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 ------------------------------------------------------------------------- i ACKNOWLEDGEMENTS --------------------------------------------------------------------- iii LIST OF ABBREVIATIONS------------------------------------------------------------------- iv DEDICATION ------------------------------------------------------------------------------------- v ABSTRACT --------------------------------------------------------------------------------------- vi CHAPTER 1 : INTRODUCTION AND PROBLEM FORMULATION -------------------- 1 1.1: Introduction ----------------------------------------------------------------------------------- 1 1.2: Problem Formulation ------------------------------------------------------------------------ 4 CHAPTER 2 : METHODOLOGY ----------------------------------------------------------------- 7 2.1: Research Design ------------------------------------------------------------------------------ 7 2.1.1: Case Study Research Design ---------------------------------------------------------- 7 2.1.2: Explanatory, Clinical Case Study Design ------------------------------------------- 7 2.1.3: The use of Theories in Case Study research Design ------------------------------- 8 2.2: The Structure of this Project ---------------------------------------------------------------- 9 2.2.1: Theoretical Consideration ----------------------------------------------------------- 11 2.3: Alternative Theory ------------------------------------------------------------------------- 12 2.4: The aim of the Thesis ---------------------------------------------------------------------- 12 2.5: Literature ------------------------------------------------------------------------------------ 14 2.6: Definition Terms --------------------------------------------------------------------------- 14 CHAPTER 3 : EMPIRICAL DATA ------------------------------------------------------------- 17 3.1: Background to LED in the Republic of South Africa (RSA) ------------------------ 17 3.2: Local Economic Development as an Emerging Reality in SA ---------------------- 18 3.2.1: Overview ------------------------------------------------------------------------------- 18 3.2.2: Why LED? ----------------------------------------------------------------------------- 20 3.3: Policy Consideration for LED in South Africa ---------------------------------------- 20 3.4: Local Economic Development in South Africa ---------------------------------------- 22 3.4.1: Developmental Local Government ------------------------------------------------- 22 3.4.2: The Role of Local Governments in Promoting LED in SA --------------------- 22 3.4.3: Objectives of Developmental Local Government -------------------------------- 23 3.4.3.1: Maximizing Social Development and Economic Growth ----------------- 23 3.4.3.2: Integrating and coordinating --------------------------------------------------- 24 3.4.3.3: Democratizing Development, Empowering and Redistributing ---------- 24 3.4.3.4: Leading and Learning ----------------------------------------------------------- 25 3.4.4: Advantages of LED in SA ----------------------------------------------------------- 27 3.4.5: The Council Monographic Study (MS) and Strategic Plan (SP) --------------- 28 3.4.6: Council Monographic Studies (MS)------------------------------------------------ 28 3.4.7: Council Strategic Plan (SP) ---------------------------------------------------------- 28 3.4.8: Participatory Economic Analysis --------------------------------------------------- 29 3.5: Community Driven LED Case Study in the Rural District of Hertzog ------------- 30 3.5.1: The Study Area ------------------------------------------------------------------------ 30 3.5.2: Hertzog Agricultural Cooperative (HACOP) Initiative ------------------------- 31 3.5.3: Flaws of HACOP---------------------------------------------------------------------- 32 3.6: The Johannesburg LED Urban Case Study --------------------------------------------- 32 3.6.1: The Economic Background of Johannesburg ------------------------------------- 33 i 3.6.2: LED Strategies for Johannesburg --------------------------------------------------- 33 3.6.3: The Outcome of the Project --------------------------------------------------------- 34 3.6.4: Lessons Learned in the Programme ------------------------------------------------ 34 CHAPTER 4: THEORETICAL AND CONCEPTUAL CHAPTER------------------------ 38 4.1: The Neo-Liberal Theory------------------------------------------------------------------- 38 4.1.1: Definition of Neo-liberalism and the Theory ------------------------------------- 38 4.1.2: The Washington Consensus --------------------------------------------------------- 41 4.1.3: Criticism of the Neo-Liberal Theory ----------------------------------------------- 41 4.2: The Empowerment Theory---------------------------------------------------------------- 44 4.2.1: Empowerment as Participation ------------------------------------------------------ 47 4.2.2: Empowerment as Capacity Building ----------------------------------------------- 47 4.2.3: Empowerment through Economic Improvement --------------------------------- 48 4.2.4: Critique to the Empowerment Theory --------------------------------------------- 49 4.3: Theory on Decentralization of Governance -------------------------------------------- 51 4.3.1: The Argument for the Decentralization Theory ---------------------------------- 53 4.3.1.1: Efficiency Values ---------------------------------------------------------------- 54 4.3.1.2: Governance Value --------------------------------------------------------------- 54 4.3.2: Critique of the Decentralization Theory ------------------------------------------- 56 4.4: The Concept of Good Governance ------------------------------------------------------- 57 4.4.1: Attributes of Good Governance ----------------------------------------------------- 59 CHAPTER 5: ANALYSIS, CONCLUSION AND PERSPECTIVES --------------------- 64 5.1: Analysis -------------------------------------------------------------------------------------- 64 5.2: Conclusion----------------------------------------------------------------------------------- 73 5.3: Perspectives --------------------------------------------------------------------------------- 75 Bibliography -------------------------------------------------------------------------------------- 76 ii 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. iii LIST OF ABBREVIATIONS ANC………...………………………………………………….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 Bank WTO……………………………………………………………World Trade Organization iv 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. v 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 multidimensional approaches, involving all stakeholders in the municipalities. vi CHAPTER 1 : INTRODUCTION AND PROBLEM FORMULATION 1.1: Introduction Since 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 Design Arguments 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 Design A 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 Design Here, 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. 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 7 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 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 8 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 Project This 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. 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 9 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 neoliberal 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 raisond'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 Consideration As 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. Transnationalization 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 Theory The 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 Thesis Until 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 Terms For 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 Development Imperative 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). Poverty Diverse 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: Overview Due 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 Africa The 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 Africa Municipalities 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 Government The 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 SA The 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 Government The 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 Growth Local 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 coordinating Various 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 Redistributing LG 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 Learning The 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 SA As 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 agreed policy goals within their financial and institutional resources (Helvetas Cameroon, p. 4 and DPLG Section B, 1998). 28 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 Analysis This 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). 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, 29 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 Hertzog In 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 Area Hertzog 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 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. 30 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) Initiative The 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 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 2 Rand is the Republic of South African currency. 31 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). 3.6: The Johannesburg LED Urban Case Study This 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 32 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 Johannesburg Johannesburg 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 Johannesburg The 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. -Support for urban agriculture to provide food for the urban population. -Support for small businesses to generate emplyment. -Support for financial service development. 33 - 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 Project The 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). 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. 34 -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 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 35 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 socioeconomic 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) 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) 36 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). 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. 37 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 26th, 2000). 4.1.1: Definition of Neo-liberalism and the Theory Neo-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. 38 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). 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 39 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 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, 40 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 Consensus The 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 (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 41 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 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 42 results of neo-liberal policy advice being followed by developing nations. In effect, the neoliberal 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). 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. 43 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 Theory Empowerment 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). 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 44 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 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). 45 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 3134). This is the thrust in LED in achieving poverty alleviation (and the essence of 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 46 developmental local government policies in SA (Stirrat, 1996: p.71 and DPLG Section B, 1998). 4.2.1: Empowerment as Participation Empowerment 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). 4.2.2: Empowerment as Capacity Building Here 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 47 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 Improvement The 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). 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. 48 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 Theory The 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 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). 49 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 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 projectsbased 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 50 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 Governance For 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). 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 51 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). 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). 52 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 Theory The 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 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). 3 Such as Rousseau, Mill, Montesquieu and Madison 53 4.3.1.1: Efficiency Values Efficiency 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). 4.3.1.2: Governance Value Governance 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 decisionmakers 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 54 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). 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 55 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 Theory Thought 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 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). 56 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 Governance Since 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 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 57 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 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 58 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 Governance The 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 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 59 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 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 multiparty 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 60 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 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 61 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 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. 62 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). 63 CHAPTER 5: ANALYSIS, CONCLUSION AND PERSPECTIVES 5.1: Analysis The 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 64 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 65 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 propoor. 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 66 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 67 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 68 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 69 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 70 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. 71 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 72 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: Conclusion The 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. 73 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 74 LED could not have radically overcome poverty. Therefore poverty alleviation is a continuous process that requires relentless efforts of all stakeholders. 5.3: Perspectives What 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. 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