Address by the Minister for Co-operative Governance and Traditional Affairs, Honourable Sicelo Shiceka, at the LGBN LED Summit, Emperors Palace, Johannesburg, July 20 2009

This Local Economic Development Summit could not have come at a better time. It is time for us within government and for you as stakeholders present, to partake and contribute to the direction of local economic development. Unfortunately, this summit also comes at a time when the country is going through a recession, with the output growth showing considerable levels of decline.

The poor are bearing the brunt of the global economic meltdown and the recent statistics show that the household consumption has somehow declined at an alarming rate.

South Africa's economy contracted in the last quarter of 2008 and in the first quarter of 2009 where we saw an annualised 6,4% contraction, the worst quarterly performance since the 80's.

Government Ministers present here today
Senior government officials
Representatives from business
Representatives from organised labour
Key partners and stakeholder bodies

Ladies and gentlemen

Introduction

A very good morning to you all, I am indeed honoured to address you this morning at a Summit of this magnitude in our country. This Local Economic Development (LED) Summit could not have come at a better time. It is time for us within government and for you as stakeholders present, to partake and contribute to the direction of local economic development. Unfortunately, this summit also comes at a time when the country is going through a recession, with the output growth showing considerable levels of decline.

The poor are bearing the brunt of the global economic meltdown and the recent statistics show that the household consumption has somehow declined at an alarming rate.

South Africa's economy contracted in the last quarter of 2008 and in the first quarter of 2009 where we saw an annualised 6,4% contraction, the worst quarterly performance since the 80's. According to the latest reports of Statistics South Africa, at least 179 000 workers have lost jobs in the formal sector in the first quarter of 2009. It is befitting to say that we have reached a worrying economic situation in our labour market.

In the circumstances, it therefore becomes appropriate that each one of us here intervenes in order to better the lives of our people, especially the poor, marginalised and disadvantaged.

Ladies and gentlemen

South Africa has to be an investment destination of choice

Despite the fact that our country has some of the greatest challenges with inherited poverty, unemployment and inequality, our citizens are privileged to live in one of the most exciting countries in Sub-Saharan Africa. South Africa remains the highest ranked country in Sub-Saharan Africa, with what the World Economic Forum describes as a very stable performance. Globally, South Africa is ranked 45 out of 134 countries in the World Economic Forum's global competitiveness Index for 2008/09.

Overseas business analysts have shown a great degree of optimism, rating the country as less risky and more rewarding for investment than most other African countries.

We all share the responsibility of making South Africa an investment destination of choice, and that starts with investing appropriate resources to develop our economy from the ward level. As the most basic unit of governance in society, each ward needs to have an economic activity with full participation by the local communities, as well as benefits.

Defining local economic development

Ladies and gentlemen, it is important that we define LED in the manner beneficial to our people. I know that this topic has various definitions, some which are academic and some which are simple. I will not go into them as I am certain that during these two days of the Summit's proceedings you will be presented with many.

It is common cause that we sometimes fail to address LED effectively as we apply a uniform approach, which we assume, is applicable uniformly within the various communities and spaces in which economic development is meant to operate. That is incorrect.

It is my considered view that LED may mean different things to different people within a local space. For instance:
* to an investor, it means having their town application approved to develop a shopping mall in Soweto
* to a local seamstress or fashion designer operating their business from his or her home, LED is getting an opportunity to have a shop at the mall in Soweto
* to a hawker, LED is having demarcated space outside that mall so that when people walk alongside the pavement on their way to the mall, they stop and buy her fruits, cigarettes or sweets.

I hope that one of the things which this summit must achieve is that understanding; that LED approaches must ensure that they are tailor-made for specific interventions. They must therefore be applied and implemented differently within the rural or urban context. The local specifics and context must always determine the applicable economic development, which will also resonate with the local people who have to own, protect and nurture it to grow even beyond small enterprises and co-operatives.

Government intervention

This country has stable economic fundamentals, but also experiencing contradictory high levels of unemployment, abject poverty and inequality. Within this context, the government should provide an enabling environment for economic growth.

In this country, we have wall to wall municipalities within provincial governments, where our people reside and development takes place. It is therefore important that we locate LED within an appropriate sphere where government deliverables have ever lasting impact. In my view, it is within municipalities where LED takes shape and starts to speak to the people, be it the communities trying to get out of poverty or businesses wanting to invest.

Municipalities must drive their LED programmes through various pillars of development such as service delivery programmes, infrastructure expansion, local skills development, public employment and any other programme geared towards economic growth.

However, it is critical that a collaborative approach is applied for LED. No organisation or person exists in isolation. The provincial governments, municipalities, state owned entities and local stakeholder groupings must truly join forces to work on behalf of continued growth and prosperity of local economies. Government cannot achieve this on its own, collaborations and partnerships with civil society stakeholders are key to achieving this goal.

We need to address the misaligned planning that exists between national, provincial and local government. The Integrated Development Plans (IDPs) and Local Economic Development strategies of municipalities must reflect the priorities of the entire public sector, including those of public entities and local business. The IDPs will be reviewed to ensure that the criterion which determine to what extent adopted IDPs are credible or realistic, includes critical aspects on LED strategies, plans, budgeting and implementation.

The observed unco-ordinated planning, implementation and oversight across spheres of government apply equally to local and provincial government. Over the next five years, provincial governments will receive dedicated support as a sphere to ensure that alignment of plans across the two spheres becomes a reality. As the Minister responsible for co-ordinating government horizontally and vertically across all spheres of government, it is our responsibility and a mandate given to us by the President of the Republic, the Honourable Jacob Zuma, to see to that this co-ordination actually happens.

Ladies and gentlemen, there can be no doubt that working together is critical. Mutual support yields success. It is therefore critical that each municipality and provincial government have a dedicated unit focusing on the LED and the implementation thereof. The barriers to development must be broken for the benefit of our people and the prosperity of our country.

Having this in mind, it becomes essential that officials within a municipality, provincial government departments, both political heads and administrative officials, have the required skills and expertise to engage business, establish partnerships, and understand LED both locally and globally.

Each and every municipal town or provincial city must become a tourist destination. Local tourism organizations must be mobilised to market and attract both tourists and investors in order to grow business. Private sector operates within the provincial and municipal space, therefore it is befitting that private sector companies are rallied to support the LED initiatives. PPPs with the local companies should be pursued with the aim of fostering economic vitality.

Some years back, the department developed a national framework for local economic development for a five year period, from 2006 to 2011. This framework entails amongst other things:
* Government's strategy
* Implementation approach and institutional arrangement
* LED funding

In addressing government's strategy, the framework unveiled four strategies on:
* improving good governance, service delivery, public and market confidence in municipalities as the first step in attracting investment and building loyalty

Various practical and implement able initiatives are provided:
* spatial planning in order to exploit the comparative advantage and competitiveness of municipalities
* intensifying enterprise support and business infrastructure development
* introducing sustainable developmental community investment which more about building communities and empowering them.

Ladies and gentlemen, these strategies touch on some of the principles of LED that I have mentioned earlier. So, instead of reinventing the wheel, we only need to review and refine the framework in line with the current economic climate and priorities as set by President Zuma in his State of the Nation Address, as well as the department's five key priorities up to 2014.
I hope that this summit ladies and gentlemen, will also suggest creative approaches on how local people can access the markets. We know that for the poor, access to loans from financial institutions without collateral is impossible, that micro-lending with its exorbitant interest rates is crippling for the have-nots and that donor funding is not always available or accessible to the poor.

I think we should also use international experiences and practices relevant to our situation. Maybe we should ask ourselves a question as to whether we shouldn't be adopting the Bangkok experience of the Grameer Bank where communities get loans based on trust and not collateral?

Professor Yunus started this initiative in Bangkok and recently gave a keynote address on the concept at the Nelson Mandela Address at the Johannesburg City Hall. The professor elaborated on this concept and proved how people honoured their loans and got themselves out of poverty. Not only did this method of funding show increased benefits within households, but it indicated that throughout Bangladesh poverty decreased. Unique solutions for local conditions and not transposing solutions that have made sense for the Western way of doing business!

I do not have the answers, but what I do know is that we should not be limited to what we know; we need to go beyond our current situation for a solution to the problems facing us.

Co-operative governance and traditional affairs initiatives

As a department, we have identified programmes in support of local economic development.

Firstly, in Pondoland, we have brought various spheres of government together at the Ingquza Hill Local Municipality in Flagstaff, OR Tambo District Municipality in the Eastern Cape with the aim of bringing an integrated development package to the Pondoland region which will ultimately result in social and economic development.

In the same manner, my department continues as a champion to co-ordinate and facilitate government's developmental packages and we will be championing such initiatives throughout the country.

Secondly, we have taken a conscious decision to facilitate the acceleration of service delivery in all parts of this country to address the service delivery backlogs. We want all backlogs to be quantified and to be funded accordingly.
The department has undertaken an audit of water and sanitation. Within the next few days, officials within the department will be in Limpopo, to pilot this initiative with respect to the status of the water and sanitation infrastructure.

Thirdly, we have heard the critique that MIG is outdated and not effective in addressing services backlogs; this despite that an amount of R24 billion has been allocated to municipalities with significant allocations in the three least developed provinces, namely Eastern Cape, KwaZulu-Natal and Limpopo.
Once this policy review process has been finalised, we will engage with municipalities and I sincerely hope that this process will accelerate the delivery of bulk services.

Fourthly, on Thursday last week I launched a project called Operation Clean Audit 2014, as one leg of a strategy to turn-around municipalities in the country. This was undertaken in pursuit of achieving clean governance and bringing quality services to our people by all spheres of government by 2014. It is indeed an ambitious task, but it is an initiative which we believe will turn around service delivery to our people, clean up government and accountability process and also improve the image of government to the citizens. This initiative will assist in bringing back community and investor confidence in government which in turn will further open up more local economic development opportunities.

Fifthly, we will develop mechanisms aimed at encouraging our people and government departments to save. Our expenditure should be driven by necessities rather than nice to haves. The governance blueprint will ensure that budgets are prioritised, reduce wastage and inefficiency. A debt management and reduction campaign is in planning and will be brought to the public in due course.

The sixth point is that Ward Committees, as basic units of governance and development, must be given the necessary responsibilities to facilitate local economic development in our communities. It is our resolve, therefore, that each ward should at least take charge of an LED project and ensure that the whole community participates and benefits.

Lastly, it is our view that all these ideas will remain futile exercise if something is not done to fight the common enemy to local economic development and that is the scourge of corruption and mismanagement of public funds. As a department we have resolved to combat corruption and wastage at all cost, if we are determined to accelerate local economic development. We have partners with the state law enforcement agencies, the treasury and other stakeholders to collaborate in rooting out corruption.

Our targeted interventions in troubled provinces and municipalities are an indication that we are serious about rooting out unbecoming behaviour within the state machinery. It is a war we are determined to win for the benefit of the masses of our people who continue to live in abject poverty without even the most basic of services, 15 years after voting their government into power. This cannot be allowed to continue!

Conclusion

These are just a few initiatives which the department is involved in to show our commitment to providing quality of life in under-developed communities and to improve public confidence in government.

Ladies and gentlemen, it is rather unfortunate that I cannot be a part of the summit over these two days, to engage, exchange ideas and learn from you as well. Finally and in closing, with your permission programme director, I would like to leave you with this statement to chew over, which is taken from the Polokwane resolutions under economic transformation.

"A South African developmental state, whilst learning from the experiences of others, must be built on the solid foundation of South African realities. Whilst engaging private capital strategically, our government must be rooted amongst the people and buttressed by a mass-based democratic liberation movement. Whilst determining a clear and consistent path forward, it must also seek to build consensus on a democratic basis that builds national unity. Whilst acting effectively to promote growth, efficiency and productivity, it must be equally effective in addressing the social conditions of the masses of our people and realising economic progress for the poor."

Need I remind you all that as citizens of this country and advocates of the poor, we are obliged to deliver in terms of this resolution. I therefore challenge you to partner with government in doing just that.
On that note, I wish you a very productive and enjoyable summit.

I thank you

Statement issued by Department Co-operative Governance and Traditional Affairs, July 20 2009

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