Who is involved in LED?

LED is a complex process which needs the active involvement of a wide variety of stakeholders. In order to bring these stakeholders together in a meaningful and effective way, it is important to have a clear concept of the different actors and their roles to play in such a process.

To do so LED stakeholders can be differentiated into four groups:

  • Public sector
  • Private sector
  • Civil society
  • Intermediary institutions

Public Sector

Government - especially Local Government - is a key stakeholder in LED processes. Government influences LED in numerous ways. National policies on LED or SMME development set important frameworks and guidelines for all actors that are involved in this policy field. Public funding and support structures at national, provincial or local level set powerful incentives. If designed correctly, they can act as useful catalysts for LED. Similarly, rules and regulations designed at different tiers of government can reduce or increase the costs of doing business at local level. LG provides hard input – infrastructure - as well as soft input - coordination and facilitation - to the other LED actors in order to create an enabling environment, or fails to do so if it is characterized by a lack of capacity.

Private Sector

Well-functioning bodies of private sector organisation and representation (Business Membership Organisations (BMOs) and professional associations), which offer services, lobbying and mutual exchange, are an important element of a country's so-called "meso-level". Meso-institutions are institutions which are created or mandated to support the competitiveness of the private sector by tackling specific market failures such as information imperfections on input and output markets and by overcoming the fragmentation of individual private businesses. In the case of most South African local economies, the fragmentation of the private sector along size and colour lines is one of the most serious challenges to functioning LED.

The lack of effective representation prevents the private sector from becoming a powerful partner and counterpart for the public sector and to properly advocate its common interests in the LED process. It further produces communication barriers within the private sector that prevent the optimal use of synergies such as mutual learning and information exchange between businesses, which tend to specifically exclude and disadvantage the emerging entrepreneurial community. Functioning and inclusive private sector institutions are therefore a vital success factor for dynamic LED processes in South Africa, and strengthening the capacity of these institutions is an important element of LED initiatives.

Civil Society

The degree to which the interests of poor communities, emerging entrepreneurs and wage labourers are taken into consideration by private and public institutions is often limited. There is little information about the specific needs, demands and potentials of poor communities and emerging entrepreneurs. In many countries this is also due to the fact that the political will to promote the development of rural areas, increase incomes and improve the livelihoods of poor communities is lacking. In the South African case, however, there is a strong political will to develop previously disadvantaged areas, and municipal boundaries have been redrawn in order to link the poor rural hinterland to economically vibrant areas. But structural obstacles such as very low skills levels, limited entrepreneurial experience, low social capital and especially the low level of self-organisation and professionalism of start-up entrepreneurs in these areas have so far hampered efforts to close the economic gap between the "two economies".

Building capacity of emerging entrepreneurial communities for entrepreneurship, self-organisation, representation, articulation, networking and interaction with the public and the established private sector is crucial to increase the participation and economic performance of the formerly disadvantaged areas. Such capacity does not only enable the actors - e.g. emerging farmers - to actively participate in the local LED process, but furthermore improves their access to the different support measures that are available in the South African context.

Local non-governmental organisations (NGOs) and civil society initiatives are an important element in strengthening these communities. Most have a very good knowledge of the locality and issues and are well-connected in the community. They are therefore an important actor and partner for LED processes in many respects: they can assist communities in organising themselves, in defining and articulating their interests and needs towards other LED actors, and in pursuing and implementing LED proposals and initiatives. Nevertheless, these institutions are often badly equipped in terms of human and financial resources, and might themselves need organisational support from LED facilitators.

Intermediary institutions

A country's LED environment is shaped by a number of intermediary actors and support institutions which provide catalytical inputs to LED processes through mechanisms of funding, conceptual support, research, advocacy, facilitation and policy design. The intermediary landscape that influences LED can comprise a wide variety of institutions with different mandates and at different levels. In the context of South Africa, the most important LED intermediaries include:

  • The Development Bank of Southern Africa (DBSA), which provides conceptual input to the LED debate in South Africa and provides funding for the design and implementation of LED processes along its conceptual inputs
  • The South African Local Government Association (SALGA), which provides advocacy, conceptual and facilitation support on LED to Local Governments
  • Public Service delivery arms like the District LED units or parastatal LED agencies, which play an active part in steering and implementing LED on the ground
  • Training institutions such as colleges and universities or parastatal institutions, which are key actors in research; the development of LED concepts and the capacity building around these concepts
  • Private sector LED experts and facilitators, which offer their expertise in terms of LED concept development, LED facilitation and LED training

The success of LED processes depends to a large extent on the quality and alignment of the LED inputs and services that these intermediaries provide. If the conceptual approach to LED and the technical support of these actors to the local level is weak or contradictory, building consensus at the local level about what LED is about and how to go about it practically will not succeed, and confusion around concepts, roles and objectives of LED will hamper LED implementation.

An unclear or contradictory conceptual LED framework can also render funding lines and other service delivery provided by these intermediaries ineffective and sometimes even counterproductive. Finally, a lack of human and institutional capacity within intermediary institutions to implement LED policy guidelines and support programmes can seriously challenge LED implementation on the ground. Strengthening LED intermediaries is therefore a crucial task, as these institutions provide important leverage factors for influencing the LED landscape at a wide scale.