LG Week 31 July - 03 August Role of LG in Rural and Local Economic Development Session 5: 31 July 2012 Cllr D. Mazibuko – NEC member & Chairperson of Econ. Dev &Planning Working Group of SALGA 1

Outline Overview Rural Development –Background / Context –Problem Statement –Key Issues –Conclusion Local Economic Development –Background –Problem Statement –Key Issues –Conclusion Recommendations

1. Overview There has been much debate in the last few years on the role of LG in stimulating or facilitating economic development and, even more recently, its role in developing rural communities and areas. In the context of LG’s now well established developmental mandate, these two areas are relatively new ground and exploratory in nature. This presentation, as the discussion document, contextualises the debate on, firstly, the role of LG in the rural development priority of govt and, secondly, in stimulating local economic development.

2. Rural Dev - Background & Context In order to articulate the role of LG, it is important to understand how rural dev is contextualized from a legislative/policy and implementation framework & how concept of rural development has evolved. Rural development has been defined as “positive advancement of communities in rural areas through improvement of rural institutions and systems, expansion of rural infrastructure and growth in rural economic activities” While rural development includes provision of physical and social infrastructure programmes-it is more about developing systems and process to enable the empowerment of rural people. Because rural development has a spatial dimension and get implemented in “municipal” spaces, the role of LG cannot be overemphasized.

2.1 Problem Statement In terms of schedule 4 Part A of the Constitution, “Urban and Rural Development” is identified as a functional area of concurrent national and provincial legislative competence. Part B of schedule 4 also identifies “Municipal Planning” as an area of competence of LG. Key issue lies in defining or determining the role of LG when the prov and nat spheres are performing their constitutional mandate with regard to “urban and rural development”, given that actual project execution occurs in municipal spaces. Furthermore there are overlaps between the Comprehensive Rural Development Programme initiatives and LG initiatives that fall under “municipal planning”, which requires better alignment and coordination Municipal IDPs are still the best tools to coordinate and align the various rural development initiatives by the other spheres of government– strengthening of IDP process is therefore key.

2.2 Key Issues Defining the role of municipalities in Rural Dev Notwithstanding the legislative framework, any rural development initiative should clearly articulate the role and expectations of municipalities in the short- and long-term. Lack of resources at municipal level to plan and implement rural dev programmes, should be used as an indicator of areas where the LG sector requires support in order to fulfil its developmental mandate Building of municipal capacity should form an integral part of the rural development strategy. Municipalities must therefore play a central role in project identification, planning, implementation and management.

Key Issues Rural dev institutional arrangements The multi-dimensional nature of rural development and associated complexities require appropriate and sustainable institutional arrangements that empower the rural communities to fully participate in rural development. The role of the various stakeholders in the current rural development initiatives has not been adequately articulated. Some of the sector departments’ programmes are being implemented in a top to bottom fashion with varying degrees of participation by municipalities, and this has implications on the sustainability of such programmes Sustainable institutional arrangements should be able to respond to the specific dynamics of the particular project community and where possible should avoid a “one size fits all” approach.

Key Issues Building mun capacity to plan, implement and manage Rural Dev The dev of municipal capacity is key to long term sustainability especially in cases where the initial project resources are provided by sector departments or non-governmental organisations, whose involvement will be for a limited period. There is little evidence of systematic municipal capacity development as integral part of current rural development initiatives. There is more emphasis on visible “projects” as opposed to developing systems and strategies that are aimed at supporting the rural people in their fight against rural poverty. There is need to focus on the development of municipal capacity to manage dev initiatives is therefore critical for long term programme sustainability.

Key Issues Coordination and Alignment of Sector Dept Initiatives Nat and prov departments as well as LG are all involved in rural development programmes that require careful coordination. IDPs are supposed to provide an opportunity for project coordination, but are compromised by the lack of meaningful participation by other key stakeholders. It is therefore important that policy proposals that are aimed at improving the livelihoods of rural communities be developed in a manner that strengthens the IDP process as a single window for projects coordination and alignment.

2.3 Conclusion The development of sustainable strategies requires systematic and targeted institutional capacity building to deal with matters such as project management and coordination of the activities of various players in the rural development agenda. The articulation of the role of municipalities in rural development as well as municipal capacity building should be at the core of any sustainable rural development strategy. It is recommended that: –Municipalities be capacitated to play a leading role in rural development as a way of addressing the challenges associated with alignment, coordination and sustainability of rural development programmes. –Sector Departments focus more on municipal capacity building initiatives as an integral part of rural development programmes, in order to ensure programme sustainability.

3. Role of LG in stimulating LED - Background Key Questions for Consideration: –What is local economic development / LED? –What are the national, provincial and municipal roles and responsibilities in supporting LED? –Why the successes in LED so low? Why are LED strategies not executed? What are the root causes? –What is SALGA’s role in supporting improved municipal LED practice?

What is LED? and contributing to national development objectives, such as economic growth and poverty eradication”“To build robust and inclusive municipal economies at district and metropolitan level exploiting local opportunities, real potential and competitive advantages, addressing local needs and contributing to national development objectives, such as economic growth and poverty eradication” “ Process by which public, business and non governmental sector partners work collectively to create better conditions for economic growth and employment generation.” 12 World Bank Definition DPLG’s 2005 LED Policy Guidelines 3. Role of LG in stimulating LED - Background

13 Traditional development policiesLocal economic development Top-down approach in which decisions about the areas where intervention is needed are taken in the centre Promotion of development in all territories with the initiative often coming from below Managed by the central administration Decentralized, vertical cooperation between different tiers of government and horizontal cooperation between public and private bodies Sectoral approach to developmentTerritorial approach to development (locality, milieu) Development of large industrial projects to stimulate other economic activity Maximising the development potential of each are to stimulate a progressive adjustment of the local economic system to the changing economic environment Financial support, incentives and subsidies as the main factor for attracting economic activity Provision of key conditions for the development of economic activity The LED Challenge for Municipalities “STRATEGIC REVIEW OF LOCAL ECONOMIC DEVELOPMENT IN SOUTH AFRICA” Prof Christian M. Rogerson May 2009

3. Role of LG in stimulating LED - Background The Constitution mandates municipalities to play an important role in the socio-economic development of their local communities. However, as a concept, LED still remains relatively new and, as a result, some of the more good practices, contemporary ideas around the role and implementation of LED are either not known or embraced. Making LED “work” in South Africa is critical in enabling economic development as well as addressing poverty and inequity. However, there are a number of key issues to be addressed before this will be a reality.

3.1 Problem Statement Govt has released the various economic policies (New Growth Path and National Development Plan in particular) aimed at enhancing growth, employment creation and equity. There are expectations from all spheres of govt, including municipalities, to play a role in enabling employment creation More needs to be done to ensure that LG becomes a partner in national policies that will require implementation in cities, towns and communities. There needs to be a substantial re-think of approach towards the current LED approaches No acknowledgement of the informal economy as an economic sector

3.2 Key Issues Importance of LED Core purpose of LED is to mobilise and unlock the local economic potential by: –Bringing innovation to all its growth dimensions including local resources, infrastructure, to local skills and SMME’s –Attracting local and foreign investment –Fostering territorial competitiveness –Strengthening local institutions –Ensuring better and more inclusive and sustainable developmental outcomes

3.2 Key Issues Consultation on national policies impacting on LED The lack of consultation with OLG on national policies impacting on LED is a concern. While it is municipalities that deal with the realities of development in implementation, there is limited upfront consultation with OLG. Only with greater participation from the wider LG sector that will result in effective participation and impact on such development policies and programmes, for example: –Amended Preferential Procurement Regulation, the DBSA Jobs Fund and the Cooperatives Amendment Bills

Most municipal Supply Chain Management Policies (SCM) encouraged procurement from within a local municipal environment. This is to ensure that the municipality itself supports companies and SMME’s from their local community where possible. The imperative of promoting local small and enterprise development is constantly reinforced at local imbizos and IDP consultation processes. The new preferential procurement regulations do not allow SCM policies to provide or set-aside and targeting of local (geographical) supplier including co-operatives, SMME’s and CBO’s.The new preferential procurement regulations do not allow SCM policies to provide or set-aside and targeting of local (geographical) supplier including co-operatives, SMME’s and CBO’s. While municipalities will have had to amend their policies, but it is the local businesses themselves who will potentially suffer the most Key Issues i- Preferential Procurement Regulations

The objective of the Jobs Fund is to co-finance projects by public, private and non-govermental organisations that will significantly contribute to job creation. Limited take up by municipalities in the first round of applications for the “infrastructure window” municipalities to apply. However with the matching funding for Infrastructure Window being 1:1 (minimum of R10million), it effectively makes it impossible for most municipalities to apply. With this in effect, there is practically no reason for municipalities to participate and assist in achieving the objectives of the Jobs Fund. Recommend that NT agree to a Local Government Window on the Jobs Fund Key Issues ii- DBSA Jobs Fund

3.2 Key Issues iii- Co-operatives Amendment Bills Organised Local Government was not consulted on the Bills. –Nor were COGTA or other lead LED departments Implications: –Only with greater participation the local government sector that will result in their effective participation on the Co-operative programme –When municipalities are made aware, understand and agree to their role will it result in improved to co-operatives support / development This is a flaw in the process of the policy makers.

3.2 Key Issues 3.4 SALGA’s role in supporting municipal LED SALGA advocates various principles to support good LED practice, these include: –Councillor awareness, accountability and leadership on LED –Donor alignment, capacity building & support –A greater focus and national position on informal economy (development of informal trading guidelines) –The mainstreaming tools from of tried and tested LED programmes (CLGF, GIZ, P3 and LED Maturity) that support more sustainable and locally-owned LED strategies –Building a pool of the right LED capacity at the local level (CENLED & DTI) –Supporting LED Dialogue & Partnerships (e.g. SALGA assisting establishing business forums)

3.2 Key Issues 3.4 SALGA’s role in supporting municipal LED SALGA has already been working with the Sweden, Namibia and Botswana in the P3 Project, with municipalities across the Commonwealth in the CLGF Good Practice Project, the SA LED Network has been a project hosted by SALGA since February It is the central portal and forum for the exchange of knowledge and successful LED practice and for municipal peer- to-peer support.

3.3 Conclusion The constitutional and legislative framework clearly places an obligation on municipalities with regard to LED. There can, as a result, be little doubt that while LED is a LG function (in keeping with the purposive interpretation of the Schedules and the developmental character of LG under the new constitutional dispensation) making LED work should be national priority. Municipalities, therefore need to have the right people, policies and support in their LED agenda. National Govt in turn needs to reinforce, rather that undermine, the role of developmental LG

4. Recommendations That all national policies (eg. NGP, SIPS, Tourism, etc) clarify and acknowledge the role of LG - Local Economic Development on a differentiated basis. –All national economic policies be accompanied by local government impact assessments That NT agrees to a LG funding window for the Jobs Fund That DTi ensures direct consultation with SALGA on the Cooperatives Amendment Bill That NT/Dti address the contradictions in policy that relates the procurement of local content and targeted procurement That DED consider a national policy on informal sector and trading (in consultation with SALGA)