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

Purpose

• Describe current policy thinking on LED

• Locate policy within 5 scenarios

• Issues for taking city economic development forward

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.

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.

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

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

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

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

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

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

LED

City

Private Sector

N/PGov’t

Comm./NGO

Policy Refinement

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

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?

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.

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

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

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

Government’s 3 Main Policy Thrusts for social and economic development

o Establishing a job-creating economic growth path

o Embarking upon sustainable rural development and urban renewal

o Bringing the poor to the centre of development

Finding Synergy between the different approaches to LED

Traditional ApproachCities attract external investment as a means of

boosting the local economy

Endogenous ApproachDevelopment from within based on growing skills

and mobilising local resources, creativity and innovation

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

Developmental LED vs

Non-Developmental LED

Developmental LEDLocal Government and communities working together to find sustainable ways of addressing social, economic and material needs of citizens

Non-Developmental LEDSocial objectives are secondary to investment attraction at all costs

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

the centre of development

Traditional Approaches

Endogenous Approaches

Developmental LED

Developmental LED is the Key

Developmental LED

Non-Developmental LED

Traditional Approach xEndogenous Approach x

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

City Scale

“Macro-economic” management – Managing the city economy

City fiscal policyCity monetary policy?Revenue generation and expenditure strategiesBorrowing frameworkCity-wide planning (IDP), budgeting, service delivery, monitoringCity industrial policy, SMME policy, etcSpatial targeting

City Scale

“Macro-economic” management –

Managing the city economyGGP indicators

Localise national economic information

Localise national/provincial economic

policy

City identity and marketing

Building credibility

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)