Department of Provincial and Local Government

1
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

2
Purpose

• Describe current policy thinking on LED
• Locate policy within 5 scenarios
• Issues for taking city economic development
  forward

3
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.

4
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.

5
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

6
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

7
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

8
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

9
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

10
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
• ME Strategy

11
Policy Refinement
N/P Govt
LED
Comm./ NGO
Private Sector
City
12
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

13
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?

14
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 worlds 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.

15
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

16
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

17
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

18
Governments 3 Main Policy Thrusts for social and
economic development

• Establishing a job-creating economic growth path
• Embarking upon sustainable rural development and
  urban renewal
• Bringing the poor to the centre of development

19
Finding Synergy between the different approaches
to LED

• Traditional Approach
• Cities attract external investment as a means of
  boosting the local economy
• Endogenous Approach
• Development from within based on growing skills
  and mobilising local resources, creativity and
  innovation

20
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

21
Developmental LED vs Non-Developmental LED

• Developmental LED
• Local Government and communities working
• together to find sustainable ways of addressing
• social, economic and material needs of citizens
• Non-Developmental LED
• Social objectives are secondary to investment
• attraction at all costs

22
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
23
Developmental LED is the Key

Developmental LED Non-Developmental LED
Traditional Approach x
Endogenous Approach x
24
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

25
City Scale

• Macro-economic management Managing
• the city economy
• City fiscal policy
• City monetary policy?
• Revenue generation and expenditure
• strategies
• Borrowing framework
• City-wide planning (IDP), budgeting,
• service delivery, monitoring
• City industrial policy, SMME policy, etc
• Spatial targeting

26
City Scale

• Macro-economic management
• Managing the city economy
• GGP indicators
• Localise national economic information
• Localise national/provincial economic
• policy
• City identity and marketing
• Building credibility

27
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)