Local Economic Development (LED) in municipalities: briefing by SALGA

NCOP Economic and Business Development

24 October 2011
Chairperson: Mr F Adams (ANC – Western Cape)
Share this page:

Meeting Summary

The meeting had been called by the Committee because of its concern that there was no structure to the role of Local Economic Development (LED) in municipalities. The South African Local Government Association (SALGA) said that key questions to consider was what LED was, what the national, provincial and municipal roles in LED was and why the LED success rate was so low.

SALGA felt that LEDs needed to be taken more seriously, and that
▪ it was still project driven,
▪ unrealistic targets were being set,
▪ there was very little monitoring and evaluating,
▪ there was limited integration to district, provincial and national planning strategies,
▪ there was limited political support,
▪ many LED strategies were not grounded in economics,
▪ it was poorly integrated with the Expanded Public Works Programme (EPWP),
▪ there was little differentiation and a “one size fits all” solution was being adopted,
▪ relationships and partnerships should be formed with the formal business sector.
One method of improving LED was using procurement to impact on LED. However this process was under threat from regulations which would be coming into effect in December.

The New Growth Path strategy sought to create jobs and thus LEDs would have to become more visible and have a more inclusive stance. By implication, it was to find the right balance between a pro poor LED and creating a conducive environment for LED. Quite a few municipalities were not reporting on their EPWP. The EPWP had been imposed and not integrated into municipal planning and was continually changing. EPWP should not take a one size fits all strategy and there should be a greater linkage with the Municipal Infrastructure Grant. The current monthly reporting schedule should be decreased. LED was in need of reinvigoration

50-70% of businesspeople had not seen the new preferential procurement regulations, yet it would be implemented on 11 December. Businesses had to be BEE certified. The certificate cost R1000. There were insufficient service providers, with none in Mpumalanga and Limpopo while eThekwini, for example, had 30,000 businesses. The result would be that only a small percentage of high capacity, mainly white businesses, would be accredited. Were government entities to ignore the regulations and purchase from a provider who was not certified, the Auditor General would give them an audit query. It would take years for the whole database to be accredited and thus this would prohibit government from attaining its own procurement targets.

SALGA’s commitment was to encourage a greater focus and position for the informal economy, to mainstream LED tools, to build a pool of LED capacity at the local level, to promote dialogue and partnerships, to induct and train councillors, to identify, capture and share good practice. As government pushed harder on job creation, LED would get a higher profile. Key outcomes identified by the commissions at the SALGA National Conference were the development of a municipal jobs plan, improving LED practice within municipalities, acknowledging the role and importance of the informal sector and giving support for the green economy and tourism sectors.

Municipalities were at the coalface, they faced and understood the practicalities at ground level. Government departments needed to be aware of what the municipalities were telling them from a practical point of view as currently government implementation was informed by a theoretic point of view.

Members said that the country had too many spheres of government. Government should stop focussing only on Johannesburg, Cape Town and Durban. Were LEDs going to link with the
Industrial Development Zones (IDZs)? When would SALGA be taking up their seats in Parliament? Could the impact of the national Parliament on local government be clarified? Was SALGA holding the South African Municipal Workers (SAMWU) to account for the cost of the strikes? What was the role of SALGA in rural development? Were there any Memoranda of Understanding (MOU) signed? Were municipalities involved in land purchases for land reform? How efficient were the Municipal Development Agencies? Did municipalities have plans in place to manage commonages? What was being done to manage overgrazing of commonages? How were the co-ordination problems between provinces and municipalities going to be overcome? Who monitored municipal projects? Were municipalities timeously informed of budgetary provisions? What was SALGA doing to assist Local Government in the introduction of the new legislation? Could a rough estimate of the value of LED as a percentage of GDP be given? How could businesses in Limpopo and Mpumalanga be assisted with BEE certification. What role did SALGA have regarding the traditional leaders? The Chairperson commented that the NCOP was important and that SALGA should use the NCOP as a platform to communicate its views.


Meeting report

Briefing
The meeting had been called by the Committee because of its concern that there was no structure to the role of Local Economic Development (LED) in municipalities.

Mr Douglas Cohen, Specialist on Economic Development at the South African Local Government Association (SALGA), said that key questions to consider was what LED was, what the national, provincial and municipal roles in LED was and why the LED success rate was so low.

SALGA felt that LEDs needed to be taken more seriously, it was still project driven, unrealistic targets were being set, there was very little monitoring and evaluating, there was limited integration to district, provincial and national planning strategies, there was limited political support, many LED strategies were not grounded in economics, it was poorly integrated with the Expanded Public Works Programme ( EPWP), there was little differentiation and a “one size fits all” solution was being adopted, relationships and partnerships should be formed with the formal business sector. The South African LED Network (http://led.co.za) was a web portal developed in partnership with a number of organisations which attempted to share a body of knowledge on LED and promote mutual learning. One method of improving LED was using procurement to impact on LED. However this process was under threat from regulations which would be coming into effect in December.

The New Growth Path strategy sought to create jobs and thus LEDs would have to become more visible and have a more inclusive stance. It would impact municipalities in the fields of energy, water, transport, housing and the green economy. By implication it was to find the right balance between a pro poor LED and creating a conducive environment for LED. He felt that LED should be rooted in the community thus it required an assessment of the community to discover and work with what was available. Quite a few municipalities were not reporting on their EPWP. The EPWP had been imposed and not integrated into municipal planning and was continually changing. He suggested that EPWP should not take a ‘one size fits all’ strategy and that there should be a greater linkage with Municipal Infrastructure Grant (MIG). The current monthly reporting schedule should be decreased. LED was in need of reinvigoration

Concerning the new preferential procurement regulations, he said 50-70% of businesspeople had not seen the regulations, yet it would be implemented on 11 December. Businesses had to be BEE certified. The certificate cost R1000. There were insufficient service providers, none in Mpumalanga and Limpopo while eThekwini, for example, had 30,000 businesses. The result would be that only a small percentage of high capacity, mainly white businesses, would be accredited. Were government entities to ignore the regulations and purchase from a provider who was not certified, the Auditor General would give them an audit query. It would take years for the whole database to be accredited and thus this would prohibit government from attaining its own procurement targets.

SALGAs commitment was to encourage a greater focus and position for the informal economy, to mainstream LED tools, to build a pool of LED capacity at the local level, to promote dialogue and partnerships, to induct and train councillors, to identify, capture and share good practice. He said that as government pushed harder on job creation, LED would get a higher profile. Key outcomes identified at the commissions at the SALGA National Conference were the development of a municipal jobs plan, improving LED practice within municipalities, acknowledging the role and importance of the informal sector and giving support for the green economy and tourism sectors.

Mr Chris Neethling, Member of the SALGA National Executive Council said that municipalities were at the coalface. They faced and understood the practicalities at ground level and that government departments needed to be aware of what the municipalities were telling them from a practical point of view as currently government implementation was informed by a theoretic point of view.

Discussion
Mr K Sinclair (COPE; Northern Cape) said that the country had too many spheres of government. Government should stop focussing only on Johannesburg, Cape Town and Durban. LEDs had become political tools. The presentation had made no mention of Industrial Development Zones (IDZ). Were LEDs going to link with IDZs? There was a shortage of skilled LED managers. He felt that one possible solution was to provide incentives. When would SALGA be taking up their seats in Parliament?

Mr J Gunda (ID; Northern Cape) asked if the impact of national Parliament on the local government could be clarified?

Ms E Van Lingen (DA ; Eastern Cape) asked whether SALGA was holding the South African Municipal Workers (SAMWU) to account for the cost of the strikes? What was the role of SALGA in rural development? Were there any Memoranda of Understanding (MOU) signed? Were municipalities involved in land purchases for land reform? How efficient were the Municipal Development Agencies? Did municipalities have plans in place to manage commonages? What was being done to manage overgrazing of commonages? How were the co-ordination problems between provinces and municipalities going to be overcome? Who monitored municipal projects? Were municipalities timeously informed of budgetary provisions? What was SALGA doing to assist Local Government in the introduction of the new legislation?

Mr D Gamede (ANC; Kwa Zulu Natal) said SALGA had ten seats in the NCOP but the seats were not properly utilised. He said municipalities were closing down informal businesses whose owners were but seeking to eke out a living. He felt that bylaws needed to be relaxed. Could a rough estimate of the value of LED as a percentage of GDP be given?

Mr A Nyambi (ANC; Mpumalanga) asked how businesses in Limpopo and Mpumalanga could be assisted with BEE certification.

Mr Cohen replied that the Industrial Development Corporation’s local economic agencies had been a nice idea but with little delivery with only 3 out of 30 projects delivering good results. The Development Bank of South Africa’s local economic development initiative now called the rural economic development initiative was a more cost effective version of the IDC’s one. The Nelson Mandela Bay municipality had had a successful project which had focussed on the CBD area.

He was concerned at the lack of consultation on the implementation of the BEE regulations as it could not be implemented in all areas. Why was it scheduled for December and not the beginning of the financial year or why could it not be phased in over three years? He said the fact that there were no certification agencies in certain areas should be a red flag for the Department of Trade and Industry. SALGA’s first formal engagement on the matter had been Friday past. He said there were national round tables between SALGA and provincial workgroups and LED practitioners were represented. LED should be placed higher up on the agenda of municipalities. Municipalities should adopt a friendlier approach to the informal economy. The current New Growth Path did not recognise the informal economy at all when compared with China and India for example.

On the Eastern Cape questions he said the rural development strategy was not aligned with local government although there had been a process underway to improve that. There was no linkage between local government and the general failure of agricultural policy. A differentiated approach to co-ordination would be more suitable.

He said LEDs needed a new voice. The Department of Co-operative Government and Traditional Affairs were setting up co-operatives but that this was a scattergun approach. Rather small municipalities should focus on one or two projects. SALGA was educating councillors on what tourism really was. IDZ had failed because they had competed for the same limited pool of investors and would in any case be renamed in the future to SEZs (Special Economic Zones).

Mr Neethling said that councillors were under time pressure when dealing with SALGA issues. Having permanent members to take up the NCOP seats would be better. Councillor training was taking place and a councillor’s guidebook would soon be published.

The Chairperson said that the NCOP was important and it needed to thrash out the issue of SALGA and the taking up of its seats in the NCOP.

Ms M Dikgale (ANC; Limpopo) asked what role did SALGA have regarding the traditional leaders

Mr Sinclair said the local governments were not co-ordinating their work. He hoped SALGA would take up their NCOP seats.

Mr Cohen replied that local government had a shared thinking on job creation regarding co-ordinating their work. SALGA could improve in insofar as their interactions with traditional leaders were concerned.

The Chairperson said that SALGA should use the NCOP as a platform to communicate its views.

The meeting was adjourned.

Share this page: