Topic: LED and Funding


"How am I supposed to do LED  when I don't have the budget for it?" This is the challenge expressed by most LED officials as they contemplate their role in initiating positive economic change in their respective localities. Every LED process requires resources and effort, the level of which differs according to the type of LED initiative being pursued. Funding is one resource. Some LED "quick win" initiatives, may require more hands on and coordination effort than money. Yet others, such as infrastructure projects, will require sizeable amount of  capital funding. More ambitous developments will require significant funding resources over a long period of time via a partnership arrangement with the private setor and other stakeholders.
The LED budget, will, in most cases, only be enough to fund the operational costs of running the LED unit, such as capacity building, for example. The LED Unit must, thus identify other sources of funding for their LED strategy to be realised. To see this, requires  a widening of the view about who the actors in LED are and the roles of each of the actors. 
Summary of Funding sources:

  • Municipal Budget
    • Own revenues (raised from Municipal rates and taxes, rental income, interest on investment)
    • Grants and transfers (e.g. MIG)
    • Long term debt (borrowings)
    • Donor organisations
    • Non-governmental organisations



Funding mechanisms differ according to the type of LED project (i.e. infrastructure, development of specific sector, attracting targetted new investments, marketing of the local area and development of local competitive advantage).

Key Issues

  • What are we going to implement and by when?: A well defined outline of prioritised LED activities to be undertaken and associated cost / budget implications is important. The LED strategy is a starting point. The strategy needs to be broken down to programmes of action.
  • Public Funds: Funds received by the LED unit are, in most cases, not adequate. The LED Unit must lobby and advocate for LED with other departments in the municipality, district, provicial and national government.
  • External Funds: LED Units must move away from a narrow focus on public funds for LED. Other stakeholders must be brought on board Funding from external sources is very much reliant on the merit of LED initiatives proposed and is also subject to specific conditions attached to the funding. It will require legal and institutional arrangements for managing the relationship.
  • Use Multi year municipal budgeting: As  a management and planning tool, multi-year planning forces programming for scarce financial resources. For LED, thinking ahead about sources of funding fo those initiatives lasting more than a year is important.  It prevents LED activities being abandoned because funding has run out.
  • In or out of the IDP?: Not all LED initiatives taking place in a locality will find their way into the IDP. This means that some LED takes place despite the IDP. In addition, some LED initiatives, even if identifed through municipal  transparent processes are not suitable to be managed through the municipal bureaucratic structures.  Such  initiatives will not fall neatly into the IDP. The LED Unit must be aware of what is taking place in their locality so as to identify even those activties that are taking place outside of the IDP process.

Critical Success Factors

  • A mind set that recognises that every decision made by the municipality has an impact on LED. Examples include the laying of roads and providng street lighting in a locality, the approval of a By-law (i.e. By-laws and regulations provide the parameters within which businesses and civil society can conduct business in a locality), Implementation of the land use policy of the municipality will determine the pattern of development in a locality. When the municipality spends their budget on these initiatives, it is impacting on LED.
  • An inter-departmental LED team at the municipal level is crucial for joint planning and joint idenfication of funds to be utilised. It is yet another internal structure but it is one where mcuh information about LED can be shared amongst municipal officials (lobbying/ advocacy) to an extent where they all understand that the decisions taken have an impact on LED.
  • Consistent and relentless engagement with the local private sector (Key businesses) and local Non-governmental Organisations (NGOs). Private sector organisations are willing to bring funding as part of their own, business-driven expansion plans or as part of their social responsisbility mandate to plough back some of their profits into a local area where they do business. NGOs have funds for dedicated focus areas. Their activities may well complement some LED activities (e.g. skills development, environmental awareness campaigns) and as such make it possible for co-funding arrangements to be established.
  • Farmiliarity with donor organisations and their specific LED programme focus areas and eligibility requirements.









Practical Knowledge

Title & Detailssort descending User Ranking Popularity
Building Partnerships to mobilise resources for Community Based Natural Resource Management (CBNRM)
Author(s): Tlou Tuwani, Fha Tuwani
Year: 2007
Format: Training
No votes yet
IDC Tourism Funding Information
Author(s): Industrial Development Corporation (IDC)
Format: Guidelines
Average: 1 (4 votes)
Manufacturing Competitiveness Enhancement Programme (MCEP): Programme Guidelines
Author(s): DTI
Year: 2012
Format: Guidelines
Average: 3 (4 votes)

Theoretical Knowledge

Title & Detailssort descending User Ranking Popularity
A Guide to the dti Incentive Schemes 2011/12
Author(s): the dti
Year: 2011
Format: Overview
No votes yet
A Problem Statement for the National Local Economic Development Policy Initiative
Author(s): DPLG
Year: 2003
Format: Overview
Average: 2 (4 votes)
An Impact Evaluation of the Provision of Health Insurance Through Microfinance Networks in Rural India
Author(s): Esther Duflo, Abhijit Banerjee, Kalyan Neelamraju, and Theresa Chen
Year: 2007
Format: Theoretical Knowledge
No votes yet