Emil Nothnagel, Urban Dynamics' Local Economic Development Specialist will publish several articles on Local Economic Development in South Africa via the Urban Dynamics website, during the next few months.

Emil is of the opinion that South Africa’s post-1994 socio-economic terrain is littered with LED failures. While money is available, projects limp along; but when the money dries up, so do the projects. SMME development has met with a similar fate: up to 90% of new small businesses fail in the first year. Local Municipalities have been charged with the responsibility for sustainable LED in their constituencies. In consequence, LED officials abound. Special stimulants – for example, expanded public works projects (EPWPs) or funding for the fulfillment of Integrated Development Plans (IDPs) – have released substantial funds towards the upgrading of the labour skills base, the inclusion of women and youth into the economic mainstream, and (it was hoped) the general development of local economies. But the combined impact of all these measures has so far been negligible. Generally, sustainable LED simply won’t take root.

1.      IMPEDIMENTS TO LED

To truly understand the LED landscape, a good understanding of the reasons for the worrying state of affairs is needed? Four of these reasons in particular, deserve consideration (Emil Nothnagel, 2007):

 Basic economic substructures are damaged or non-existent. People are living in localities that are often overcrowded and plagued by poverty with no economic rationale. Traditional rationales have long ago been destroyed, all too often replaced merely by political or ideological concerns as in the case of apartheid-inspired dormitory towns. The task of building local economies has therefore been seriously underestimated.

Little strategic cohesion exists in current LED attempts. Attempts to establish sustainable LED tends to be uncoordinated, emerging from a system that is vertically divided. Soft issues are separated from hard infrastructural issues. Authorities work in "silos", case in point where the housing department doesn't talk to the LED department; LED has little understanding of what is happening in the municipal tourism offices; procurement officials seek the best deals while remaining ignorant of emerging local SMME's; and so on.

LED is seen as project driven rather than locality inclusive. There is a widespread misunderstanding that LED is directed at the poor, supporting initiatives where they earn a few cents from project based initiatives. This generally results in a division between the so-called 'second' and 'first' economies that is inimical to the steady development of an inclusive locality-based foundation for sustainable economic development.

Scant consideration is given to the psycho-cultural aspects of development. Being poor and unemployed is fundamentally boring and demeaning. LED efforts are bound to fail if the needs to raise self-esteem and to stimulate a sense of identity with the locality being economically developed are ignored. This generally creates a 'dependency syndrome' mentality displayed by all too many beneficiaries of LED initiatives in South Africa, and must begin to be realigned towards the richer rewards of self-actualisation.

 This worrying state of affairs forces stakeholders to think differently about LED and to consider existing channels, infrastructure and resources that offers an integrated approach to drive local economic development in smaller towns.

2.      FINDING A SOLUTION 

The State’s Approach - We can begin by observing that LED funding from the state is usually locked into large capital projects with the expectation that increased job opportunities, particularly of the marginalized, and increased training among the unskilled, will eventually lead to a more employable population and to the emergence of greater SMME development. In theory, that will probably be the case in the long run – and 'the long run' may extend to a considerable time, not least because responsibility for on-the-ground local economic development has been devolved to the generally struggling third-tier government level. So, a special catalyst is required to convert state funding more rapidly into those 'strategically planned and deliberately integrated' local economies for which municipalities have become responsible.

The Development Hub Defined - In short, the Development Hub concept is this catalyst – but only if it is carefully defined to take into account existing state inputs and a more holistic definition of LED established above. Such a definition would read:

"The development hub concept is designed to build viable local economies by maximizing the impact of state interventions for local economic development and enriching the influence of these interventions with a bouquet of sustainable grassroots services"

 But for this effective conversion of state interventions into a sustainable socio-economic development process, a 'core operating rationale' for the Development Hub and its various services needs to be clearly recognized.

Download Article 1: Local Economic Development in South Africa

Download Article 2: Can Local Authorities in Small Towns get Maximum LED impact out of Tourism?

• Emil Nothnagel
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