Local Economic DevelopmentConcepts & Discussion

Shannon Hiemstra & Colin Mitchell Stone Soup Development (Pty) Ltd 083 7771004www.stonesoupdevelopment.com

West Coast District Piketberg

12 November 2013

What is LED?

LED is an ongoing process by which key stakeholders and institutions from all spheres

of society, the public and private sector, as well as civil society, work jointly to create a

unique advantage for the locality and its firms, tackle market failure, remove

bureaucratic obstacles for local businesses and strengthen the competitiveness of local

firms’

LED & Competitiveness at the Local and Regional Level: The Hexagon

Process Management

Governance

SustainabilityPolicy focus and synergy

Locational factors

Target group

The 1st Triangle: The Target Group

Process Management

Governance

SustainabilityPolicy focus and synergy

Locational factors

Target group

Enterprises and Firms

streng-thening

local firms

Attractionof newfirms

Promotionof start-upsand entre-

preneurship

supplier development,outsourcing, spin-off;

support for ownersuccession

Attract suppliers andcomplementary firms,manufacturers ofcapital goods,service providers

franchising

LED activities around the 1st triangle

streng-thening

local firms

Attractionof newfirms

Promotionof start-upsand entre-

preneurship

supplier development,outsourcing, spin-off;

support for ownersuccession

Attract suppliers andcomplementary firms,manufacturers ofcapital goods,service providers

franchising

• address market failure• business skills • business contacts, networking, info

• address market failure• entrepreneurship skills • business contacts• entrepreneurs’ networking• coaching, business angels

• professional investment promotion • locational marketing• targeted investment promotion • investor after-care

Main messages

General principles: • Identify and remedy market failure (e.g. barriers

to entry, information access, etc. )• Avoid market distortions and discrimination• Reduce barriers to entry• Pursue a balanced approach: look at each of the 3

types of companies• Look at the synergies between the 3 types

Food for thought?

Research by the Edward Lowe Foundation; the RUPRI Centre for Rural Entrepreneurship and the Kauffmann Foundation provided evidence that for every 100 new jobs created in the private sector:

55 Jobs will be created by the expansion of existing local businesses

44 Jobs will created by new start‐up companies1 New job will be created by a “greenfield”

corporate relocation.

The 2nd Triangle: Locational Factors

Process Management

Governance

SustainabilityPolicy focus and synergy

Target group

Locational factors

Intangible locational factors

Tangible locational factors

-- quality of housing-- environmental quality-- schools and HE-- health facilities-- social facilities-- culture and recreation

-- efficiency of government-- business climate-- availability of related industries-- supporting institutions

-- geographical location-- real estate-- transport and communication infrastructure

-- skilled workers-- energy and environment-- taxes and levies-- subsidies

Locational advantages

Relevant for firms:Relevant for individuals:

The 3rd Triangle: Sustainable Development

Process Management

Governance

Policy focus and synergy

Locational factors

Target group

Sustainability

The triangle of sustainable development

economicdevelop-

ment

ecologicaldevelop-

ment

socialdevelop-

ment

e.g. • Review of economic priority

• new types of living and housing (for instance

for retirees)

e.g. • processing of locally

available bio-mass• Green manufacturing

e.g. • regional recycling

economy• Ecological priority

e.g. labor-intensive rehabilitation and maintenance of ecological infrastructure

Main message

• Address ecological and social problems as business opportunities

• Look for win-win-opportunities– finding an innovative approach to LED by thinking

out of the box• Ecological infrastructure development &

maintenance can be good business

The 4th Triangle: Policy Focus and Synergy

Process Management

Governance

Sustainability

Locational factors

Target group

Policy focus and synergy

Focus and Synergy, 1: Separating

Economic Development:Quick results

CompetitivenessSustainabilityConsumers

Environmental Sustainability:

Water managementAir quality

Social Development: Support for disadvantaged

and marginalisedBeneficiaries

Solidarity

Time horizon

Visualvs.

substance

Profit vs.solidarity

Urban / Regional Planning:

Long time horizonPlanning

Aesthetic criteria

Choices & Trade-off’s

Local Economic Development is about making the best use of what will always be a limited amount and quality of resources!

The 5th Triangle: Governance

Process Management

SustainabilityPolicy focus and synergy

Locational factors

Target group

Governance

Local government

Businessassociations

The Triangle of Governance

Civilsociety

• Not always representative.• Sometimes protectionist.• Can be a powerful ally if

representative .

• Trade-off’s are necessary.• Trade-off’s accepted if well

articulated.• Communication and consistency

is key

• Democracy Development Paradox.

• Want’s vs. Need’s mismatch.

• Resource constraints.

• Red tape.• Profit / development

dilemma• CSR vs. CSI

CSF Transparency

& Trust

Main message

Current approach in successful localities:• Social Capital & Trust• Network governance

– Distribution of responsibilities between various governmental and non-governmental organizations

– Negotiation and co-ordination without a clear decision center

• Subsidiarity and decentralization• Participatory approaches.

The 6th Triangle: Diagnostic Planning, Monitoring & Evaluation

Governance

SustainabilityPolicy focus and synergy

Locational factors

Target groupProcess Management

Participatorydiagnostic

(PACA / Genesis)

Shared Strategic intentParticipatory planningContinuous engagement

Participatory: M+E, Benchmarking,Organisational alignment

Implementation

MotivationFeedbackReference

The Triangle of Process Management

Main message

• Successful LED is based on learning • LED is about sentiment and momentum• Don’t waste too much time with research &

discussing, -- get into action quickly!• LED is an iterative process• Development is systemic

Sustaining Development interventions

Small business promotion Investment promotion

Start-up promotion Promotion of BDS

Efficient publicadministrationEnablingenvironmentCompetitiveinfrastructureSkills

Synergy between differentfields of local development

Innovation: AddressingLED from a new angle

Encourageindependent

businessassociations

Public-privatepartnership

Effective governance

Participatory approachLED = iterative & learningProcess

Gov

erni

ng th

e

proc

ess

of L

ED

Innovation & differentiation

Hard-core

LED

We are not born with rights - we are all born with obligations!

Jewish Philosophy

We know what to do, we know why we should do it, and we know how to do it. Yet most businesses and individuals don’t do what is good for them because the pain is today and the benefits are only in the future.

David Maister – Strategy & the Fat Smoker