and programmes with the national economic objectives and programmes, but to also serve as the point of integration for economic development initiatives by all spheres of government within their respective jurisdictions.
Since 1994, several key policy documents of government, such as the Reconstruction and Development Programme (RDP) and the Integrated Sustainable Rural Development Strategy (ISRDS) have placed emphasis on the role of local economies in stimulating growth and development in the country.
The Local Government Turnaround Strategy (LGTAS) also highlights the need for LED. One of its goals is defined as to: “Enhance the municipal contribution to job creation and sustainable livelihoods through LED.”
The Industrial Policy Action Plan recognises the importance of municipalities as enablers in industrial development and the need to stimulate local economies by supporting the development of key sectors in local areas.
LED Needs to be Improved:
CoGTA recently undertook a review of LED in the country. Among the various challenges identified were:
- A lack of understanding of what LED is or its value.
- Significant differences about the appropriate geographical scaling of LED.
- A lack of skills.
- Failure of political leadership.
- Private sector distrust of governmen
- Inadequate funding.
- Weak cooperative governance.
The department is working with other departments in the economic cluster to encourage a greater commitment to LED.
There are various proposals to motivate municipalities to become more active in LED and include it in their Integrated Development Plan (IDPs). A review of the 2006 LED Framework is underway that takes into account the experiences of the past 5 years.
There is a need to also develop the skills of both councillors and staff to manage LED.
Setting up partnerships with educational institutions and other specialist bodies could be very useful. Working closely with the state-owned enterprises would also help. In some rural areas setting up partnerships with traditional leaders could also be of value.
CoGTA is looking into developing model regulations on informal trading, including hawkers and “spaza shops”. Consideration is also being given to the economics of the informal sector, including the value chains to identify business linkages.
Municipalities can do more to minimise red-tape and encourage a climate friendlier to business. Within their financial restraints, municipalities need to be more innovative about using grants and rebates to attract investors need. Properly managed, there are significant rewards to be reaped from this investment.
Municipalities are being encouraged to set up LED Units and LED Forums. The department is looking into establishing a Business Development Forum in each District to facilitate LED, especially in the rural municipalities. CoGTA is also looking into mobilising SMMEs, cooperatives and emerging farmers at District level.
It’s important that LED is more effectively implemented in rural areas. If we don’t develop the rural economies, we will not be able to stem the continued migration of people from rural to urban areas.
We need a different approach to economic development in rural municipalities. Together with other Departments, we are looking at innovative ways of encouraging significant economic activity in rural municipalities.
We have initiated the “Small Towns Regeneration project” to support the regeneration of small rural towns.
We also need to create an enabling environment for the private sector to invest in rural municipalities. We need to look at the possibility of establishing incentive schemes and programmes that will attract private sector investment to rural municipalities. We also need to prioritise development of infrastructure in order to stimulate economic growth in the rural towns and areas.
The supply chain management policies of municipalities should be reviewed to encourage SMMEs and local businesses.
There needs to be a better link between the roll-out of the Municipal Infrastructure Grant (MIG) and LED. Access to broadband and increased rural penetration of telephony infrastructure would also be of value. There is huge potential in waste-to-energy projects that is not being harnessed. Even the poorer municipalities can do more to encourage the informal sector, community-based tourism, and other aspects of LED.
Municipalities in rural areas, poor as they are, can also do more to encourage subsistence and small scale farmers, especially with our food security challenges.
The tension between a more pro-market and pro-poor LED approach needs to be addressed. There needs to be an inclusive LED approach. Properly managed, the imperatives of business and the poor in LED are reconcilable. Trade unions need to be actively drawn into LED programmes.
National and provincial government have to do far more to assist municipalities with LED.
LED should be a focus of the Provincial Growth and development Strategies and the New Growth Path. For LED to work all three spheres of government and civil society need to cooperate far more effectively.
Community Works Programme:
Closely linked to LED is the Community Works Programme (CWP), a component of the Expanded Public Works Programme (EPWP). The implementation of the CWP is now output 3 of the Outcome 9 Agreement signed by the CoGTA Minister with the President. The CWP is also an important LGTAS priority.
The CWP provides people with 100 days of part-time work a year. It aims to be an ongoing programme, with participants moving in and out as their needs change. The programme is community based, with the work projects being decided through participatory structures and processes at local level, including ward committees and development forums.
The projects have to be ‘useful work’ that contribute to the public good and improve the quality of life for the local people. They can’t be work normally done by public sector workers.
Essentially, the CWP seeks to provide an employment safety net for those without access to opportunities to lift them out of poverty. The programme provides access to work twice weekly at R60 a day to people in the poorest areas in which there are few private sector jobs. There are 1,000 participants per site, with a 65% labour-intensity per site. In the 12 months to March 2011, 89 689 people participated in the programme putting in 5 449 376 workdays. The work opportunities were created in 480 wards in 63 municipalities.
The Cabinet decided in its July Lekgotla to consider scaling up the CWP to a million work opportunities by 2013/2014. The NGP also speaks of extending the CWP to more wards. The CWP is relevant too to the government’s Outcome 7 on “Vibrant, Equitable and Sustainable Rural Communities and Food Security for All”, in particular Output 4 dealing with “Improved Employment Opportunities and Promotion of Economic Livelihoods”.
CoGTA is exploring the possibilities of working towards the target of a million job opportunities. Of course, that will be a huge challenge. One option is to extend the programme from the current 5 to 10 wards to all the poor wards in a municipality by 2014. The geographical extension of the CWP within municipalities is perhaps the easiest way of scaling up fast, building on the CWP’s existing track record and model. The demand is established and would draw on existing capacities.
The provincial departments responsible for cooperative governance and traditional affairs are being engaged with to play a more active role to accelerate the CWP. We are also engaging with National Treasury to secure extra funding to scale up the programme.
If effectively implemented, the CWP can stimulate local economic activity. Small as the incomes might be, they can contribute to “thicken” the local markets. The work experience, skills acquired, assets produced by the work, the involvement of people in participatory planning - all this contributes to LED, in however modest a way.
Consolidating and Strengthening the LGTAS:
I am not sure what the next Good Practice Scheme Programme will focus on, but it seems to me that it would be useful if it remained in the area of local economic development and job-creation.
In conclusion, it’s clear that municipalities need to give specialised, focused attention to LED, but they should, within the framework of the LGTAS, integrate LED into their Municipal Turnaround Strategies and incorporate it into their IDPs.
We must be clear! Given the challenges of economic growth, job-creation and food security, we have no choice! We - all three spheres of government, business, unions and other stakeholders - have to take LED more seriously! So let’s just.
