IDP Conference 2004 “Developmental Governance in Action” SESSION 2: ‘Economic Development and Municipalities’ ‘Economic Development and Municipalities’ -Rashnee Parhanse Project Manager: Socio-Economic Development SALGA -Rashnee Parhanse Project Manager: Socio-Economic Development SALGA 4 March March 2004

‘Local Economic Development and Municipalities’ Presented by Rashnee Parhanse 4 March 2004

Content Rationale for municipal participation in economic development LED Good Practice Learning from the past…… Towards a strategy for LED ……. Conclusion

Why should municipalities engage in Local Economic Development?

Resources Role Players Interests Economic Development Opportunities in municipal areas Impact Globalization Decentralization Global and national economies Regional and Local economies Mobilise

Macro Economic Challenges The rate at which new jobs are created is insufficient to absorb the increasing levels of unemployment In adequate skills of South Africans to meet the demands of the new economy that is service and knowledge driven. Poverty levels and unemployment remain high The income and skills gap between white and black South Africans remains extremely high - South Africa is still characterized by two parallel economies.

Legislative Mandates Local government sphere closest to the people Municipalities have a constitutional mandate to undertake a developmental approach in implementing policies and programmes Local Government White Paper, Municipal Structures and Systems Act –Municipalities are to exercise powers and functions to maximize the impact of social development, meeting needs of poor and ensuring growth of local economy

Primary Responsibilities of Municipalities To meet the basic needs of people –Establish an environment (whether directly or indirectly) that will create jobs and alleviate poverty in a sustainable manner –Engage actively engage with spheres of government and partners –Co-operate and align policies and programmes –Cannot perform in a vacuum and assume that external processes (e.g. the changes in the global economy, NEPAD, Growth and Development Summit) are irrelevant to the municipality

Local Economic Development - a local response to global and national economic and social dynamics and challenges The type of response by municipalities is critical!

LED Case Studies in Municipalities: Ekurhuleni Randfontien Oudtshoorn

Ekurhuleni Municipality LED Policy –Economic Status of Ekurhuleni –LED Vision – An inclusive wealth generating local economy –LED Mission –Objectives of the Policy –Key Policy thrusts –Key Principles LED Strategy –Strategic Interventions –Key Performance Areas –Implementation Mechanisms

Ekurhuleni Municipality Key Policy Thrusts –Local production for local need –A cooperative sector to represent community-based interventions in the local economy –A skills development network –Develop and sustain urban and commercial agriculture to build food security –Promote Waste Recycling and Reusable Energy –Build Local Development Capital –Ensure Participatory and Integrated Planning –Maintain Linkages with the Industrial base –Facilitate and Grow SMME’s –Affirm Local Procurement Strategic Interventions –Ring fencing revenue surplus –Developing and sustaining economic sectors – Agriculture, Mining, manufacturing, services, finance, electricity and water –Development zones –Harness Conditional Grants –Mainstream the marginalised into the Formal Economy –Procurement – target start up 20% –Service levels and retention plans –Business register

Ekurhuleni Municipality LED Drivers –Cooperative Governance –Partnership –Rapid Response to innovation and investment –Sound Intergovernmental Relations Problems –planning – IDP not aligned to economic realities –Capacity ( Understanding of LED and Political Representatives and officials require training) –Linkages on Trade and Investment ( DTI and Province and local not fully aligned, International relations and investment on aligned) –Cooperatives (funding for capacitation limited, Procurement processes needs to be adjusted to include cooperatives)

Ekurhuleni Municipality Comments Policy –Challenges of dual economy –Securing markets for entrepreneurial development –Harnessing local resources and skills in a sustainable manner –Qualitative skills development –Impact of industries e.g. pollution –Co-operative governance and integration Strategy –Monitoring and evaluation –Linkages to IDP

Randfontein Municipality LED plan linked to IDP LED drivers –Prioritizes economic sectors for LED intervention – agriculture, mining, trade and tourism –Encourage community participation and ownership –Establish Public-Private-Donor Partnerships – partnership with rugby association, DBSA and Mines –Support SMME development – bylaws –Enhance Co-operative governance Implementation of Credit Controls to increase flow of income to communities e.g. waste management

Randfontein Municipality Comments –Challenge - Gradual decline in mining sector - retrenchment of mine workers –Tourism – primary or secondary sector –SMME Development linkage to market opportunities and business management skills –Strong partnerships with business sector and donars –Clear linkage of sector plans to LED strategy

Oudtshoorn Municipality Article in Business Times (22 Feb 2004) Renowned as tourist destination (arts festival, ostrich farms, Cango Caves, climate etc) –increased earnings for the farms, festival, hotels and B&B’s

Oudtshoorn Municipality Comments –Role of municipality –Impact on municipality? Direct benefits for the municipality Number of jobs created Service delivery costs (electricity, water, sanitation) Municipal assests – land, facilities etc Partnerships –Currently municipality formulating LED strategy, business plans and establishing partnerships

Learning from the Past

Challenges Lack of national policy and strategy coherence Functional specialization and uncoordinated actions Lack of dedicated LED institutions Shortage of LED capacity and skills Lack of clear roles and responsibilities Competitiveness of local areas and IDP’s Poor financial position of municipalities Poor access to accurate information Ineffective monitoring and evaluation Project based - survivalist such as brickmaking, poultry farming, hydroponics Consultant Driven to address capacity problems

Towards a strategy for LED - LED Principles

Key LED Principles Linked to current economic realities People focused and mobilises social capital Socio-economic focus- increases income flow to people to creates jobs and alleviate poverty Co-operative governance Alignment and coherence of policies and programmes Market functioning and promote competitiveness Support systems for entrepreneurial institutions e.g. SMME’s, targeted procurement Continued……

Key LED Principles Creates opportunities for human resource development e.g. skills development Building partnerships with business community, community, NGO’s, Ensures sustainable economic outcomes Innovative and creative response Network, listen to and know what's happening!

Designing a LED Strategy: Key Elements to consider

Key Design Elements Purpose: To co-ordinate and integrate economic development efforts, resources, role players investments and institutions (internally and externally) Strategy driven by municipality –Design and implementation championed by the municipality –Housed within the municipality –Emanates from the IDP Policy thrusts of strategy to be aligned to national and provincial economic polices

Strategy informed by competitive assessment of local economy (demographics etc)– accurate and updated information Thereby prioritizing primary, secondary and tertiary economic sectors Defines the municipal economic vision and objectives Identifies role players and establishes clear roles and responsibilities Utilizes internal departmental relations to integrate and align to other components of municipality (BEE, land reform, housing etc) Key Design Elements

Specifies the type of intervention –Establishing Partnerships –Cluster and sub-sector cluster development (firms, groups working together) –Co-ordinated business support programme –Set of special purpose vehicles Strategy identifies and addresses the skills gap in communities to participate in economic development e.g. business management skills Identity's the LED spatial boundary or target area Clear performance areas and comprehensive monitoring and evaluation indicators Key Design Elements

Conclusion: Good Practice Municipal LED Holistic and Integrated approach Process orientated Partnerships Municipal Driven (not control) Proactive and Dynamic!!!!!!