Geoforum 34 (2003) 113–122
www.elsevier.com/locate/geoforum
The Local Economic Development mirage in South Africa
Richard Tomlinson
Graduate School of Public and Development Management, University of the Witwatersrand, South Africa
Received 1 October 2001; received in revised form 1 March 2002
In 1985 I asked a Taiwanese businessman in Dimbaza, an Ôindustrial development pointÕ in the Ciskei, why
he had invested in the ÔhomelandÕ. 1 His answer was: ‘‘I
was considering Malaysia and Brazil, but then I discovered that labour in South Africa was free’’. In terms
of the apartheid governmentÕs regional industrial decentralisation programme he was being paid R110 2 per
labourer per month, quarterly, tax-free. He was paying
his male labourers R55 per month and his female labourers R45 per month. He had labourers sleeping on
the cutting tables.
The policy, central to the governmentÕs Ôregional industrial development programmeÕ during the 1980s,
was intended to entice investment to rural ethnic
enclaves in order to reduce the movement of blacks
to the cities. Not surprisingly, with the approach of
democracy, the decentralisation programme fell into
disrepute and the focus turned to local economic development (LED) as an alternative means of promoting
economic development in particular localities. The exploration began with an argument for replacing regional
planning with LED and continued with an exploration
of comparative material, mostly from the US and the
United Kingdom, 3 in the attempt to see how LED
might best be practiced in South Africa (Tomlinson,
1994).
As it turns out, the ideas advocated in that book and
many other later documents have largely been ignored.
These ideas replicated the US ÔformulaÕ at the time
wherein LED most commonly involved a localityÕs
attempting to create jobs, enhance property values
and increase the rates base through attracting inves-
E-mail address: [email protected] (R. Tomlinson).
Dimbaza was initially one of apartheidÕs most notorious Ôdumping
groundsÕ, with tragic pictures of rows of childrenÕs graves illustrating
the plight of those forcibly relocated.
2
At the time $1 equalled about R2.6. In January 2002 $1 equalled
about R12.
3
Illustrative of the material that influenced the author are works by
Fainstein (1987), Eisinger (1988), Scott (1988), and Judd and ParkinsonÕs (1990) edited book.
1
tors, promoting investment and attracting skilled labour through city improvements, supporting local
enterprises, and backing community LED initiatives
(Rogerson, 1999). In contrast, in South Africa, the
space currently being created for LED has to do
with advancing small businesses in the black community and with relieving poverty. Thus, in South
Africa, the closest parallel is with community LED initiatives.
My argument in this paper is, first, that this narrow
conception of the role of LED follows directly from
black unemployment and apartheid restrictions on black
enterprise. Second, that LED is increasingly being used
by central government to shift to local government some
of the responsibility for dealing with unemployment and
poverty. Third, that the commitment of resources to
regional investment programmes so dwarf the resources
made available for LED purposes that LED has little
role when it comes to shaping the economic direction of
the countryÕs cities and towns. Fourth, that the skillintensive, export focus of the regional programmes
works against LED efforts focusing on the poor and the
unskilled. Fifth, that should local governments seek to
do more than address poverty issues, their economic
strategies are shaped by whether they fall within or
outside the territory of central or provincial governmentÕs regional programmes.
My conclusion is that neo-liberal policies and global
competition are shaping and limiting LED, while
apartheid-era inheritances lead to the LED focus on
poverty alleviation and black empowerment through
support for small enterprises. LED, presented as a
progressive government policy, is becoming ever more
marginalized.
It is also my view that references to LED are becoming ever more confused. This is apparent in the fact
that the Department of Provincial and Local Government sometimes means by LED economic and social
activities undertaken at a local level and sometimes any
activities undertaken by any sphere of government that
have unplanned local economic impacts. Adding to the
potential for confusion is that the Department of Trade
0016-7185/03/$ - see front matter 2003 Elsevier Science Ltd. All rights reserved.
PII: S 0 0 1 6 - 7 1 8 5 ( 0 2 ) 0 0 0 2 5 - 8
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R. Tomlinson / Geoforum 34 (2003) 113–122
and Industry refers to its small business strategies as
LED (both points are demonstrated below).
Thus, at the outset, I need to define my understanding
of LED. Following the lead of the International Labour
Organisation, we understand that
LED is a participatory development process that
encourages partnership arrangements between the
main private and public stakeholders of a defined
territory, enabling the joint design and implementation of a common development strategy, by making
use of the local resources and competitive advantage in a global context, with the final objective of
creating decent jobs and stimulating economic activity. 4 . . . (LED) must belong to the local stakeholders. 5
1. Economic backdrop
Underlying all thinking about LED in South Africa is
massive and increasing unemployment. As recounted
before (Tomlinson, 2001), South Africa has seen a
considerable loss of formal sector jobs since the late
1980s. Initially due to sanctions, the trend increased
sharply after 1994 with a newly democratic South
AfricaÕs joining the World Trade Organization and
rapidly dropping tariff protection against imports. It
was reported in Business Day (26 September 2000) that a
million mostly unskilled jobs were lost between 1993 and
1997, offset against 60,000 new skilled jobs and about a
million informal sector jobs (77% of which earn less that
$140 per month (Business Day, 3 October 2000)). One
million jobs represents over 10% of the formal sector
labour force. 6
Underlying the lost jobs are broader structural trends
in the economy (Bhorat and Hodge, 1999). On the one
hand, due to the restructuring of the economy resulting
from changes in the local and global demand for goods
and services, investment has shifted out of agriculture,
mining and manufacturing into the services sector.
These are sectors in which Africans and ‘‘coloureds’’
predominate. On the other hand, changes in production
methods resulting from capital deepening have led to a
change in the skills mix of the labour force towards
more skilled labour. These changes have benefited
4
International Labour Organization (n.d.). What is LED? http://
oracle02.ilo.org/dyn/empent/empent.Portal?p_prog ¼ L&p_lang ¼ EN.
5
International Labour Organization (n.d.). The LED Process. http://
oracle02.ilo.org/dyn/empent/empent.portal?p_docid ¼ PROCESS&
p_prog ¼ C&p_subprog ¼ LE.
6
Estimates as to the job losses vary. For example, Professor Charles
Simkins, Head of the Economics Department at the University of the
Witwatersrand, provided a rough estimate that a million jobs were lost
between 1990 and 2000.
Asians and whites, as they are mostly employed in the
tertiary sector. As a result, including the 1970s when
jobs were increasing, while total employment grew by
13.8% between 1970 and 1995 employment opportunities for non-Africans increased by 45% and those for
Africans, 77% of the population, decreased by 3.8%
(Bhorat and Hodge, 1999, pp. 371/2). Thus it is that
about 40% of the labour force lacks formal employment
(Arndt and Lewis, 2000).
The upshot of global changes in the structure of demand for goods and services and the increase in global
competition that has hastened capital deepening and the
adoption of the latest information technology has been
to marginalize different components of the labour force
in direct proportion to their skills and ability to find
employment in sectors that are competitive in the global
economy. The implication for Johannesburg, for example, is found in variations in unemployment statistics
as one heads from the rich, mostly white north to the
poor, still black south. The 1996 census records that
formal sector unemployment in Sandton was 4%, 23% in
the inner city, 45% in Diepkloof Zones 1–6 (a suburb of
greater Soweto) and 55% in Devland (a squatter settlement south of Soweto).
2. The origins and conception of LED
It is unemployment statistics such as these as well as
their racial incidence that cause local government
councillors to say that their foremost problem is how to
reduce unemployment. Indeed, the role of local governments in reducing unemployment is emphasized in
the Constitution, finalised in 1996, wherein local governments have been constituted as an independent
sphere of government and where one of the five objectives set for local government is promoting ‘‘social and
economic development’’. This responsibility was interpreted in the Department of Constitutional DevelopmentÕs (1998) (now called the Department of Provincial
and Local Government), White Paper on Local Government as requiring that local governments implement
LED strategies. The presumption is that ‘‘Local government can play an important role in promoting job
creation and boosting the local economy’’ (p. 25).
The ANCÕs conception at the time of how local
government would implement LED is to be found in the
earlier Reconstruction and Development Programme
(RDP) (African National Congress, 2000, p. 83), which
represented the ANCÕs policy framework when it assumed power in 1994. In the RDP it is noted that
‘‘In order to foster the growth of local economies,
broadly representative institutions must be established
to address local economic development needs. Their
purpose would be to formulate strategies to address job
creation and community development . . .’’ With gov-
R. Tomlinson / Geoforum 34 (2003) 113–122
ernment leading, the ANC envisaged a wide-ranging
consultative and participatory process for the preparation of LED strategies. Emphasis was placed on community economic development and programs to support
and sustain emerging (black) informal and very small
enterprises that, together with public works programs,
were intended to foster job creation.
The RDP responds to some of the defining characteristics of apartheid, in regard to this paper, oppressive education and labour policies that limited blacks
to inferior jobs, a high level of income inequality, spatial exclusion expressed in a large poverty-stricken
rural population and divided cities, and poor access
to municipal and social services. Thus it was that the
five RDP programs, which were a key feature of
the ANC electoral platform at the time of the 1994
elections (and which found broad multi-party support),
were:
• ‘‘meeting basic needs’’ (jobs, land, housing, water,
electricity etc.);
• ‘‘developing our human resources’’ (education and
training for all);
• ‘‘building the economy’’ (while addressing racial and
gender inequalities);
• ‘‘democratising the state and society’’ (including preparing a Constitution and a Bill of Rights); and
• ‘‘implementing the RDP’’.
Emerging out of this commitment were, inter alia,
grant programs for capital investment in housing and
municipal services, an ‘‘equitable share’’ grant to local
governments to subsidise services consumed by lowincome households, and a small enterprise program
biased to emerging entrepreneurs. Apartheid has left the
country with a broadly accepted mandate to address
basic needs and poverty.
The expression of this continuing commitment to
basic needs and the relief of poverty is to be found in the
Department of Constitutional Development (no date)
Linking LED to Poverty Alleviation and, in its LED
manual, the Department of Provincial and Local GovernmentÕs (2000, p. 1) noting that ‘‘The aim of LED is to
create jobs, alleviate poverty, and redistribute resources
and opportunities to the benefit of all local residents’’. It
is difficult to imagine how redistribution will be to the
benefit of all local residents. The focus is on the poor.
The Department of Provincial and Local GovernmentÕs (2001, s. 1.1.2) later policy document makes the
point: ‘‘. . . the Department of Provincial and Local
GovernmentÕs pro-poor LED policy must be focused
primarily at meeting the unmet basic needs of the
community, including employment’’.
The Department of Provincial and Local Government has established a LED unit, has published LED
manuals directed at enabling local governments to un-
115
dertake LED, and has established a LED Fund and a
Social Plan Fund. When compared to the billions of
Rand devoted to regional planning, what is striking
about the two funds is the limited resources made
available. The LED Fund was established with a budget
of R42 million as part of governmentÕs overall poverty
alleviation strategy. The Fund ‘‘provides financial support, up to a maximum of R1.5 million, to municipalities engaging in projects that will lead to job creation,
poverty alleviation and redistribution . . . (and) is considered a key instrument that national government has
made available to assist municipalities in taking up the
challenge of developmental local government’’. 7 Over
85% of the projects supported by the Fund serve microand small enterprises and community development. 8
The Social Plan Fund provides a maximum of R50000
to local governments that have been affected by largescale retrenchment to undertake a ‘‘Local Economic
Regeneration Study’’. 9
But the RDP has not served to promote economic
growth and little employment was generated by the investment in housing and infrastructure. With a view to
economic growth, the RDP has largely been supplanted
by Growth, Employment and Redistribution (GEAR),
which was prepared by the Department of Finance (now
incorporated in the National Treasury), with the assistance of the Department of Trade and Industry. 10
GEAR, essentially a self-imposed structural adjustment
program, is a response to South AfricaÕs joining the
World Trade Organization and is intended to promote
the countryÕs export competitiveness.
Most Department of Trade and Industry capital expenditure and hoped for leveraging of private sector
investors has been located in the Spatial Development
Initiatives (SDIs) and Industrial Development Zones
(IDZs). The SDIs and IDZs, together with a two-year
Tax Holiday Scheme, which contains spatial, industry
sector and labour components, have replaced the apartheid regional industrial decentralisation programme
(Lewis and Bloch, 1998).
According to the Department of Trade and Industry, SDIs ‘‘are the practical implementation of the
governmentÕs economic strategy as set out in its GEAR
policy’’. 11 The SDIs are intended:
7
Department of Provincial and Local Government, ‘‘LED Fund
Review, January 2000’’. http://www.local.gov.za/DCD/dcdindex.html.
8
Department of Provincial and Local Government, ‘‘LED: Boosting Local Economies’’. http://www.local.gov.za/DCD/dcdindex.html.
9
Department of Provincial and Local Government, Regenerating
Local Economies: The Social Plan Fund. http://www.local.gov.za/
DCD/dcdindex.html.
10
Although it is often held that that GEAR has replaced the RDP,
this is incorrect in the case of capital grants for housing and
infrastructure and subsidies for the operating costs of services.
11
http://www.dti.gov.za/review.asp?iSDivID ¼ 143&iEvent_ID ¼
179.
116
R. Tomlinson / Geoforum 34 (2003) 113–122
• To overcome the spatial legacy of apartheid: the distribution of economic activity and infrastructure was
distorted by political agendas, which left many areas
neglected.
• To reorient economic activity, especially in industry,
away from a narrow focus on import substitution
and domestic markets, towards production for global
markets (Gelb and Manning, 1998, p. ii).
IDZs are viewed as a special type of SDI.
The IDZ programme is intended to encourage international competitiveness of the South African
based manufacturing sector. 12 (The programme
consists of) purpose-built industrial estates linked
to an international port or airport in which quality
infrastructure and expedited customs procedures
are coupled with unique duty-free operating environments suited to export-oriented production. 13
The SDIs and IDZs involve massive expenditure on
infrastructure and the attempt to attract one or two
‘‘anchor’’ projects. An example of the infrastructure
expenditure is the R2.65 billion for the construction of
Coega port and R800 million for the industrial infrastructure for an IDZ. 14
The Department of Trade and Industry and the National Treasury, as the proponents of GEAR and the
SDIs, do not envisage much of a role for local governments in promoting economic development. For example, the focus in 1998 White Paper on Local Government
is on the efficient delivery of services and the financial
viability of those governments. However, the central
government macro-economic reforms and export-led
growth informs the managerial elites in the public and
private sectors and helps to shape their perceptions of
desirable forms of local economic growth (Bond, 2000).
Nonetheless, it is important to review perceptions of
LED within the Department of Trade and Industry since
they point to the conceptual impoverishment on the topic. The Department also has established a LED unit
whose focus is on small business development. But the
conception of LED is incorrect. For example, greatest
attention is paid to ‘‘unpackaging’’ the investments of
large companies with a view to providing market opportunities for small and micro-enterprises (SME). This
involves the ‘‘scoping- of . . . opportunities in and
around’’ the project. This is a centrally determined and
implemented programme that was not set up to promote
12
http://www.dti.gov.za/review.asp?iSDivID ¼ 117&iEvent_ID ¼
167.
13
http://www.dti.gov.za/review.asp?iSDivID ¼ 143&iEvent_ID ¼
179.
14
Coega is articulated as a regional strategy intended to address
poverty, but is capital and skill intensive and certainly will fail to do so.
development within a locality or to assist local LED
stakeholders to do so. As before, project based interventions will have unforeseen spatial outcomes.
To return to GEAR, GEAR put in place what is
described as the Ôeconomic fundamentalsÕ: low government debt and inflation rate, and so on, for which South
Africa is now lauded. But, like the RDP, GEAR has not
served to promote rapid economic growth and, more
especially, has failed to create jobs; which takes us to
GEAR-plus. Out of frustration with the limited impact
of GEAR, during his budget speech of 21 February
2001, Trevor Manuel, Minister of the National Treasury, signalled the shift towards ‘‘a more interventionist
state role through targeted investment and incentives’’. 15 The shift is premised on the macro-economic
fundamentals being in place and the move towards micro-economic incentives.
The character of the interventionist strategy is a
matter for discussion within the ANC 16 and it has
been speculated that the full scope of the strategy will be
revealed at the ANC Congress in 2002. Nonetheless, it
is apparent that the sectoral targeting envisioned in
GEAR-plus includes, for example, the clothing industry
and tourism, both of which benefit Cape Town and
Durban, and the IT industry, which benefits the area
along the M1 between the Johannesburg and Tshwane
(Pretoria) CBDs. The examples demonstrate that sectoral strategies represent implicit regional strategies,
which become explicit when the strategy is accompanied
by public investment in key infrastructure.
It is interesting, though, to speculate on what GEARplus means for LED. Some direction is to be found in
debate within the Department of Trade and Industry
regarding its future role in promoting small business
development. As reported to the author, some people in
the Department view the present support for the ‘‘microenterprise stuff’’ as a welfare issue and seek to step up
the support for ‘‘sustainable enterprise development’’,
larger small enterprises that have a track and most likely
will not be owned by blacks. Perspectives such as these
go some way towards explaining the positive response 17
to a Business Day article, 18 which pointed to the dilemma government faces between supporting microblack-owned enterprises that have a tremendously high
15
Linda Ensor, ‘‘Manuel takes a new economic path’’, Business
Day, 22 February 2001. Referred to as a ‘‘post-Gear’’ strategy, Jurgen
Stetten of the Friedrich Ebert Stiftung, has, instead, correctly described
it as ‘‘Gear-plus’’, as it builds on the Ôeconomic fundamentalsÕ put in
place by GEAR.
16
I was asked not to quote from the document made available to
me, ‘‘A growth path for South Africa’’, (no date).
17
Reported by Bala Rajaratnam, consultant to the Department,
and Jurgen Stetten of the Friedrich Ebert Stiftung.
18
Tomlinson (2000), ‘‘Small enterprise creates jobs, and other
myths’’, Business Day, 17 July 2001.
R. Tomlinson / Geoforum 34 (2003) 113–122
failure rate and create very few, very low-paid jobs,
versus a sustainable job creation strategy taken forward
by established small and medium enterprises, the minority of which are likely to be black-owned.
In the context of GEAR and GEAR-plus and regional programmes such as the SDIs that are formulated
by central or provincial government without regard to
local LED initiatives, why does government persist with
LED?
3. The role of LED
Marcuse (1993, p. 362/3) helps to explain why this
should be so. He makes the point that worldwide ‘‘The
rise of what might be called local economic development
policy has been paralleled by a radical conservative shift
in national and local policies and ideology’’; an accusation that has been levelled at GEAR (Adelzadeh, 1996).
This is because national governments have shifted responsibility for policies to address poverty from the national to the local level. The National Business Initiative
(1998), an organisation that leads businessÕ collective
response to South AfricaÕs socio-economic challenges, is
explicit: LED is ‘‘about local people taking control and
responsibility for job-growth and the economic wellbeing of their community’’ (p. v). Statements of this sort
give rise to considerable apprehension. Are impoverished
local communities to assume responsibility for overcoming poverty within their area? Might it be that central
government itself supports so extreme a decentralisation
of responsibility for reversing increasing unemployment
and for improving household incomes?
The seeming plausibility of this perspective follows
from governmentÕs positioning LED within integrated
development plans, which all local governments are required to prepare. In its most recent formulation, in the
Municipal Systems Act 32 of 2000,
25. The development priorities and objectives set
out in an integrated development plan must reflect
the municipalityÕs most critical development needs
for each priority identified. The municipality must
state what its medium and short-term objectives
are, taking into accountc. its long-term vision for meeting those needs;
d. the basic needs of disadvantaged sections of the community;
e. the need for social and economic advancement of
those sections of the community;
f. financial sustainability; and
g. its capacity and available resources.
The Act emanates from the Department of Provincial
and Local Government and combines the contradictory
117
policy imperatives contained within GEAR and the
RDP. Pycroft (2000) holds that the decentralisation to
local governments of responsibility for delivering and
financing services arises from the perceived ‘‘. . . links to
overall economic reform and improved governance
(and) progress in stabilization, privatisation, and poverty alleviation’’ World Bank (no date, p. 1). More
particularly, conformity to global policy prescriptions
for decentralised, financially sustainable service delivery is viewed as a precondition for attracting foreign
equity and bond finance for investment in municipal
services. Integrated development plans essentially aim to
help local governments cope with poverty and the
scarcity of resources when it comes to addressing that
poverty.
Yet the Department persists with the emphasis on
social rights contained in the Constitution and the
RDPÕs commitment to meeting the basic needs of all
South Africans. I believe that government, while probably accepting that integrated development plans address scarcity, would argue instead that the plans are
primarily vehicles for bringing about ‘‘developmental
local government’’. Developmental local government is
defined as ‘‘local government committed to working
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 lives’’
(White Paper on Local Government, 1998, p. 17). This
returns us to the point, is central government anticipating that local governments and local communities
can make a significant impression on poverty with their
localities and that they can do so in the midst of national
economic restructuring?
That LED is viewed as contributing to a progressive
role for local government is evident from President
Thabo MbekiÕs ‘‘Statement on the Conclusion of the
2000 Local Government Elections’’ (Pretoria, 7 December 2000).
The people have spoken and the ANC has heard.
The ANC will therefore act without delay to ensure
that all its mayors and councillors work with everybody in their communities to elaborate integrated
development plans for their areas.
The ANC will act to ensure that these plans include programmes for the eradication of poverty,
for job creation, for sustained local economic
development, for an accelerated housing programme.
But how should local governments fulfil their responsibility for promoting economic development and
reducing unemployment?
118
R. Tomlinson / Geoforum 34 (2003) 113–122
4. The juxtaposition of policy formulae for LED and the
powers of local government
Very many manuals and other documents and some
academic publications followed the first South African
publication on LED (Tomlinson, 1994). Probably the
most influential was the manual prepared by an Australian consultant on behalf of the National Business
Initiative (1996), in partnership with the Development
Planning Branch of the Office of the President. This
manual was subsequently converted into an instructional manual and video. At the time, reflecting
the AustralianÕs expertise, the focus was on LED in
small towns, which can be seen, for example, in marketing to attract visitors rather than investors. The
manual propagated a LED formula. Communities
should:
• improve local infrastructure and service provision for
small enterprises;
• help local business to improve their productivity and
market share;
• support the development of new business;
• plug the leaks in the local economy through encouraging greater local loyalty purchasing;
• develop the capacity of the community to find jobs
for local people through supporting the job search activities of unemployed people; and
• marketing the community through enhancing the appeal and image of the community to potential visitors
(p. i).
Later, in the second of its series of five manuals on
LED––Strategies and Instruments: Transforming Localities––the Department of Provincial and Local Government (2000, p. 3) adopts the conventional perspective:
• industrial recruitment and place marketing;
• small, medium and micro-enterprise promotion and
support;
• community economic development;
• export promotion; and
• business retention and expansion. 19
These proto-typical policies bear little relationship to
what local governmentÕs are empowered to do by the
Constitution and by later legislation, the Municipal
Structures Act 117 of 1998 in particular. The powers
available from Schedule 4, Part B of the Constitution
19
The formulae suggest a balance between enhancing the competitiveness of the local economy attention to micro- and small business
development and community empowerment, but one should refer back
to the data provided in the review of the LED Fund. The fund is
intended to promote micro- and small and community development
and over 85% of the projects identified are used for this purpose.
touch on LED only tangentially, for example, in regard
to local tourism, municipal airports, municipal planning, trading regulations, beaches and amusement facilities, billboards and the display of advertisements in
public places, local sport facilities, markets and street
trading.
Despite the great attention paid to LED, the many
government publications and the presidentÕs commitment to LED, there is presently no legislation that
supports LED. (The only reference to LED in existing
or impending legislation is to be found in the Mineral
Development Draft Bill, 2001, Section 17.) On the
contrary, there is a hierarchy of prerogative that singularly disadvantages local government. That is, ‘‘The
principle underlying the relationship between and
among the three spheres of government is that of cooperative governance.’’ (Section 41 of the Constitution).
In the case of municipalities, co-operative governance
implies a subservient position since, as can be seen from
the Municipal Systems Act, it is the municipality that
must align its policies with higher spheres of government.
22. Municipal planning must be aligned with, and
complement, the development plans and strategies
of adjacent municipalities, the province within
which the municipality is located, and national organs of state, to give effect to the principles of cooperative governance . . .
Aside from the SDIs and IDZs prepared by national government, there is also the potential difficulty
that arises from the fact that provinces also implement and prepare their own SDIs and IDZs and, in the
spirit of co-operative governance, are entitled to expect that municipalities will align their strategies with
higher spheres of government. Since local government LED plans are expressed through their integrated development plans and it is the provinces that
approve the plans, the term ÔexpectÕ is an understatement.
Some relief for local governments is to be found in
provincial ordinances where there is provision for some
LED practices. For example, the Gauteng Provincial
Ordinances do empower municipalities to provide rates
rebates to investors, negotiate special arrangements for
the payment of services charges, engage in proactive
planning to, say, create mixed-use zones, steer municipal
procurement in favour of emerging enterprises, operate
an employment bureau, and collect data to assist potential investors. On the other hand, the Ordinances do
not allow municipalities to make land available at below
market prices, provide loan guarantees for small enterprises, operate venture capital schemes, invest in emerging businesses, and provide skills training other than to
its own labour force (Emdon, 1998).
R. Tomlinson / Geoforum 34 (2003) 113–122
This municipal lack of empowerment has recently
been compounded by LED policy, with the Department
of Provincial and Local GovernmentÕs 2001 LED policy
document including policies wherein local stakeholders
have little role and even, in some instances, are not allowed a role. (Examples of these strategies are contained
in Appendix A.) Presenting national economic strategies
in the guise of LED does not create space for LED, quite
the contrary. Most of these strategies are devised and
implemented at the national level and only by happenstance benefit a particular locality.
Indeed, some of these strategies actively disempower
local governments when it comes to LED. The SDIs are
illustrative. These do not preclude towns that are located within an SDI from aligning their LED strategies
with national priorities. But the SDIs are to the disadvantage of localities adjacent to and outside to the SDI.
This negative impact is exacerbated by the LED Fund
and governmentÕs small business programs, Khula (finance) and Ntsika (training), which favour projects located within SDIs.
While cities and towns located within the SDIs will
shape their LED plans to benefit from the SDI, cities
and towns that are not located within the SDI are likely
to perceive their local economic opportunities in a defensive manner, with the contents of the LED programme also being shaped in reaction to the regional
programs from which they are excluded. 20 It appears
that the space available for LED will be akin to a lottery, with the contents of local LED strategies being
determined by a city or townÕs insider or outsider status.
It is quite unclear why the Department of Provincial
and Local Government should make the mistake of
presenting centrally determined and implemented economic strategies as somehow at the same time LED
strategies, especially as in the first line of the DepartmentÕs manual for Strategies and Instruments, one reads
that LED ‘‘is a process based on local initiative and
driven by local stakeholders’’. Since local initiative is a
defining feature of LED, the 2001 policy document
presents a considerable confusion. On the other hand, a
perusal of the document does usefully identify a long list
of regional and other programmes that have marked
spatial impacts!
5. Local dependence: the case of Johannesburg
An example of how local governments, perforce, align
their economic strategies with those of central and pro20
For example, when I was preparing the LED plan for Ermelo, a
key issue was the townÕs being located outside a close-by SDI, with the
provincial government steering potential investors to sites within the
SDI.
119
vincial government is provided by the City of
Johannesburg. The initial context for JohannesburgÕs
LED strategy, or the lack thereof, is that between 1990
and 2001 Johannesburg experienced an extended period
of negotiation and restructuring, and restructuring again
and again, as the 13 local government structures that
existed under apartheid were incorporated into one metropolitan government. In addition to the tremendous
financial strain imposed on the new government, incorporation was accompanied by financial maladministration and deteriorating service delivery (Tomlinson,
1999). With the city facing bankruptcy, the Gauteng
Provincial Government stepped in to impose financial
rigour. The result was the iGoli 2002 strategy that
comprised a three-year revenue-led budget, credit control, institutional rationalisation and partnerships with
the private sector for service delivery (Editors, 2002).
Lacking the resources, in iGoli 2002 the administration
did not seek to address poverty and services backlogs.
But, with about 45% of the labour force lacking formal employment and 20% of the labour force scrounging
a living in the informal sector, city councillors could
not long ignore this economic hardship. These are circumstances that, one might presume, fully justify the
Department of Provincial and Local GovernmentÕs emphasising that LED should focus on jobs and small
businesses. But this is not the route the City of Johannesburg has gone.
Despite its introverted effort to deal with financial
crisis and institutional malaise, iGoli 2002 did anticipate
the need for a longer-term strategy. Released in 2002,
iGoli 2030 charts the cityÕs hoped for economic future. It
contains the call for Johannesburg to become ‘‘a worldclass business location’’.
It is the belief of the Johannesburg City Council
that, by growing the economy of the city, and by
basing our dreams of a better life for all our citizens
firmly on economic growth, we can aim to confer
on the citizens of the city the economic freedom
equivalent to the political freedom they achieved
in 1994 (City of Johannesburg, 2002, p. 115).
To this end the cityÕs LED strategy prioritises reducing crime and enhancing skills. Despite the fact that
the consequence is to exclude more than 50% of the
labour force, in iGoli 2030 it is accepted that
Mining, primary good production and much of the
manufacturing sector will no longer be the key contributorÕs to the CityÕs economy. Financial and
business services, transport, communication, trade,
accommodation and catering and the utilities will
be the main providers of employment and GGP
value added. Productive activities in the City will
have a strong export focus . . . (p. 117).
120
R. Tomlinson / Geoforum 34 (2003) 113–122
Why should this be the case?
The answer is to be found in the Gauteng Provincial
GovernmentÕs ‘‘Blue IQ’’ economic strategy. (Blue IQ is
described in Appendix B.) The reason for looking at
Blue IQ is that while the City of Johannesburg lacks the
resources to attempt an independent LED strategy,
considerable resources have been made available for the
Blue IQ strategy. Thus it is that the City seeks to align
its economic growth strategy with that of Blue IQ, indeed to become more ‘‘substantively involved’’ in Blue
IQ. 21
Blue IQ is a R1.7 billion initiative of the Gauteng
Provincial Government to invest in 10 mega-projects in the areas of tourism, technology, transport
and high value-added manufacturing, to create a
truly ÕsmartÕ province. 22 . . .Through Blue IQ,
Gauteng will invigorate its economic trajectory by
attracting some R100 billion in foreign direct investment in the next 10 years––creating an environment in which local and foreign businesses can
prosper and boost job creation opportunities for
all South Africans. 23
Blue IQ adopts many of the previously identified
SDIs and IDZ projects (for example, the City Deep industrial area) or projects foreseen within governmentÕs
new GEAR-plus economic strategy (for example, technology led ‘‘smart manufacturing’’ for export).
Important features of Blue IQ are the focus on a
‘‘smart’’ province, which leads to employment creation
for the skilled, and the location of Blue IQÕs intended
‘‘10 mega-projects’’, which steer growth to the area between the Johannesburg and Tshwane CBDs. Blue IQ is
not presented as a regional strategy. This would be too
damning as most low-income persons lack the skills
to participate in the growth sectors and live south of
the Johannesburg CBD and north of the Tshwane
CBD. 24
An additional striking feature of Blue IQ is the attempt to minimise the role of local government in
managing resources allocated by the province to specific
projects. The provincial government has often insisted,
and the City of Johannesburg has willingly accepted,
21
There is also the point that the official primary responsible for
preparing the Blue IQ initiative in the provincial government later
joined the city government and was responsible for preparing iGoli
2030.
22
http://www.blueiq.co.za/frmain.htm.
23
http://www.blueiq.co.za/frsbusweek.htm.
24
The planned R7-billion Gautrain is especially illustrative. It is to
run between the two CBDs, with stops at Rosebank, Sandton,
Marlboro (Alexandra), Midrand, and Centurion, and a spur between
Sandton and the Johannesburg International Airport. It will not
continue to the majority of JohannesburgÕs population living south of
the CBD.
that the projects be run by partnerships or private
companies. 25 The provinceÕs acting to remove the projects from the public realm, which is also evident in the
creation of Blue IQ as a private company, is the very
antithesis of LED. This is significant in the light of the
distributional implications of the policies so generously
funded by government.
Lost in this policy milieu is the majority of the labour
force. A strategy that excludes the majority due to their
lack of skills and their spatial isolation stands in stark
contrast with the Department of Provincial and Local
GovernmentÕs guidance to local governments in respect
of LED. But what are the alternatives for a cashstrapped city government whose leadership subscribes to
GEAR and whose constitutional and legal mandate to
undertake LED is severely constrained?
6. Conclusion
LED and the role of local government in assisting
with economic development in South Africa have created a contradictory situation that has been exacerbated
by the Department of Provincial and Local Government. On the one hand, following on the depredations
of apartheid and the RDP policy agenda, the Department of Provincial and Local Government has steered
local governments to focus on poverty in their integrated development plans and their LED strategies. On
the other hand, in their focusing on poverty to such an
extent, they have stepped outside the mainstream of
economic policy. Departments such as Trade and Industry and the National Treasury, with far greater resources, focus on GEAR and export competitiveness,
foreign direct investment, tax incentives and major infrastructure programs––the ‘‘serious stuff’’.
The way in which LED is positioned within the
countryÕs economic policy agenda has led to its increasing irrelevance and, for that matter, also of the
Department of Provincial and Local Government when
it comes to promoting economic development. The
danger inherent in the DepartmentÕs championing of
LED as a means of addressing poverty is that it creates
the impression that LED might actually do so. Instead,
after reading the special issue in the Economic Development Quarterly (1999, 13, 1) on ÔEvaluating LEDÕ, it is
no wonder that Markusen and Carlson (1989, p. 49)
should earlier have concluded that LED has ‘‘not been
successful against the tide of restructuring forces’’. The
restructuring forces, fostered by GEAR and the SDIs
with a view to enhancing South AfricaÕs export com25
Information provided by Graeme Reid, at the time Manager of
the Inner City District for the Greater Johannesburg Metropolitan
Council (30 March 2000).
R. Tomlinson / Geoforum 34 (2003) 113–122
petitiveness in the global economy, both render marginal the potential for LED to address poverty and entice LED strategies in directions that have little to do
with poverty.
Appendix A. Examples of strategies construed by the
Department of Provincial and Local Government as
representing LED
Community-based economic development: . . . In addition, SME promotion is being given strong intergovernmental support. Currently, the Local Industrial Park
initiative run by Department of Trade and Industry as
well as the Manufacturing Advisory Centres and Market Access and Business Linkages Division programmes
fall within this category. Khula Enterprise supports the
SME sector by providing loans and equity capital to
SMEs, and seed funding to Retail Financial Intermediaries in need of capital and capacity (s. 2.3.1.1).
Development of human capital: . . . The Employment
and Skills Development Services Programme administered by the Department of Labour falls under this
category (s. 2.3.1.3).
Development and maintenance of infrastructure and
services: The Consolidated Municipal Infrastructure
Programme (CMIP), National Housing programmes,
the Community Water Supply and Sanitation programme of the Department of Water Affairs and
Forestry, the Public Works DepartmentÕs CommunityBased Public Works Programme, SDIs in the Department of Trade and Industry, and Department of
TransportÕs subsidy programme fall into this category.
Plugging the leaks in the local economy: The main
government programmes that promote buying local are
labour-intensive construction associated mainly with
infrastructure and community-based public works, and
procurement. Consistent with the SME development
strategy described below, the Ten Point procurement
reform programme was developed by the Department of
Public Works (s. 2.3.1.5).
Appendix B. The Gauteng Provincial GovernmentÕs Blue
IQ strategy 26
Blue IQ the plan for a smart province––Gauteng:
‘‘Blue IQ is a R1.7 billion initiative of the Gauteng
Provincial Government to invest in 10 mega-projects in
the areas of tourism, technology, transport and high
value-added manufacturing, to create a truly ÔsmartÕ
province’’.
26
http://www.blueiq.co.za/frsbusweek.htm.
121
A vision for the future: Through Blue IQ, Gauteng
will invigorate its economic trajectory by attracting
some R100 billion in foreign direct investment in the
next 10 years––creating an environment in which local
and foreign businesses can prosper and boost job creation opportunities for all South Africans.
Driving force––focused approach: Blue IQ is the dynamic catalyst for funding and promoting strategic investments in Gauteng. The focus is specifically on
technology, high value-added manufacturing, transport
and tourism. Blue IQ works in partnership with business, government departments and other organisations.
Clear goals: A total of R1.7 billion has already been
allocated by the Gauteng Provincial Government towards this initiative, based on a well-researched trade
and industrial strategy. It takes a three-pronged approach to developing Gauteng into the smart province
of South Africa.
• Create a high value-added manufacturing sector:
Shift GautengÕs manufacturing sector away from traditional heavy industry and low value-added production to focus more on sophisticated, high value-added
production and the development of similar production activities in other sectors of the economy.
• Enable Gauteng to be the smart province of South
Africa: Create an environment in which smart industries can thrive––information technology, telecommunications equipment, research and development,
biomedical industries.
• Develop Gauteng’s service sector: Develop GautengÕs
finance and business service sector by focusing on financial services and technology, auxiliary business
services, corporate head office location and business
tourism.
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