The role of Local Economic Development on Poverty eradication in South Africa’s rural

municipalities.

Case study of Greater Tubatse Municipality

Master of Business Administration (MBA): Corporate Strategy & Economic Policy

Candidate: Bethuel Sephaka Motswiane

Republic of South Africa

Supervisor: Professor Meine Pieter van Dijk (UNESCO)

“This paper was submitted in partial fulfilment of the requirements for the masters of Business Administration (MBA) degree at Maastricht School of Management (MSM)

Maastricht, Limburg Province, the Netherlands, August, 2009”

Dedication

I dedicate this work to my entire family for their love and support throughout

the days of my life, my mother in Particular, Mrs Mangetane Rebecca Motswiane who raised and educated me, my brother Mr Mathule Motswiane

for his continued support and inspiration during my academic life and my

daughter Mangetane Pride Motswiane for her continued intrinsic motivation

in me to succeed during my studies at MSM. I also dedicate this paper to all

South Africans who are directly and indirectly affected by poverty.

ii

Acknowledgements Above all, I would like to thank my almighty God to guide me through to the

end of this study. I also want to express my sincere gratitude to the entire

MSM staff and my supervisor Professor Meine Pieter van Dijk for his

assistance and availing his time to read and correct my draft. Their support

cannot be measured in monetary terms.

My profound thanks go to the Netherlands government, Nuffic and Maastricht

School of Management for affording me the opportunity to do my studies. I

would like to express my sincere thanks to the Greater Tubatse Municipality

(GTM) Management in particular Mr S Malepeng for accepting my request to

use GTM as a case for this research and for the provision of all the data

required to carry out this study.

My appreciation and thanks goes to my mother Mangetane, my family and

Kgotlopong community for raising me and giving me a solid foundation without

which I would not have reached this level. I would wish to thank my daughter,

sisters, brothers, uncles and aunts for the encouragement they gave me when

I was tired and home sick. God bless you all.

My sincere thanks and appreciation goes to my MBA25 colleague Herieth

Ligate for her positive criticisms and guidance throughout the whole study and

the entire MBA25 for their undivided support in all group works and team

works during the studies. May God bless.

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Acronyms

ANC African National Congress ARC Agricultural Research Council DPLG Department of Provincial and Local Government GTM Greater Tubatse Municipality IDP Integrated Development Planning LED Local Economic Development LIMDEV Limpopo Economic Development Enterprise LIBSA Limpopo Business Support Agency MQA Mining Qualification Authority NDA National Department of Agriculture NGO Non Government Organisation NPO Non Profit Organisation PC Project Consolidate SADC Southern African Developing Countries

iv

Map of South Africa

Map of Greater Tubatse Municipality

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List of Figures 2.1 Three spheres of government in South Africa

3.1 Performance evaluation model in LED.

List of Tables 2.1 Three waves of LED

2.2 Philippines LED

2.3 Bulgarian case conclusion

2.4 Togo case

3.1 Sample

4.1 Education information in GTM

4.2 Awareness & Promotion of LED

4.3 GTM staff competency

4.4 Private Public Partnerships at GTM

4.5 Community involvement in LED

4.6 Annual household income at GTM

4.7 LED impact at GTM

4.8 GTM labour market

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TABLE OF CONTENTS

Dedication .................................................................................. ii Acknowledgements .................................................................. iii Acronyms .................................................................................. iv Map of South Africa ................................................................. v Map of Greater Tubatse Municipality .................................... v List of Figures .......................................................................... vi List of Tables ............................................................................ vi Executive Summary ................................................................. ix CHAPTER 1 .............................................................................. 1

1.1 Background and Overview .................................................................................. 1 1.2 Problem Statement ............................................................................................... 3 1.3 Research Objectives and Questions ..................................................................... 5

1.3.1 Research Objectives ...................................................................................... 5 1.3.2 Research Questions ....................................................................................... 5

1.4 Research Methodology ........................................................................................ 5 1.5 Assumptions, Problems and Limitations ............................................................. 6 1.6 Conclusion ........................................................................................................... 7

CHAPTER 2 .............................................................................. 8 LITERATURE REVIEW ........................................................ 8

2.1 Introduction and Background .............................................................................. 8 2.2 What is Local Economic Development (LED)? .................................................. 8 2.3 South African Local Government and LED ...................................................... 12

2.3.1 South Africa’s LED Framework ................................................................. 14 2.4 The Role of Municipalities on LED................................................................... 18 2.5 LED Strategic Planning ..................................................................................... 19 2.6 Some Countries LED cases ................................................................................ 20

2.6.1 Philippines Case .......................................................................................... 23 2.6.2 Bulgarian Case ............................................................................................ 24 2.6.3 Togo Case ................................................................................................... 27 2.6.4 Russian case ................................................................................................ 27

2.7 Conclusion ......................................................................................................... 30 CHAPTER 3 ............................................................................ 31

THEORETICAL FRAMEWORK AND RESEARCH DESIGN ................................................................................... 31

3.1 INTRODUCTION ............................................................................................. 31 3.2 PROBLEM DEFINITION ................................................................................. 31 3.3 RESEARCH OBJECTIVE ................................................................................ 33 3.4 THEORETICAL FRAMEWORK ..................................................................... 33

3.4.1 Structure (External Factors) ........................................................................ 35

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3.4.2 Agency (Organizational/Internal Factors) .................................................. 35 3.4.3 Independent Variable .................................................................................. 36 3.4.4 Dependent Variables ................................................................................... 36 3.4.5 Moderating Variables .................................................................................. 36

3.5 RESEARCH ASSUMPTIONS .......................................................................... 37 3.6 RESEARCH LIMITATIONS ............................................................................ 37 3.7 RESEARCH QUESTIONS ............................................................................... 37

3.7.1 Major Research Question ............................................................................ 37 3.7.2 Minor Research Question ........................................................................... 38

3.7 RESEARCH METHODOLOGY ....................................................................... 39 3.8.1 Data Collection ........................................................................................... 39 3.8.2 Sampling Method ........................................................................................ 40 3.8.3 Data Analysis Method................................................................................. 41

CHAPTER 4 ............................................................................ 42 DATA ANALYSIS, FINDINGS AND DISCUSSION ......... 42

4.1. INTRODUCTION ............................................................................................ 42 4.2 LED AWARENESS, COMMUNICATION AND PROMOTION ................... 43 4.3 LED SUPPORT SYSTEMS .............................................................................. 44

4.3.1 Municipal LED unit. ................................................................................... 45 4.3.2 LED Strategic Plan ..................................................................................... 46 4.3.3 Public Private Partnership (PPP) ................................................................ 46 4.3.4 LED Budget ................................................................................................ 47

4.4 COMMUNITY INVOLVEMENT IN LED ...................................................... 48 4.5 IMPACT OF LED AT GTM ............................................................................. 49 4.6 FINDINGS ......................................................................................................... 53

4.6.1 Findings on Structure .................................................................................. 53 4.6.2 Findings on Agency .................................................................................... 54

4.7 CONCLUSION .................................................................................................. 55 CHAPTER 5 ............................................................................ 56

CONCLUSION, RECOMMENDATIONS AND FUTURE RESEARCH. ........................................................................... 56

5.1 CONCLUSION .................................................................................................. 56 5.2 Recommendations .............................................................................................. 58

5.2.1 Community Involvement ............................................................................ 58 5.2.2 LED Budget ................................................................................................ 58 5.2.3 Monitoring, Control and Evaluation ........................................................... 59 5.2.4 Skills development and Illiteracy reduction ............................................... 59 5.2.5 Municipal LED unit .................................................................................... 60

5.3 Future Research ................................................................................................. 60 6. References and Bibliography ............................................. 61

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Executive Summary

The focus of this study is to find out the role of Local Economic Development

on Poverty eradication in rural municipalities of South Africa. The paper gives

a background of LED and practices in different countries.

Poverty is a challenge that many South Africans are facing. The rural areas

are also highly affected with this problem. LED has been practiced in many

countries from way back. In South Africa the ANC led government also

introduced LED in the municipalities to fight the rising poverty level. Since the

ANC government took over in 1994 different interventions have been made to

fight poverty which resulted from the apartheid government. Many rural areas

seem not to have benefited from those interventions.

I intended to answer to the following research questions:

• How does LED assist in problems such as poverty eradication,

employment generation, skills development and infrastructure

development?

• To what extent does the local government implement LED?

• How does private business get involved in the LED?

• What is the major LED challenges facing the local government?

• How does the local community get involved in the LED process?

• What support system exists for LED?

In an attempt to answer all the questions an LED performance measurement

model was used to assess the structural and agency factors which affect LED

towards effectiveness and efficiency. The researcher used primary and

secondary data and the data was drawn from 50 respondents from GTM. The

data has been analysed, interpreted and related to the literature. The findings

have been made also from the analysed data. The researcher had come up

with the following findings which are categorised as structural findings and

agency findings. Under structural findings the first finding is that there is high

ix

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level of illiteracy and skills shortage in the communities and this will distort

many LED activities. The second finding is that there is insufficient LED

awareness, communication and promotion from the municipality and this

result in community not being involved in LED activities. The third finding is

that there is lack of infrastructure such as roads, electricity, etc. Under agency

the first finding is that the municipality has insufficient human capacity to

execute LED activities.

The second finding is that the municipality have no budget for LED activities.

The third finding is that there is insufficient control, monitoring and evaluation

of LED activities at GTM. The fourth finding is that there are insufficient

reliable private partners to the municipality who will help achieve effective and

efficient LED. The researcher finds that the combination of all findings results

in LED not having impact on poverty eradication at GTM.

From the findings the researcher also made some recommendations.

The researcher recommends that the municipality should involve communities

in all steps of the LED process. Secondly the municipality should have special

budget for LED activities and should also market the municipality to potential

investors and donor organisations.

Thirdly the municipality should develop an LED control, monitoring and

evaluation program for all LED activities. Fourthly the municipality should

create and increase partnership with universities, colleges, research

institutions and training and skills development institutions for vocational

training to fast track on solving the problem of illiteracy and skills shortage.

CHAPTER 1

INTRODUCTION

1.1 Background and Overview I was the Projects Co-ordinator in the Agricultural Research Council (ARC) a

sub structure of the National Department of Agriculture (NDA) in South Africa.

My role is facilitation, coordination and management of agricultural projects for

small scale farmers through local governments which are mostly found in the

rural areas. Before joining NDA I also worked for the Department of Provincial

and Local Government (DPLG) which is the overseer of both the provincial

and local government in South Africa.

While working at the DPLG I started learning about the aspect of Local

Economic Development (LED). I became more interested in the subject of

LED since some of my projects which were aimed at developing farmers in

rural areas would be classified under LED and I also aspired to know how it is

being practiced by different local governments that I have been in contact

with. I also became a member of LED network of South Africa and continued

to receive monthly newsletter.

According to Tamasane (2002) the aim of local economic development is to

produce higher standards of living, improve the quality of life, alleviate

poverty, create more and better jobs, advance skills and build capacity for

sustained development in the future for local communities. According to

Lafferty (2001) many of the challenges concern lifestyles and a constructive

dialogue between many groups in society is needed, not only between

experts and political decision makers. With all my past interaction with

different local government I found it difficult to really relate to what Tamasane

says in his explanation. While there is such a good explanation by Tamasane,

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I found lot of contrary situations in different communities in South Africa,

situations where poverty is very high and the standards of living are very low.

The study by Wandschneider (2004) shows that the much economic activity in

rural municipalities is closely linked to the surrounding villages economy

through consumption, production, employment and various types of economic

and social service provision. This indicates that economic growth for local

authorities is dependent on the developmental dynamics of the villages.

As a new democracy South Africa is faced with the challenges on issues such

as rising poverty and unemployment. According to Nel (2001) municipalities

are charged with responsibility of creating an enabling environment for

communities in South Africa through LED.

Greater Tubatse Municipality (GTM) is a local municipality according to the

municipal structure act (DPLG). GTM with its seat in the small town of

Burgersfort is a local municipality in the Limpopo province in South Africa. The

municipality has an estimated population of 290 000 which is spread over 29

wards. The main economic activities in the municipality are mining, agriculture

and service sector.

The municipality has a high number of natural resources such as Platinum,

Chrome, Vanadium, Andalusite, Silica and Magnetite. There are also fourteen

mines in the area of which some dates back to the 1920s. GTM is one of the

136 municipalities in South Africa which are targeted for Project Consolidate

(PC). PC is a hand on local government support engagement programme

which targeted municipalities that needs support to enhance service delivery

and LED is one of the key performance areas of Project Consolidate (DPLG).

I however believe that this research will help me and other South Africans in

finding the role of LED on poverty especially in rural local governments in

South Africa. The significance of this study will be geared towards identifying

if the LED is relevant in poverty eradication in South Africa. This will help to

2

redefine the current LED documents and will also help identifying the gaps in

the local government structures.

The other benefit of the study will be derived from the evaluation and

assessment of the practices used for LED if they are really effective towards

poverty eradication and if not how should corrective measures be taken in

such situations. This benefit will extend to local communities through

improved LED that will curb poverty.

1.2 Problem Statement

South Africa is among the countries with better economies in Africa; it is also

the country in Africa with advanced level of infrastructure and regarded to be

the hope to other African countries especially the SADC region (Mbeki. 2005).

Over the past fifth teen years of democracy, South Africa has been

restructuring and implementing different developmental programmes and

initiatives at National, Provincial and Local government level.

At local government level one of the interventions that were introduced is local

economic development (LED). Local economic development is about

economically empowering the local communities and also a participatory

process which encourages social dialogue and public-private partnerships in a

defined geographical area with intentions of eradicating poverty and creating

jobs.

Persky (1993) recognizes that urban places have a greater variety of

production than rural areas and these rural areas are likely to specialise in

relatively few local economic development activities. Given such interventions

and the strategies, majority of South Africans are still found to be living in

deep poverty characterised by high level of unemployment, skills shortage,

etc. This poverty situation is happening in both rural and urban areas.

3

Current situation of the marginalisation of poor people from the formal

mainstream economy and opportunities for income generation has increased

dramatically especially in rural communities. Poverty seems to be increasing

even more, the level of unemployment is also very high and the skills

shortage is severe in rural communities. On the other hand Prahalad (2006)

says “what is needed is a better approach to help the poor, an approach that

involves partnering with them to innovate and achieve sustainable win-win

scenarios where the poor are actively engaged”.

Many rural communities have been engaging in demonstrations in different

local government offices in need of addressing the high level poverty and poor

service delivery in those areas. This situation has been rising than declining,

yet there is LED that is supposed to be addressing these issues at community

level. The general standards of living in rural areas are very low. Access to

health facilities is difficult. People have to travel for as far as eighty kilometres

to access health facilities. In many cases rural communities still continue

sharing drinking water with animals from the streams. There is also one

source of employment which is mostly mining.

During rainy seasons many rural villages have no access to roads and some

many people still living in mud houses becomes victims since the houses fall

from heavy rains. All these challenges bring a very big question into the role

that intervention strategies such as LED are bringing to the rural communities.

Does LED as an economic development strategy serve as an answer to the

communities?

4

1.3 Research Objectives and Questions 1.3.1 Research Objectives

1. Assess the impact of LED on poverty eradication and local government

development.

2. To assess whether LED strategies are well coordinated in rural

municipalities.

3. Assess the role of private enterprise on LED.

4. Assess the depth of local community participation on LED.

1.3.2 Research Questions Main Research Questions

1. How does LED assist in problems such as poverty eradication,

employment generation, skills development and infrastructure

development?

2. To what extent does the local government implement LED?

Minor Research Questions

1. How does private business get involved in the LED?

2. What is the major LED challenges facing the local government?

3. How does the local community get involved in the LED process?

4. What support system exists for LED?

1.4 Research Methodology A qualitative study based on a survey research, with a questionnaire as a data

collecting tool was undertaken to determine the impact of LED on poverty.

Telephone interviews were also conducted to supplement the questionnaires.

There was also some data collection through reading of various publications.

5

The research questionnaires was targeting twenty young and ten old

residents for the local communities of the selected municipality, ten

employees both managers and non managerial staff of the same municipality,

ten Non Governmental Organizations (NGOs) and local business people in

the municipality was also targeted with questionnaires and telephone calls.

The total number of my sample was 50.

The existing documents from the municipality and articles were also used for

data collection. Information, documents and articles from the LED department

in the municipality were also used for gathering data. The LED

Performance measurement framework was used as a tool of analysis.

1.5 Assumptions, Problems and Limitations

The study focused on rural communities. A sample of 50 people was selected.

The problem of access to communication facilities is a reality in these villages.

So the researcher had a difficulty of having all people electronically accessing

the questionnaire. However the researcher hired and sent a person who will

physically circulate the questionnaire in those villages.

The other alternative was the use of telephone interviews to people who might

not be able to access the questionnaire. Another foreseeable limitation would

be data availability with particular reference to LED in Greater Tubatse

Municipality. The researcher therefore had to move faster with the research

so that the data collection does not get delayed.

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1.6 Conclusion Poverty is a reality in the rural areas of South Africa after 15 years of

democracy. The strategies that the ANC government has put in place to

promote economic development and address the past imbalances are stake

given the increase in poverty and unemployment. The study assessed the

impact that one of the strategies for economic development is having on

poverty eradication.

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CHAPTER 2

LITERATURE REVIEW

2.1 Introduction and Background Over the past century the world has experienced significant political and

economic changes. This resulted with high level of economic growth and

inequality. Those inequalities resulted in governments in both developed and

developing countries having to introduce policies of decentralising power and

resources to address the inequalities.

The broader macro economic policies had to be downsized into district and

regional policies that would address the economic needs of those districts.

This resulted into different localities having different economic needs and

resulting in different economic policies and thus resulting into local economic

development (LED) being adopted in different countries as a local economic

development policy.

2.2 What is Local Economic Development (LED)?

“LED is a process where local actors shape and share the future of their

territory” (Pretorius. 2005)

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

all spheres of society work jointly to create a unique advantage for the locality

and its firms, tackle mark failures, remove bureaucratic obstacles for local

business and strengthen the competitiveness of local firms” (MunicipalIQ.

2009)

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“Local economic development (LED) is a participatory process in which local

people from all sectors work together to stimulate local commercial activity,

resulting in a resilient and sustainable economy. It is a way to help create

decent jobs and improve the quality of life for everyone, including the poor

and marginalised” (UN-HABITAT. 2005).

“It is a process by which public, business and non-governmental sector

partners work collectively to create better conditions for economic growth and

employment generation” (Swinburn et al. 2006).

“Local economic development is about local people working together to

achieve sustainable economic growth that brings economic benefits and

quality of life improvements for all in the community” (World Bank. 2004).

“Local Economic Development (LED) is an approach towards economic

development which allows and encourages local people to work together to

achieve sustainable economic growth and development thereby bringing

economic benefits and improved quality of life for all residents in a local

municipal area” (DPLG. 2006).

Different writers and researchers define LED in different ways but the concept

behind it is the development and empowerment of local people and

improvement of the standard of living for the local citizens.The issue of local

economic development is a very popular issue in both developed and

developing countries. According to DPLG (2006) as from the late 1970s LED

increased its popularity and took different forms ranging from the public sector

led Local Enterprise Boards in the UK to the flagship projects of private sector

led entrepreneurialism in the inner cities of Europe and North America.

LED is about local people working together to achieve sustainable economic

growth that brings economic benefits and improvement in the quality of life for

all in the community (Davis. 2005). What is referred to as LED dates back to

the 1960s and 1970s and since then LED went through a number of stages

and waves;

9

Table 2.1: Three waves of LED.

WAVE

FOCUS TOOLS

First

1960 to early

1980

During the first wave the focus was on

the attraction of:

• Mobile manufacturing

investment, attracting outside

investment, especially the

attraction of foreign direct

investment.

• Hard infrastructure development.

To achieve this cities used;

• Mass grants

• Subsidized loans

usually aimed at

inward investing

manufactures.

• Tax breaks

• Subsidized hard

infrastructure

investment.

• Expensive low road

industrial recruitment

techniques.

•

Second

1980 to mid

1990s

During second wave the focus moved

towards;

• The retention and growing of

existing local businesses.

• Still with an emphasis on inward

investment attraction but usually

this was becoming more targeted

to specific sectors or from certain

geographic areas.

To achieve this cities

provided;

• Direct payments to

individual businesses

• Business incubators

• Advice and training

for small and medium

size firms.

• Technical support

• Business start-up

support.

• Some hard and soft

infrastructure

investment.

10

Third

Late 1990s

onwards

The focus then shifted from individual

direct firm financial transfers to making

the entire business environment more

conducive to business. During the

current wave of LED, more focus is

placed on;

• Soft infrastructure investments.

• Networking and leveraging of

private sector investments for the

public good.

• Public Private Partnerships

• Highly targeted inward

investment attraction to add to

the competitive advantages of

local areas.

To achieve this cities are;

• Developing a holistic

strategy aimed at

growing local firms.

• Providing a

competitive local

investment climate.

• Supporting and

encouraging

networking and

collaboration.

• Encouraging

workforce

development and

education.

• Closely targeting

inward investment to

support cluster

growth.

• Supporting quality of

life improvements

Source: World Bank (2004) www.worldbank.org/urban/led/

Despite the different approaches, the common theme was about local actors

in defining their autonomy. Over the past decade, the local economic

development (LED) has being a major policy issue in many developing

countries of Europe, North America, Australia and Asia (Rogerson, 1999). In

many countries economic policy has become a very important and central

issue in all spheres of governance.

It is no longer the responsibility of the central government only to deliver on

economic growth and poverty eradication it is a decentralised responsibility

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that goes to provinces, cities and local governments. LED seeks to empower

local participants to effectively utilise business enterprise, labour, capital and

other local resources to achieve local priorities (e.g. promote quality jobs,

reduce poverty, stabilise the local economy, and generate municipal taxes to

provide better services).

The turbulence of the U.S. economy in the late 1970s, the recession of the

early 1980s, the rise of federal budget deficits, and the cutback of federal aid

to the states and localities have forced states and local governments to

broaden their efforts in economic development (Dere, 2001).

2.3 South African Local Government and LED

Since the downfall of apartheid in 1994 South Africa has been moving for

change in the political and economic structure of government. The fall of

apartheid as a system of governance paved a way for the ANC led

government to introduce new policies to address the imbalances caused by

the apartheid government. One major area that the apartheid government had

left a mark is in the economy of the country.

While people from other parts of the world see South Africa boosting better

economic in Africa, the reality is that majority of South Africans still leave in

severe poverty, as a results of the injustices of the apartheid government. The

fall of the apartheid gave rise to a new constitution of South Africa where in

chapter 7 define the responsibilities of the local government (Municipalities)

(SA constitution, 1996). Municipalities forms part of the three spheres of

government in South Africa.

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Figure 2.1 Three spheres of government in South Africa

NATIONAL GOVERNMENT

PROVINCIAL GOVERNMENT

LOCAL GOVERNMENT

THREE SPHERES OF GOVERNMENT IN SOUTH AFRICA

Source. GCIS. www.gcis.gov.za

As early as 1995, constitutional debates on the future form and shape of local

government stated clearly of the proactive role of municipalities. In South

Africa municipalities are the lowest level of government structures. The

municipalities are governed and defined by separate municipal structures acts

adopted by parliament.

Municipalities are classified into three categories, category A referred to as

Metropolitan municipalities, this are large regions which are mostly urbanised,

category B, District municipalities which are main divisions in provinces and

category C, Local municipality which are small municipalities that makes a

district (Municipal Structures Act. 1999).

According to the constitution of South Africa there are objectives that a

municipality should strive to achieve; first to promote social and economic

development, secondly to encourage the involvement of communities and

13

community organisations in the matters of local government (SA Constitution.

1996).

The DPLG (2006) highlighted the great lack of literature on LED in the

Southern part of the world, however stating that lot has been written from

regions such as Latin America, East and South Asia adding to the available

good literature from Brazil which describes the emergence of economic

clusters including the Campinas high technology cluster noted for its strong

linkages between research institutes and local firms. Since then South Africa

has developed an LED framework to work as a guiding tool towards a

successful LED.

2.3.1 South Africa’s LED Framework

The aim and role of the LED framework in South Africa is to support the

development of sustainable local economies through integrated government

action (DPLG. 2006). The LED framework in South Africa has been

encouraged and shaped by the evolution of LED internationally and is based

purely on the South African context.

According to Department of Provincial and local Government the LED

framework contextualises the move towards new institutionalism that breaks

down the distinction between economy and society, showing how economic

decision making and action is shaped by the shared values, norms, beliefs,

meanings, and rules and procedures of all stakeholders in the society.

The framework has been influenced also by the following policy papers; South

African constitution (1996), white paper on local government (1998), municipal

systems act (2000), policy paper on integrated development planning (IDP)

(2000), municipal structures act and LED strategies and instruments.

According to the constitution of South Africa (chapter 7) municipalities have

the following objectives:

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• to provide democratic and accountable government for local

communities;

• to ensure the provision of services to communities in a

sustainable manner;

• to promote social and economic development;

• to promote a safe and healthy environment; and

• to encourage the involvement of communities and community

organisations in the matters of local government.

Objective b, c, d, and e are purely aligned to the definition of LED as

discussed previously. The LED framework comes as support mechanism for

the realization of these constitutional objectives of the local government. The

achievement of sustainable socio-economic development for local people in

the municipalities is very important on poverty eradication.

While poverty is stated as a state in which people cannot have access or

afford the basic needs like healthcare, water, sanitation, roads, electricity,

employment, etc (World Bank. 2004) the objectives spell out what

municipalities should do and if well implemented then poverty will not be an

issue in South Africa.

According to the framework LED is seen as one of the five key performance

areas for the local government. As a KPA it is therefore seen as interrelated to

other four KPAs; Municipal Transformation and Organisational development,

Basic Service Delivery, Municipal Financial Viability and management, and

Good Governance and Public Participation. The LED framework promotes an

approach of developmental economies through partnerships and a shift away

from narrow municipal interests focused only on inputs from government.

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The following are the guiding Principles of the LED Framework (2006):

• Through a developmental approach, Government has a decisive and

unapologetic role to play in shaping the economic destiny of our

country.

• Creating an environment in which the overall economic and social

(structure) conditions of the locality are conducive to the creation of

employment opportunities is the responsibility of local government.

• Local Economic Development is an outcome of actions and

interventions resulting from local good governance (agency) and the

constant improvement and integration of national priorities and

programs in local spheres.

• Inward investment from the state or private sector will only be effective

where the potential and competitive advantage of each area are known

and exploited.

• Promoting robust and inclusive local economies requires the

concerted, coordinated action of all spheres and sectors of

government.

• Locally owned appropriate solutions and strategies must emerge to

support national frameworks in both rural and urban local spheres.

• Private companies, including social enterprises and cooperatives form

the heart of the economy and have a crucial role to play as

partnerships with the public and community role players that will

ultimately stimulate robust and inclusive local economies.

• People are the single greatest resource and including all citizens in

development and increasing their skills leads to increased opportunities

for stimulating local economies.

• Local initiative, energy, creativity, assertive leadership and skills will

ultimately unlock the latent potential in local economies and will shape

local spheres.

The principles of LED spread well to cover very important issues for the

success of LED on addressing poverty. These issues range from good

16

governance, intergovernmental relations, consultation with local communities,

stakeholder relations and public private partnership. The above factors seem

to be very central towards the success of LED in combating poverty and are

keys to an effective and efficient LED as per the researcher’s theoretical

model.

However some principles are contradictory towards a successful LED in all

municipal categories. Not all of the above mentioned principles do seem to be

practical especially in rural municipalities where there is no competitive

advantage for such small municipalities. Therefore it means less or no

investment at all for these municipalities from private and government

investors. Central government support becomes very important in enforcing

and supporting the existence and growth LED in all areas in such rural

municipalities

South Africa created and demarcated new democratic municipalities after the

1994 elections, to redress the massive imbalances of service provision and

redirecting services towards eradicating poverty through growth and economic

development. The apartheid government municipal structures were under

resourced and not able to serve the needs to the poor communities. There are

disparities between rural and urban communities.

According to Davis (2005) the social situation of historically disadvantaged

population of South Africa lives in rural areas and is characterised by low

standards of living and high rates of unemployment and poverty. There is high

level of illiteracy, poor infrastructure and severe skills shortage. Many people

do not have enough income or no income at all, are resource poor and have

no access to basic services to satisfy their basic needs.

“The government has lamented good on achievements over the past ten

years on addressing poverty, however concerns still remains about the

sustainability of those interventions” (Bond. 2003). There are various policy

documents and white papers in South Africa aiming at poverty eradication and

17

all those documents are aided by the Reconstruction and Development

Program (RDP) of 1994 and Growth, Employment and Redistribution (GEAR)

policy of 1996.

All these are aimed at Poverty alleviation and economic growth. GEAR policy

emphasises the need for fast growing economy which creates enough jobs,

redistribution of income and opportunities in favour of the poor (Bond. 2005)

2.4 The Role of Municipalities on LED

Both small and medium sized rural towns are an important part of the Local

Economic Development. The employment opportunities in such locations and

the standard of living of its population are very important for local economic

development (Wandschneider. 2004). The municipalities are very important in

developing LED strategies and providing rural and urban linkages.

Municipalities may draw their LED strategies based on the socio-economic

status of the region and villages in the location of a particular municipality. A

municipality may be in a form of a district therefore the LED strategy has to be

aligned with the socio-economic needs of the district taking in to consideration

the individual village needs. In the Indian context, the district may be an

appropriate unit for planning and implementation purposes (Wandschneider.

2004).

The South African policy document (Refocusing Development to the Poor)

recalls on developmental and pro-poor responsibilities that local government

are facing in South Africa. The municipalities have the responsibility of

working hand in hand with communities in the development of working and

sustainable pro-poor strategies for LED. According to Bond (2004) investment

is all very well, but the benefits are unlikely to be visible to the needy unless

the very needy are the active participants in the development process.

18

Municipalities have the role to bring all stakeholders, resources and the

necessary planning together towards a sustainable, effective and efficient

LED.

2.5 LED Strategic Planning

According to UN-HABITAT (2005), municipalities, private sector and

communities are looking for improved ways to achieve LED, which is a

cornerstone of sustainable development. The UN-HABITAT round table

participants showed a common view about the success of LED, which

included local leaders and economic practitioners’ need to have access to a

range of tools (structural and agency), ideas and experiences which will help

them to address their own issues at local level since local challenges require

local solutions. Therefore municipalities are required to have their own LED

strategic plan which will address local issues.

The strategic planning should be an all inclusive process of businesses,

government, labour and the poor. According to UN-HABITAT if a strategic

planning is well done, it provides a way to clarify competitive advantages,

identify cooperative opportunities and generate strategies that better achieve

local priorities. With lot of programmes and projects, LED practitioners need to

bring all stakeholders for the projects to succeed.

LED is centred on three pillars “Local values (poverty reduction, basic human

needs, local jobs, integration of social and environmental values), utilises

Economic drivers (value-added resource use, local skills training, retention of

income, regional cooperation) and considers Development (the role of

structural change, quality of development)” (UN-HABITAT. 2005). Since the

success of LED is dependent on all stakeholders and both internal and

external factors, it is very important that even the people living in poverty

should be included in the LED planning process.

19

People living in poverty are the most marginalised in strategic decisions that

affect them and the result is that such decisions fail to make a difference in

their lives. LED should be seen as an important element towards poverty

reduction. Poverty alleviation strategies need to be included in the LED plan.

According to UN-HABITAT (2005) “at strategic level, experience indicates that

economic initiatives for poverty reduction are most effective and sustainable

when they are also incorporated into a broader economic development

strategy because pro-poor strategies alone may not lead to the development

required to alter the situation of the poor”.

It is important to combine both broad local economic strategies and poverty

reduction so that a balanced economic development can be achieved. LED

should better ensure that those who have been marginalised get access to

opportunities. Therefore the poor should be invited to take part in shaping

their own destiny.

2.6 Some Countries LED cases

Besides many economic changes in the world, countries still believe in

integrations and strategic partnerships. According to Capkova (2005) there

has been significant growth and differences in foreign investment especially

between central and eastern European countries and different areas in the

world, it is also evident that at the same time regions and municipalities face

difficulties that have arisen under conditions of rapid restructuring, increased

international competition and lack of experience which puts pressure on a

need for an all inclusive strategic plan for economic development.

Municipalities and regions like in South Africa are still undergoing similar

transformations and restructurings. Municipalities in South Africa were

demarcated after 1994 elections with an aim of redressing the imbalances of

20

the then apartheid homelands which left lot of inequality among the citizens.

Capkova (2005) further outline the following points as difficulties that

municipalities face in economic development and poverty eradication:

• Increased unemployment especially among unskilled people

• A general lack of business know-how as well as a lack of working

capital which inhibits firms from acquiring the new technology.

• Lack of business management expertise among small and medium

sized enterprises.

All these points are mostly applicable to rural municipalities in South Africa.

The government is mostly concerned of that and in the LED framework of

South Africa, some limitations are also stated which also include the location

of the municipality. According to the LED framework of S.A (DPLG. 2006)

there are municipalities that due to their location and history are not in a

position to create and generate growth in their economies.

The framework share the same view with Capkova, when he states that many

localities in the central and eastern Europe are distressed because in the

past, central governments manipulated their economies by installing a single

large employer regardless of its long term economic viability. This is exactly

the case in many South African municipalities. The GTM is depended largely

on mining. While many people in the GTM are unskilled, they are found doing

unskilled jobs in the mines with little income.

Because mining is the greatest supplier of quality or formal job in the GTM

municipality, the sector also become strained and the employment need of the

communities are not met. With little on service sector, most of the unskilled

people are found unemployed and these result in poverty since the

government social grants are not enough. According to Capkova (2005)

localities with narrow or declining economic bases such as agriculture and

21

mining face severe economic problems and have to deal with specific

difficulties such as long term poverty and youth unemployment.

The economic growth of South Africa has been growing slow in the past ten

years (Statssa. 2008). This also impact on the economic growth of

municipalities. The introduction of GEAR as economic policy has also put a lot

of strain for the rural municipalities because many people lost their jobs as a

result of privatisation. Capkova also states that economic restructuring also

has an impact on the economic performance of municipal economic growth

because it results in distressed socio-economic environment.

Local Economic Development is closely tied with availability of infrastructure.

Most localities in Bulgaria and Poland failed to achieve their economic growth

strategies because of lack of supportive infrastructure. In comparison, large

cities perform better on LED than the small municipalities because of their

disparities in their level of infrastructure.

This is evident in South Africa. Johannesburg municipality has lot of

supportive infrastructure which gives it more opportunity for economic growth

than a small rural municipality Greater Tubatse Municipality in Limpopo

province. Infrastructure plays a very important role especially in investment

attraction. According to Capkova (2005) there are three important elements

that a firm considers when making investment decision, those elements are

transportation, labour and energy.

In the GTM we still find many areas without proper roads, without

electrification and high level of unskilled labour and this put a strain on LED.

Studies shows that urbanised municipalities do well in local economic

development than their rural counterpart. This is related to the capacity in

terms of capital and labour. Rural municipalities have a less pool of labour

22

force most rural residents migrate to urbanised municipalities to seek survival

and this result in brain drain in the rural localities.

The success of LED is highly associated with the size of the municipality as

well. However even in the urban municipality there is high level of poverty due

to high level of urbanisation. At the end both skilled and unskilled labour

become overcrowded in the urbanised municipalities and makes it impossible

for every person to the employed.

According to Capkova (2005) hundreds of small municipalities in Europe lack

the technical, professional and financial resources to undertake discretionary

activities and economic growth. That results in less economic development in

the municipalities and resulting in poverty. However many small municipalities

in Europe creates partnerships and collaborations with other small

municipalities in their region and private sector to overcome their limited

resource and economic growth difficulties.

According to Capkova (2005) co-operation in the promotion of LED has

started recently on a voluntary basis and several solutions in organising co-

operations have been created. This resulted in agencies which have been

established for LED purposes.

2.6.1 Philippines Case Table 2.2: Philippines LED

National Support for LED – Micro-Businesses Enterprise Act, Philippines In 2002, the government of the Philippines enacted the Barangay [town]

23

Micro Business Enterprises (BMBEs) Act. This act seeks to promote a

business enabling environment for micro-enterprises and states: “As much as

possible, BMBEs shall be subject to minimal bureaucratic requirements and

reasonable fees and charges.”

This includes exemptions from many taxes, fees, and minimum wage laws. It

also includes a range of micro-small business support: Market development

and access, Skills development, Access to capital, Credit delivery,

Technology transfer, Production and management training, Marketing

assistance and Trade and investment promotion.

Philippines Department of Trade and Industry: http://www.dti.gov.ph.

Source: UN Habitat (2005)

2.6.2 Bulgarian Case

According to the Bulgarian constitution, municipalities are local role players in

terms of governance and service provision. Municipalities are vested with

provision of public services to the communities. However municipalities

operate on limited budgets which are centrally passed.

According to Damianova et al (2005) the municipalities are also governed by

legal frameworks which give it limited power and responsibilities over local

economic development. The Bulgarian municipalities are also characterised

by severe socio-economic disparities as a result of the past government

policies.

According to Capkova (2005) there are disparities in economic development,

employment, income and the general quality of life. However different

municipalities have progressed in different paces as a result of their sizes,

management capacity and potential, economic partnerships and SME

development (Capkova. 2005)

24

Conclusion on the Bulgarian Case study. Table 2.3 Bulgarian case conclusions

The analysis leads to several conclusions, which can serve as reference

points for basic polices and recommendations for ways local governments can

encourage economic development:

• There is currently only one level of local self-government in Bulgaria—

municipalities. The basic responsibilities of local authorities are highly

limited—brought down to mere distribution of the scarce budget funds and

delivery of a limited number of services.

• Bulgarian municipalities are characterized by significant variation in levels of

social and economic development. These differences are most pronounced in

terms of investment capacity, poverty, and general social and economic

status.

Many municipalities suffer from geographic and transport detachment as a

result of underdeveloped infrastructure and highly reduced public transport;

absence of developed and effective economic activities; heavy

unemployment; the depopulation of some towns and villages; impeded access

to information, contacts, and markets; and low public services support. These

differences, along with reactions to the transition process, determine different

priorities of individual municipalities and the guidelines of their economic

policy.

• Demographic factors have a serious effect on municipal economic

development potential. Depopulation of certain regions, migration, and

different levels of education and qualification among the labour force all come

to bear on implementation of economic policy.

• Many municipalities are characterized by a lack of entrepreneurial skills and

an indisposition to operate in a market environment, conform to the processes

of globalization, or become successfully involved in international production

networks. Consequently, the business community cannot actively partner with

municipal authorities in developing and implementing specific economic

policies.

25

• General social and economic status is low and central, prompting local

authorities to support competition among local business as a way to promote

sustainable economic growth.

• Foreign investment is geographically concentrated in only a few regions,

leaving most municipalities with little of its benefit.

• Decentralization of local government, though already launched, is still in its

initial stages. Expansion of reform is expected to provide local authorities with

wider opportunities to influence economic development—greater freedom in

making decisions on economic development, more high quality business and

public services, greater opportunities to implement projects and improve

infrastructure.

Source: Capkova. 2005

Bases on the conclusion from the box, the municipalities in Bulgaria have

almost similar circumstances which limits them into actively promoting LED.

The scarcity of funds is a major problem, most LED interventions needs lot of

capital investment and because of the size of the municipality and

management potential many municipalities fail to do well when it comes to

poverty eradication through LED.

Infrastructure is also a constraint for successful LED in the Bulgarian

municipalities. Lack of skills, poor standard infrastructure, competitive

advantages among municipalities, poorly coordinated PPP, migration, etc are

common causes for LED to fail to function well and municipalities should

when drafting LED policies and strategies consider all the constraints.

26

2.6.3 Togo Case Table 2.4 Togo case

Case Reference: Business Development to Reduce Poverty and Unemployment, Togo In Togo, poverty has led to more creative ways of developing employment

opportunities. AVEBETO, a non-governmental agency is working to address

the situation of unemployment by advocating and training young people to

become entrepreneurs.

Students are encouraged to brainstorm on various business ideas and to start

a business before the end of their training. In 1988 and 1998, nearly 10,000

university and college graduates were trained and about 70 per cent of them

manage their own businesses today. This programme has been replicated in

other countries in Africa.

Source: Source: UN-HABITAT Best Practice Database http://www.bestpractices.org/

2.6.4 Russian case

The Russian municipalities have high responsibilities. According to Vizgalov

(2006) the Russian government has decentralized lot of responsibilities to

municipalities, including housing and economic development. However

municipalities still face constraints of implementing good poverty eradication

economic activities due to the regional authorities’ strong influence on the

formulation of the budget.

According to Vizgalov (2006) some significant challenges facing LED in

municipalities in Russia are:

• narrow economic base (tax base in particular), strong

dependence of budgets on a limited number of enterprises

27

• lack of economic expansion in municipalities, especially “mono-

profiled” ones(excluding those where hail growth is based on oil

and gas production and processing, showing steady income)

• necessity to support social infrastructure despite the fact that

municipal, social, cultural, and housing facilities are relegated to

municipalities without provision sufficient funds.

However as economic crises grows municipalities are now granted freedom to

choose the available means for the economic development. Performance of

LED differs greatly from one municipality to another. Vizgalov (2006) further

state that the execution of effective LED in Russia is delayed by both

organisational problems (agency) and the system (structure) itself.

Those problems include imperfection of municipal legislative base, structural

imperfection of governing institutions, poor democratic control, size and

status. All the stated problems are mostly in relation to the LED performance

measurement framework as developed by Lindblad. Socio-economic

conditions, organisational performance and competition for economic

development are used to measure the competitiveness of LED in Lindblad

framework (2006).

In Russia the internal factors seems to be the growing cause of ineffective

LED. The factors are mostly about capacity of local government institutions,

both management and capital. However according to Vizgalov (2006) there

are backbone factors that can lead to a well productive LED activities:

• The transformation of local government system in Russia

• Provision of good financial base for local government.

The revenues of many municipalities in Russia are not enough to facilitate the

needed economic development this is not only the case in Russia, but a

similar case in Poland, Ukraine, South Africa and many other countries of the

world. In South Africa for example we find a rural municipality that has 70

28

percent of its annual financial allocation going for salaries while there is no

other means to raise revenue.

Therefore it means that only 30 percent will be left for the execution of

mandatory municipal programmes including LED which makes it difficult to be

effective. For that reason job creation by municipalities in Russia result in non

prestigious and low remuneration jobs. The level of unemployment continues

to grow. Vizgalov (2006) states that “most managers participating in local

elections are not community oriented, but rather use the municipality as a

springboard which can help them satisfy their career ambitions in various

state structures on a high level”.

This is very true in many municipalities in South Africa. Local government is

used as a stepping stone to the top. Most of the municipalities are left without

capacity because of managers and leaders who move from local government

to either private sector or other higher public offices.

There is also an emerging good partnership for LED form local authorities and

businesses in Russia. The private businesses also want to play a fair share in

local economic development. A good private participation stand to be an

important condition for the successful development of LED. In strategy

formulation it is very important to have input from all stakeholders and this is

what is happening in Russia. According to Lafferty (2001) transparency in

development plays a major role in stakeholder participation especially at local

government.

The Russian municipalities have the same challenges that other discussed

countries have in achieving the best LED for poverty alleviation. However the

Russian case is different because there are also reported case of success in

some small towns. However agency problems are classified high on the

determinants for failures in the municipalities on LED because there are no

means of accounting for local government activities by state and local

29

authorities. The freedom of municipalities is high and result in anarchy and

dictatorship on economic development by municipalities.

2.7 Conclusion

The studies conducted on LED shows that LED is an important economic

strategy for the development of local communities. There is constraint which

comes with this strategy and these constraints can be internal and external

depending on the locality. The better the internal and external positions of the

municipality is the better the performance of LED.

Success cases of LED have been reported in different countries and the

researcher in this study is looking into the effectiveness of LED on poverty

especially in rural municipalities. The use of Performance Measurement in

Local Economic Development theory by Lindblad (2006) by the researcher will

help in putting the research on the right side of furthering the research on

Local Economic Development.

30

CHAPTER 3

THEORETICAL FRAMEWORK AND RESEARCH DESIGN

3.1 INTRODUCTION Different researchers and Local Economic Development practitioners are

continuously searching for different strategies to pull resources that will result

in greatest employment gains. According James et al (2002) the traditional

LED policy strategies used by municipalities are tax benefits, low interest

loans, labour force training programs and other strategies used to promote

economic growth.

The efficiency, effectiveness and success of these efforts could be measured

with a reduced unemployment rate, numbers of successful economic

development projects, number of people trained, level of infrastructure

development and number of loans given for business purposes. Poverty in

rural municipality is still at alarming rate in the South Africa, unemployment

rate is high and the disparity between the skilled and unskilled labour is very

high. Although the metro areas are enjoying economic growth since 1994, the

case is different in the small rural municipalities.

3.2 PROBLEM DEFINITION

With the most advanced infrastructure in the African continent, South Africa is

also still experiencing severe poverty especially in the rural areas where

majority of the population is found. The ruling African National Congress

(ANC) has lamented on their success since their first term in government in

1994 however there are still majority of citizens who cannot point to a single

31

benefit. As part of their programme of action the ANC led government

introduced a new constitution in 1996.

The constitution also has in chapter 7 the responsibilities that local

governments should carry which among others include the promotion of social

and economic development within the communities. The department of

Provincial and Local government (DPLG) is charged with responsibility over

the municipalities. The South African government have also indicated its

intention of halving poverty level in the country. However when looking in the

rural area it seems the government is not succeeding.

Strategies have been put in place to help local governments to realise the

government mission of economic growth. Local economic development as a

policy tool has been introduced in South Africa for local government to use as

a tool towards economic development of the citizens at the municipal level.

The DPLG has also supported the usage of LED as an economic

development tool by drawing up an LED framework to serve as a guiding tool

for municipalities in South Africa.

However poverty level seems to be increasing, the level of unemployment is

also high and skills shortage is severe especially in the rural communities.

This poses lot question about the validity of LED as an economic

development tool especially in the rural areas. As Prahalad (2006) says “what

is needed is a better approach to help the poor, an approach that involves

partnering with them to innovate and achieve sustainable win-win scenarios

where the poor are actively engaged”.

Citizens in South Africa have resorted to mass demonstrations and public

protests about the inability of local governments to provide better services that

will improve the standards of their lives. Many citizens feel like the

municipalities are not doing anything for them. The question is that is LED

useful in poverty eradication in those rural municipalities? Does LED as an

economic development strategy at local government serve as a solution for

poverty to the communities?

32

3.3 RESEARCH OBJECTIVE

1. The researcher’s first objective is to assess the impact that LED has in

eradicating poverty and economic development. The researcher wants

to establish if LED would eradicate poverty in the rural municipalities.

2. To assess if LED strategies are well coordinated in rural municipalities.

There seems to be better coordinated LED strategies in urban

municipalities because there is more economic growth than in rural

municipalities, so assessment of LED strategies is very important.

3. LED definition talks about the participants in the locality taking part in

economic development, now assessment of private sector in partnering

with the local authorities in achieving economic growth has to be

checked.

4. Local governments are the extension of National and Provincial

governments in South Africa. These three spheres are politically

constituted. Ward representatives are politically voted to represent their

constituencies. Assessment of political interferences in the execution of

LED is also important.

5. The definition of LED talks about the community participation in their

own development, so it is very important to assess the involvement of

communities in the rural municipalities when implementing LED.

3.4 THEORETICAL FRAMEWORK

This is a framework of how the key concepts in the study relates and lead to

good LED that can eliminate poverty. The model used by the researcher was

developed by Lindblad (2006) for measuring the performance of LED. Poverty

reduction is one of the key performance indicators (KPI) of LED. Usage of

poverty to measure the performance of LED is a very relevant tool. The

33

researcher’s choice of Structure and Effects model (Lindblad. 2006) relates to

the definitions made on LED.

Figure 3.1: Performance Evaluation Model in local Economic Development.

STRUCTURE

1. Socioeconomic Conditions• Skilled labour• Infrastructure2. Policies and acts

3. Community

PERFORMANCE EVALUATION

• Both Effectiveness (e g. Jobs created,SME, Successful Community projects,

Skills level) &Efficiency (e g, costs/ benefits)

• Either Effectiveness or Efficiency • Neither Effectiveness nor Efficiency

AGENCY

1. Organizational Characteristics:• ED Staff size• ED Budget

• Formal Planning2. Partnering & pooling resources (PPP)

Incentives

Source: Mark Lindblad (2006)

Local Economic Development Performance Evaluation Model

The model shows both Structural (external) and Agency (internal) factors

having an impact on LED performance in the municipality.

34

3.4.1 Structure (External Factors)

The structure represents external factors of the organisation. The structural

factors are socioeconomic conditions of the municipal jurisdiction. Socio

comes from the word social and include conditions like education, age

structure, race, health, population, crime and violence. The economic

conditions are such as saving rate, unemployment rate and income.

Competition for economic development refers to the municipality’s

competitiveness to attract investments for economic development. Other

factors that determine the competitiveness of the municipality include

infrastructure, political stability, tax and lease rates. A municipality that is on

structural good standing will be on a better position to have a good

performance on LED than the municipality that is not.

3.4.2 Agency (Organizational/Internal Factors) The agency is defined as an organisation providing a specific service in this

case it is the municipality. Agency represents the organisational

characteristics of the municipality. These include the economic development

staff size, economic development budget and activities in place to promote

economic development. Inside the organization there are things like formal

planning (e.g. LED strategic plan) and partnering and pooling resources which

refers to things like public, private partnership with businesses, NGO, and

communities to bring together the necessary resources for economic

development. The organisation should also consider the incentives given

towards the achievement of economic development.

The combination of the structure (external factors) and agency (internal

factors) should result in either effective and efficient LED performance or

ineffective and inefficient LED performance. When the LED performance is

effective, there will be enough job creation and that will lead to the reduction

of both unemployment and poverty. When the LED performance is efficient,

35

the costs will be low and the LED benefits will increase. But when there is

neither effective nor efficient performance, LED will not be able to create jobs,

both unemployment and poverty will rise, the costs will be high and there will

be no benefits on LED.

3.4.3 Independent Variable

This is the variable that influences the behaviour/ pattern of the dependent

variable in a negative or positive way. LED program is an independent

variable that influences poverty level in the locality.

3.4.4 Dependent Variables Dependent variables are all the factors and attributes that are responsive to

the independent variable. The researcher is interested in the impact of LED

on poverty in the local government. Then poverty becomes the dependent

variable for the researcher. The dependent variable are the outputs from the

LED program under which its performance towards poverty eradication can be

measured in different ways such as employment rate, skills level,

infrastructure development, establishment of SME to mention but few, would

be very important to determine LED effectiveness and efficiency.

3.4.5 Moderating Variables

These are the variables other than the independent variable which might have

an effect on the dependent variable (Hussey et al. 1997). The moderating

factors which influence the performance of LED on eradicating poverty will be

environmental factors like socioeconomic conditions, availability of resources,

36

location and competitive attractiveness of the area as factors outside the

municipality (organisation).

3.5 RESEARCH ASSUMPTIONS The researcher made a major assumption that rural based municipalities are

not able to alleviate poverty through LED. The assumption is based on the

following:

• Majority of people in rural areas live in poverty.

• Many rural municipalities don’t have financial and human capacity to

carry economic development

• There are small chances for rural municipalities to attract investors.

The assumption is also based on extended exploration of literature about

limited funding of local government activities.

3.6 RESEARCH LIMITATIONS The researcher is limiting the study to one rural municipality of Greater

Tubatse Municipality (GTM). GTM is a rural municipality in Limpopo province

where poverty is still high. The limitation is based on the time constraint and

financial resources allocated for the study.

3.7 RESEARCH QUESTIONS

3.7.1 Major Research Question 1. How does LED assist in problems such as poverty eradication

(employment generation, skills development and infrastructure

development) in the rural municipality?

Poverty in South Africa is still high even after the much said achievements

by the ANC led government. Municipalities are charged with

37

responsibilities among others is the development of economic activities in

their area of jurisdiction to eradicate poverty and the imbalances of the

past apartheid government. The government introduced LED as a tool to

help municipalities to facilitate economic development in their areas, yet

poverty is still high especially in the rural municipalities. The researcher

needs to find out if LED as a tool to facilitate economic development is

doing well especially to eradicate poverty.

2. To what extent does local government implement LED? The success of LED will go with the level at which it is implemented. The local

government is the coordinator of all local economic development activities.

Therefore the local government should go an extra mile in encouraging the

communities, the business and NGO to full participate in LED.

3.7.2 Minor Research Question

1. How does private business get involved in the LED?

2. What is the major LED challenges facing the local government?

3. How does the local community get involved in the LED process?

4. What business support system exists for LED?

The minor research questions seek to find ways of answering to the main

research question. For LED to succeed on eradicating poverty there is a

need for government to create a policy framework that will guide

municipalities know what and where LED should go in the municipality. As

the LED definition says that all local role players needs to be involved in

the process it is important also to check the level of PPP and community

involvement towards achievement of economic development. Lastly all the

challenges and constraints facing the rural municipalities in achieving LED

have to be explored also.

38

3.7 RESEARCH METHODOLOGY Research methodology is the reflection of the entire approach for the

research process (Hussey et al. 1997). The research methodology in this

research is concerned with the data collection, the sampling and data

analysis methods.

3.8.1 Data Collection The researcher will have the data collected from the primary sources,

through respondents, individuals and selected groups that will provide

data. In these case sources of the primary data are the citizens of the

GTM from different villages, municipal employees, NGOs and business

people.

A structured questionnaire has been designed for this research. The

questionnaire has been developed based on the research objectives and

questions so that it provides answers to the research question. The

questionnaire is divided into four sections that cover the youth of GTM, the

elders at GTM, GTM employees and business and NGOs.

The researcher hired a consultant to facilitate the data collection process

because the rural areas do not have infrastructure such as internet that

can fast track the data collection process. The sample of 50 people filled

the questionnaire and all respondents are assured of confidentiality of their

information. The research questionnaire is compiled by the researcher for

this study.

39

3.8.2 Sampling Method

Table 3.1 Sample

CATEGORY NUMBER

1. Youth 20

2. Elders 10

3. GTM Employees 5

4. Business & NGO 15

The researcher decided to use a sample size of 50 due to limited

resources on conducting this study. The researcher divided the sample

into four categories: 1. youth is the future of the country and is the active

human resource in the economy. Youth are also eager for economic

opportunities and they still have long live ahead so they looking forward to

work and provide for their needs, 2.

Elders have responsibility over their families, when there is no income in

the house it’s the elders who suffer most because they have to find a way

of providing for their families therefore they are also the relevant source of

economic development, 3. GTM employees knows all their economic

development programmes and know the strengths and weakness of their

organisation and getting information from the main sources is very

important, 4. Businesses and NGOs are the central part of PPP and are

very important for the growth of the economy and it is therefore relevant to

also get information from them.

40

3.8.3 Data Analysis Method The researcher used the data reduction analysis method and explaining

analysis method. Data reduction method is about sorting, categorising,

prioritising and interrelating data through the use of matrices (Hussey.

1997). Explaining method is about understanding the coherence of

meaning and action in the case under study (Hussey. 1997).

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CHAPTER 4

DATA ANALYSIS, FINDINGS AND DISCUSSION

4.1. INTRODUCTION The analysis of the researcher is made from data collected using

questionnaires filled by the youth, elders, businesses and NGO, and

employees of the Greater Tubatse Municipality. Ten questionnaires were

received from the GTM youth, eight received from the GTM elders, five

received from the GTM NGO and businesses and five received from the GTM

employees.

The respondents to the questionnaire come from different villages around

GTM and each person filled the questionnaire independently. The discussion

on the analysis has been made based on chapter 3 of this research in

collaboration with the research objectives and questions of the study.

Table 4.1 Education information in GTM. Population 270 122 Education of over 20 years old No Education/ schooling Primary Schooling Complete Primary schooling Secondary schooling Matriculation Tertiary education

119 507 40% 13% 5% 28% 10% 4%

Source: Gaffney 2008 There is high level of illiteracy in the communities of the GTM. Only 10% of

the population manages to obtain school leaving certificate/ matriculation.

This is a very small number considering the shortage of skills that the region

42

is experiencing. There is only 4% of the population that manages through the

universities and colleges it is also a very small number looking at the size of

the population. However most respondents are cite shortage of money as a

resultant factor to this small number of people reaching through tertiary

education. This result in highly skills jobs being taken by people outside the

municipality.

Education is very important in LED. When the structural environment has

educated people there are always many alternatives towards problem solving

and economic development. People without education find it hard to

understand basic requirements for economic development. Most villages in

GTM are found without educated people who can also help the municipality

towards unleashing the LED potential.

The 4% of people who reach through tertiary education are mostly migrating

to bigger cities for jobs and end up leaving their communities being brain dry.

People with no education to those who reach secondary schooling without

matriculating are mostly people who find it difficult to acquire skills. They

become hopeless jobseekers.

4.2 LED AWARENESS, COMMUNICATION AND PROMOTION Communication, promotion and making the communities and stakeholders

aware of LED are one step towards achieving an effective and efficient LED.

This answers to the researcher’s objective of assessing the depth of local

community participation in LED. Participation comes with being aware of what

is happening around you. The local community participation becomes easier

when good efforts are made to communicate and promote LED.

This also extends to potential investors, donors and other possible private

partners. The investors and other private partners respond mostly to

promotions and communication made by the municipality on LED. Some

43

municipalities in Russia have a dedicated marketing and public relation offices

that promotes economic development. The researcher’s analysis on

promotion of LED is based on the four categories that were chosen through

the questionnaire. The following table shows how different categories rate the

level of awareness, communication and promotion of LED.

Table 4.2 Awareness and Promotion of LED PROMOTION STATUS

YOUTH ELDERS GTM BUSINESS & NGO

TOTAL

YES 35% 10% 100% 40% 46%

NO 65% 90% 0 60% 54%

The researcher’s data shows that 54% of the people who answered the

questionnaire seem to not agree that there is enough effort from the

municipality to promote, communicate and make people aware of LED in the

municipality. There is 46% who are saying that there is awareness,

communication and promotion of LED.

4.3 LED SUPPORT SYSTEMS Successful LED also needs well organised and coordinated support systems.

These systems can be both within the organisation (GTM) and outside the

organisation (community). As I can define a system to be a set of interrelated

components that forms a unit, when good support systems are in place then

LED will show its effectiveness and efficiency by reducing the levels of

poverty, reducing unemployment and increase skills development.

44

4.3.1 Municipal LED unit. This is the central point of LED. Its role is to coordinate the whole LED process for the municipality. Table 4.3 GTM staff competency STATUS YOUTH ELDERS GTM BUSINESS

& NGO TOTAL

EXCELLENT 10% 0% 0% 0% 3%

GOOD 20% 0% 40% 40% 25%

FAIR 50% 37% 60% 60% 52%

POOR 20% 63% 0% 0% 21%

The analysis from the respondents on the researcher’s questionnaire shows

that people see small percentage (3%) of excellence from the municipal staff

when it comes to LED execution. 25% of the respondents are saying that the

municipality is good in LED delivery while 52 percent is saying that the

municipality is only fair and 21 percent says that the municipality is poor in

executing LED.

This is attributed to the comments made by respondents in which the

respondents shows two reasons for the problem; one thing indicated is that

the municipality do not have well skilled staff to execute LED and the second

comment is that there is shortage of staff for the LED unit to carry out an

excellent job on LED.

The LED performance measurement model that the researcher is using for

theoretical framework shows under agency that the local economic

45

development unit has an important role towards achievement of efficient and

effective LED. The finding by the researcher is that the municipality is not well

capacitated and shaped to deliver on the effective and efficient LED. This

finding answers to the researcher’s objective of assessing whether LED

strategies are well coordinated in rural municipalities.

4.3.2 LED Strategic Plan The GTM has a well developed LED strategic plan. The respondents from the

municipal side are aware of the current strategic plan in place towards

achieving a successful LED. The GTM LED strategy follows a four stage

process.

• Stakeholder mobilisation and baseline review

• Development potential analysis

• LED strategy formulation

• Implementation plan and institutional options.

However the strategic plan process is very quiet on important issues such as

monitoring and evaluation. Most respondents from the interviews the

researcher has conducted shows that there is no proper control, monitoring

and evaluation of economic development initiatives and this results in LED

initiatives losing track and failing. The findings here answers to the

researcher’s objective of finding out if the LED strategies are well coordinated

and also the research question on what LED support system exists.

4.3.3 Public Private Partnership (PPP) PPP is an economic development support mechanism in which private

business is funded and operated by partnering with government. According to

Van Dijk (2006) this is also called Public Private Community Partnership

(PPCP) in countries like Indonesia. This stresses the need to bring all

stakeholders into the process of economic development.

46

Table 4.4 Public Private Partnership at GTM. STATUS GTM BUSINESS & NGO TOTAL

YES 38% 57% 28%

NO 62% 43% 72%

The respondents shows that PPP is practiced (28%) at GTM towards the

achievement of LED, however there is also a high (72%) number that shows

that PPP is not practiced. Most commented partners of GTM are LIBSA,

LIMDEV, Modikwa Mine, MQA and Anglo-Zimele mines. These help the GTM

with entrepreneur training and funding, and funding for community

development projects. However the problems are that the mines most of the

time do not work with municipality instead directly link with communities which

results in conflicts between the mines and the communities.

The other resultant factor is that funding is not well administered or monitored

and result in failing economic development projects. The findings here

answers to the researcher’s objective of assessing the role private enterprise

on LED and answer the research question on how do the private business get

involved in the LED.

4.3.4 LED Budget LED budget is very important towards the realization of effective and efficient

of LED. The higher the budget especially in rural disadvantaged

municipalities, the higher the chances of achieving a poverty eradication

economic development. GTM has no money budgeted for LED purposes. The

municipality is however depended on the money that the private businesses

like mines are offering for economic development purposes.

47

Since there is no formal partnership agreement the mines are most of the time

overlapping the LED office in the municipality and directly interacting with the

communities on LED matters. Therefore the municipality has no financial

capacity to carry LED in the communities except by just coordinating training

on entrepreneurial skills with the help of LIBSA and LIMDEV.

4.4 COMMUNITY INVOLVEMENT IN LED The community’s involvement and reaction towards LED is very important

towards the successful LED at GTM. The municipality has to have the support

of the community and the community should show a will to be part of the

process towards economic development in the locality. At GTM this will be

villagers from all the villagers of GTM. After being made aware and

communicated to about the LED, there should be a direct involvement from

the community.

The involvement according to UN-HABITAT has to start from the LED

strategic planning by involving and getting the views of the community

regarding the economic development needs that will benefit the communities,

participating in projects implementations and rewards structures.

Table 4.5 Community Involvement STATUS YOUTH ELDERS GTM BUSINESS

& NGO TOTAL

YES 52% 15% 80% 25% 43%

NO 48% 85% 20% 75% 57%

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The results from the filled questionnaires shows that less (43%) than half of

the respondents have been involved in LED, the respondents shows that

community is highly not involved in the LED. However the municipality shows

80% confidence that the community is involved while the elders in the

community disagree 85% that the community is involved in LED. There is

52% of the youth who says that the community is involved in the LED while

48% says there is no community involvement. This result is not inline with the

objective of South African LED framework (see chapter 2), which states about

encouraging the involvement of communities and community organisations in

the matters of local government.

The findings by the researcher answers to researcher’s objective of assessing

whether LED strategies are well coordinated and also the assessment of the

depth of local community participation on LED. Coordination of LED without

full involvement of the community is not enough therefore the researcher finds

that not much effort is put to coordinate well the LED. The other finding is that

participation of the communities is very minimal.

4.5 IMPACT OF LED AT GTM LED as economic development activity should have a positive impact in the

society. This will be reflected through increase in employment, skills

development, increase in income and general increase in the standard of

living.

Table 4.6 Annual Household Incomes at GTM INCOME NUMBER PERCENTAGE NO INCOME 24065 42.8% R1- R4800 4228 7.5% R4801- R9600 12536 22% R9601- R19200 6426 11% R19201- R38400 4637 8%

49

R38401- R76800 2688 4.7% R76801- R153600 1077 1.9% R153601- R307200 350 0.6%

R307201- R614400 106 0.2%

R614401- 1228 801 28 0.04%

The general annual income per household at GTM shows a high level (42.6%)

of the people who have no income at all. This reflects the level of poverty that

people are exposed to. There is very limited number of people (28) people

who have a high income of R614401 – R1228 801. This shows a great gap

between the people living in poverty and those who can afford a luxury

lifestyle. The impact of LED should be shown with the benefits that

communities are getting towards improving their economic status.

Table 4.7 LED Impact at GTM STATUS YOUTH ELDERS GTM BUSINESS

& NGO TOTAL

YES 20% 20% 60% 10% 27.5%

NO 60% 80% 40% 90% 72.5%

The respondents do not seem to be happy with the impact that LED has on

their life. 72.5% of the respondents do not see the impact of LED raising

reasons that they are not communicated of the LED, that some projects are

targeted at individual, friends and relatives of the municipal employees, that

LED is targeted to some few villages around the municipality. Most of the

projects were on sawing, poultry, bricks making and agriculture and they

created few jobs and later the projects could not be sustained and as a result

they collapsed.

50

The respondents also argue that there is still low level of skills in their

communities and that the trainings and funding taking place were not well and

fairly coordinated in the municipality, leaving many people not being aware of

such possibilities. One example given by the respondents is the car wash

project at Praktiseer which was not well coordinated and was given to the

community leader’s relatives.

The same project’s value was far below the money that was allocated. Other

arguments raised by the respondents are that most of the activities taking

place from the municipality are not aimed at the poor people and therefore

their live has not improved since 1994. There is still lack of infrastructure such

as roads, transport, electricity, telecommunication and water.

While there is also 27.5% of the respondents who are saying that LED has an

impact on their lives, however they are also highlighting that most of the

projects such as agricultural projects are not big enough to provide enough

employment and income, therefore there is generally an imbalance between

the communities’ economic needs and the provision by the municipality as a

result of lack of enough funding and poorly coordinated LED activities.

The researcher’s findings on this part answers to the researcher’s objective of

assessing the impact of LED on poverty and according to the respondents

LED is not helpful at GTM on poverty eradication.

Table 4.8 GTM Labour Market

Employed 19227

Unemployed 30678

Strict Unemployed Rate 61%

Strict Labour Force 49905

Discouraged Workers 21530

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Expanded Labour Force 71435

Expanded Unemployment Rate 52208 (73%)

Source: GTM strategic plan. (www.tubatse.co.za) The level of unemployment at GTM is standing at 73%. This statistic is

inclusive of all sectors and age groups at GTM. This number is in relation to

the education status of the citizens in the municipality. These education and

unemployment rate puts lot of strain on LED. The respondents indicates that

there is some training on entrepreneurship skills which is coordinated by GTM

and its partner organisation (LIBSA, LIMDEV) however the challenge is that

the rate of people leaving school before matriculation is high and therefore

making the structural environment for LED success very difficult.

The findings here are that unemployment is still high (73%) at GTM, 59% of

the total unemployed is actively looking for a job and 41% is discouraged

people, many people (42%. See table 4.6) still have no income at all, the

communities are less involved in LED activities and as a result LED does not

help in poverty reduction.

According to the respondents the municipality has no sufficient human

capacity to carry effective and efficient LED. The LED unit has only two

personnel (LED Manager & LED officer) to facilitate LED activities. The unit is

not equal to the poverty status at GTM. The respondents also comment that

the projects that are carried are of little capacity and they are unable to create

many jobs. The respondents also are raising the problem that there is very

poor infrastructure at GTM, most villages do not have electricity, poor roads

and communication facilities are also poor and therefore makes LED difficult

to achieve efficiency and effectiveness.

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4.6 FINDINGS

The researcher’s findings are in relation to the research objectives and

questions in chapter one. The findings are also made based on the framework

in chapter 3 of the research.

4.6.1 Findings on Structure The structure represents the external environment of the municipality, the

important part of a successful LED. The findings on labour shows that there is

high level of illiteracy and skills shortage in the communities with a small

percentage (10%) being able to obtain school leaving certificate and 4% able

to reach tertiary education. This finding put a strain on capacity to achieve

effective and efficient LED. The finding answers to the assessment of

community participation on LED. People in these communities take long to

understand basic concepts of economic development because of their

illiteracy level.

The second finding is that there is no sufficient LED awareness,

communication and promotion from the municipality which result in community

not being well informed and not involved in LED activities. The community is

the one in need of economic development therefore it is very important that

they get involved fully in addressing their economic needs. This finding

answers to the depth of community participation on LED.

The third finding is that there is still lack of infrastructure such as roads,

electricity, telecommunication, water and sanitation which makes it difficult for

the achievement of effective and efficient LED. Infrastructure is very important

in the development process. Without good infrastructure many projects might

fail because the cost of operating such projects might be high when

infrastructure is poor. Infrastructure is a basic support system in any

development and with poor infrastructure development might be slow because

even investors will not be attracted to invest where there is poor infrastructure.

53

4.6.2 Findings on Agency These are findings which are internal to the municipality responsible for LED

coordination. The first finding is that the LED or municipality does not have

sufficient human capacity to achieve effectiveness and efficiency. This result

in LED activities not being well coordinated to the fullest and result in projects

collapsing. This finding answers on the objective of assessing LED strategies

and answers to the question on what LED support system exist and what are

the major LED challenges facing local governments.

The second finding is that GTM has no budget allocation for LED unit and

activities except sourcing funds from mines which happens slowly. Therefore

the question on LED support system is answered by this finding. LED’s

success is based on the availability of funds and without proper and reliable

funding the chances of achieving effective and efficient LED are very less.

The third finding is that there is formal planning in a form of LED strategic plan

however the strategic plan does not state anything about control, monitoring

and evaluation of LED. This resulted in lot of projects failing and funds

channelled into wrong hands. There has been a collapse of projects as a

result of lack of clearly stated monitoring and control measures. This finding

answers the objective on whether LED strategies are well coordinated and the

question on to what extend does the local government implement LED.

The fourth finding answers the role of private enterprises on LED. There is a

little interaction between the municipality and the private business. However

the mines most of the time creates a direct link with communities than the

LED unit in the municipality. As a result there is little monitoring when the

municipality is not involved which result in projects not having a positive

impact on the lives of the citizens.

The last finding answers to the main research question on the impact of LED

on poverty at GTM. The researcher’s finding is that there is very little success

of LED on poverty. There is very few skills trainings coordinated, some

54

funding have been secured for economic development projects although

some were not sustainable. Most of the projects results in little income which

does not make a difference in the standard of living for the citizens. There is

still a huge number of unemployment and infrastructure backlog. The finding

is that there is very little that LED is doing on poverty eradication.

The researcher finds that the combination of all findings results in LED not

having impact on poverty eradication at GTM.

4.7 CONCLUSION The researcher has analysed the data in relation to the research objectives

and research questions stated in chapter two. The researcher also made the

analysis in this chapter basing on the theoretical model used in chapter 3. The

findings in this chapter reflect the data received from respondents to the

questionnaires and the telephone interviews conducted during the course of

the research.

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CHAPTER 5

CONCLUSION, RECOMMENDATIONS AND FUTURE RESEARCH.

5.1 CONCLUSION The purpose of the research was to study the role of LED on poverty in rural

municipalities. In earlier chapters it was stated that municipalities in South

Africa have constitutional mandate to promote socio-economic conditions of

the citizens. The researcher raised four research objectives with research

questions.

To answer to the objectives and questions a theoretical model of LED

performance measurement was used with the concept that if the municipality

carrying LED (agency) and the environment where LED is carried (structure)

are all well organised then there will be effective and efficient LED that will

eradicate poverty.

Looking at the earlier assumptions the respondents agree that there is still

poverty in communities and that there is lack of capacity in the municipalities

to deliver LED. The human capacity is both internal and external. Looking at

earlier chapters as stated that many small municipalities are not well funded

to deliver their expected mandate then it becomes difficult for LED to be fully

functional. In chapter 2 the Bulgarian case states well that the municipalities

are brought down to a mere distribution of scarce budget funds and delivery of

limited resources.

The researcher has established that the LED unit at GTM has no budget

aiming at projects for economic development except through seeking funds

from mines and other potential funders. Adding to that is that the municipality

56

is small and has very little revenue that it generates for itself. While one of the

principles of LED framework in chapter 2 states that through a developmental

approach, Government has a decisive and unapologetic role to play in

shaping the economic destiny of our country, this theory seems not to be true,

because not putting a budget to achieve one of your principles shows a

compromise to that principle and therefore it becomes apologetic.

The researcher also managed to establish that private business do not want

to be abide or play openly on PPP agreements with the municipality and that

sometimes the private business prefer to deal directly with the communities

than going through municipality except when there is conflicts between the

businesses and the communities. The researcher also found that the

strategies for LED are developed at GTM however there is no clear

monitoring, control and evaluation of processes and as a result LED projects

become unsustainable. LED processes can start but will not end with their

intended results as a result of lack of monitoring and evaluation.

The researcher learned also that there is high level of illiteracy and skills

shortage in the communities and result in many citizens being unemployable,

however the skills development programmes are not communicated enough

as such many communities are not aware of such programmes. Therefore the

skills development interventions do not make a much of a difference because

many people are still found unskilled. However in Philippines (see chapter 2)

the case was achieved very well through skills development and production

management trainings.

The GTM does not fund projects but coordinate private funders to fund

potential economic development project and there is slow funding from private

funders because funders are sceptical to fund people without skills necessary

for the proposed projects. In Togo as stated in chapter 2 many young

entrepreneurs emerged as a results intensive training and skills development

that was carried for young students. This also helped creating more

opportunities and avoided mono profiles in many municipalities in Russia.

Therefore low skills it’s a problem for GTM, when it comes to LED.

57

The unemployment rate and the disparity in income level clearly reflects that

many citizens live in poverty and since the introduction of LED in South Africa

with the ANC government very less is being said to have been achieved

within GTM in fight against poverty. In general looking at the statistics from

the respondents LED is failing in poverty eradication because none of the

structural and agency factors are favourable for the achievement of effective

and efficient LED.

Therefore in conclusion poverty is still high at GTM. The municipalities should

be looked at especially for the lack of human capacity especially in their

recruitment system. The central government since is the one responsible for

allocating resources to the municipalities should give a better look at the rural

municipalities since they can hardly generate their own revenue. The rural

municipalities are as a result of apartheid system and needs special financial

and human resource attention from the national government otherwise the

problem of poverty will not be reduced in the rural areas.

5.2 Recommendations

5.2.1 Community Involvement

LED is about developing economy for the communities in the locality. It is very

import that the GTM involve and encourage the communities in all steps of the

way in the LED. As practised in the Philippines, the GTM should move for a

PPCP (Private Public Community Partnership). The municipality should take

in to cognisance the educational status of the communities and bring

measures that will match the status of the communities in economic

development.

5.2.2 LED Budget

58

Without a reliable funding source for economic development, LED will not

succeed. The municipality should find a way of creating a specific budget for

LED purposes only. That could be achieved by applying funds with national

treasury, the province and department of provincial and local government and

also by marketing the municipality to attract local and international donor

organisations and investors in LED projects. This will help the municipality to

acquire more private funding because there will be ongoing projects that

potential funders will see that their funds will not be taken for a waste.

5.2.3 Monitoring, Control and Evaluation

The municipality should develop an LED monitoring and control program for

all LED intended projects. There is no meaning of giving money that you will

not know if it is used for the intended purpose. With clearly set monitoring and

control systems in place that should form an integral part of the LED strategic

planning all LED projects will be geared towards community development.

5.2.4 Skills development and Illiteracy reduction

The municipality should accelerate on skills development and reduction of

illiteracy level. This can be done by creating and increasing partnerships with

universities, colleges, research institutions and training and skills development

institutions for vocational training to fast track the pace of reducing illiteracy

and skills shortage. This will help communities to have understanding of their

economic development responsibilities and be in a position to also add value

in the LED process. This can also be enhanced by developing infrastructure

to support things such as internet access where communities will be able to

access information without the municipality having to directly visit the

communities.

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5.2.5 Municipal LED unit

The municipality should expand the LED unit so that the staff can be equal to

the challenges facing the unit. Currently the LED unit has only two staff.

Therefore it is needed that the current structure of the unit be reviewed and

additional posts should be created and filled so as to enable the unit to

execute its tasks. The current staff should also be further trained and

developed.

5.3 Future Research Rural areas are large in South Africa and this study covered only a small part.

The remaining parts need to be researched. This study was carried in a very

short time and there is a need to further extent the time for this study so as to

cover all aspects necessary in LED. The researcher recommends that further

research should be carried out in a more detailed manner, in the area with the

use of a more detailed quantitative and qualitative analysis. Future research

should also look into including various municipalities and the sample be

expanded.

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6. References and Bibliography ANC (1999) Election Manifesto www.anc.org.za Bond .P. (2002) Local economic development debates in South Africa. Capkova .S. (2006) Local government and economic development. Open Society Institute, Budapest. http//lgi.osi.hu Constitution of the Republic of South Africa, 1996. www.info.gov.za. Retrieved 30 May 2009 Davis J.R (2005) Addressing poverty through local economic development. www.nri.org Davis J.R (2006) Evaluating and Disseminating Experiences in Local Economic Development: Observations on Integrated Development Programmes of the Free State, Republic of South Africa. Davis J.R & Rylance .C. (2005) Addressing poverty through local economic and enterprise development: A review of conceptual approaches and practice. www.nri.org Domianovo .A, Tzvetkovska .M & Ivanovs .S. (2005). The role of local government in local economic development in Bulgaria. http//lgi.osi.hu DPLG (2006) National Framework for local economic development in South Africa. www.dplg.gov.za DPLG (1999) Municipal structures act. www.dplg.gov.za DPLG (2004) Project Consolidate www.dplg.gov.za DPLG Local Economic Development www.dplg.gov.za Dijk .M.P (2006) Managing cities in Developing Countries. Renmin University Press

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Gaffney’s Local Government in South Africa Official year book. 2008. www.gaffney.co.za Hussey .J & Hussey .R. (1997) Business research: A practical guide for undergraduate & post graduate students. MacMillan press LTD. Lafferty .M.W (2001). Sustainable Communities in Europe. London, Earthscan Publications Ltd. Lindblad .R.M. (2006) Performance measurement in local economic development. Urban affairs review, Vol 41. Nr 5. p 653. Mufamadi. S. DPLG (2006) Stimulating and Developing Sustainable Local Economies. www.dplg.gov.za retrieved on 05 March 2009. MunicipalIQ. (2009). The state of local economic development in South Africa. www.municipaliq.co.za retrieved 16 July 2009 Nel.E.L (2001) Local Economic Development: A review assessment of its current status in South Africa. Nel E.L & Bins T (2002) Evaluating local economic development initiatives in South Africa: Evidence from the cities. Persky. P, Ranney. D and Wiewel. W. (1998) Import substitution and Local Economic Development. Economic Development Quartely, Vol. 7 No, 1, p 4, February 1993. Prahalad .C.K (2006). The fortune at the bottom of the Pyramid. USA, Wharton School Publishing Pretorius .A & Blaauw .D (2005) Local Economic Development agencies in South Africa- six years later. Durban Rogerson C.M (1999) Local Economic Development and Urban Poverty Alleviation: The Experience of Post-Apartheid South Africa. Pergamon. www.elsevier.com

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Swinburn .G. (2006) Local economic development quick reference. Urban Development Unit. The worldbank. Washington DC. www.worldbank.org/urban/led Swinburn .G, Goga .S & Murphy .F. (2006) Local economic development: A primer developing and implementing local economic development strategies and action plans. Cities of Change. Worldbank. www.worldbank.org Tamasane.T. (2007) Sustaining Livelihoods in Southern Africa. www.khanya-mrc.co.za retrieved 11 January 2009 Visgalov D.V. (2005). The role of local government in local economic development in Russia. http//lgi.osi.hu Wandschneider.T. (2004) Small rural towns and Local economic development: National Resources Institute. www.nri.org retrieved 22 February 2009