Get the LED out

Local economic development (LED) is in poor shape. On the whole there seems to be disdain for this concept, which is seen as an expensive and futile exercise.

This is unfortunate because LED can be crucial in the current period of economic turmoil. It is vital that local economies devise ways to remain competitive, but what role should municipalities play?

The 2009 budget focused on a broad-based strategy for the state to support competitiveness and invest in infrastructure, small business and rural development, rather than on sectoral bail-out packages that have been seen abroad. Instead of focusing on the direct promotion of competitiveness, dispensing with large marketing conferences, road shows and incentives, municipalities should rather get the basics right with matters such as correct billing, ensuring that services are delivered and local infrastructure is upgraded.

The first step to this approach is entirely definitional. There are numerous definitions of LED that only serve to bring up more questions than answers.

Should municipalities see LED as work that encourages economic activity? Or should they intervene directly to correct market imbalances, create jobs through favoured projects in more of a social welfare role?

The latter role tends to be associated with LED in South African local government circles, with a social emphasis commonly (although not exclusively) applied to municipal LED strategies. Typically, LED translates into infrastructure investment, sectoral programmes, preferential tender policies for local businesses and questionable marketing programmes.

The issue goes beyond semantics. The failure to articulate LED clearly has undermined the integrity of LED programmes. These can become wish lists in development plans, but are poorly integrated into provincial or national strategies and this leads to poor sustainability.

There are too many ill-conceived, expensive projects that leave communities worse off than when they started.
Even if the role of LED is one of social welfare, this needs to be costed to assess the outcomes of spending. Too many LED projects demand hundreds of thousands of rand for each job created.

Yet, aside from their direct opportunity cost, they risk detracting from processes that ensure cooperation with existing stakeholders, such as engaging with investors, small enterprises and regional development agencies.

Investors often argue that all they require from a local government is accurate billing, passing plans within a reasonable time frame, access to officials and occasional but often fairly minor initiatives such as cutting the grass to enhance the safety of workers and drivers using local roads.

In the long run extended free basic services such as access to clinics or libraries also promote LED because they can enhance the productivity and wellbeing of residents.

All that is needed to truly shape LED may be a degree of humility to recognise the failures of many past projects and redirect focus to core operations.

Karen Heese and Kevin Allan are the founders of Municipal IQ, a web-based data and intelligence service specialising in the monitoring and assessment of South Africa’s municipalities

The LED’s in the definition
The biggest with LED is that there are too many different definitions. Here are a few:

  • LED is an ongoing process by which key stakeholders and institutions from all spheres of society, the public and private sector as well as civil society, work jointly to create a unique advantage for the locality and its firms, tackle market failures, remove bureaucratic obstacles for local business and strengthen the competitiveness of local firms. — GTZ
  • LED is an approach towards economic development which allows and encourages local people to work together to achieve sustainable economic growth and development thereby bringing economic benefits and improved quality of life for all residents in a local municipal area. — Department of provincial and local government

  • LED is a participatory process which encourages social dialogue and public-private partnerships in a defined geographical area. LED enables local stakeholders to jointly design and implement a development strategy which fully exploits local resources and capacieites, and makes best use of the area’s comparative advantages. — the International Labour Organisation
  • The purpose of local economic development (LED) is to build up the economic capacity of a local area to improve its economic future and the quality of life for all. It is a process by which public, business and nongovernmental sector partners work to create better conditions for economic growth and employment generation. — World Bank
  • Local economic development is a lasting process of strategic partnership between business, local government and other community stakeholders who help make their cities economically robust today, tomorrow and in years to come. — US Aid

What’s the problem?
In the face of pressing backlogs and service delivery concerns local economic development (LED) is not considered a core mandate.

This is made worse when it is viewed as a social welfare function with little expected of changing the face of local economies.

To illustrate, dozens of initiatives were scattered around the country in an attempt to provide employment for destitute communities. But once the funding is removed, these projects invariably collapse because there is no inherent market logic for the programmes without a subsidy.

Would simpler measures such as free basic delivery or employment-generating public works programmes such as fencing or road construction not deliver better bang for the buck?

It would also be naive to overlook the political dimension behind unsuccessful LED projects. These often focus on infrastructure “legacy” initiatives such as the construction of bridges or stadiums designed to reflect personal legacies rather than community needs. There is also the risk of patronage in these processes. But these problems could be fixed, even if it is by agreeing that LED should take a back seat to basic service delivery.

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