LED in South Africa

How does LED work in South Africa?

Local economic development (LED) is concerned with the creation of an environment which will engage stakeholders in implementing strategies and programmes. This perspective had to be aligned with the country’s macro-economic strategy which focused on re-entering the global market, providing a climate which is amenable to international investments, enhancing the role of the private sector, and reducing the role of the state. The increasing status of locality in the global economy and the rising emphasis of local and community decision-making have paved the way for the advancement of local economic development (LED).

In South Africa LED is strongly driven by government and the approach to LED various from municipality to municipality. The smaller and rural municipalities focus more on pro-poor LED and poverty alleviation and small scale projects, while the bigger and more urban municipalities focus on pro-growth interventions and the metropolitan municipalities mainly focus on attracting large scale invest and competitiveness.

Who is involved?

LED involves identifying and using local resources to create opportunities for economic growth and employment. Successful LED depends on local partnerships as well as on national and regional structures to promote and support local initiatives.LED is usually strategically planned by local government in conjunction with public and private sector partners. Implementation is carried out by the public, private and non-governmental sectors according to their abilities and strengths. Provincial governments, municipalities, state-owned entities, business sector and civil society have to join forces to work on continued growth and prosperity of the local, provincial and national economies.

Local government structures have a particularly important role to play in harnessing national and regional resources to promote their areas and in facilitating strategic local partnerships to enhance and sustain economic growth. Local stakeholders, such as government, business, labour and civil society organisations, should work together in order to enhance local economic development (LED). Local communities and authorities can play an active role in determining their own economic paths.

Government has a particular role to play in LED, by ensuring that LED leads to job creation, sustainable rural development and urban renewal. LED interventions must benefit disadvantaged and marginalised people and communities within municipal boundaries through an inclusive and redistributive approach to economic development.

The respective roles of national government, provinces, district municipalities, metros and local municipalities are not always clear, and sometimes overlap, but the following role players are important:

  • The main role for national government in LED is to coordinate public policies and investment programmes.
  • The role of provincial government is described as having two main parts. Each province has a coordination role; they are responsible for resources allocated from national to provincial government and for ensuring that these are correlated with the priorities of the various IDPs. Provinces should establish LED forms to carry out the work of the National LED Forum at the provincial level. Provinces also play a role in building the capacity of municipalities to undertake LED and in supporting them in its implementation.
  • Local government is responsible for creating a favorable environment for business development and success. By its nature, local economic development is a partnership between the business sector, community interests and municipal government.
  • Government agencies such as the Sector Education Training Authorities (SETAs) and SEDA (Small Enterprise Development Agency) all have a potential role to play in supporting LED initiatives.
  • Foreign donor organisations that have a specific focus on LED issues; the most important country in this regard is Germany, whose main focal sectors are local government and good governance. The EU has also played a significant role in provinces such as KwaZulu-Natal, the Eastern Cape and Limpopo.
  • Local Economic Development Agencies (LEDA), there are currently more than 30 LEDAs across South Africa, operating at the District and Local Municipality level. However, they have had very different levels of success, and there is not always agreement among the various LED role players as to exactly how these agencies should operate and how their mandate should differ from and be integrated with the LED responsibilities of the local authorities. (click here to learn more about Development agencies)

What are the problems?

Getting LED to ‘work’ in South Africa is a critical success factor in addressing poverty and inequity. However, there are a number of key issues to be addressed and challenges to be overcome before this can be a reality. Some of the obstacles to making LED work are:

  • A lack of common understanding of the role of LED and LED processes;
  • An increasing urban-rural divide in LED processes and practices;
  • The practical spatial constraints of economic planning at a very local level;
  • A less-than-effective working relationship between provinces, districts and local authorities;
  • A lack of effective LED “networks” in many areas;
  • The inability of many local authorities to clearly define a LED strategy within the broader IDP process; and
  • A lack of planning resources and capacity.

Key policy documents, frameworks and legislation

The key pieces of legislation and related documentation relevant to LED, and which provide context for LED in South Africa, are:

  • The Constitution (1996), which recognises the importance of local government in economic development through the following statement:

"A municipality must structure and manage its administration, and budgeting and planning processes to give priority to the basic needs of the community, and to promote the social and economic development of the community."

  • The White Paper on Local Government (1998), which introduced the concept of “developmental local government”, defined as:

Local government committed to working with citizens and groups within the community to find sustainable ways to meet their social, economic and material needs, and improve the quality of their lives.”

  • The Municipal Systems Act (2000), which made integrated development planning compulsory, and legislated a number of key LED functions, roles and responsibilities. The aim of the Act is

“To provide for the core principles, mechanisms and processes that are necessary to enable municipalities to move progressively towards the social and economic upliftment of local communities.”

  • The LED Guidelines (2000)
  • Refocusing Development on the Poor: LED Policy Paper (2001)
  • The Draft LED Policy (2002)
  • The National Spatial Development Perspective has made a key contribution to the LED policy debate through its assertion that some areas are better suited to business development and growth, while others should simply be allocated for government services and transfers.
  • The Policy Guidelines for Implementing LED in South Africa (2005)
  • The National Framework for LED in South Africa (2006), which aims to build a shared understanding of good LED practice and motivate more effective implementation. 
  • The Integrated Sustainable Rural Development Strategy and Urban Renewal Strategy of the DPLG
  • The Revised National LED Framework 2012-2016