LOCAL ECONOMIC DEVELOPMENT, AN

EMERGING REALITY IN SUB-SAHARAN AFRICA

(CASE OF REPUBLIC OF SOUTH AFRICA)

MASTERS THESIS

SUBMITTED BY

EVANS FONSO AKAH

DEVELOPMENT AND INTERNATIONAL

RELATIONS

AALBORG UNIVERSITY, DENMARK

DECEMBER 2008

ii

TABLE OF CONTENTS

TABLE OF CONTENTS-------------------------------------------------------------------------iACKNOWLEDGEMENTS--------------------------------------------------------------------iiiLIST OF ABBREVIATIONS------------------------------------------------------------------ivDEDICATION------------------------------------------------------------------------------------vABSTRACT--------------------------------------------------------------------------------------vi

CHAPTER 1 : INTRODUCTION AND PROBLEM FORMULATION--------------------11.1: Introduction-----------------------------------------------------------------------------------11.2: Problem Formulation------------------------------------------------------------------------4

CHAPTER 2 : METHODOLOGY----------------------------------------------------------------72.1: Research Design-----------------------------------------------------------------------------7

2.1.1: Case Study Research Design----------------------------------------------------------72.1.2: Explanatory, Clinical Case Study Design-------------------------------------------72.1.3: The use of Theories in Case Study research Design-------------------------------8

2.2: The Structure of this Project----------------------------------------------------------------92.2.1: Theoretical Consideration------------------------------------------------------------11

2.3: Alternative Theory-------------------------------------------------------------------------122.4: The aim of the Thesis----------------------------------------------------------------------122.5: Literature------------------------------------------------------------------------------------142.6: Definition Terms---------------------------------------------------------------------------14

CHAPTER 3 : EMPIRICAL DATA-------------------------------------------------------------173.1: Background to LED in the Republic of South Africa (RSA)-------------------------173.2: Local Economic Development as an Emerging Reality in SA-----------------------18

3.2.1: Overview-------------------------------------------------------------------------------183.2.2: Why LED?-----------------------------------------------------------------------------20

3.3: Policy Consideration for LED in South Africa-----------------------------------------203.4: Local Economic Development in South Africa----------------------------------------22

3.4.1: Developmental Local Government-------------------------------------------------223.4.2: The Role of Local Governments in Promoting LED in SA---------------------223.4.3: Objectives of Developmental Local Government--------------------------------23

3.4.3.1: Maximizing Social Development and Economic Growth------------------233.4.3.2: Integrating and coordinating---------------------------------------------------243.4.3.3: Democratizing Development, Empowering and Redistributing-----------243.4.3.4: Leading and Learning-----------------------------------------------------------25

3.4.4: Advantages of LED in SA-----------------------------------------------------------273.4.5: The Council Monographic Study (MS) and Strategic Plan (SP)---------------283.4.6: Council Monographic Studies (MS)------------------------------------------------283.4.7: Council Strategic Plan (SP)----------------------------------------------------------283.4.8: Participatory Economic Analysis---------------------------------------------------29

3.5: Community Driven LED Case Study in the Rural District of Hertzog-------------303.5.1: The Study Area------------------------------------------------------------------------303.5.2: Hertzog Agricultural Cooperative (HACOP) Initiative--------------------------313.5.3: Flaws of HACOP---------------------------------------------------------------------32

3.6: The Johannesburg LED Urban Case Study---------------------------------------------323.6.1: The Economic Background of Johannesburg-------------------------------------33

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3.6.2: LED Strategies for Johannesburg---------------------------------------------------333.6.3: The Outcome of the Project---------------------------------------------------------343.6.4: Lessons Learned in the Programme------------------------------------------------34

CHAPTER 4: THEORETICAL AND CONCEPTUAL CHAPTER------------------------384.1: The Neo-Liberal Theory-------------------------------------------------------------------38

4.1.1: Definition of Neo-liberalism and the Theory--------------------------------------384.1.2: The Washington Consensus---------------------------------------------------------414.1.3: Criticism of the Neo-Liberal Theory-----------------------------------------------41

4.2: The Empowerment Theory----------------------------------------------------------------444.2.1: Empowerment as Participation------------------------------------------------------474.2.2: Empowerment as Capacity Building-----------------------------------------------474.2.3: Empowerment through Economic Improvement---------------------------------484.2.4: Critique to the Empowerment Theory----------------------------------------------49

4.3: Theory on Decentralization of Governance---------------------------------------------514.3.1: The Argument for the Decentralization Theory-----------------------------------53

4.3.1.1: Efficiency Values----------------------------------------------------------------544.3.1.2: Governance Value---------------------------------------------------------------54

4.3.2: Critique of the Decentralization Theory-------------------------------------------564.4: The Concept of Good Governance-------------------------------------------------------57

4.4.1: Attributes of Good Governance-----------------------------------------------------59 CHAPTER 5: ANALYSIS, CONCLUSION AND PERSPECTIVES---------------------64

5.1: Analysis--------------------------------------------------------------------------------------645.2: Conclusion----------------------------------------------------------------------------------735.3: Perspectives---------------------------------------------------------------------------------75Bibliography--------------------------------------------------------------------------------------76

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ACKNOWLEDGEMENTS

I wish to thank all those who supported me through out my studies in Aalborg University.

Intellectually, my greatest debt is owed to my supervisor Dr. Vibeke Andersson who did

not only read my work but also inspired and focused my thoughts throughout this

research project. My sincere thanks also go to my beloved wife Ntsang Miranda Akah

who took her time to read through the manuscript and her unremitting moral support

during these tough moments. I would also like to extend my appreciation to my sisters

Mildred Bugh Ferim and Nicholine Ngum Anagho for their continuous encouragements.

My gratitude also goes to Hosea Nguh Akam and Franklin Mbende Che who gave me a

lot of technical assistance with regards to laptop when I was writing this masters thesis. I

also owe a duty say thanks to; Eric Shu Neba, Mr and Mrs Senjo, Leonard Anagho and

Collins Anyi for their moral and social support in times of sorrow and happiness. To

Bradley and Junior I say thanks for your cheers to me when I am returning from the

library.

Above all, my endless thanks and praises go to God Almighty for guiding and guarding

me through out this work.

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LIST OF ABBREVIATIONSANC………...………………………………………………….African National Congress

CSO ………………………………………….………………...Civil Society Organization

CSO’s ...………..……………………………………………. Civil Society Organizations

DLG …………………………………………………...Developmental Local Government

DPLG…………………………………………..……...White Paper on Local Government

EU…………………………………………………………………………European Union

GDP………………………………………………………………Gross Domestic Product

Gear……………………………………………..Growth, Employment and Redistribution

HACOP……………………………………………........Hertzog Agricultural Cooperative

HELVETAS …………..……………...... Swiss Association for International Cooperation

IMF…………………………………….…………………….International Monetary Fund

LEDA………………………….........Local Employment Development action programme

LED………………………………………………………...Local Economic Development

LG…………………………………………………………………..…. Local Government

LG’s……………………………………………………………………Local Governments

MDG………………………………………………………Millennium Development Goal

MDG’s……………………………………………………Millennium Development Goals

MS …………………………………………… ………………….....Monographic Studies

NGO……………………………………………………None Governmental Organization

NGO’s…………………………………………………None Governmental Organizations

OECD ……………………Organization for the Economic Cooperation and Development

RDP…………………………………………….Reconstruction Development Programme

RSA……………………………………………………………...Republic of South Africa

SA……………………………………………………………………………..South Africa

SP ……………………………………………. ……………………………..Strategic Plan

SSA…………………………………………………………………….Sub-Saharan Africa

UN…………………………………………………………………………...United Nation

US…………………………………………………………………………….United States

WB…………………………………………………………………………….World Bankiv

WTO……………………………………………………………World Trade Organization

DEDICATION

This work is dedicated to my beloved parents Mr. and Mrs. Akah who through their

conscientious efforts brought me to this world and through their commitments gave me

the required education which I am proud of today.

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ABSTRACT

Local economic development as an emerging reality in South Africa is a recent

phenomenon and is gaining much support from the ANC-led government that came to

power in 1994. Its emergence has been saluted with a lot of legislations and literature on

this field of study. At the same time, municipalities, both urban and rural, are struggling

to apply local economic development processes within their municipalities. This is to

create robust local economies so as to stem rising unemployment and poverty.

LED has had a difficult birth in South Africa with regards to accomplishing its objectives

of job creation and poverty alleviation. This report uses two case studies: a community

driven rural local economic development programme – the Hertzog agricultural

cooperative, and an urban case study – the Johannesburg Pro-growth Clothing project.

Both case studies have improved on the employment situations of these localities yet they

cannot achieve acceptable poverty alleviation levels due to massive job losses from other

sectors of the economy and the deep rooted distortions created by decades of apartheid

reign in the country. More so, there has been mixed results as some LED programmes

tend to be pro-growth and not pro-poor oriented.

The research makes use of three theoretical frameworks encompassing the neo-liberal

theory, the empowerment theory and the theory on decentralization of government. The

concept of good governance is used to project the essence of acceptable code of conduct

in applied development within localities.

Though the overall trend of LED is commendable the reality remains that poverty cannot

be effectively eradicated within such a short period of active application of LED in SA.

This is because poverty is multi-dimensional and needs to be tackled from multi-

dimensional approaches, involving all stakeholders in the municipalities.

vi

CHAPTER 1 : INTRODUCTION AND PROBLEM FORMULATION

1.1: IntroductionSince 1945 the world has observed over fifty years of unprecedented development

policies and remarkable global economic growth. Yet the global polarization is

increasing, with the economic gap between states and people growing. Poverty remains

widespread and continues to compromise available opportunities to majority of the

world’s poorest people. This situation is not only confined to the third world particularly

since the 1980’s and 1990’s with the worldwide promotion of the neo-liberal economic

policies by global governance institutions. Thus millions of people previously cushioned

or protected by the state have been thrown into poverty with the transition to market

economy – globalization (Baylis and Smith, 2005: p. 646).

As such, close to one billion people in the world are facing an unacceptable poverty

situation and live on less than a dollar per day (Pedro Sanchez et al. pp. 1-2, 2005,

online). About 46% of the population of Sub-Saharan Africa (SSA) lives below the

poverty line. Between 1990 and 2001, the number of people in SSA living on less than a

dollar per day rose from 227 million to 313 million, and the poverty level rose from 45%

to 46% (Millennium Project, 2006: p. 1).

Sub-Saharan Africa (SSA) has always been one of the poorest regions of the world

despite it favourable land and abundant resources. The gross domestic product growth

declined from 6.4% during 1970 – 1974 to 2.5% during 1975 – 1979 and to 1.3% from

1980 – 1984. At the same time, the export oriented development of SSA as primary

producers could do no better because of the complex nature of the international trade

system, resulting in fall in the prices of their export commodity. The two oil shocks of the

1970’s worsened the situation thereby deepening the poverty situation of the region

(Dasgupta, 1998: p. 342 – 344).

Therefore, the world crises that started in the1970’s remains an intriguing phenomenon,

due to its intensity and duration which led to rising unemployment, inflation and a

general instability in the economic situation. Yet different regions of the world faced

1

similar situations at varying degree and intensity. Accordingly, the macro economic

policy instruments put in place after World War II to regulate the economy at national

and international level, seemed to have reached inherent limits or protected the interest of

dominant nations and powerful world institutions. Since then, the overwhelming changes

in the organization of production, the fragmentation of demand, and the continued

expansion of international trade have increased the ineffectiveness of nations-states’

regulatory structures and institutions. Countries have been forced to adopt free market

policies in the hope of attracting new investments to spur development. Transnational

corporations have never been so powerful, while regions, localities and individuals within

such setting are looking for or acting to create alternative economic possibilities that suit

their needs and protect their local economic interest. Within such circumstances, local

economic development (LED) became a vast field of experiments to be explored not only

as an alternative economic model but also as a complementary model to overcome the

weaknesses inherent in the conventional economic approach which seems to allot

economic resources and processes through dominant world interest groups (Demaziere,

1995: p. xii and Baylis and Smith, 2005: p. 646).

Consequently, over the past decades, the world has witnessed a LED movement and local

initiatives have become a preferred instrument for economic development in localities

and communities around the world. The functional decentralization of business activities,

the exclusion of many areas from the geography of new production systems, the failure of

top-down national and regional economic restructuring policy to solve the problems of

localities, the rise of regional and local autonomy movements, have encouraged local

perspectives in tackling problems of local development and underdevelopment in recent

era. As a new school, local economic development is compounded with diversities thus

leading to terminological ambiguity (Demaziere, 1995: p. 3). What ever these diversities,

they still have major objectives which guide their course.

Due to these considerable changes witnessed in the operations of the international

political economy, the responsibilities or functions of states and localities have changed

significantly in recent decades. Within such an era typified by increasing

internationalization and the weakening of state control in many countries of the world,

2

individual localities both urban and rural are bound to pursue locally determined

appropriate development strategies for their people. The limited successes achieved by

the central government in the regional development strategies have assisted the overall

trend towards local economic development. As such, this has resulted in the

responsibilities for development planning being devolved reasonably from the

institutional cores (the states) to individual localities. The need to address local crises

(problems) by capitalizing on local opportunities has encouraged numerous urban and

rural areas to assume the responsibilities for development planning which is designed to

meet the distinctive situations of localities - bottom up approach (Nel, 1999: p. 1).

Even though local economic development (LED) started gaining grounds into the

vocabulary of policy makers and academia in the 1970’s, it achieved prominence during

the 1980’s. At this time, sustained economic recession and rising unemployment was

having a dramatic impact on many localities and economies in the world. The response at

the local level was the emergence of a vast range of initiatives aiming to alleviate the

consequences of high unemployment and manage the processes of economic

restructuring. There was the need to develop a new policy agenda appropriate to the

rapidly changing economic conditions to ensure that such local level actions which

attracted considerable interest and recognition could not be undermined. The introduction

by OECD (Organization for the Economic Cooperation and Development) of a

programme in 1982 aimed at the promotion and evaluation of local employment

initiatives, the subsequent development by the European Union (EU) of a local

employment development action programme (LEDA) and the introduction in SSA and in

other parts of the world of LED has given local level initiatives recognition

internationally. The concepts relating to LED issues have become a focus for social

sciences and debate as well as an acceptable component in government policy in

contemporary world (Syrett, 1995: p. 1 and Nel, 1999: p. 1).

In the above light, the relatively sophisticated LED endeavours in the countries of the

North can only be matched with the emerging moves of the countries of the South to

develop local self-reliance strategies which are practiced either as traditional forms of

livelihood or as local alternatives to overcome poverty (Nel, 1999: p. 1). Thus the move

3

towards LED in South Africa may range from urban case studies in cities like

Johannesburg, Cape Town to rural case studies in smaller communities such as Hertzog

community and Sodwana Bay community, etc. On the other hand, LED may range from a

community initiated venture as in the rural district of Hertzog or externally supported and

initiated as the case of Border Corridor. In the former case (Hertzog community) the

programme was predicated on the notion that control of the process of development

should be vested in the host community and managed by the people from whom the

development initiative had its birth. This led to the reestablishment of an abandoned

white farmland by the former farm labourers who had lost their jobs because of the

closure of the farm. They had the skills as former farm workers and were eager to gain

self employment through the establishment of a cooperative and thus overcome poverty

(Nel, 1999: p. 217 and Nel et al., 2006: p. 54).

The extent of the challenges of poverty was recognized by the UN in 2000 with the

acceptance of the Millennium Development Goals (MDG’s) setting time limits and

quantifiable targets with priority being the eradication of extreme poverty and hunger

with the target of reducing by half the proportion of people living on less than a dollar a

day by 2015. This has witnessed the concerted efforts of majority of governments,

intergovernmental organizations and other stakeholders towards poverty alleviation in

recent era (Baylis and Smith, 2005: p. 646 - 647). Yet at the recent UN summit in New

York in 2008, the world leaders were unanimous on the fact that they are not able to meet

with the targets set by the MDG’s. This is overt acknowledgement of the challenges of

poverty on the continent.

1.2: Problem Formulation Local economic development as a practical concept aims to strengthen the economic

capacities of localities, improving its future and the quality of life for all. It focuses on the

community’s competitive advantage and provides communities with the means to

identify new opportunities, create jobs, income, develop local infrastructure and enhance

the revenue sources for the municipality and its people. Thus it lays emphasis on local

needs and the use of local resources for the development of its own economic potentials.

Communities in both the developed and less developed world turn more increasingly to

LED strategies as a response to the challenges posed by globalization and the widespread 4

move towards decentralization of governance (Cazanelli, October 2001: p. 6 – 9 and

Catenacci, December 2003: p. 12 – 16).

Thus LED seeks to address the hypothesis of an economic possibility of solving the

problems of the underdevelopment of communities within this present global

dispensation. Communities in the Republic of South Africa (RSA) are endowed with

enormous economic possibilities which can be used as a means to jump-start their own

economic advancement. Yet these resources are seldom engaged to enable local

populations reap the benefits of their own economic potentials. The driving force of this

hypothesis stems from the fact that states and other international economic actors have

designed and approved economic policies that have stood the test of time, yet academic

researchers and professionals within development and international relations were quick

to find fault with these policies for not being capable of solving problems at local levels

due to the specific peculiarities of localities.

The rationale behind the many LED initiatives in South Africa became obvious in that,

people living in their localities are concerned about their economic future and are bound

to determine their own economic destiny through LED initiatives. Rather than being

mainly the result of economic strategies pursued at the national level (the top bottom

approach) emphasis for local potential for economic development is resulting more from

the many local initiatives (bottom up approach) taking place (Spilling, 1985: p.1).

As such, the developed and developing worlds have been experiencing processes of

economic changes. This has affected so much the production forms, organizations and

enterprise management, the role of public intervention in the economy as well as the

activities of private organizations and why not the labour market. These changes are

further compounded by the increasing globalization of the world’s economy which poses

major challenges in guarantying proper conditions for the consolidation of national local

small and medium size enterprises. Secondly, centralized policies had little effect on the

more marginalized areas of the economy to reassure growth. The results of such policies

became inevitable, sometimes leading to poverty, exclusion of disadvantaged groups in

the society, less safe environment, greater gap between the developed and the less

5

developed counties, more disparity between the rich and the poor, etc. In this vacuum

LED became a viable alternative which intends to solve the problem of local job creation,

inclusion of the disadvantaged groups in the communities, ensuring environmental safety

nets, improving the welfare of the people within the lower echelon incomes and the

participation of communities as a whole in directing their own economic, social and

political destiny (Canzanelli, October 2001: p. 4 and Catenacci, December 2003: p.12).

Achieving these objectives is not without its own limitations, which has provoked

scholars and researchers to explore this area of studies. This in effect, takes us to the

problem question which we seek to examine in this report. Why, despite the emergence

of Local Economic Development in the Republic of South Africa, are localities

unable to exploit their economic resources sufficiently to enable them overcome

poverty at local level?

The challenges of these localities are that of transforming their available economic

opportunities for their own prosperity thus eradicating poverty. How tenable the LED

approach has been in overcoming poverty in the RSA is the focal point of this research.

Therefore, this research work intends to tackle the notion of LED and its role in poverty

alleviation. A detailed examination of this problem question exposes us to the

ramifications of communities grappling with issues of overcoming poverty within

localities in SA through LED programmes.

6

CHAPTER 2 : METHODOLOGY

LED in Sub-Saharan Africa is considered as an economic possibility to strengthen the

capacities of communities laying emphasis on local needs and local resources. It focuses

on community’s competitive advantage as a means to identify new opportunities, create

jobs, income and develop local infrastructure. In this light, this research work will strive

to present the research design which seeks to investigate the research question.

2.1: Research DesignArguments on how to strengthen the economic capacities of localities in order to alleviate

poverty vary according to the different theoretical views. Therefore, it may be possible to

identify several economic development programmes in various countries, that each

stresses on different solutions to achieve poverty alleviation through economic

improvement. Instead of taking the overall perspectives on how different economic

development programmes attempt to alleviate poverty, our problem formulation focuses

on only one specific economic development programme in one country, that is, LED in

South Africa. Thus it is the research problem and the research objectives that determine

the type of research design which will be used in this project (de Vaus, 2001: p. 220).

2.1.1: Case Study Research DesignA case study research design will be used for this project because the research deals with

a particular case study as the unit of analysis from which information is collected i.e. the

Republic of South Africa (de Vaus, 2001: p. 220). The object of study (LED and poverty

alleviation) will be examined within the explanatory case study.

2.1.2: Explanatory, Clinical Case Study DesignHere, this case study seeks to achieve both a more complex and fuller explanation of

LED in South Africa. It seeks to achieve this through the narrow or idiographic

explanations as well as the nomothetic (fuller) explanations of LED and poverty as

spelled out in the problem question within this research (de Vaus, 2001: p. 221 - 233).

This will not only give us the narrower explanation but also a full explanation of LED

and poverty in South Africa.

7

Furthermore, this project will examine the case as a whole (holistic), which is LED and

poverty in the Republic of South Africa and a case as consisting of various levels or

components (embedded units), that is, background of LED in SA, the developmental

local government, the urban LED case study and the rural LED case study in South

Africa. This will enable the research to build a much fuller and a different picture of LED

and poverty by incorporating the experiences and perspectives of these factors as

subunits. It is imperative to avoid examining a specific constituent element (embedded

unit) of LED and poverty because the other embedded units will build up a extensive or

extended picture of the case by taking into account the information gained from the other

levels – holistic or the case as a whole. By so doing, the final case study will tell us

something different from what LED and poverty in South Africa if looked from just one

embedded (Ibid, p.220).

2.1.3: The use of Theories in Case Study research Design De Vaus presents three different ways of performing a research study based on a case (de

Vaus, 2001: p. 221). Firstly, a theoretical dimension can be used as a testing mechanism

in which case the purpose of this design is to see whether the theory can be supported in a

real life situation. In contrast to this stand is the theory-building research design, where

cases are selected to develop and refine propositions. The purpose is therefore to test and

develop a theory that fits the case (Ibid, p. 223). The difference between the two is that

the former begins by setting out specific propositions and testing them against the real

world situation. The latter begins with questions and basic propositions and then looks at

real world cases in order to end up with a more explicit theory. The third research design

is a clinical case study; in this design the locus or area of attention is the case itself. The

clinical case study gathers information in order to build up a complete picture of what is

happening in the case. The goal of the clinical case study is to understand a case with the

purpose of solving a problem. The purpose is not to test or develop theories but to use

existing theories to understand and explain what is going on in the case. This is an

inductive theoretical approach, where the question raised in the problem formulation acts

a starting point, and the case is examined in the light of the question (Ibid).

In this research project, a clinical case study design will be used to examine why despite

the introduction of LED in South Africa, communities are unable to make use of the 8

available resources in order to alleviate poverty. The project will make use of three

different theoretical perspectives, which can be used to understand LED and poverty

alleviation. This will enable us to identify different important aspects to be taken into

consideration when assessing poverty alleviation. The identification of theoretical

assumptions allows us to assess the ways to alleviate poverty at different levels as defined

by the theories. Finally, this multi layered understanding in a holistic perspective will

provide the answer to the problem formulation.

2.2: The Structure of this ProjectThis project will consist of empirical data including the background to LED in the

Republic of South Africa, the legal basis for LED policies and two case studies of LED.

One of the case studies is chosen from the metropolitan city of Johannesburg and the

other from the rural community of Hertzog in the Eastern Cape. The reason for these two

case studies is to illustrate the orientation of the municipalities towards their LED

programmes. The urban case study is pro-growth while the rural case study is pro-poor

giving us an understanding of these two scenarios. Furthermore, the neo-liberal theory,

the empowerment theory and the theory on decentralization of government shall

constitute the theories to be used in this research work. It will be imperative to look

beyond the theoretical considerations by examining the concept of good governance in

South Africa. Thus the empirical data on LED, the various theories and the concept of

good governance shall be scrutinized within the problem question which will provide the

basis for the analysis. Finally, there shall be a conclusion and a perspective that will

address issues of the future.

It is important to examine the LED background of the Republic of South Africa in order

to understand a country such as SA has decided to apply LED policies within localities.

This will open up for a better understanding of certain policy formulation such as the

legal basis for the application of LED within the country. The country LED background

gives an outline of SA in terms of the economic and the political history very briefly.

This intends projects a picture of South Africa as a country endowed with resources yet it

is threatened with poverty and is bound to put in place LED structure in order to arrest

the prevailing situation.

9

The LED program in SA which is the basis of this research will be treated by examining

two key documents: “The White Paper on Local Government” (WPLG) the enabling

document that sets a formal and official piece of legislation mandating municipalities to

carry out LED activities and secondly, Investigation of Pro-Poor Local Economic

Development (IPPLED) paper in South Africa; a policy document funded by the World

Bank-Netherlands Partnership Programme (WBNPP) and the Development Bank of

South Africa. The objectives and strategies of these documents are firstly to set a guide

for municipalities and secondly to understand and implant firmly LED programmes with

the intention to achieving economic growth and/or alleviating poverty in SA.

As already mentioned, the theories to be treated in this report shall comprise the neo-

liberal theory, the empowerment theory and the theory on decentralization of

government. These theories are going to act as an enabling guide in explaining

theoretically the problem identified in the problem formulation thus generating critical

views to the issues raised by the theories in relation to LED in SA. However, we must

look beyond the theoretical background of LED in order to widen our understanding of

the question raised in the problem formulation by examining the concept of good

governance. The concept of good governance can be used as an enabling tool to break the

poverty vicious circle within communities. It arouses the need to apply developmental

policies very prudently by all the stakeholders (the government, municipalities, NGO’s,

civil society organizations and the population) achievement optimal results. The raison-

d'être of the concept of good governance is that it will raises other practical issues on the

application of LED and poverty alleviation which are not explained on the basis of a

theoretical analogy in SA. These theories and the good governance concept will be

examined in line with local economic development, poverty alleviation vis-à-vis the

problem question.

Juxtaposing or putting together the empirical data on local economic development and

the case studies, the theories, the concept of good governance and the problem question

will provide the basis of the analysis. Thereafter, a succinct conclusion which will be

crowned by a perspective that addresses issues for the future with regards to LED in

South Africa.

10

2.2.1: Theoretical ConsiderationAs earlier mentioned, three theories shall be used in this research project: The neo-liberal

theory, the empowerment theory and the theory on decentralization of government. The

epistemology of these theories combined will provide us with a holistic understanding of

the relationship between LED and poverty alleviation in SA within the framework of the

problem formulation.

The neo-liberal theory will enable us to understand the philosophy that underpins

conventional economic model in designing economic possibilities for the global

prosperity. Neo-liberalism is used here to demonstrate the ideology, which underpins the

basic philosophy in the free market structure emphasizing on globalization as the basis

for economic growth in an economy thus leading to poverty alleviating. Trans-

nationalization in trade has been upheld by neo-liberal theory and policy advocacy and

relies on the trickle down effects for the spread of wealth to the disfavoured in society –

top bottom approach. It argues that liberalization of markets is the key to development of

policy reform and will lead to the maximization of the gains from international trade for

the good of all (Colclough and Manor, 1991: p. 51).

The empowerment theory on the other hand will enable us understand the idea which

buttresses the emergence of local economic development, in providing the theoretical

arguments for poverty alleviation through collective efforts especially the vulnerable

poor. The manifestation of the empowerment theory to LED initiative is obvious as it

blends the practical reality and theoretical framework within which this concept operates

by encompassing all the facets of LED. This theory lays much attention to participation,

capacity building, economic improvement, democracy and transparency, which are the

grand words in LED programmes within municipalities (Stirrat, 1996: p.67).

Furthermore, an examination of the theory on decentralization of government

(specifically democratic devolution of power) creates an enabling environment for the

enforcement of local economic development policies within communities. LED thrives

through decentralization of responsibilities to the local administration regarding the

economic challenges communities face and how this can be overcome – the bottom up

11

approach. These theoretical considerations provide various perceptions on how poverty

can be overcome. However, like any social problem within the field of social sciences,

the problem questions seem to beg for an answer as to whether a theoretical

understanding per se of social problems is sufficient to offer a complete solution to the

problem itself.

Therefore, it became necessary to look at the concept of good governance as it is very

relevant for the overall development policies of SA. It enables the application of

development policies (by public and private sectors or even NGO’s and CSO’s) in

virtuous manner for enhancement human welfare. In this light, it creates the basic extra

economic conditions for development e.g. an effective public administration, a functional

legal framework and a transparent system (Wohlmuth et al, 1997/1998: p. 6).

2.3: Alternative TheoryThe locality theory: The locality theory could have been one of the theories treated in

this report but due to limited time and space, it is only mentioned as an alternative theory

that ought to have been part of this research work. The locality theory states that, a

locality is a descriptive term for a place where people live their daily and domestic lives.

The theory has been refined to also focus on social processes occurring within particular

localities or places and the important role of governance operating within that locality

(Nel, 1999: p. 24). This leads to a shift from the view that a locality is a passive location

of economic activities to an endogenous approach that lays emphasis on the unique

factors of the location in determining economic processes within such localities. It

focused on the distinctive attributes found within specific communities and the degree to

which the natural characteristics and social conditions in such places determine future

development (Ibid, p. 26).

2.4: The aim of the ThesisUntil now, most research on LED has been biased by focusing predominantly on the

developed world. As such, this research intends to break new grounds in applying LED

and practices to problems specific to the developing world - LED in the RSA. Because of

the upsurge in LED, it has created a new power relationship between the various actors in

conceiving, defining and implementing developmental issues within localities. With the

12

new role in the implementation of developmental issues there are bound to be new actors

assuming different responsibilities within this context. This in effect creates new

challenges and new responsibilities. This therefore makes it important to explore how

best the stakeholders can better manage processes of LED and foster its growth there by

alleviating poverty in SA.

This report also aims at considering LED as a tool that can be used to unlock economic opportunities and make them available to people within their communities. It intends to look at how LED projects have been applied to a more thoughtful response to conditions of poverty in the case study in question which will be examined subsequently in this research.

This report seeks to look at the increased attention focused on LED and its emergence;

how local action interacts with the legal, institutional and structural factors to provide

possibilities and constraints for the development of LED.

Furthermore, this research intends to look at the international experience which suggests

that the opportunities arising from economic globalization benefit economies that are

globally competitive. The threats of globalization are more severe for economies in low

and middle-income countries especially the marginalized areas within them. The logic of

globalization is not only of integration; it is also of greater exclusion and differentiation

within less competitive communities. As such it becomes imperative to investigate other

measures to mitigate these globalization adversities (LED) within communities in SA.

This report equally aims at looking at how the new government of SA embraces LED and

what strategies they have put in place towards empowering people within communities

who had been brutally disempowered by apartheid for many decades.

This will in effect widen our views on development and international relations and

increase our knowledge on policies of LED and poverty. With the emergence of LED, we

will find out if this economic approach has the ability to overcome the weaknesses

13

inherent in conventional economic policies within communities, thus alleviating poverty

in SA.

2.5: Literature This research work will make use of the following literatures: The “White Paper on Local

Government” in South Africa which outlines the role of LG in the social and economic

development of municipalities. The LG is captioned “developmental local government”

with the special mandate to promote LED (DPLG, Content, 1998). Furthermore, this

research will make use of “The Investigation of Pro-poor Local Economic Development

in South Africa”, a policy paper that outlines an investigation into the LED situation of

SA funded by the World Bank through the Netherlands Trust Fund and the Development

Bank of South Africa. The constitution of SA, text books, academic publications and

other internet materials relevant to LED shall be used in this report. When used

cautiously, they will provide updated and current information for this research topic.

However, this report will rely predominantly on secondary data relevant to this research

topic because it will save time and money. Considering that the project has to be

submitted within four and a half months, it makes it even more appropriate to rely on

secondary data so as to meet up with the deadline. This will enable a better formulation

and understanding of the research problem and broaden my views on other research work

within the same field. It will facilitate the verification process of the material and the

reliability of the information and conclusions will be greatly enhanced (Ghauri and

Gronhaug, 2002: p. 78).

2.6: Definition TermsFor the purpose of clarity, it will be necessary to attempt a definition of certain

terminologies used in this report. This will give a more focused meaning of the words and

their contextual meaning.

Local Economic DevelopmentImperative to this research is the need to clearly attempt a definition of what LED is. Like

most definitions in the field of social sciences the term is far from being unequivocal. Nel

Etienne presents the definition of LED as advanced by Zaaijer and Sara as “essentially a

process in which local governments and/or community based groups manage their

existing resources and enter into partnership arrangements with the private sector, or 14

with each other, to create new jobs and stimulate economic activity in an economic area”

(Nel, 1999: p. 5).

Furthermore, Nel uses the works of Bennett and Stohr to give a more definitive value of

LED as “an initiative and entrepreneurship, which can occur in both urban and rural areas

having a sub national or sub-state action” (Ibid, p. 6). The first definition did not qualify

the sphere of LED but rather referring to an economic area which may be a country or a

trade bloc.

According to Blakely and Bradshaw, LED refers to “the process in which local

governments or community-based organizations engage to stimulate or maintain business

activity and /or employment. The principal goal of local economic development is to

stimulate local employment opportunities in sectors that improve the community using

the existing human, natural, and institutional resources” (Blakely and Bradshaw, 2002:

p.xvi). Although these definitions cannot be taken as the final statement of what LED is,

they do provide a broad insight into the overall orientation of the concept.

Local or locality is used here to mean a geographic area composed of municipal

institutions under a local government administration (DPLG, Section D, 1998).

Local Government: Local government will refer to municipal level government

irrespective of whether they are metropolitan governments, district governments or local

municipalities (Blakely and Bradshaw, 2002: xvi and DPLG, Section D, 1998).

PovertyDiverse notions of poverty underpin the mainstream and alternative views of the

definition of poverty. Most governments, international organizations and citizens around

the world adhere to the orthodox conception of the definition which refers to a situation

“where people do not have the money to buy adequate food or satisfy other basic needs,

and are often classified as underemployed.” This main stream view of poverty based on

money evaluation has arisen as a result of globalization of western culture and the

expansion of the market. Thus since 1945, the meaning of poverty has almost been

15

universalized and poverty is seen as an economic condition dependent on cash

transactions within the economy. This refers to those living on less than a dollar per day.

What ever the case, there is a basic consensus on the material aspects of poverty such as

the lack of food, clean water and sanitation, etc (Baylis and Smith, 2005: p. 647).

According to Sen, “poverty can be sensibly identified in terms of capability deprivation”.

This is a more resounding definition of poverty as it emphasizes on the deprivation of

basic capabilities rather than merely lowness of incomes (Sen, 1999: p. 87).

The above definition is in compliance with the definition put forward by the Copenhagen

Declaration of the World Summit for Social Development which defines absolute poverty

as “ ….a condition characterized by sever deprivation of basic human needs, including

food, safe drinking water, sanitation facilities, health, shelter, education and information”.

This definition does not only rely on lack of income but also dispossession or deprivation

which undermines human well-being either in civilized societies or primitive societies

where cash transactions are virtually unavailable for economic dealings (Spicker et al,

2006: p. 8).

16

CHAPTER 3 : EMPIRICAL DATA

3.1: Background to LED in the Republic of South Africa (RSA)The Republic of South Africa (RSA) has the largest economy in SSA, but it is highly

dualistic, with the first and the second economies. The first economy (rivaling other

developed economies) is very modern with a world class formal economy which

produces a bulk of the country’s wealth and is well integrated with the global economy.

Mining, manufacturing, services and agriculture, within the first economy are well

developed. On the other hand, the second economy is the marginalized economy, which

is portrayed by underdevelopment, contributes very little to the GDP, makes up a vast

percentage of the population, comprises the poorest of the rural and urban population, is

structurally disconnected from the first economy and the global economy thereby

incapable of self generated growth and development. Therefore there is no doubt that

about 40% of the population in SA is unemployed and relies for survival on welfare

grants and the informal sector (Nel et al, July 2006: p.6 & US Department of State,

September 2008).

The 1990’s witnessed a remarkable transformation of the South African society and the

government from a racially repressive to one of the most liberal on the continent. While

this transition has not been devoid of complications, it nonetheless remains one of the

most dramatic and momentous transitions in recent decades. The African National

Congress (ANC) led-government which came to power in 1994 is determined to redress

the deeply entrenched imbalances caused by decades of apartheid policies and at the

same time striving to reconcile social harmony within such a multi racial society that was

fragmented by apartheid. This is to be achieved by planning an acceptable development

strategy in one of the most unequal societies in the world by strengthening grassroots

participation and delivery to what it terms developmental local government. This in effect

takes development to the people by entrenching a pro-poor development focus on local

government (Nel et al, July 2006: p.6 and DPLG, Section B, 1998).

In a bid to modernize the economy by being internationally competitive, there have been

massive job losses from the formal economy in some labour-intensive sectors in SA. The

number of unemployed people rose from 1.9 to 4.2 million from 1995 and 2002, and by

17

1999 an estimated 33% of households were living below the poverty line. Though the

March 2003 Labour Force Survey of Statistics in SA illustrated that two million new jobs

were created in the past seven years bringing the total number of those employed to 11.6

million, this growth rate of over 2.5% a year is unable to keep up with the new applicants

into the work force. The government estimated that the economy must achieve a growth

rate of at least 6% to counterbalance the current unemployment situation. It is against this

background that the RSA engaged vigorously to overcome poverty through a systematic

approach by instituting LED as an appropriate tool to strengthen the economic

capabilities of municipalities (Nel et al, July 2006: p.6 and US Department of State,

September 2008).

Therefore two of the hallmarks of the last half of the 20th century and the beginning of the

21st century in terms of the development theory and practice in the world have been the

major attention committed to poverty as expressed in the MDG’s and the veracity that, in

an era of globalization and decentralization, localities and their authorities are now

playing a vital role in applied development at local level – LED (Etienne Nel et al, 2006:

p. 1). SA took this golden opportunity to alleviate poverty and bring meaningful

development at local level through LED during the political transformation process in

1994 after the first multi-party nonracial democratic elections (Nel et al, July 2006: p. 1).

3.2: Local Economic Development as an Emerging Reality in SA

After the election of the ANC led government in SA in the 1990’s, saw the inevitable

emergence of LED as a relatively new concept within municipalities in SA (Nel, 2001: p.

1008).

3.2.1: OverviewDue to the increasing attention attached to poverty and the greater responsibilities given

to local governments (LG’s) in the economic, social and political development of

localities, LED became an emerging reality in SA. Therefore, LED is attracting a lot of

attention in SA and draws considerable interest from the SA government, municipalities

as well as within donor communities. The emergence of LED in SA is mostly due to the

following reasons: Firstly, SA is pursuing decentralization policies, and as part and parcel

18

of this policy, responsibilities for the promotion of economic development are delegated

to local governments. There is hope that governing may be easier at the local level and

developmental local government may be feasible since issues such as low national

cohesion, ethnic tensions, racial divide on the one hand and overburdening of central

government bodies, fragmentation of problems, policies and governmental institutions on

the other hand are less of an issue at this level (Meyer-Stamer, 2004: p. 1). SA has

suffered from the brunt of apartheid which precipitated limited governance and delivery

capacity by the government. With decentralization and the end of apartheid, local

stakeholders are now more involved in the promotion of economic activities vigorously at

the local level since unemployment and poverty are most urgently felt at this level (Ibid).

The application of LED is a relatively recent phenomenon in SA; having become evident

in the early 1990’s, as well as, tremendously gaining credibility and acceptance by the

late 1990’s SA became keen to apply LED policies because of the major challenges

facing localities. The unique nature of LED in SA as opposed to other African countries

is based on the fact that there is significant government endorsement for LED

interventions and secondly, the wide spread application of LED interventions within the

country (Nel et al, July 2006: p. 1). With such attention attached to LED by the

government of SA and the prioritization of the needs of the poor, the country could serve

as learning laboratory with respect to policies of LED on the continent (Nel et al, July

2006: p. 1 & DPLG, General, 1998). This therefore makes the case of LED in the country

of SA very significance.

In the above light, it became undisputed within public and private spheres that after the

political miracle achieved by the country in 1994, what is now needed in SA is an

economic miracle with the intention of closing the gap between the two economies thus

alleviating poverty (Nel, 2006: p. 1 and Nel, 1999: p. 1). This remarkable opportunity

came when the government of SA enacted the “White Paper on Local Government”

(WPLG) with the intention of transforming local government to meet up with the

challenges in its developmental goals. Here the local government was given a distinctive

status and role in building democracy and promoting the socio-economic development of

municipalities (Nel, 1998: p 1 & DPLG General, 1998).

19

There has been a new wave and a significant shift in the economic strategies pursued in

the country at the local level. The rationale behind the many LED initiatives becomes

obvious as people living within municipalities are concerned about their own future and

are bound to determine their own economic destiny through LED initiatives. Rather than

being mainly as a result of economic strategies pursued at national level, emphasis for

local potential for economic development is resulting more from the many local

initiatives taking place within localities (Spilling, 1985: p.1).

3.2.2: Why LED?LED overcomes market failures and the challenges in the global market structure; it

galvanizes the population towards a common objective and sense of purpose. LED

stimulates citizens towards participation and entrepreneurial ventures, guarantees suitable

conditions for sustainable employment, and promotes favourable environment for human

development. It is consistent with the fight against poverty and social inclusion, assures

environmental safety and leads to the reorientation of economic and social policies

towards “bottom-up” development strategies (Canzanelli, October 2001: p. 7-9 and

Helvetas Cameroon and Anembom Consulting, September 2005: p. 12 – 17).

Furthermore, LED combats the traditional model of economic development that gives the

task and privilege of producing wealth to a small segment of the population and relies on

the unlikely trickle-down effect to get to the poor, i.e. the neo-liberal postulation which

promotes globalization and multinational corporations (Catenacci, December 2003: p.26).

3.3: Policy Consideration for LED in South AfricaThe new developmental role placed on local government was precipitated by the need to

apply LED at local level thus overcoming the challenges facing municipalities such as

poverty alleviation and job creation. This then resulted in a series of broadly interrelated

policy considerations, which include the fact that the country’s unemployment and

poverty situation required the need to seek employment-generating strategies at both the

national and local government level thus necessitating the introduction of LED (Nel et al,

July 2006: p. 6).

20

Local governments in SA are now constitutionally mandated to promote the social and

economic development of their municipalities. The constitutional guarantee has been

strengthened by the White Paper on Local Government of 1998, which formally

introduced the concept of developmental local government. In its other enabling

provisions, it outlined that local governments are expected to promote job creation and

boost the local economy through LED (South African Constitution, 1996: Sections 152

(c) and 153 (a) and DPLG, Section B, 1998).

The decentralization of government through democratic devolution of power to municipal

governments and the responsibilities to their elected officials is a key feature of

government policy; it reinforces popular participation in local development with

emphasis on the needs of the people, was vital for LED in SA (Nel, et al, 2006: p. 7).

Local spheres of government consist of municipalities which are established through out

the country. Municipalities have the right to govern local government affairs subject to

national legislation (South African Constitution, 1996: Sections 151 and 154). In terms of

the Reconstruction and Development Plan1 (RDP), which provides a wide statement on

the developmental objectives in SA, development is about active involvement and

empowerment rather than delivery of goods to a passive citizenry. This has been

entrenched in the South African constitution which requires local governments to

encourage the involvement of communities and community organizations in matters of

local government and development (Nel et al, 2006: p. 7).

The status of local government and its developmental role has been enhanced by a

commitment to the fact that local governments are not merely the lowest level of

government occupying an inferior position, but rather a distinct unit of government

having a special and distinctive place within the state. Government in the Republic of SA

constitutes national, provincial and local spheres with each sphere being distinctive,

interdependent and interrelated. This therefore, makes LG’s to have a sphere in its own

right. This is one of the tenets of a democratic state which seeks to promote development

1 The Reconstruction and Development Program (RDP) was designed to improve the standards of living for the majority of the

population by providing housing, basic services, education, and health care. While a specific ministry for the RDP no longer exists, a

number of government ministries and offices are charged with supporting RDP and its goals.

21

at local level especially through LED initiatives. As such, localities will be able to take

direct control of their developmental processes. This will facilitate planning, execution

and the prioritization of their needs to local specificities. This is so fundamental in the

success of any development process within SA (Ibid).

It worth noting that, the above policy considerations are in line with LED and poverty

alleviation in SA due to its interventionist elements towards the poor. Secondly, it

mandates local people to be part and parcel of their own development processes. And

thirdly, the constitutional safeguards and the devolution of power to local councils are a

further bolster to LED within SA. But the governments’ free market thinking in a

dominated neo-liberal era is at variance with LED policies, which has provoked debates

on how the government intends to close the gap between the first and the second

economy with this free market concept.

3.4: Local Economic Development in South AfricaMunicipalities in SA cannot pretend not to take into account the economic changes going

on within their localities either through the rise or closure of businesses. This is because it

has a consequence on job creation, poverty and municipal revenue sources. That is why

municipalities have been termed developmental local governments so as to confront these

challenges.

3.4.1: Developmental Local GovernmentThe White Paper on Local Government in SA refers to local governments as

developmental local governments which are inextricably linked to LED. It is local

government that is committed to work with citizens and groups within the community to

find sustainable ways to meet their social, economic and material needs and improve the

quality of their citizenry. This is to be achieved by transforming LG to play a

developmental role. It sets out a series of developmental outcomes and proposes several

ways to become more developmental in order to improve the lives of their people

(DPLG, Section B 1998).

3.4.2: The Role of Local Governments in Promoting LED in SAThe Constitution entrusts the LG to take reasonable measures, within its available

resources, to ensure that all South Africans have access to their basic needs (adequate 22

housing, health care, education, food, water and social security) and promote the

economic development of municipalities (South African Constitution, 1996: Section 153

a). As such, developmental local government aims at playing a central role in the

development of the communities. It focus on improving the quality of life of communities

most especially those members and groups within communities that are often

marginalized or excluded, such as, women and the very poor within the localities. This

creates an opportunity for municipalities to develop their own strategies for meeting local

needs and promoting the social and economic development of communities (DPLG,

Section B: 1998).

3.4.3: Objectives of Developmental Local GovernmentThe objectives of developmental local government include maximize social development

and economic growth, integrating and coordinating activities at the local level,

democratizing development and playing a key role in leading and learning within

municipalities.

3.4.3.1: Maximizing Social Development and Economic GrowthLocal governments should exercise its functions in a way that it has maximum impact on

the social development of the community by meeting the basic needs of the poor and on

the growth of the local economy. Through service delivery and regulations, local

governments exert a lot of influence on the social and economic well-being of local

communities. They set the agenda for local politics and the way they work tells a lot to

their own residents, prospective migrants or investors towards existing opportunities. LG

therefore need to have a clear outline for the local economy and work in partnership with

local businesses, NGO’s and the population to maximize job creation and sustainability

and investment opportunities for the citizens (DPLG Section B 1998).

It is worth noting that LG in South Africa are not directly responsible for creating jobs;

rather they are in charge of guaranteeing that the general political, economic and social

conditions of their localities are favorable for poverty alleviation through job creation and

investment (Ibid).

23

Provision of infrastructure is the central contribution made by local government to social

and economic development. Linking municipal contracts to social responsibility,

proactively identifying and releasing land for development could have a significant

impact on development. Policies and programmes can be initiated, aimed specifically at

alleviating poverty and enhancing job creation. For instance, LG could assist with the

provision of support services, such as training to small businesses or community

development organizations (Ibid).

Local government can also promote social development through functions such as arts

and culture, the provision of recreational and community facilities, and the delivery of

aspects of social welfare services e.g. subsidized medical bills, creation of cheap and

affordable schools for the poor. The empowerment of marginalized and disadvantaged

groups is a critical contribution towards social development in order to boost LED (Ibid).

3.4.3.2: Integrating and coordinatingVarious agencies, such as national and provincial departments, parastatals, trade unions,

community groups and private sector institutions, contribute towards development. It

becomes necessary for the LG to provide a platform and leadership role for those

agencies which participate in achieving local prosperity. Poor coordination between

service providers could severely undermine the development efforts of LG thereby

thwarting the growth of LED. Municipalities should aggressively develop ways to pull

resources and investment from both the public and private sectors to meet their

development targets. A sustainable and livable settlement depends on the coordination of

a range of services and regulations e.g. land-use planning, household infrastructure,

environmental management, transport, health and education, safety and security and

housing. Municipalities will need to work closely with other spheres of government and

service providers in order to enhance the development of LED (Ibid).

3.4.3.3: Democratizing Development, Empowering and RedistributingLG play a vital role in promoting local democracy and representing community interests

within the municipality and at national level. This can be achieved through the

involvement of citizens and community groups in the planning and execution of

municipal programmes. LG can do a lot to support individuals and community initiatives,

24

and to direct community energies into projects which benefit the area as a whole. The

involvement of youth organizations is particularly important (Ibid).

Municipalities should promote the participation of marginalized and excluded groups in

community processes. Obstacles to effective participation such as social values and

norms as well as practical issues such as the lack of transport, household responsibilities,

and personal security should be overcome. LG must adopt inclusive approaches in

fostering community participation and actively encouraging the participation of

marginalized groups (e.g. women) in the local community processes, which will in effect

promote the general development aspiration of the municipality – LED (Ibid).

The participatory process should not impede development and the narrow interest of local

elites must not be allowed to overcome the development vision of the locality.

Participation should improve rather than hinder the development path (Smith, 2007: p.

148 and DPLG, Section B, 1998). The RDP aimed at the empowerment of the poor and

the marginalized in communities. This was reinforced by the Growth, Employment and

Redistribution (Gear) strategy with the intention of redistribution of income and

opportunities in favour of the poor. This income redistribution approach is not compatible

with the neo-liberal thinking as it gives room for greater intervention by the local

government in the economic processes. Developmental local government is uniquely

placed to combine empowerment and redistribution in a number of concrete programmes

that includes:

-Service subsidies to provide openings for the poor to improve their status. This must be

done in a way which is within municipal budget.

-Assistance to community organizations (women groups, youth associations) by the LG

in the form of finances, technical skills or training can enhance the ability of the poor.

-The socio-economic development and community empowerment directed at poverty

alleviation e.g. empowerment strategies which focuses on women are likely to prove the

most effective and inclusive in improving poverty alleviation (DPLG, Section B, 1998).

3.4.3.4: Leading and LearningThe speedy changes at the global, regional, national levels are forcing local communities

to reconsider the way they are organized and governed. In SA, communities are looking 25

for new ways to sustain their economies, build their societies, protect their environments,

improve personal safety and reduce poverty. Although support from other levels of

government is critical, LG are increasingly devising strategies to make their localities

more economically sustainable. This requires the concerted efforts of stakeholders in

building this kind of social capital (this sense of common purpose) to find local solutions

for local problems (Blakely and Bradshaw, 2002: p. 26 and DPLG, Section B, 1998). The

municipalities can achieve this by:

a) Having a local political leadership that is competent to bring together a network of

local interests that collaborates to realize a shared vision of the municipality.

b) Being open to problem-solving and dedicated to working in partnerships with

stakeholders.

c) Assuring that knowledge and information are acquired and managed in a way that

promotes continuous learning and easy access to knowledge.

d) Improving local democracy, human rights and promoting constitutional values and

principles.

e) Building awareness on environmental issues by encouraging citizens to utilize scarce

natural resources in a wise, careful manner.

f) Investing in youth development through involvement in civic and development

programmes.

g) Empowering the marginalized groups in the community and encouraging their

participation.

h) Empowering councilors as community leaders who should play an essential role in

building a shared vision and mobilizing community resources for development

(DPLG, Section B, 1998).

Developmental local government requires that municipalities become more strategic,

creative, and ultimately influential in the way they function. They have a crucial role as

policymakers, as thinkers, innovators and as institutions of local democracy. Therefore

the developmental outcome of LG is that they should seek to mobilize a range of

resources towards the provision of infrastructures and services thus achieving LED and

poverty alleviation. It is worth noting that these developmental outcomes should not

26

compromise national sovereignty as all LG and LED are carried out within the state

(Ibid).

It is even more demanding for these elected officials to meet the development aspirations

of the people as their next mandate is determined by the result registered during their

current term in office. Whether they receive state or other subventions or not, local

municipalities must generate revenue over which they can have control and guarantee

sustainable development in order to meet the expectations of their population (Helvetas

Cameroon, p. 1 & A H J Helmsing, 2001: p. 61). It becomes very imperative that LG

mobilize their communities under the LED platform especially during this period when

the central government is rolling-back its traditional responsibilities while delegating

more tasks to local councils to direct the social and economic destiny of their people.

Thus, the principal goal of LED is to stimulate local development by increasing local

productivity, guarantee employment opportunities, improve on household income,

develop local infrastructure and improve on the revenue of the local council using their

existing human, natural and institutional resources at the local level. LG should manage

their existing natural and human resources to create jobs and stimulate the economic

activities of communities (Nel, 2001: p. 1003-1005).

3.4.4: Advantages of LED in SAAs opposed to traditional development policies, LED strategies empower local

communities and generate local dialogue. Citizenry who had little or no control over the

economic activities taking place on their territory begin to adopt a more proactive stance

with regards to their own economic future. As such this leads to a general improvement

in the quality and quantity of jobs because of the involvement of local stakeholders in the

economic activity within their territory (Rodríguez-Pose, 31 December 2001: p. 1- 2).

It helps to make local institutions more transparent, more accountable and contribute to

the development of the local civil society. It makes economic activities dependent on the

specific economic conditions and competitive advantages of a defined territory (Ibid, p.

12).

27

LED generates sustainable employment in firms and makes them more capable of

withstanding changes in the global economic environment (Ibid). In this light, we are

going to look at the council monographic studies and strategic plan in designing LED in

SA.

3.4.5: The Council Monographic Study (MS) and Strategic Plan (SP)Municipalities are facing immense developmental challenges and to overcome these

challenges, LG will need to understand the development situation within their

municipality and develop concrete visions and strategies for realizing and financing their

developmental vision in partnership with other stakeholders. Therefore monographic

study and strategic plan are tools to help municipal councils focus their activities on the

development opportunities and needs of the population. This will enable councils to

engage in an integrated development planning in order to establish a development plan

for the short, medium and long-term which is dedicated towards LED and poverty

reduction (DPLG Section B 1998: p. 11).

3.4.6: Council Monographic Studies (MS)MS are base line studies aimed at summarizing all relevant physical and socio-economic

information about a municipality to enable the identification of the needs of the

population and the development potentials. The MS reflects the councils’ actual

specifications like history, sociology, population, natural resources, economy and

infrastructure at the time the MS was produced (Helvetas Cameroon, p. 3).

3.4.7: Council Strategic Plan (SP)The SP aims at planning the most urgent actions and investments in the council area. This

is done through effective communication and collaboration between the council, the

community and other stakeholders. The Strategic Planning is in three parts: short term

(for 1 year), mid-term (for 5 years) and the long-term (for 25 years) of the council

activities. The establishment of the SP in the short, medium and long-term is because LG

have limited resources to exhaustively carry out the developmental needs of their

municipalities as projected in the MS. Prioritizing these needs in order of urgency while

taking into consideration the available income is important. This enables LG to align their

28

agreed policy goals within their financial and institutional resources (Helvetas Cameroon,

p. 4 and DPLG Section B, 1998).

The elaboration of the council MP and SP should be the priority of any council to achieve

the development vision of its municipality. It is indeed the first step local actors pursue to

clarify what objectives they share as well as the first step in the learning process for

building LED. It is a fundamental exercise for fixing collective ideas, exchanging

interests and values, and identifying the strengths and weaknesses of their territory. This

makes it a necessary tool for the assessment of any future coherent actions for the

achievement of LED for councils in SA (Canzanelli, October 2001: p. 15).

The elaboration of MS and SP for the council represents an important way of improving

social cohesion. It is not an easy exercise to arrive at because it sometimes leads to

different contradictory positions and interests. Once the local actors reach an agreement

on what the development objectives the council are, the rest turns out to be easier and

more effective (Ibid). As such, the council will identify a few key areas where it can

intervene to stimulate economic growth. These are generally known as poles of economic

development within the LED programme. The selection of poles of economic

development must be carried out within the framework of participatory economic

analysis (Helvetas Cameroon and Anembom Consulting, September 2005: p. 17 and

DPLG, Section B, 1998).

3.4.8: Participatory Economic AnalysisThis serves as the basis for engagement between LG, the population and other

stakeholders in the design of the economic policies of the municipalities. The objectives

of participatory economic analysis are (i) to define poles of economic development (ii) to

analyze the economic areas that have the potentials to stimulate economic growth (iii) to

involve all the stakeholders within the council area in the analysis. This will in effect

enable the council to play its role as a catalyst in the design of the LED programme while

all the stakeholders are part of the development process (Helvetas Cameroon &

Anembom Consulting, September 2005: p. 17 and DPLG Section B, 1998).

29

To ensure that the economic poles identified can stimulate growth, they must have a

competitive advantage over other regions that produce similar commodities. These

include better quality, greater quantity, cheaper prices, rapid delivery, better services,

regular supply and a guaranteed market both at local, national and why not international

level (Helvetas Cameroon & Anembom Consulting, September 2005: p. 20). This helps

the municipality to develop a holistic strategy for poverty alleviation. This is one of the

major virtues of LED policies as it offsets the weaknesses inherent in the conventional

economic policies (the global market challenge and multinational corporations) to the

third world (DPLG, Section B, 1998).

3.5: Community Driven LED Case Study in the Rural District of HertzogIn the vision of LED in the rural district of Hertzog of SA, we are going to look at

farmers Cooperative Society which seeks to give support to the vulnerable groups

through participation and endogenous use of resources for a sustainable development, job

creation and poverty alleviation (Canzanelli, October 2001: p. 34).

3.5.1: The Study AreaHertzog is a rural village in the Eastern Cape within the District of Mpofu of the former

Ceiskei Homeland. The cooperative includes Hertzog and Fairbain area with a population

of about 1500 people. Unemployment in the area was about 84% of the economically

active population before the cooperative was formed and the poverty levels are high. This

has led to a high dependency ratio with 35% of the population having to support others.

The area lies in the valley of the Katberg Mountains and in the upper catchment region of

the Kat River. White farmers, who practice intensive irrigated farming predominantly for

tobacco and citrus, settled there in the 19th century. Although the white farmers left the

area in the 1970’s the farm workers remained on the land. Attempts to re-establish

farming on the valley by the Ceiskei department of agriculture in 1980 and a religious

organization in 1992 failed because of lack of support from the local community (Nels,

1999: p. 218-219).

National political change, escalating unemployment, poverty and the consciousness that

attempts had been made to re-establish the farm, prompted the broader Hertzog

30

community to re-establish the farm. This led to a series of community workshops run by

community organizations. The ending of state repression by 1994 allowed local leaders to

be identified who took control of local affairs to explore possibilities for their own future.

The community realise that their strength lay in the agricultural sector given their farming

skills, sufficient rain fall, a river, the abandoned farm land and farm equipment. The

success of the project is based on the notion that the process of development should be

vested in the community where the development initiative has its origin. The community

will tend to have greater ownership over the process of development and are bound to

work for the success of the project as they benefit directly from it. The cooperative

leaders negotiated with the government departments and a permit was granted for the

community to farm the valley and the abandoned machines rehabilitated for use (Ibid 217

– 219).

3.5.2: Hertzog Agricultural Cooperative (HACOP) InitiativeThe rural community consented to set up a farming cooperative called HACOP whose

aimed was:

1) To educate, empower members of HACOP to operate a self-sustainable and

economically viable gardening project on a hectare of land each.

2) To produce all year fresh vegetables for the local and neighbouring markets.

3) To optimally utilize the available land for agriculture.

4) To promote an agricultural habit.

5) To generate adequate income for its members (Nels, 1998: p. 220).

Membership to HACOP is based on the purchase of 100 shares at 1 Rand2 each, which

provided the cooperative with its initial capital. The venture started with 23 members

who occupied 23 hectares of land with sufficient piping for irrigation. HACOP leaders

are members who make and implement decisions based on shared experience as farmers.

Agribank gave HACOP a loan for the project in 1994 at the inception of the project (Ibid,

p. 220-221).

The success of the scheme is partly because they have a sense of mutual self-reliance that

prevails amongst HACOP members. Market gardening suits the labour intensive nature

2 Rand is the Republic of South African currency.31

and irrigation of HACOP small farm systems for producing cabbages, potatoes, tomatoes,

spinach and a few fruit trees. Productions are mainly for sale in the local and regional

markets, and for household needs. This has led to profits between 1000 to 7000 Rand per

hectare per growing season and consequently improving household incomes. The

economy of the valley has been transformed. The success of the first phase led expansion

of HACOP farm size to all willing members of the valley and the farms were producing

enough to meet the repayment of the loan deadline. HACOP was a market driven project,

which paid off as members improved on their income. The achievements of the HACOP

project have motivated the department of agriculture to assign an extension agric officer

to assist and advice members. They equally benefit from bulk buying through cheap

prices from their external suppliers of their inputs (Ibid, 222- 224).

The HACOP has led to sustainable employment and improved farming capabilities

(training) of members through the establishment of 83 small scale farmers who never had

stable incomes before the establishment of the project. It has also led to empowerment

and the improvement of the quality of life of the members through community

involvement and a sense of ownership which enhances the participation of members in

decision making. It has led to the improvement of the infrastructure of the farming

community through the rehabilitation of the machines, farm houses and roads etc (Nel,

1998: p. 227-228 and DPLG, Section B, 1998).

3.5.3: Flaws of HACOP Inadequate piping led to frequent maintenance of the irrigation system which increases

cost. Secondly the nature of farming is labour intensive with the only machines being

diesel pumps and three tractors for ploughing (Nel, 1998: p. 223).

The intensive market oriented farming system requires high level of skills and

technology, which the individual HACOP members lack but is generally available in he

cooperative. This is further compounded by the fact that there is no accurate statistic to

evaluate out put from an individual and a community basis. The successes attained and

the desire to thrive led to friction among members (Ibid, 223-224).

32

3.6: The Johannesburg LED Urban Case StudyThis case study portrays a pro growth focus LED although there is some latitude either

directly or indirectly for economic growth in the poorer areas of the municipality. The

case study uses the Johannesburg fashion district initiative to exemplify a market focused

project which has a direct bearing on the pro-poor development of the municipality (Nel

et al, 2006: p. 54).

3.6.1: The Economic Background of JohannesburgJohannesburg is one of the biggest cities in Sub-Saharan Africa which is experiencing

rapid growth in the financial and business services, high technology manufacturing,

wholesale and retail sectors in recent years. This has led to growth in employment to be

limited within the capital intensive sectors of the municipality. Other sectors such as

mining and manufacturing are experiencing long term decline thus leading to persistent

unemployment levels in the city (Ibid, p. 55).

Johannesburg has the most sophisticated policy development framework for LED in SA

titled “Johannesburg 2030”. The policy document supports a pro-growth policy which

aims at developing a knowledge based economy and enhancing the city’s status as a

world class city. Their LED strategy places emphasis on skills improvement, the

promotion of the tertiary sector and infrastructure development. The policy framework

sees poverty as an issue to be tackled through the overall development of the city’s

economy – trickle down which is not consistent LED common sense (Ibid).

The city’s economic development is managed by the economic development unit and is

helpful in creating partnership arrangements with both the private sector and state

institutions e.g. the “Blue IQ” programme which seeks to develop high tech, logistics,

tourism and transport facilities within the municipalities (Nel et al, 2006: p. 55 and

DPLG, Section B, 1998).

3.6.2: LED Strategies for JohannesburgThe city has embarked on an extensive development initiative, which includes:

-Development of the city deep freight and logistics deport – for continued economic

development and linkages of the city to other towns and the rest of the world.

33

-Support for urban agriculture to provide food for the urban population.

-Support for small businesses to generate emplyment.

-Support for financial service development.

- Support for marketing the city as an avenue for conferences and events (Nel et al, 2006:

p. 55).

The LED for the clothing fashion district did not initially incorporate poverty alleviation

as central in the venture; rather it laid emphasis as a catalyst pro-growth focused project.

There are positive moves to incorporate poverty as part of the programme (Ibid).

The fashion district covers 20 city blocks and the programme is designed to form a

partnership between the city authority, provincial and national government, the private

sector and the city tertiary training institution. Activities to enhance the programme

include training, the development of training centres, the formation of a production net

work and an operators’ association. The project has incorporated about 1000 micro

clothing manufacturers and has focused on niche markets, outsourcing and the integration

of migrant workers (Ibid). This has further compromised national job prospects as these

industries will do very little to train nationals who lack the skills since it will be cheaper

and easier engaging foreign labour.

3.6.3: The Outcome of the ProjectThe output of the supported firms within the Fashion District programme has increased

tremendously as well as the employment and net working between firms. The project has

facilitated small businesses to break through new markets possibilities both local and

international which have led to job creation and income improvement through the

involvement of some 1000 micro clothing manufacturers (Ibid, p. 55-56).

The Johannesburg clothing initiative is facing serious competition from cheap imported

textile products into SA and the recruitment of foreign workers undermine domestic work

force who could trained to enable them gain the skills (Ibid).

34

3.6.4: Lessons Learned in the Programme-Poverty reduction intervention is multi dimensional which requires explicit policy and

strategy support.

-Training is decisive for poverty relief interventions to be effective.

-A competitive market environment requires the positioning of small operators in a niche

market along other bigger competitors or as a group of small operators in order to

overcome the challenges.

- Collective efficiency improves market potentials and quality.

-The project shows that pro-poor growth initiative can be embedded into a city’s search

for global competitiveness and at the same time alleviate poverty (Ibid, p. 56).

It is worth noting that there are many other LED case studies in both Urban and rural

municipalities in SA. Some municipalities, especially the urban municipalities, have laid

emphasis on pro-growth and global competitiveness while within other municipalities;

LED is still at the policy development and potential strategies rather than applied practice

(Nel et al, 2006: p. 54-55).

3.6.5: Critique to LED in South Africa From the foregoing discussions, it is clear that LED is an essential tool for the

development of robust local economies in a bid to alleviate poverty and create jobs in SA.

However there are substantial hold backs for the achievement of these LED goals:

The reality within municipalities is far from these ideal expectations of developmental

LG policy paper. Many communities are still separated; millions of people live in poverty

and isolated from services and opportunities. The apartheid government system did very

little to help those with the greatest needs. The current democratic and nonracial

government is unable to do much to reverse these long standing patterns of inequities and

unsatisfied human needs. Therefore LED could not be a magic solution to reverse

decades of failed policies within such a short period (DPLG Section B, 1998).

Furthermore, there is a major constraint in that the concept is still relatively new in SA as

compared to countries of the West who have had inbuilt experiences due to decades of

35

tested knowledge and experience on the field with substantial results in the application of

LED (Nel, 2001:p. 1008).

There is no unified LED policy frame work in SA and as such, LED is unevenly

developed and operationalized. A major divide exists between the larger well resourced

municipalities and the smaller municipalities in terms of policy development and

practical reality (Nel et al, 2006: p. 96).

LG’s in SA have been given enormous constitutional mandate to create viable sustain

humane societies. It is very doubtful whether local governments in SA are adequately

equipped to fulfil these developmental mandates. Municipalities are facing greater

challenges in promoting human rights, meeting human needs, addressing past socio-

economic and political distortions caused by apartheid. Though the LG have been

democratized and considerable powers handed to local authorities, there are insufficient

funds to meet these demands (DPLG, Section B, 1998).

One of the serious truths about the current situation of LED in SA is that not withstanding

the attention paid to LED by policy-designers, after more than 10 years of application,

results are rather limited. In the case of Stutterheim where a programme for community

reconciliation and LED was launched in 1990’s, less than 100 permanent jobs were

created after 6 years of involvement. In other cases, promising ventures have been

downgraded in terms of their scale and focus; for instance, the small coastal town of

Stilbazzi where tourism and promotional endevours have achieved close to full

employment yet the programme has been downgraded due to lack of resources and loss

of skilled labour to promote tourism (Nel, 2001: p. 1017).

Furthermore, the out migration of skilled people and the absence of economically minded

local leaders have added to the problem of high levels of disempowerment of

communities devastated by decades of apartheid induced discrimination, deprivation and

denied opportunities (Ibid)

36

A major weakness of LED in SA is that there is no conceptual framework on which the

programme is based. Although the policy document talks of a robust and inclusive LED

capable of exploiting local opportunities, addressing local needs and contributing to

national development objectives such as economic growth and poverty eradication, it

nevertheless does not mention the conceptual guidelines on which municipalities should

harness these potentials (Hindson et al, July 2005: p. 18)

The limited allocated funds, the absence of poverty reduction targets in most

municipalities and the lack of details on the impact of LED on poverty alleviation suggest

that LED is not yet as embedded in municipal practice as envisaged by related legislation

on LED. This is further compounded by the lack of monitoring and evaluation methods

especially within the rural municipalities which has led to the complications in evaluating

the success of individual projects and their impact on poverty alleviation (Nel et al, 2006:

p. 96).

With the exception of some bigger municipalities e.g. Cape Town, interactions with the

private sector and other stakeholders are limited thus leading to the inability of

municipalities to fully tap the potentials of LED in alleviating poverty (Ibid).

Government failure may account for the overall lack of success of the LED programme to

alleviate poverty. Here the government is seen as too bureaucratic, hierarchical and

opaque in its functioning with regards to LED. Furthermore, bureaucratic governments

may attract or retain personnel who lack commitment, ability to bargain and compete.

Human capacity shortages have compounded the problems of service delivery failure in

areas of LED and poverty alleviation (Hindson et al, July 2005: p. 9).

The impediments faced by LED practitioners in SA include securing consistent political

support for the programmes with long yield, as well as recognition of the need to align

other policies with LED interventions. There are very limited resources to support LED,

both in number and capacity. Thus failure to rally the necessary political support and the

inability to align other policies to LED undermines the ability to enable municipalities to

come out of poverty (Nel et al, 2006: p. 98).

37

Emphasis by some municipalities on pro-growth instead of concentrating on the pro-poor

direction undermined its ability to legitimately tackle poverty. Although positive moves

are now being made in that direction this may be considered as an afterthought, which

will require a lot of time for it to be embedded as a central within the municipality policy

designers and implementers.

CHAPTER 4: THEORETICAL AND CONCEPTUAL CHAPTER This chapter will comprise of the neo-liberal theory, the empowerment theory, the theory

on decentralization of government and the concept of good governance.

4.1: The Neo-Liberal Theory Neo-liberalism is used to demonstrate the ideology which underpins the basic philosophy in the

global market structure as an enabling tool for economic growth, thus leading to poverty

alleviation. This theory is predicated on the fact that widespread involvement of the state in

economic activities was leading to inefficiency and slower rates of economic growth than

would have been achieved if the markets were left on their own devices. The principle of

transnationalization in trade has been upheld by neo-liberal theorists and policy advocacy. It

argues that liberalization of markets is the key to development policy reform and will lead to

the maximization of the gains from international trade for the good of all (Colclough, C. and

Manor, J. 1991, p. 51). The liberal school of economics became famous in Europe as an engine

of development when Adam Smith (classical economist), in 1776 published his book “The

Wealth of Nations”. Adam Smith suggested that, for maximum efficiency, all forms of

government interventions in economic activities should be removed and free trade was the best

way for a nation’s economy to develop through the invisible hand of the market (Anup, July

02, 2007 and Willis, 2005: p. 47).

The capitalist crisis over the last 25 years, with its shrinking profit rates, inspired the business

class to revive economic liberalism. Now, with the rapid globalization of the capitalist

economy, we are seeing neo-liberalism on a global scale (Elizabeth and Arnoldo February 26 th,

2000).

38

4.1.1: Definition of Neo-liberalism and the TheoryNeo-liberalism in its dominant international use refers to a political-economic philosophy that

rejects government intervention in the domestic economy. It is a label for an economic and

political movement based on liberalization. It focuses on free market policy with fewer

restrictions on business operations, and property rights (Answers.com, 2006).

Neo-liberalism has been promoted through the main international financial institutions and

organizations of the world, namely the IMF, WB and World Trade Organization (WTO), and

by powerful states such as the United States of America and European Union member states.

Multinational and transnational corporations also foster the neo-liberal philosophy because it is

compatible with their objectives in the current global dispensation. As such, these

governmental institutions are seen as advocates of neo-liberalism. They point to economic

studies of the turbulence and shocks of the 1970s and argue that free markets will be more

resilient in the face of such shocks, produce higher growth, better returns on capital and

therefore more investment and development. They argue that binding other nations (less

developed) to the developed core (developed) will promote global stability, prosperity, and

eventually a turn to more democratic forms of government (Answers.com, 2006 and Willis,

2005: p. 47).

The ideology of neo-liberalism is centred upon the values of unregulated trade and markets,

and the expanded business prospects provided by globalization. It argues that free markets, free

trade, and the unrestricted flow of capital will produce the greatest social, political and

economic good for everybody in the society. It advocates for minimal government spending,

minimal taxation, minimal regulations, and minimal direct involvement of government in the

economy. The argument is that market forces will naturally fill many areas of jurisdiction for

the highest overall gain. Neo-liberalists argue that the Welfare State should be dismantled or

privatized. The thrust of this argument is to utilize the world’s resources in the most efficient

way possible, and in doing so, to make more markets open to developed nations (Ibid, 2006,).

Market solutions to the problem of resource allocation are inherently natural and the emerging

hegemony of the market stands out as the essence of development. The liberal political

economy is that of a borderless world as far as economic activities are concerned. In other

words, neo-liberalism favours the opening of foreign markets (globalization) through its free

trade policy and international division of labour (Hettne, Bjorn, 1995, pp6-8).

39

Neo-liberalism favours privatization over direct government intervention in the production

process, it opposes socialism, protectionism and measures success in overall economic gain.

Neo-liberalism has become increasingly important in international economic policy discussions

from the 1970’s onwards. A major axiom of the neo-liberal school is that “there is no

alternative” to globalized capitalism (Answers.com, 2006 and Willis, 2005: p. 48-49). As such

in the neo-liberal universe, co-operation is emphasized instead of war making. Accord is

achieved by putting emphasis on individualism and the opening up of international markets

through trade, deregulation and privatization. Neo-liberalism covers theories of

transnationalism that claim states are no longer the dominant actors in world politics and argue

amongst other things de-emphasizing the role of the state (Schmidt, J.D. 2004, p. 11). The

main elements of neo-liberalism include:

-The role of the market in liberating private enterprises from any bonds imposed by the

government to allow freedom of capital, goods and services and de-unionizing labour force. In

a self-regulated market system allows the “trickle down” notion of wealth distribution is

applicable. An unregulated market in international trade and investment is the best way to

increase economic growth, which will ultimately benefit everyone in society thus leading to

poverty alleviation.

-Cutting public expenditure on social services like education and health care will reduce

government’s expenditure.

-Deregulation of the market to allow the forces of demand and supply as a self-regulatory

mechanism.

-Privatization of state-owned enterprises to private investors for greater efficiency. This

includes key industries, railroads, electricity, schools, hospitals and even fresh water.

-Eliminating the concept of public goods (community goods) and replacing it with

individualism and individual responsibility (Martinez and Garcia, February 26th, 2000).

As described by Berkeley (economic historian) and Professor Brad DeLong neo-liberalism has

two main tenets:

"The first is that close economic contact between the industrial core [of the capitalist world

economy] and the developing periphery is the best way to accelerate the transfer of technology

which is the sine qua non for making poor economies rich. Hence all barriers to international trade

40

should be eliminated as fast as possible. The second is that governments in general lack the capacity

to run large industrial and commercial enterprises. Hence, [except] for core missions of income

distribution, public-good infrastructure, administration of justice, and a few others, governments

should shrink and privatize." (Answers.com, 2006).

These two principles represent parts of the “trickle-down theory,” i.e. under free-market

capitalism economic growth and technological change benefit the poorest countries and people,

even if ownership remains predominantly with the wealthier countries. More economic growth,

specialization and opportunities create chances for individuals to achieve more and prosper,

instead of rigid structures which provide only illusory protection, breed poverty and

administrative bureaucracy which undermine economic transactions (Answers.com, 2006).

The neo-liberal doctrine is linked to the Washington consensus, a set of specific policy goals

designed for Latin American countries and other third world countries. Neo-liberals believe

that greater economic and political interdependence will lead to progress, overcome poverty

and a reduction of international tensions.

4.1.2: The Washington ConsensusThe Washington consensus is generally regarded as a summary of the lowest common

denominator of policy advice to the Bretton Wood institutions and the subsequent use of

the term to denote the neo-liberal or market fundamentalist policy. It depicts the basic

framework in which the neo-liberal theory is implemented through the ten propositions

outlined in the consensus: Fiscal discipline, a reduction of public expenditure, tax reform,

interest rate liberalization, a competitive exchange rate, trade liberalization, privatization,

deregulation and secure property rights (Williamson, August 2000: p. 251-253).

Globalization can explain the failure of the Washington Consensus or neo-liberalism by

stressing on the adequacy of its main premise in that economic and social trends in a country

were explained in terms of exclusive government failure rather than power relations in the

larger global political economy. This explanation may seem appropriate to South Africa

because of the distortions caused in a bid to enforce apartheid when most of the people were

against. Government failure is the direct cause of poverty, rather than failure of the neo-liberal

policy which is intended to provide a vibrant private sector and stimulate economic growth

41

(Atkinson, 2005: p. 42). The rationale of the neo-liberal theory is that it upholds a trickle down

concept – for wealth to trickle down from the rich to the poor within the economy.

4.1.3: Criticism of the Neo-Liberal Theory Critics of neo-liberalism in both theory and practice are numerous. Karl Polanyi succinctly

outlined an influential rebuttal of the neo-liberal protestation against state intervention in his

book “The Great Transformation”. Polanyi contends that, modern markets require extensive

political and legislative intervention. “Free markets could never have come into being merely

by allowing things to take their course…laissez-fair itself was enforced by the state…” Not

only was the state necessary to establish a laissez faire free market system, the self-regulating

market system required continuous interference and monitoring by the state. This is because

society needs to be protected against the dangers inbuilt in a self-regulating market system. It is

an untenable assumption for the neo-liberals to think of “rolling back the state” instead of

increasing intrusion and regulation by the central state. The consequences of an unregulated

market may lead to social destruction or even war. To Polanyi, an extended market requires

support of a unified currency and integrated banking system, which can only be supported by

state apparatus. He stressed on the unavoidable connection between markets and social

relations. He states that, it is an unobtainable dream to talk of an entirely free market system,

which is void of social relations (Hodgson, 2001: p.1218-1221). This could be seen in the case

of South Africa where neo-liberalism as a free market theory cannot on its own devices be able

to write-off the inequality or deep rooted poverty left behind by apartheid. Allowing the free

market to operate on its own devices will enable the minorities benefit enormously from

inequities created by apartheid thus creating a situation where the rich will be richer and the

poor poorer.

Other critics contend that developing nations whose assets foreigners have acquired and whose

underdeveloped domestic political and economic institutions had been undermined by the

effects of being exposed to foreign trade and rapid flows of capital see their economies being

taken over. Even within the neo-liberal movement, there is intense criticism on how many

developed nations have demanded that other nations should liberalize their markets for

manufactured goods, while at the same time protecting their own domestic markets

(Answers.com, 2006). The government in SA should protect small and medium size enterprises

who create employment and generate revenue for municipalities yet are unable to compete with 42

multinational corporations that have huge capital and technology and are globally competitive

thus capable of overcoming international market complexity.

Joseph Stiglitz has described the impact of liberalized capital markets in third world as

“sending small boats into the rough sea. Even if the boats are sound and the captains

competent, they are likely to be capsized by the big wave”. The neo-liberal economic policy

demanded boats set forth “into the roughest part of the sea before they are sea worthy, with

untrained captains and crews, and without life vests” for the disappointing, if not disastrous

results of neo-liberal policy advice being followed by developing nations. In effect, the neo-

liberal advocates are guilty of forcing neo-liberal policy goals on countries at a time when it

was not appropriate (Tabb, 2004: p. 24).

Critics say neo-liberalism impedes democratic rules. Neo-liberalism is often used as pejorative,

usually not to mean an economic theory, but the implementation of global capitalism and the

power of multinational corporations, as well as the effects of free trade on wages and social

structures. Anti-capitalists, argue that unbridled market forces inevitably increase inequality in

wealth and hence power. The effects of neo-liberalism can be seen as the rich get richer and the

poor get poorer in SA. It is responsible for dismantling welfare programmes, attacking the

rights of labour and cutting back social programmes. The beneficiaries of neo-liberalism are a

minority while to a majority it brings more suffering (Martinez and Garcia, February 26th,

2000).

Neo-liberalism is portrayed as the imposition of free markets from top-down arguing that it has

been promoted through the largest international institutions of the world-economy namely: the

IMF, WB and WTO, for the benefit of multinational corporations and core states such as, the

United States and European Union (EU) member states. Many identify these policies with

exploitation by corporations and the developed nations of the less developed e.g. SA. Critics

argue that these institutions do not promote development, but instead ensure the advantages to

developed countries that dominate them. Neo-liberal policies give multinational corporations

economic power over democratically elected governments as these corporations can use their

abilities to withdraw or infuse capital (and therefore affect jobs and the economy) as political

leverage (Answers.com, 2006).

43

Anti-globalization advocates are the most vocal opponents of neo-liberalism, particularly its

implementation of “free capital flows” but not free labour flows. They argue that this

encourages a “race to the bottom” as capital flows to the lowest environmental and labour

standards and can create moral hazard (Martinez and Garcia, February 26th, 2000).

Although the Washington consensus provided the foundation to well functioning markets, it is

incomplete and sometimes even misleading in most third world economies such as SA.

Williamson clearly acknowledged the fact that the Washington Consensus in enforcing the

market fundamentalist policies could not have been expected to provide an effective

framework in combating poverty but that the original advice will be broadly valid. When

public investment in human capital and transfer of technology is insufficient the market will

not be able to fill the gap (Willianson, August 2000: p. 251 – 253).

4.2: The Empowerment TheoryEmpowerment and the empowerment theory is a widely used term and has acquired

considerable fame within the vocabulary of development and international relations. As

such great explanations were offered and analyses carried out largely within the

developing world to show that existing structural inequities and imbalances,

marginalization and oppression were the basis of the explanations for the poverty of

millions. A new form of analysis emerged that has largely shaped approaches to

explaining and tackling poverty and underdevelopment over the decades. At its core lay

the concept of power and the inevitable division of many societies into those with power

and the powerless. In the 1970’s, forceful debates between the modernization and the

dependency schools of thought emerged on the root causes of underdevelopment which

focused attention on the relationship between power and poverty, while in the 1980’s a

major analytical thrust began to collect evidence on which much of the contemporary

empowerment energy is based. Anthropologists have long argued that development is

nothing new and societies are in the continual process of developing and power is central

to the ability of different groups within the society promoting their own development.

The refining of an alternative development paradigm of the 1980’s and 1990’s appeared

to have unified in the early 1990’s around the notion of empowerment (Oakley, 2001: p.

11 -12).44

Therefore, empowerment had become a central concept in development discourse and

practice by the 1990’s. As a consequence, empowerment as an operational objective is

now widely noticeable within the policies or programmes of national and international

NGO’s and as well as a major influence on the policies of bilateral and multilateral

development agencies in the third world. In SA, the central principle in the

Reconstruction and Development Programme (RDP) is the empowerment of the poor and

marginalized communities. This was reiterated in the Growth, Employment and

Redistribution (Gear) strategy which calls for redistribution of income and opportunities

in favour of the poor. Thus the DPLG is uniquely placed to combine empowerment and

the redistribution in a number of concrete programmes to favour the poor. These include

service subsidies to the poor below cost, support to community organizations in the form

of finance, and technical skills or training to enhance the ability of the poor to identify

their needs in order to take control of the development process (DPLG, Section B, 1998).

Empowerment is not so easily defined and is open to a broad range of interpretations. It

would be necessary to attempt a definition to this complex term. “Empowerment is about

collective community, and ultimate class conscientization, to critically understand reality in order to use

the power which even the powerless do possess, so as to challenge the powerful and ultimately to transform

that reality through conscious political struggles” (Oakley, 2001: p. 15).

On the other hand, “Empowerment is an intentional and ongoing process centered on the local

community, involving mutual dignity, critical reflection, caring and group participation, through which

people lacking a valid share of resources gain greater access to and control over those resources, through

the exercise of an increased leverage on power” ( Ibid., p. 16).

The above definitions revolve around the notion of power analysis and on actions to

empower groups or people that lack access to those resources and institutions that would

enable them compete more effectively in the struggle to sustain their livelihood –

development as transformation. Consequently, people’s empowerment can manifest itself

in three broad areas (i) power through greater self-confidence in ones capability to

effectively undertake some form of action (ii) power by increasing and effecting relations

that powerless people establish with other organizations (iii) power as an upshot of

45

increasing access to economic resources, such as credits and inputs. Empowerment does

not merely mean making people feel better about their poverty or encouraging local

initiatives or making people to be politically aware. It equally does not assume that

people are entirely powerless. On the contrary empowerment has to do with positive

change in an individual, community and structural sense with regards to organizations

and with negotiations. Thus empowerment is a motivational concept that evokes or calls

to mind a wide range of different responses among different groups (Ibid. p.16 - 17).

To avoid the nuance and ambiguity of a succinct definition of empowerment, it has

forcefully entered the formal publications and discourse of development agencies as an

operational concept used in a variety of ways with the intention to promote it. This is a

positive sign that the empowerment theory is filtering into the field of development and

international relations as a practical concept and not merely staying at the level of

strategic intent for academic discursions (Oakley, 2001: p. 170). Therefore, the

manifestation of the empowerment theory to LED initiative is obvious as it blends the

practical reality and theoretical framework within which this concept operates; it

encompasses all the facets of LED. This theory lays much attention on participation,

capacity building, economic improvement, democracy and transparency, which are the

grand words in LED programmes. Over the past years, words such as participation,

empowerment, bottom up planning and indigenous knowledge have become increasingly

common within development discourse or debate. Such is their popularity that it is

difficult to find a LED project which does not claim to adopt a participatory approach

involving bottom up planning, and/or to empower people within their communities

(Stirrat, 1996: p.67). If the logic of the concept is taken to its full limits, then it can only

mean “equalizing or near equalizing power, empowering those who do not have the

power in the system” which is the fundamental goal of LED. This is clearly illustrated in

SA in the White Paper on Local Government as intended by the functions in its

developmental role. Therefore, to empower people at the grassroots (to break the

monopoly of economic power by encouraging small business enterprises and by making

government more accountable to the people) you would have created enabling conditions

for a more equitable distribution of wealth and productive assets (Tandon, 1995: p 31-

34). This is the thrust in LED in achieving poverty alleviation (and the essence of

46

developmental local government which is spelt out in the local government white paper)

in the Republic of South Africa (DPLG, Section B, 1998).

To better understand the empowerment theory as a central concept in development

studies and practice it is necessary to examine the theory within a wide variety of

interpretations such as empowerment as participation, empowerment as capacity building

and empowerment through economic development. All these strands of empowerment

are incorporated into the LED common sense and the intended vision of the

developmental local government policies in SA (Stirrat, 1996: p.71 and DPLG Section B,

1998).

4.2.1: Empowerment as ParticipationEmpowerment through participation is an approach which gives local or disadvantaged

people rights and supports them in developing the capacity to analyze situations, find

solutions and produce responses to key issues that affect them within their communities.

Thus they do not only participate in the management process but take decisions and

analyze situations (Stirrat, 1996: p.71). The completion of the process of participation

should result in the more active participation of previously excluded groups in areas such

as the design, management and evaluation of development processes (Oakley, 2001: p

171). The logic in this form of empowerment is embedded in the LED agenda and it

makes use of the bottom top management approach - reemphasized by the notion of

people centered in development planning. This is clearly seen in White Paper on Local

Government in SA which gives local communities or councils the power to promote LED

at local level. Thus municipalities in SA are mandated to represent community’s interest

by promoting the involvement of citizens and community groups in the design and

delivery of municipal programmes. Emphasis was laid on the participation of youth

organizations, marginalized and excluded groups (women) in community processes by

removing the many obstacles that impede effective participation such as social values and

norms, as well as practical issues as lack of transport and enormous household

responsibilities. This mandates municipalities to adopt inclusive approach in fostering

community participation (DPLG Section B, 1998).

47

4.2.2: Empowerment as Capacity BuildingHere empowerment is seen as the process whereby partner organizations or people

(stakeholders) are strengthened and as a result have more power in terms of the multiple

challenges and tasks that they confront (Oakley, 2001: p. 171). This aspect of

empowerment enshrines in the people the ability or capabilities to conceive, design and

implement their own development goals within the LED platform. It projects the

tendency of a group of people or a community knowing what they want, how to achieve

what they want and when best to achieve it. This approach to empowerment is buttressed

in SA through municipal responsibilities to assist the poor in improving on their technical

skills or training to enhance their overall capacities and to take control of their own

development process (DPLG Section B, 1998).

4.2.3: Empowerment through Economic ImprovementThe link between power and resources is a major driving force behind many efforts of

development agencies to promote the empowerment of the powerless through LED.

These efforts have been greatly enhanced by the recent micro credit activities targeted at

the poor. It is a major tool in strengthening the economically unempowered within the

LED programme. They will have access to loans even if they do not have tangible

collateral security. The quantifiable activities of the micro credit and other infrastructure

development to enhance the economic situation offer the prospect of tangible evidence of

economic empowerment (Oakley, 2001: p. 171). In SA, the socio-economic development

and community empowerment is directed towards economic activities that will eradicate

poverty. In the White Paper on Local Government, majority of the poor in SA are women

and economic empowerment strategies aimed towards women are likely to prove the

most effective. This is a major leap forward as women could be identified as vulnerable

within the poverty circle in SA. Furthermore, the developmental local government aims

at directly linking profitable growth or investment of businesses with redistribution or

community development. This could be done by levying fast growing areas to subsidize

the poor or to make social responsibility investment in return for business permission

within localities. This will in effect boost the economic situation of the poor in SA

(DPLG, Section B, 1998).

48

While current practice is also influenced by empowerment through self-awareness,

transparency and democratization, the above three areas represents its more tangible

manifestation within localities. A contextual analysis also looks at differential use of

empowerment in terms of gender relations. Empowerment may be an explicit objective of

the development intervention and that the intervention is undertaken in a manner that

promotes active local participation or the more disadvantaged within the

community/beneficiary in question (Oakley, 2001: p 171 - 172). Accordingly, it becomes

the apt goal for LED to strengthen the economic capabilities of the community and

especially the economically disadvantaged groups of the community thereby alleviating

poverty.

The rationale of the empowerment theory is that it upholds a “trickle up” notion by

creating economic possibilities to the poor at the local level.

4.2.4: Critique to the Empowerment TheoryThe empowerment theory like any social theory has its own weaknesses both as an

academic concept and in its applicability. Although empowerment and the empowerment

theory is a widely used term and has acquired considerable respectability or social

reputation within the vocabulary of development and international relations, it has not yet

acquired a socially agreed content. This is because within such a short period,

empowerment appeared to fit easily into development perspectives and their actors

(ranging from the grassroots level to institutions such as the World Bank and other

multilateral or bilateral agencies). This makes it a sanitized buzz-word divorced from the

real understanding of power and the implications that follow with it. Therefore it is one of

those concepts whose full implications people do not realize when used. As stated by

Tandon Yash, “lurking under its naivety lays a dangerous monster, the monster of

revolution”. If the logic of the concept is taken for its full meaning “it can only mean

equalizing or near equalizing power by empowering those who do not have power in the

system” which is what is difficult to achieve in SA. The critique or weakness of the

empowerment theory is further compounded by the fact that, like any concept born out of

the people’s struggle, it has been co-opted by those in power because of the fear that it

will take the disempowered into positions of power and equally bring down those in

positions of power or equalize power. “Since the concept is located within the very center 49

of power relations, and therefore challenging to power holders, they have no choice but to

incorporate it within their language and rob it of its threatening implications”. Thus

empowerment to power holders has come to mean the management of power in their

favour (Tandon, 1995: p 31 – 32 and Oakley, 2001: p. 11).

On the operationalization of the empowerment theory, evidence shows that much still has

to be done before development experts and scholars could confidently say that

empowerment lies at the core of social development interventions and there are

mechanisms in place that will help us understand its progress (Oakley, 2001: p. 170).

Social critiques saw the Arusha conference on participatory development in 1990 as the

recognition of its zenith as well as the signpost of its collapse. These critiques were quick

to point out that this does not mean participatory development has lost its significance or

its disciples as there is compelling evidence of organizations and governments sponsoring

programmes based on participatory development endeavours. They justified their

arguments on the fact that as long as there are institutions that get their funding by

brandishing participation, the word will continue to attract a group of followers (Tandon,

1995: p 31). Proponents of participation failed to realize that a participatory framework at

the local level is unlikely to be a spontaneous event among the disadvantaged

communities or people and therefore it is likely that local communities or people will

need to be stimulated to initiate the process of participatory management. Sometimes

participation may be taken to mean a token or symbolic form of management which is

widely practiced and usually involves informing people of top-down directives or

casually engaging them in management activities through their paid labour as people

could participate in projects without having the power to decide on critical issues related

to those projects (Stirrat, 1996: p 69-70). This frustrates the goal of the theory within the

LED common sense.

The very term of empowerment would mean that some external force or facilitator could

empower supposedly powerless groups. Thus empowerment has become the latest

strategic objective of planned social change, but the project remains the basic instrument

to effect the change. This makes it mandatory for any project with such goals to be

50

people centered. Yet most governments, development NGO’s or multilateral

organizations eschew this view by laying emphasis on the project rather than the people

in accomplishing their goals. This is because the project is very central in drumming

more support and funds for their activities. Hence the innumerable reports and projects-

based documents that describe the actions that are intended to empower local people

rightly point to this misapprehension on the part of those whose mission it is to empower

(Oakley, 2001: p. 168-169).

Furthermore, the problem of countries in the third world such as SA is that the elites

appropriate wealth for themselves by monopolizing power at the political level and

through corruption at the administrative level. By so doing, they acquire political,

economic and social power within the system for their personal gains and look at the

process empowering the unempowered as ceding away what is within their exclusive

prerogative. Therefore, to empower the people within communities, there is need of

breaking the monopoly of economic, political and social power arrogated to the elites and

politicians in the third world (Tandon, 1995: p 31). This goes beyond policy papers or

design programmes aimed at empowering communities by elites, NGO’s and other multi

lateral bodies. Rather, it requires the concerted efforts of all the stakeholders and most

especially the unempowered within communities.

Most inevitably, the concept of empowerment is more easily espoused than put into

application and much of the literature that accompanies the practice lacks the firmness

that is essential if such a complex theory is to be put into operational terms. To talk of

empowerment is to suggest that there are groups which are completely devoid of power

(which is not always the case) and need support to be empowered (Oakley, 2001: p. 13).

4.3: Theory on Decentralization of GovernanceFor over many decades, scholars have advocated for decentralization as a means to

achieve such goals as enhanced participation, greater control over local programmes by

the citizenry, increased resource mobilization for development projects, democracy and

better governance (Olowu and Wunsch, 2004: p. 1).

51

The last half of the twentieth century witnessed the sustained growth of the power of

central governments within the developing and developed world. This was motivated by

the growth of welfare states in the industrialized world while in the developing world,

firstly by the political importance of creating national identities out of the ashes of

colonialism and secondly by developmentalist attempts to guide the economy towards

growth, and prosperity. Central governments increased their authority and involvement in

the political, social and economic lives of their electorate to the scope unimagined by

their 19th century advocates. With centralized policy, came excessive concentration of

political power and discretion over resource allocation, which in turn brought

comparative incentive towards corruption and inefficient management at both national

and local level. The population grew dissatisfied with bureaucratic regimes which seemed

far away and produced uniform outputs often unrelated to local needs and conditions.

Local cultural and ethnic variation was suppressed for national identity defined by the

central government (Faguet, 2006: p. 127 – 128).

The modern debate about decentralization and the decentralization theory could not be

held back by the citizenry and scholars due to the advantages of a decentralized system of

government and the failures of the centralized system. Advocates of decentralization

theory condemn the impotence and misuse of centralized governments. The ills of

corruption and political alienation are often regarded as the natural side-effects of a

bureaucracy distant in space, which is insensitive, inefficient, and inflexible. Reformers

advocated the decentralization of political authority and public resources to sub-national

levels of government as a general panacea for these ills operating through the reduction

of government to more manageable dimensions, thereby making it responsive and

accountable to the governed. It should be noted that we recognize three types of

decentralization: devolution, de-concentration, and delegation of power. Since this

theory is like a wide elephant, we will concentrate on democratic devolution of power as

an aspect of the decentralization theory (Faguet, 2006: p. 127 – 128 and Olowu and

Wunsch, 2004: p. 5). Therefore, democratic devolution of power refers to the “legal acts

and administrative measures that initiate a transfer of responsibility (authority),

resources (human and financial), accountability, and rules (institutions) from the central

government to local entities” (Olowu and Wunsch, 2004: p. 4-5).

52

Formally, devolution is the creation or increased reliance upon sub-national levels of

government with some degree of political autonomy, that are substantially outside direct

central government control yet subject to general policies and laws within a sovereign

state. In other words, when there is transfer by law and other formal actions of

responsibility, resources and accountability to the local level that is decentralization by

devolution of power. What is important to us is decentralization which is devolution of

power to local communities in a democratic manner as in the case study of SA. Here the

local populations choose their various local officials through elections and the local

administrations are directly accountable to their local citizenry (Ibid).

The theory of decentralization like most theories in Development and International

Relations is multi disciplinary drawing its inspiration from political science, sociology,

economics, public administration, etc. Therefore the word decentralization is more a

semantic umbrella beneath which are a collection of different concepts than it is an

understandably precise term. This study will concentrate on the more representative

academic usages given decentralization by both political scientists and economists. It has

been argued whether effective decentralization is more likely to occur under democratic,

authoritarian, theocratic, or other regimes. This thesis will concentrate on decentralization

under democratic regimes. Democratic controls will play a major role in our ability to

theorize about decentralization (Faguet, 2006: p. 130-131).

“Decentralization will be understood as the devolution by the central (i.e. national) government

of specific functions, with all the administrative, political and economic attributes that these

entail, to local (i.e. municipal) governments which are independent of the central government and

within a legally delimited geographic and functional domain” (Ibid, p. 131). However for the

purpose of this report we will rely on the latter definition although both definitions are

relevant.

4.3.1: The Argument for the Decentralization TheoryThe decentralization theory emanates from the anxiety to have democratic regimes where

citizens’ are well represented and also the economic point of view based on efficiency

allocation, which has been added in recent era. The 17th and 18th centuries political

53

philosophers3 were against autocratic central government and they strongly believed that

democratic states such as ancient Athens have the best possibilities to preserve the

liberties of citizens. Madison theorized on the need to prevent tyranny through a balance

of powers not only within the central government, but also between regional and local

governments (sub-national level) as well. The contemporary arguments for the

decentralization theory are clearly put forward by Wolman, whose arguments in favour of

decentralization are captioned under two main headings: Efficiency Values and

Governance Values (Faguet, 2006: p. 132).

4.3.1.1: Efficiency ValuesEfficiency values relates to the popular justification for decentralization as a means to

maximize greater social welfare within a democratic local constituency. Wolman

distinguishes the provision of public goods with the market for private goods in a

decentralized government by arguing forcefully that within the private economy,

individual preferences are articulated in a free market by the forces of demand and supply

through price. To Wolman, the provision of public goods is predicated on the fact that a

competitive market will not provide them for the population because they are not

profitable. He none the less stresses on differences in individual preferences for public

goods and services within communities. In a succinct manner he explains that the tax and

service packages for the community should reflect correctly the community aggregate

preferences. He noted that average deviation of individual preferences from the tax and

service packages adopted by the community through locally elected government officials

will be less in smaller communities of comparatively like-minded individuals than it will

be in larger more heterogeneous areas within the central government. The upshot of the

foregoing is that locative efficiency and social welfare will evidently be more enhanced

or maximized under a highly decentralized political regime. This claim is supported by

the argument that different preferences for public goods will produce different patens of

demand that will be efficiently met only by responsive decentralized LG. This is a very

tenable argument in the decentralization theory as canvassed by Wolman in his efficiency

value approach (Faguet, 2006: p. 132 – 133 and Smith, 2007: p. 102).

3 Such as Rousseau, Mill, Montesquieu and Madison54

4.3.1.2: Governance ValueGovernance values constitute the second arm of Wolman’s argument for the

decentralization theory, emphasizing responsiveness and accountability, diversity, and

political participation enhanced within a decentralized government. As Wolman

theorized, placing government closer to the people promotes greater reaction of local

public authorities to the needs of the people and results in a closer relationship between

the needs of the people and public policy. This does not only presuppose that decision-

makers within a decentralized government are likely to be well informed about and

familiar with the needs of their area, but also decentralization permits local public

officials to be directly accountable in elected responsibilities for their acts or omissions as

well as indirectly accountable to the local population through local elections (Faguet,

2006: p. 135 and Smith, 2007: p. 105).

Diversity in public policy is another argument in favor of decentralization theory through

a variety of policy choices at the local level, some of which will be more successful than

others. Once given policies have been shown to work, they can be taken up by other

decentralized units and why not the central government. We note however that there is a

lot of academic literature which stresses that decentralized structures promote innovation,

while centralized structures promote adoption (Faguet, 2006: p. 135).

The devolution of genuine power to localities promotes political participation amongst

the people because of the improved levels of interest and participation in local

government which it brings. To make accountability more effective, additional

opportunities for participation of the population are required for this gives room for

greater public scrutiny of the actions and policies of both the local government and the

central government. This process enhances democratic values thus promoting political

stability. Similarly, decentralization provides the opportunity for citizens to debate and

decide upon those local issues which matter most to them at local level, thus promoting

political education. Lastly, local politics provides a nursery for local political leaders,

who may progress to become national leaders. Decentralization has improved

participation and enlarged the capacity of local administration to lobby through central

government agencies, to make available national resources for local development

(Faguet, 2006: p. 135 and Smith, 2007: 106).

55

The foundation of decentralization composed of a combination of the allocation

efficiency argument with that concerning the responsiveness and accountability of local

government. This is because the provision of public goods and services by the local

government such as schools, health care, roads, etc, is expected to lead to income

redistribution that benefits the poor – local safety nets. This enables local governments to

target poverty more effectively because local public goods are non-excludable especially

when user fees are not charged. The view that local government can be designed in a way

that it accurately perceives the needs of its electorate with the motivation to attend to

them better than central government represents an influential premise in favor of the

decentralization theory (Faguet, 2006: p. 135 and Smith, 2007: p. 119).

Accountability in the provision of local public administration and the provision of public

goods and services constitutes the essential part of the theory on decentralization of

government. LG autonomy within democratic devolution creates real local power that

opens local administration to resources and transparency. Institutional safeguards to

protect against abuse of power by local leaders are guaranteed through an appropriate

legal framework that ensures the rule of law, which makes public officials accountable to

its electorate. LG will tend to respond to their needs population more than their central

government peers LG in SA will in this way produce outcomes in rendering public

services more efficiently. Decentralized governments can be more cost-effective by

spending very less in the public administration and the provision of public services with

better results (Smith, 2007: p. 17-20).

4.3.2: Critique of the Decentralization TheoryThought the above arguments outline the decentralization theory which is relevant to this

research, it does not explain in rigorous terms how decentralization achieves these results.

The conditions necessary for decentralization to succeed are not clearly delineated. What

are the mechanisms which decentralization of governance brings about improvements in

efficiency of local public administration? What are the conditions to guarantee fair local

elections that reflect the popular will of the people? (Faguet, 2006: p. 137)

A major rebuttal to the underlying principle raised by Wolman is that decentralization

will complement or even intensify disparities among communities with different

56

economic means. Decentralization has a tendency to create greater inequalities among

municipalities with different levels of organizational capacity such the urban and rural

municipalities in SA. Equally, decentralization to low levels of government may reduce

efficiency by hindering the benefits of economies of scale in the provision of some

services. Furthermore, the existence of externalities in the provision of local public goods

by the central government or funding organizations or external market forces will reduce

the overall efficiency for localities (Faguet, 2006: p. 134 and Nel et al, 2006: p. 55-62).

In a period of information technology, it is simply not convincing that data on local

preferences and other relevant conditions, once accurately gathered, cannot be

transmitted to the center without significant distortion or cost. In reality, the

modernization of information technology would seem to have efficient transmission of

information and reduce unit costs which will enable central government more viable to

afford and get detailed information on local preferences for greater effectiveness (Faguet,

2006: p. 137).

Furthermore, local governments are generally not financially viable, lack the expertise

and are victims to elite manipulations to function efficiently thus necessitating the

directives of a central government which is technically capable and generally fit in the

efficient management of the state. Municipalities usually lack the human, technical and

economic resources for a successful LG. Therefore decentralized LG often lack

competent personnel responsible for providing local public services, such as health care,

education and agricultural extension worker, just to name a few. Decentralization will

hinder career opportunities and civil servants will sometimes resist to work under LG

because of greater career aspirations, life style and professionalism with the central

government. It equally creates domination and oppression by local elites of the political

process. Local resources will be treated as a municipal secret, providing politicians with

numerous opportunities for corruption (Faguet, 2006: p. 150 and Smith, 2007: p. 105).

4.4: The Concept of Good GovernanceSince the 1980’s the concept of good governance has dominated international discussion

within development and international assistance to Africa. What is most demanding to

partner governments, development consultants, donors and scholars is not just how to

57

promote good governance but equally how this can improve on the overall developmental

conditions in Africa. Whereas in the 1980’s the policy agenda concentrated on economic

reforms and structural adjustment, focus has now turned to the criteria for good

governance as a fundamental factor for economic development and poverty alleviation

(Wilmot, 1997/1998: p. 1). Most aid donors are convinced that the achievement of

development objectives is linked to good governance e.g. the United Nation

Development programme makes poverty alleviation the primary aim of political

accountability. On the other hand, the World Bank looks at political accountability as

being linked to anti-corruption. Thus good governance has been seen by some scholars as

an end in its own right in the achievement of the developmental goals in Africa. That is

why most official donor assistance comes with conditions attached, and as such have

frequently attempted to force good governance on dependent states for development

assistance (Smith, 2007: p. 1 - 17).

The concept of good governance is a broad concept within which other concepts are

attached thus making it not easy to be defined. The issues of democracy and

development, popular participation and development, corruption and development, and

the issues of state capacity, transparency and development are all enshrined within the

concept of good governance. Within this context, new priority issues emerged e.g. state

and public sector reform, improving the capacity of the state to deliver public goods and

services, and how to improve the quality and efficiency of public administration and the

civil service, etc (Wohlmuth, 1997/1998: p. 1 - 7).

Good governance may be defined as “government that is democratically organized

within a democratic political culture and with efficient administrative organizations, plus

the right policies particularly in the economic sphere. This has generally included trade

liberalization, the deregulation of economic activities…” (Smith, 2007: p. 4).

The above definition lays emphasis on the economic sphere and democratic tenets of

good governance. This presupposes that non-democratic states or states which do not

liberalize their markets cannot talk of upholding the precepts of good governance.

Furthermore, the definition insinuates that all democratic states are abiding to the

58

principle of good governance. This presupposition is an affront within academic thinking

and creates a more complex situation in attempting a definition for this concept.

Therefore, there is no single and exhaustive definition of good governance, nor is there a

delimitation of its scope that commands universal acceptance. The term is used with great

flexibility which serves as both an advantage and a source of some difficulties at the

operational level. Most international organizations have developed their own definitions

of good governance with different expectations. This makes the concept to occasionally

suffer from subjective interpretations. However, good governance relates to the political

and institutional processes and outcomes that are deemed necessary to achieve the goals

of development. More suitably, a lot of academic literature looks at good governance as a

normative concept that refers to norms of governance within the state (Wohlmuth,

1997/1998: p. 1-7 and Smith, 2007: p. 1 &17).

4.4.1: Attributes of Good GovernanceThe attributes of good governance are the elements of the concept that enable developing

countries such as SA to function more efficiently thus accomplishing their developmental

goals. In order to better understand the concept, it will be necessary to examine it as a

normative term based on the following attributes:

(a) Legitimacy of government: The legitimacy of government is based on popular

sovereignty and international recognition. Here the governments must achieve legitimacy

through a transparent, free and fair electoral system by popular vote. Legitimacy in the

eyes of the citizens at both national and local government level is the basis of a vibrant

economy. This is because it will reduce possibilities of civil and political disobedience

and foster democracy as the political authorities reflect the will of the people to whom

they are accountable. Furthermore national resistant movements will be co-opted within

the democratic structure of the state and their demands could be presented through either

political parties or other organizations that have a national or local representation. The

apartheid years in SA saw the growth of ANC as a national resistant movement and the

imposition of political, economic and social sanctions on SA by the international

community. Political legitimacy and national unity is said to be two sides of the same

coin as these serve as the main push for economic growth and development for the 59

alleviation of poverty. A legitimately democratic government obviously gains

international recognition from other governments and international organizations thereby

improving on its cooperation ties (Smith, 2007: 111-112 and Wohlmuth, 1997/1998: p.

7).

(b) An Appropriate Legal Framework to guarantee the rule of law: Good governance

requires appropriate legal frameworks that are enforced impartially irrespective of race,

colour, sex or origin and a regular and impartial administration of public rules. It also

requires full protection of human rights, including those of minorities. According to John

Rawls (an American philosopher), “one legal order is more justly administered than

another if it more perfectly fulfils the precepts of the rule of law”. The rule of law also

implies equality that expunges all forms of discrimination. This will safeguard rights of

citizens, businesses and a fair public administration for the fostering of development of a

country such as South Africa (Smith, 2007: p. 45-78).

(c) Popular participation: This will enable decision making by the people at all levels of

the state. The World Bank strongly supports popular participation as an attribute of good

governance for it improves the effectiveness of development projects and programmes at

both local and national level within a state. Popular participation must be co-opted into

policy design, implementation and evaluation by public authorities. This can be done

through the administration, the people, civil society organizations and NGO’s, etc.

Participation is important as it guarantees long term sustainability of projects and

policies. It equally strengthens ownership, transparency, accountability and

empowerment. Gender relationship should also be incorporated into participation as this

gives the possibility for both men and women to take part in decision making. However,

a perfectly functional democracy guarantees greater participation and assures the

protection of the vulnerable in society through the concept of good governance.

Governments that involve the public will be in a better position to make good decisions

and the decisions will enjoy more support from the populace once taken. While there may

be no direct link between democracy and every aspect of good governance there is no

doubt that accountability, transparency and participation are reinforced in a democracy,

and also support the quality of a democratic system. In other words, good governance

60

reconciles conflicting interests to reach a broad consensus on what is in the best interests

of the people/participants and where possible, on policies and procedures (Smith, 2007:

p. 149-154 and Wohlmuth, 1997/1998: p. 7).

(d) Political and Social Pluralism: Legitimate political pluralism gives room for multi-

party democracy, electoral choices, and justifiable and effective political opposition

within the state. The opposition in a pluralistic political system serves as the watch dog

for the population by scrutinizing government action thus rendering greater

accountability within government institutions at both national and local level. It equally

pressures for meaningful policy reforms such as when corruption is exposed. Thus

pluralism restores the imbalance of power between the state and society and provides the

basis for the abusive use of state authority. Social pluralism or freedom of association

stimulates political participation and provides the basis for political leadership. Freedom

of association and expression allows the formation of civil society organizations and a

critical evaluation of government decisions. The empowerment of associations and

increased social pluralism within the state makes it more difficult for elites to manipulate

democratic institutions and this encourages the growth of civil society organizations and

other groups. The mobilization of CSO’s and organized interest groups in a pluralistic

political system encourages the political power of the poor and their participation in those

political organizations that will promote poverty reduction (Smith, 2007: 128 – 138).

(e) Accountability and transparency: Accountability and transparency create a

situation where impersonality in decision making by public officials and a uniform

application of rules by them will be guaranteed. This makes accountability an essential

requirement of good governance. This is not only a requirement for governmental

institutions: private sectors, civil society organizations and NGO’s must be accountable

to the public and to their institutional stakeholders. Accountability gives room for

scrutinizing public decisions at the internal or external level by other stakeholders. It

equally implies public authorities are accountable to the population who evaluate their

behaviour and their sense of judgment over policy choices. Accountability is more

effective when there is transparency and the rule of law. Transparency means that

decisions made and their enforcement are achieved in a manner that follows rules and

61

regulations. It also means that information is freely available and directly accessible to

the public. Accountability and transparency give confidence to the various stakeholder of

a government (Smith, 2007: p. 17-37).

(f) Rationality of governmental organizational structures: The rationality of

government organizational structure enables the incorporation of a public administration

system that is highly controlled and characterized by impersonality and a predictable

behaviour of officials thereby creating confidence in the citizenry towards their

administration in the rendering of public goods and services. Secondly, a coherent

governmental structure will create a conducive environment for private sector

development. This is because, such governmental structures are people-center and

development-oriented (Wohlmuth, 1997/1998: p. 7).

These six elements of the good governance concept should be related or incorporated into

the socio-economic development, structural changes and the political reform process of

SA. Therefore the quality of governance system is established by the nature of the

political system and the specific distinctive attributes of the government. Here I am

referring to a democratic government where there is accountability, popular participation,

rule of law, etc (Ibid).

What is important is the relevance of the concept of good governance to LED and

poverty alleviation. This is because most poverty alleviation programmes such as LED

have had little impact on poverty alleviation. Very central to LED is the concept of good

governance which acts as a facilitator for an efficient management of the state in order to

achieve its developmental goals. For the government to achieve its developmental goal

thus alleviating poverty, it becomes necessary to evaluate the developmental policies

within the frame work of the good governance concept as outlined above.

There are very persuasive academic arguments that the characteristics of good

governance are normally not part of authoritarian or totalitarian regimes. Yet it is equally

obvious that some authoritarian governments have elements of good governance at the

various government levels and institutions. Consequently some elements of good

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governance can be found even within the context of undeveloped democratic structures.

It is therefore a paradox that in democratic systems of government public administration

may show weaknesses that are not in compliance with the nature of government and the

principles of good governance (Ibid: p. 7-8). This now creates unresolved issues because

democratic governments do no have the monopoly over the characteristics of good

governance nor are these characteristics out of the exclusive application of authoritarian

states.

The concept of good governance is so important for the South African development

agenda because bad management, institutional instabilities, internal political shocks etc

impede investment, both domestic and foreign. It is not only the argument about market

failures that enables us to lay emphasis on good governance. The stakes are even higher

when there are social, political and economic instabilities, the breakdown of social and

political institutions, and the danger of further loss of public legitimacy if economic

reforms fail. This creates a very legitimate concern for considering good governance as

an essential tool for LED in SA. Therefore, development programmes need to be

accompanied to an effective development management system and an effective public

administration system at all state levels for any meaningful sustainable development

process to be achieved (Wohlmuth, 1997/1998: p. 9).

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64

CHAPTER 5: ANALYSIS, CONCLUSION AND PERSPECTIVES

5.1: AnalysisThe world has observed decades of unprecedented development policies aimed at solving

poverty yet there is an increased gap between the rich and the poor. Poverty remains

widespread while world leaders have never relented efforts in abetting poverty

eradication. In this light, the government of SA is concerned enough to engage new

development policy agenda that will adapt with the exiting economic challenges facing

localities. The extent of poverty as a socio-economic and political problem within SA

cannot be over emphasized. This is why the government decided to take the bull by the

horns in introducing LED with the intention of strengthening the economic capabilities of

localities and improving their quality of life in an attempt to eradicate poverty. This is to

be achieved through the evaluation of local potentials for the development of localities

thus creating a situation where local solutions can be found to solve national problems.

The intention was to create an enabling environment for the use of the enormous local

economic potentials to jump start the economic advancement of localities. The guiding

policy behind this vision is that, the complex global economic structure is unable to solve

problems that are peculiar within specific localities. Therefore people living in

communities in SA were concerned about their own economic future through the

application of LED. Thus LED became a veritable economic possibility in the eyes of

South Africans competent to propel job creation, improve income, greater participation of

the poor in decisions and most especially in directing the social, economic and political

destiny of their localities. Achieving all this is not a day’s job nor is it the responsibility

of a selected few; the participation of all stakeholders is required for the achievement of

this lofty ambition.

Although the RSA has the largest economy in SSA, the highly dualistic nature of its

economy precipitated an increase in the gap between the poor and the rich thereby

creating a situation where the country’s wealth is in the hands of a few. The deeply

entrenched imbalances caused by decades of apartheid are intended to be reversed

through LED thereby eradicating poverty. As such it is no surprise that 40% of the

population is unemployed and the new government had to institute new policies which

will not only transform the economy but also reconcile racial divide and poverty

65

alleviation. The corner stone in achieving this is the LED strategy embarked on by the

state through local municipalities. The significant attention attached to poverty as

expressed in the millennium development goals cannot be underestimated that is why the

government of SA thought, through LG in their LED endevours poverty could easily be

overcome. It is no wonder that local governments were given greater responsibilities

through decentralization to enable them accomplish their LED ambitions. The pursuit of

LED was because of its ability to address poverty through job creation, social inclusion

and the re-orientation of economic policies from “top-down” to “bottom-up” approach.

This could not be achieved without an appropriate legal framework. Not only was the

constitution of SA in favour of LED, there are equally other related legislations such as

the White Paper on Local Government of 1998 and the reconstruction and development

programme which was a direct policy instruments aimed to beef up LED programmes.

Furthermore there was the pro-poor LED paper sponsored by the WB through the

Netherlands Cooperation and Development Bank of SA, which is intended to guide LED

towards poverty alleviation.

The role of LG is further amplified as a developmental local government became self

evident. Not withstanding the policy support for local governments through the

constitution, other related legislation and the considerable devolution of power to

municipalities; the government’s free market thinking in a dominant neo-liberal era

seems to compromise the basic philosophy in LED. This has incited remarks on how the

government intends to reconcile these positions. Armed with the necessary legal support,

LG’s were at the forefront in maximizing social development and economic growth,

integrating and coordinating community activities, democratizing development,

empowering and redistributing resources in favour of the poor. This makes municipalities

more strategic, creative and influential in the way they function. All these will eventually

enhance the advancement of LED within SA and poverty alleviation.

Therefore, LED requires more talented and skilled personnel to direct its activities, such

as designing a monographic study and strategic plan for councils. This will enable a more

focused development strategy which is to be achieved through a participatory economic

analysis of the development needs of the municipalities. The merits of a participatory

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economic analysis are that, the community own and design their development goals by

involving all stakeholders. This is to enable the identification of economic poles that are

very competitive in terms of quality, quantity, price, delivery, better services, regular

supply and guaranteed markets. Establishing all this is not an easy task for the

municipalities because most often, these municipalities lack the technical know-how in

implanting LED policies. Considering that LG’s are mandated on a political basis rather

than shared technical experience, the development of any municipality becomes

predicated on the dynamism and competence of the local administration. This is why

some of these LED programmes are bound to fail shortly after take-off or because of poor

coordination and lack of competent personnel to run the programmes.

Although there is a significant policy and legal basis for the application of LED in other

to alleviate poverty in SA, there is no formally approved policy frame work for LED.

This has led to mixed results from one municipality to another or from one LED

programme to the other thus hindering a consistent LED success story within the country.

The lack of an embracing poverty alleviation LED policy document geared towards the

poor weakens the strength of its achievement especially within rural communities where

the populations are most vulnerable. In this dilemma, some municipalities caption their

LED programme pro-growth while other municipalities titled their own programmes pro-

poor. There is no denying the fact that mainstream LED planning in SA is dominated by

market-led activities aimed at achieving economic growth, which is re-echoed by the new

government’s neo-liberal thinking. What is so fundamental is the fact that economic

growth is a means to an end and not an end in itself. That is why it does not amplify

poverty alleviation but gives a general projection as to the overall economic situation of

the locality or economy which makes it impossible to address poverty directly. The

Johannesburg case study had to reconsider its focus from pro- growth to pro-poor with

the need to enhance the quality of life for the urban poor. This recommended that the

institutional framework of LG’s safeguard needs to be devoted to alleviate poverty. This

is because economic growth from both economics and development stand point is not a

precondition for poverty alleviation. The HACOP project which is pro-poor and

community-led, has witnessed considerable successes in job creation, improved income

and household food sufficiency. Although both case studies have achieved considerable

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job creation, these ventures have been unable to contain poverty due to the high entrants

of job applicants within SA.

Although many LG’s understand the importance of LED and larger municipalities have

assigned staff to apply the policies; some local authorities are yet to develop appropriate

LED programmes. On the other hand some LG have developed LED policies but the

practical applications are slow within their localities. Therefore, LED does not always

enjoy direct support at local council level and investments in LED are insufficient to

overcome poverty due to lack of funds.

Due to the high incidence of poverty in SA, LED in rural municipalities are focused on

poverty intervention, yet this is also undermined by the severe poverty situation and the

limited capacity and limited resources to overcome poverty. This explains why, despite

the considerable priority given LED by the South African LG, there is uneven and

unreliable delivery in the programmes poverty alleviation outcome. It is for this reason

that writers such as Regerson asserted that “there is a strong pro-poor focus of LED in

rhetoric than it has been in practice within SA”.

The emerging reality of LED in SA with its significant achievements in terms of policy,

application on the field has been undermined by the absence of a guiding national policy;

lack of direct political links and a weak institutional support hinder its objective to

alleviate poverty within municipalities. The political will should even be stronger to

complement the policy objectives of LED for a more remarkable outcome.

From empirical observation starting LED initiatives is not a simple undertaking, as it

involves overcoming the constraints present. LED implies learning at more than just one

level. It is more of an interdisciplinary venture and focuses on collaboration between

government, non-governmental organization and the community to promote business

development at local level. Learning all this at the same time is quite a challenge to

municipal authorities. Yet their LED initiatives tend to be overambitious, i.e. addressing

multiple and or highly complex projects which cannot be realized within a short period.

Even when LED programmes are not overambitious and complex, we often fail to notice

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these projects require much time, expertise and it may take more than ten years for

concrete achievements to be realized. That is why development endevours aimed at

alleviating poverty may span from 1 to 25 years within the short term, mid-term and

long-term development plans. Nonetheless, both the community and observers often

expect instant results. Whatever the case, LED initiatives could be a sign of relief to the

previously excluded or the economically poor within localities because their involvement

in ventures that concern them directly helps to better plan, manage and control local

development processes and resources for their own common good.

With regards to the theories alongside LED programmes, it looks like a white elephant

conceptualize to solve the economic situation within communities. These theories are

western designed and fail to take into consideration old socio cultural practices which

have been engraved into third world. This is worsen by the fact that theories are idealistic

and abstract meant to arouse the feelings and curiosities of academic philosophers in their

critical thoughts which sometimes do not comply to the practically realities of localities.

That is why theoretical perceptions are always tampered with by field researchers and

they run at variance with conceptual thinkers because altering the theory per se

undermines the very essence on which these theories were predicated thus watering down

the vigor in the theory. This makes field researchers not able to evaluate the theory in its

own right as the distortion in the course of its application may not be able gauge the

extent of its merit.

There has been an increasing agreement within donors, governments, CSO’s and NGO’s

that economic liberalism is necessary to replace state-led development for greater

international competition. Free markets and free trade will produce the greatest social,

political and economic gains for everybody in SA. Where the market is self regulating it

allows the trickle down notion of wealth distribution in society. An unregulated market is

the best way to increase economic growth and ultimately alleviating poverty in the

country. What ever the case, the above assumption of neo-liberalism is incomplete.

Polanyi in his Book “The Great Transformation” contends that any modern market

requires extensive political and legislative intervention. This is because when economic

restructuring has severe consequences on the poor, the role of the state is to give

69

capitalism a human face by empowering the poor in both markets and politics - social

safety nets. He justifies his argument by stating that “free markets could never have come

into being merely by allowing things to take their course…laissez-fair itself was enforced

by the state”. It is an unobtainable dream to talk of an entirely free market system which

is without social relations. A self-regulated market requires the continuous interference

and monitoring by the state in other to protect the society against the dangers inbuilt in a

self-regulated market. Therefore it is untenable for the neo-liberals to think of completely

“rolling back the state” instead of increasing intrusion and regulations by the state to

regulate economic processes in a way that will overcome poverty. The consequences of

an unregulated market may lead to social destruction or even war within the society. This

therefore makes the case for LED more acceptable as local communities need the

assistance of state apparatus to strengthen localities. Williamson clearly acknowledges

the fact that enforcing market fundamentalist policies could not provide an effective

framework in combating poverty. There is therefore an unavoidable connection between

the market and social relations which creates an avenue for both market forces and

government intrusion to coexist in any civilized system worth its name.

With regards to the empowerment theory, it is a practical concept which is used by many

organizations in their operations especially patterning to poverty alleviation programmes.

The hallmark of the theory is that it is a practical concept which is not only used at the

level of strategic intent for academic purpose. The manifestation of the empowerment

theory to LED is very evident as it blends the practical reality and the theoretical

framework within which LED operates. It encompasses all the facets of LED in relation

to poverty alleviation. The theory lays emphasis on participation, capacity building,

economic improvement, democracy and transparency which are the watch words for any

successful LED programme capable of overcoming poverty in SA. It seeks to give power

to those who do not have power in a system by taking them out of poverty. This theory

also looks at empowerment through self-awareness, transparency, democratization and

empowerment through gender balance. The theory recapitulates poverty alleviation

through LED in SA by incorporating some basic attributes of the concept of good

governance such as transparency and democratization, which strengthens the practical

application of the theory. What is startling is the enforcement of the empowerment theory

70

within the South African society. The theory has not yet acquired a socially agreed

content thus making it a sanitized buzz-word divorced from the real understanding of

power and its implications. If the full meaning of the theory is to be applied it will mean

equalizing or near equalizing power by empowering those who do have power in the

system which becomes the practical difficulty in SA. Power is usually monopolized by

the elites and powerful politicians who control the system. The theory has been co-opted

by those in power so as to enable them rob it of its threatening meaning by managing

power in their favour as they fear the theory will take the unempowered into positions of

power or equalize power which will be against their interest. Empowerment through

participation is often taken to mean engaging local people at the grassroots through their

paid labour or informing them of top-down directives without the people having the

power to decide on any critical issues relating to the projects. Elites in the third world

appropriate wealth to themselves by monopolizing power at the political level and

through corruption at the administrative level, as such they acquire political, economic

and social power for their personal gains and looking at the process of empowering the

unempowered as ceding aware what is within their exclusive prerogative. This has been

compounded by the fact that empowerment has become a strategic objective of social

change yet the project remains the instrument to effect change rather than the people.

This is because the success of the project is very central in drumming support. Therefore

empowerment goes beyond policy papers or design programmes aimed at empowering

communities by elites, NGO’s and other multi lateral bodies. Rather, it requires the

concerted efforts of all the stakeholders and most especially the unempowered within

communities. However, political manipulations by elites to control power for their selfish

interest will be compromised where the concept of good governance is highly respected.

This concept guarantees legitimacy of government, popular participation, accountability,

transparency, political and social pluralism in a genuine democracy. The strength of the

empowerment theory in its practical dimensions to overcome poverty in a country like

SA is that the theory does not operate in isolation but functions within defined code of

conduct of the concept good governance. Building local capacities like any development

process takes time as it involves other institutional development within the system. It will

be naive to think local capacity building can be achieved with a single project or

71

instantly. Capacity building is a process and like any social process, it relates to other

institutional measures which must be developed for its efficient implementation in SA.

It is true that LED and poverty alleviation are best applicable through democratic

devolution of power to local municipalities, which enhance participation, greater control

over local programmes by the stakeholders, increase resource mobilization by the

communities, democracy and good governance. That is the bases of Wolman’s arguments

for the decentralization under the efficiency values and governance values. This will lead

to greater maximization of social welfare and greater reaction of public authority to the

needs of the people such as the application of LED programmes to alleviating poverty.

Local people in SA will be bound to control the processes of development within their

localities in order to alleviate poverty. This theory may not achieve its full potential in

that decentralization creates disparity between more resourced and less resourced regions

in SA. Secondly, democratic devolution of power is not always accompanied by the

available financial and technical resources to enable municipalities bolster their

development potentials. Local elites tend to monopolize the political processes at the

local level for their personal gains. The argument for resource disparity may not be

tenable because the national government in SA gives financial and technical assistance to

LG who act in sub-national capacity to guarantee balance development within the less

resource regions. There is greater ability to solve problems of poverty at local level

within a decentralized LG system than at national level because local politicians are

directly answerable to their citizenry. At the local level there is greater legitimacy of

government through local elections, popular participation accountability and transparency

which is beefed up by a legal framework that assures the rule of law at local level.

Corruption and abuse of public office at the local level in SA cannot be stopped

completely, what is important is a regulatory system that will guarantee checks and

balance in the conduct of public authorities at local level. This strengthens local public

administration and gives citizens the trust in their system as public authorities are

answerable for their acts or omission in rendering public duties. This enhances the

prospects of poverty alleviation within SA through LED.

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From the above analysis it is eminent that there is no clear cut model in achieving poverty

alleviation through LED. This is because the various theoretical arguments advanced are

manifested by problems inherent in their application. This creates an avenue to reconcile

how the concept of LED can achieve its goal of poverty alleviation. Therefore, the

concept of good governance creates an enabling environment for the guiding principles of

a successful development agenda in SA. This is not predicated on economic reforms or

on perceived academic theories to guide development processes but rather on prescribed

rules to enable development policies achieve its maximum potentials. In this light,

scholars, development organizations and governments have consider the concept of good

governance as an end in its own right for the achievement of the development goals of a

country such as SA – LED and poverty alleviation. Although the concept of good

governance is so broad, when applied meticulously it will lead to maximum results. The

concept prescripts how issues such as democracy and development, popular participation

and development, corruption and development, state capacity, transparency are applied

within the development domain. The attributes of good governance which comprise:

legitimacy of government, appropriate legal framework to guarantee the rule of law,

popular participation, political and social pluralism, accountability etc when applied in

the socio-economic and political reform process in SA will lead to admirable outcomes of

the LED and poverty alleviation.

These tenets of good governance are generally aligned with genuine democratic

governments at both national and local level and should be applied with all the fairness to

achieve the expected results. However, it will be no aberration to point out that some

elements of the concept of good governance can be found within authoritarian

governments and the same time, democratic systems may show some weaknesses which

does not comply with the concept.

This analysis points to the most important problems facing LG’s but the evidence set out

above and the theoretical framework which supports it identify effective democratic

representation and corruption as the most urgent challenges municipal governments face

in achieving poverty alleviation through LED. Lack of local capacity problems are of

secondary concern and could easily be solved by designating the appropriate competent

73

administrators to direct local activities. However the main concern of LG’s programs

centre on finance, capacity building measures and implementation. These activities relate

to the management of municipal governments and ignore the profound problems of

public accountability and legitimacy of LG. We need not ignore these problems because

we may jeopardize all efforts of LED and poverty alleviation within localities by putting

resources and knowledge in the hands of those bent to impede local development.

Efforts should be geared towards the promotion good governance and public

responsiveness to local needs and demands. There is no society that is void of corruption

and as corruption cannot be completely eliminated within SA, they should be legal

instruments to hold public authorities fully responsible for their actions. Such a system

will produce a breed of politicians who are interested in turning popular needs into

municipal outputs and will ensure that poverty is an integral part of LED. They will shun

the temptation of using public goods for their personal gains or the use of public offices

for their selfish political interest. Such a system does not come about suddenly but

depends upon a number of minimum political and social conditions. There is need for an

open, just political system free to all political parties with free and fair elections.

Transparency in local political and economic affairs that enable access to information on

the political and economic dealings of LG is necessary. There is need for social cohesion

to enable the people to galvanize their existing potentials by agreeing on desired

developmental options for their localities. The role of the central government to serve as

an impartial administrator in the local government process is so fundamental in the

success of LED overcoming poverty in SA. Not withstanding the role of the central

government, significant degree of local autonomy is crucial if LG’s are to take control of

the process of LED and poverty alleviation.

5.2: ConclusionThe object of this research work seeks to find out why despite the emergence of Local

Economic Development in the Republic of South Africa, localities are unable to exploit

their economic resources sufficiently to enable them overcome poverty? The concept of

LED in SA is relatively new in a country whose previous apartheid governments led to

the disempowerment of many South Africans and the new government inherited a

country that is significantly endowed with resources yet the poverty levels are so high.

74

The country’s LED programme is not predominantly focused on poverty alleviation as

some LG’s concentrate on pro-growth which may not address poverty directly.

Furthermore, the lack of a specifically designed LED policy paper aimed at addressing

poverty makes LG’s to direct their scarce resources on other priority areas for their

localities. Consequently, not withstanding the country’s outstanding economic position in

Africa, poverty is widespread. In this research work, we cannot deny the fact that

progress has been made in some of the larger cities, but in most parts of the country LG’s

are dealing with unfounded mandates which lack the power, resources and capacity to

implement LED so as to alleviate poverty.

The lack of securing a consistent political support for LED programmes with long yield

terms as well as the need to re-align other policies with LED intention has slowed it

results. For many LG’s, priority is to get the basic infrastructure in order to fascilitate

LED but there are limited human resources to be injected in the programmes for better

outcomes.

Theoretical explanations may not be the best way to address social problems such as

poverty in society but they serve only as a guide to develop sound policies. LED policies

are not consistent with the new governments’ neo-liberal thinking which is based on a

free market principle. This is further compounded by the near absence of an effective

monitoring and evaluation techniques to access LED ventures.

Local economic development is a multi-disciplinary field of studies that requires a

comprehensive and rigorous engagement of the various disciplines in setting up LED

programmes and evaluation techniques. At the same time poverty needs to be understood

as a multi-dimensional phenomenon which cannot be perceived as requiring only an

income evaluation solution to determine those within the poverty range. This therefore

creates a complex situation to policy designers, practitioners and scholars in effectively

applying LED. In a bid to tackle poverty all stakeholders need to be part of this exercise.

It is an affirmed fact in this research work that the relative short period of applied LED

75

LED could not have radically overcome poverty. Therefore poverty alleviation is a

continuous process that requires relentless efforts of all stakeholders.

5.3: PerspectivesWhat is germane within the South African localities is that there should be a concerted

effort by local authorities to incorporate LED within mainstream centres of learning and

LED programmes should be well structured to allow continuous monitoring and

evaluation of programmes towards poverty alleviation. Furthermore, local authorities

should create a network to evaluate achievements within other municipalities and how

sister councils can best impart their learned lessons to others. This should lead to a

resourceful and purposeful network of experts within this domain. All stakeholders

should be part of the development process and development should be seen as a

continuous process which actually gives the possibility for continuity, and not just a

process which ends at the mandate of each administration. By so doing local authorities

will build on the knowledge and achievements of the successive administrations which

will act as their strength in fostering LED and poverty alleviation. The goal is not to

achieve this lofty objective overnight but through conscious efforts that give room for

continuity and knowledge sharing.

It is very important to link LED to micro credit schemes because this will facilitate its

growth in order to alleviate poverty. A good example is the profound experience of Nobel

price winner Mohammad Yunu founder of Grameen Bank in Bangladesh. His new

experience created a category of banking by granting millions of small loans to the poor

people without collateral security for the establishment of businesses. He went against

traditional banking principles to award loans to the poor in his effort to create economic

and social development from below based on trust from those receive the loans.

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