The role of Local Economic Development on Poverty eradication in South Africa’s rural municipalities. Case study of Greater Tubatse Municipality Master of Business Administration (MBA): Corporate Strategy & Economic Policy Candidate: Bethuel Sephaka Motswiane Republic of South Africa Supervisor: Professor Meine Pieter van Dijk (UNESCO) “This paper was submitted in partial fulfilment of the requirements for the masters of Business Administration (MBA) degree at Maastricht School of Management (MSM) Maastricht, Limburg Province, the Netherlands, August, 2009”
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ThesisThe role of Local Economic Development on Poverty eradication in South Africa’s rural municipalities. Greater Tubatse
Case study of Greater Tubatse Municipality Master of Business Administration (MBA): Corporate Strategy & Economic Policy
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The role of Local Economic Development on Poverty eradication in South Africa’s rural
municipalities.
Case study of Greater Tubatse Municipality
Master of Business Administration (MBA): Corporate Strategy & Economic Policy
Candidate: Bethuel Sephaka Motswiane
Republic of South Africa
Supervisor: Professor Meine Pieter van Dijk (UNESCO)
“This paper was submitted in partial fulfilment of the requirements for the masters of Business Administration (MBA) degree at Maastricht School of Management (MSM)
Maastricht, Limburg Province, the Netherlands, August, 2009”
I dedicate this work to my entire family for their love and support throughout
the days of my life, my mother in Particular, Mrs Mangetane Rebecca Motswiane who raised and educated me, my brother Mr Mathule Motswiane
for his continued support and inspiration during my academic life and my
daughter Mangetane Pride Motswiane for her continued intrinsic motivation
in me to succeed during my studies at MSM. I also dedicate this paper to all
South Africans who are directly and indirectly affected by poverty.
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Acknowledgements Above all, I would like to thank my almighty God to guide me through to the
end of this study. I also want to express my sincere gratitude to the entire
MSM staff and my supervisor Professor Meine Pieter van Dijk for his
assistance and availing his time to read and correct my draft. Their support
cannot be measured in monetary terms.
My profound thanks go to the Netherlands government, Nuffic and Maastricht
School of Management for affording me the opportunity to do my studies. I
would like to express my sincere thanks to the Greater Tubatse Municipality
(GTM) Management in particular Mr S Malepeng for accepting my request to
use GTM as a case for this research and for the provision of all the data
required to carry out this study.
My appreciation and thanks goes to my mother Mangetane, my family and
Kgotlopong community for raising me and giving me a solid foundation without
which I would not have reached this level. I would wish to thank my daughter,
sisters, brothers, uncles and aunts for the encouragement they gave me when
I was tired and home sick. God bless you all.
My sincere thanks and appreciation goes to my MBA25 colleague Herieth
Ligate for her positive criticisms and guidance throughout the whole study and
the entire MBA25 for their undivided support in all group works and team
works during the studies. May God bless.
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Acronyms
ANC African National Congress ARC Agricultural Research Council DPLG Department of Provincial and Local Government GTM Greater Tubatse Municipality IDP Integrated Development Planning LED Local Economic Development LIMDEV Limpopo Economic Development Enterprise LIBSA Limpopo Business Support Agency MQA Mining Qualification Authority NDA National Department of Agriculture NGO Non Government Organisation NPO Non Profit Organisation PC Project Consolidate SADC Southern African Developing Countries
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Map of South Africa
Map of Greater Tubatse Municipality
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List of Figures 2.1 Three spheres of government in South Africa
3.1 Performance evaluation model in LED.
List of Tables 2.1 Three waves of LED
2.2 Philippines LED
2.3 Bulgarian case conclusion
2.4 Togo case
3.1 Sample
4.1 Education information in GTM
4.2 Awareness & Promotion of LED
4.3 GTM staff competency
4.4 Private Public Partnerships at GTM
4.5 Community involvement in LED
4.6 Annual household income at GTM
4.7 LED impact at GTM
4.8 GTM labour market
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TABLE OF CONTENTS
Dedication .................................................................................. ii Acknowledgements .................................................................. iii Acronyms .................................................................................. iv Map of South Africa ................................................................. v Map of Greater Tubatse Municipality .................................... v List of Figures .......................................................................... vi List of Tables ............................................................................ vi Executive Summary ................................................................. ix CHAPTER 1 .............................................................................. 1
1.1 Background and Overview .................................................................................. 1 1.2 Problem Statement ............................................................................................... 3 1.3 Research Objectives and Questions ..................................................................... 5
1.3.1 Research Objectives ...................................................................................... 5 1.3.2 Research Questions ....................................................................................... 5
1.4 Research Methodology ........................................................................................ 5 1.5 Assumptions, Problems and Limitations ............................................................. 6 1.6 Conclusion ........................................................................................................... 7
CHAPTER 2 .............................................................................. 8 LITERATURE REVIEW ........................................................ 8
2.1 Introduction and Background .............................................................................. 8 2.2 What is Local Economic Development (LED)? .................................................. 8 2.3 South African Local Government and LED ...................................................... 12
2.3.1 South Africa’s LED Framework ................................................................. 14 2.4 The Role of Municipalities on LED................................................................... 18 2.5 LED Strategic Planning ..................................................................................... 19 2.6 Some Countries LED cases ................................................................................ 20
2.6.1 Philippines Case .......................................................................................... 23 2.6.2 Bulgarian Case ............................................................................................ 24 2.6.3 Togo Case ................................................................................................... 27 2.6.4 Russian case ................................................................................................ 27
3.5 RESEARCH ASSUMPTIONS .......................................................................... 37 3.6 RESEARCH LIMITATIONS ............................................................................ 37 3.7 RESEARCH QUESTIONS ............................................................................... 37
3.7.1 Major Research Question ............................................................................ 37 3.7.2 Minor Research Question ........................................................................... 38
3.7 RESEARCH METHODOLOGY ....................................................................... 39 3.8.1 Data Collection ........................................................................................... 39 3.8.2 Sampling Method ........................................................................................ 40 3.8.3 Data Analysis Method................................................................................. 41
CHAPTER 4 ............................................................................ 42 DATA ANALYSIS, FINDINGS AND DISCUSSION ......... 42
4.1. INTRODUCTION ............................................................................................ 42 4.2 LED AWARENESS, COMMUNICATION AND PROMOTION ................... 43 4.3 LED SUPPORT SYSTEMS .............................................................................. 44
4.3.1 Municipal LED unit. ................................................................................... 45 4.3.2 LED Strategic Plan ..................................................................................... 46 4.3.3 Public Private Partnership (PPP) ................................................................ 46 4.3.4 LED Budget ................................................................................................ 47
4.4 COMMUNITY INVOLVEMENT IN LED ...................................................... 48 4.5 IMPACT OF LED AT GTM ............................................................................. 49 4.6 FINDINGS ......................................................................................................... 53
4.6.1 Findings on Structure .................................................................................. 53 4.6.2 Findings on Agency .................................................................................... 54
5.2.1 Community Involvement ............................................................................ 58 5.2.2 LED Budget ................................................................................................ 58 5.2.3 Monitoring, Control and Evaluation ........................................................... 59 5.2.4 Skills development and Illiteracy reduction ............................................... 59 5.2.5 Municipal LED unit .................................................................................... 60
5.3 Future Research ................................................................................................. 60 6. References and Bibliography ............................................. 61
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Executive Summary
The focus of this study is to find out the role of Local Economic Development
on Poverty eradication in rural municipalities of South Africa. The paper gives
a background of LED and practices in different countries.
Poverty is a challenge that many South Africans are facing. The rural areas
are also highly affected with this problem. LED has been practiced in many
countries from way back. In South Africa the ANC led government also
introduced LED in the municipalities to fight the rising poverty level. Since the
ANC government took over in 1994 different interventions have been made to
fight poverty which resulted from the apartheid government. Many rural areas
seem not to have benefited from those interventions.
I intended to answer to the following research questions:
• How does LED assist in problems such as poverty eradication,
employment generation, skills development and infrastructure
development?
• To what extent does the local government implement LED?
• How does private business get involved in the LED?
• What is the major LED challenges facing the local government?
• How does the local community get involved in the LED process?
• What support system exists for LED?
In an attempt to answer all the questions an LED performance measurement
model was used to assess the structural and agency factors which affect LED
towards effectiveness and efficiency. The researcher used primary and
secondary data and the data was drawn from 50 respondents from GTM. The
data has been analysed, interpreted and related to the literature. The findings
have been made also from the analysed data. The researcher had come up
with the following findings which are categorised as structural findings and
agency findings. Under structural findings the first finding is that there is high
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x
level of illiteracy and skills shortage in the communities and this will distort
many LED activities. The second finding is that there is insufficient LED
awareness, communication and promotion from the municipality and this
result in community not being involved in LED activities. The third finding is
that there is lack of infrastructure such as roads, electricity, etc. Under agency
the first finding is that the municipality has insufficient human capacity to
execute LED activities.
The second finding is that the municipality have no budget for LED activities.
The third finding is that there is insufficient control, monitoring and evaluation
of LED activities at GTM. The fourth finding is that there are insufficient
reliable private partners to the municipality who will help achieve effective and
efficient LED. The researcher finds that the combination of all findings results
in LED not having impact on poverty eradication at GTM.
From the findings the researcher also made some recommendations.
The researcher recommends that the municipality should involve communities
in all steps of the LED process. Secondly the municipality should have special
budget for LED activities and should also market the municipality to potential
investors and donor organisations.
Thirdly the municipality should develop an LED control, monitoring and
evaluation program for all LED activities. Fourthly the municipality should
create and increase partnership with universities, colleges, research
institutions and training and skills development institutions for vocational
training to fast track on solving the problem of illiteracy and skills shortage.
CHAPTER 1
INTRODUCTION
1.1 Background and Overview I was the Projects Co-ordinator in the Agricultural Research Council (ARC) a
sub structure of the National Department of Agriculture (NDA) in South Africa.
My role is facilitation, coordination and management of agricultural projects for
small scale farmers through local governments which are mostly found in the
rural areas. Before joining NDA I also worked for the Department of Provincial
and Local Government (DPLG) which is the overseer of both the provincial
and local government in South Africa.
While working at the DPLG I started learning about the aspect of Local
Economic Development (LED). I became more interested in the subject of
LED since some of my projects which were aimed at developing farmers in
rural areas would be classified under LED and I also aspired to know how it is
being practiced by different local governments that I have been in contact
with. I also became a member of LED network of South Africa and continued
to receive monthly newsletter.
According to Tamasane (2002) the aim of local economic development is to
produce higher standards of living, improve the quality of life, alleviate
poverty, create more and better jobs, advance skills and build capacity for
sustained development in the future for local communities. According to
Lafferty (2001) many of the challenges concern lifestyles and a constructive
dialogue between many groups in society is needed, not only between
experts and political decision makers. With all my past interaction with
different local government I found it difficult to really relate to what Tamasane
says in his explanation. While there is such a good explanation by Tamasane,
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I found lot of contrary situations in different communities in South Africa,
situations where poverty is very high and the standards of living are very low.
The study by Wandschneider (2004) shows that the much economic activity in
rural municipalities is closely linked to the surrounding villages economy
through consumption, production, employment and various types of economic
and social service provision. This indicates that economic growth for local
authorities is dependent on the developmental dynamics of the villages.
As a new democracy South Africa is faced with the challenges on issues such
as rising poverty and unemployment. According to Nel (2001) municipalities
are charged with responsibility of creating an enabling environment for
communities in South Africa through LED.
Greater Tubatse Municipality (GTM) is a local municipality according to the
municipal structure act (DPLG). GTM with its seat in the small town of
Burgersfort is a local municipality in the Limpopo province in South Africa. The
municipality has an estimated population of 290 000 which is spread over 29
wards. The main economic activities in the municipality are mining, agriculture
and service sector.
The municipality has a high number of natural resources such as Platinum,
Chrome, Vanadium, Andalusite, Silica and Magnetite. There are also fourteen
mines in the area of which some dates back to the 1920s. GTM is one of the
136 municipalities in South Africa which are targeted for Project Consolidate
(PC). PC is a hand on local government support engagement programme
which targeted municipalities that needs support to enhance service delivery
and LED is one of the key performance areas of Project Consolidate (DPLG).
I however believe that this research will help me and other South Africans in
finding the role of LED on poverty especially in rural local governments in
South Africa. The significance of this study will be geared towards identifying
if the LED is relevant in poverty eradication in South Africa. This will help to
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redefine the current LED documents and will also help identifying the gaps in
the local government structures.
The other benefit of the study will be derived from the evaluation and
assessment of the practices used for LED if they are really effective towards
poverty eradication and if not how should corrective measures be taken in
such situations. This benefit will extend to local communities through
improved LED that will curb poverty.
1.2 Problem Statement
South Africa is among the countries with better economies in Africa; it is also
the country in Africa with advanced level of infrastructure and regarded to be
the hope to other African countries especially the SADC region (Mbeki. 2005).
Over the past fifth teen years of democracy, South Africa has been
restructuring and implementing different developmental programmes and
initiatives at National, Provincial and Local government level.
At local government level one of the interventions that were introduced is local
economic development (LED). Local economic development is about
economically empowering the local communities and also a participatory
process which encourages social dialogue and public-private partnerships in a
defined geographical area with intentions of eradicating poverty and creating
jobs.
Persky (1993) recognizes that urban places have a greater variety of
production than rural areas and these rural areas are likely to specialise in
relatively few local economic development activities. Given such interventions
and the strategies, majority of South Africans are still found to be living in
deep poverty characterised by high level of unemployment, skills shortage,
etc. This poverty situation is happening in both rural and urban areas.
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Current situation of the marginalisation of poor people from the formal
mainstream economy and opportunities for income generation has increased
dramatically especially in rural communities. Poverty seems to be increasing
even more, the level of unemployment is also very high and the skills
shortage is severe in rural communities. On the other hand Prahalad (2006)
says “what is needed is a better approach to help the poor, an approach that
involves partnering with them to innovate and achieve sustainable win-win
scenarios where the poor are actively engaged”.
Many rural communities have been engaging in demonstrations in different
local government offices in need of addressing the high level poverty and poor
service delivery in those areas. This situation has been rising than declining,
yet there is LED that is supposed to be addressing these issues at community
level. The general standards of living in rural areas are very low. Access to
health facilities is difficult. People have to travel for as far as eighty kilometres
to access health facilities. In many cases rural communities still continue
sharing drinking water with animals from the streams. There is also one
source of employment which is mostly mining.
During rainy seasons many rural villages have no access to roads and some
many people still living in mud houses becomes victims since the houses fall
from heavy rains. All these challenges bring a very big question into the role
that intervention strategies such as LED are bringing to the rural communities.
Does LED as an economic development strategy serve as an answer to the
communities?
4
1.3 Research Objectives and Questions 1.3.1 Research Objectives
1. Assess the impact of LED on poverty eradication and local government
development.
2. To assess whether LED strategies are well coordinated in rural
municipalities.
3. Assess the role of private enterprise on LED.
4. Assess the depth of local community participation on LED.
1.3.2 Research Questions Main Research Questions
1. How does LED assist in problems such as poverty eradication,
employment generation, skills development and infrastructure
development?
2. To what extent does the local government implement LED?
Minor Research Questions
1. How does private business get involved in the LED?
2. What is the major LED challenges facing the local government?
3. How does the local community get involved in the LED process?
4. What support system exists for LED?
1.4 Research Methodology A qualitative study based on a survey research, with a questionnaire as a data
collecting tool was undertaken to determine the impact of LED on poverty.
Telephone interviews were also conducted to supplement the questionnaires.
There was also some data collection through reading of various publications.
5
The research questionnaires was targeting twenty young and ten old
residents for the local communities of the selected municipality, ten
employees both managers and non managerial staff of the same municipality,
ten Non Governmental Organizations (NGOs) and local business people in
the municipality was also targeted with questionnaires and telephone calls.
The total number of my sample was 50.
The existing documents from the municipality and articles were also used for
data collection. Information, documents and articles from the LED department
in the municipality were also used for gathering data. The LED
Performance measurement framework was used as a tool of analysis.
1.5 Assumptions, Problems and Limitations
The study focused on rural communities. A sample of 50 people was selected.
The problem of access to communication facilities is a reality in these villages.
So the researcher had a difficulty of having all people electronically accessing
the questionnaire. However the researcher hired and sent a person who will
physically circulate the questionnaire in those villages.
The other alternative was the use of telephone interviews to people who might
not be able to access the questionnaire. Another foreseeable limitation would
be data availability with particular reference to LED in Greater Tubatse
Municipality. The researcher therefore had to move faster with the research
so that the data collection does not get delayed.
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1.6 Conclusion Poverty is a reality in the rural areas of South Africa after 15 years of
democracy. The strategies that the ANC government has put in place to
promote economic development and address the past imbalances are stake
given the increase in poverty and unemployment. The study assessed the
impact that one of the strategies for economic development is having on
poverty eradication.
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CHAPTER 2
LITERATURE REVIEW
2.1 Introduction and Background Over the past century the world has experienced significant political and
economic changes. This resulted with high level of economic growth and
inequality. Those inequalities resulted in governments in both developed and
developing countries having to introduce policies of decentralising power and
resources to address the inequalities.
The broader macro economic policies had to be downsized into district and
regional policies that would address the economic needs of those districts.
This resulted into different localities having different economic needs and
resulting in different economic policies and thus resulting into local economic
development (LED) being adopted in different countries as a local economic
development policy.
2.2 What is Local Economic Development (LED)?
“LED is a process where local actors shape and share the future of their
territory” (Pretorius. 2005)
“LED is an ongoing process by which key stakeholders and institutions from
all spheres of society work jointly to create a unique advantage for the locality
and its firms, tackle mark failures, remove bureaucratic obstacles for local
business and strengthen the competitiveness of local firms” (MunicipalIQ.
2009)
8
“Local economic development (LED) is a participatory process in which local
people from all sectors work together to stimulate local commercial activity,
resulting in a resilient and sustainable economy. It is a way to help create
decent jobs and improve the quality of life for everyone, including the poor
and marginalised” (UN-HABITAT. 2005).
“It is a process by which public, business and non-governmental sector
partners work collectively to create better conditions for economic growth and
employment generation” (Swinburn et al. 2006).
“Local economic development is about local people working together to
achieve sustainable economic growth that brings economic benefits and
quality of life improvements for all in the community” (World Bank. 2004).
“Local Economic Development (LED) is an approach towards economic
development which allows and encourages local people to work together to
achieve sustainable economic growth and development thereby bringing
economic benefits and improved quality of life for all residents in a local
municipal area” (DPLG. 2006).
Different writers and researchers define LED in different ways but the concept
behind it is the development and empowerment of local people and
improvement of the standard of living for the local citizens.The issue of local
economic development is a very popular issue in both developed and
developing countries. According to DPLG (2006) as from the late 1970s LED
increased its popularity and took different forms ranging from the public sector
led Local Enterprise Boards in the UK to the flagship projects of private sector
led entrepreneurialism in the inner cities of Europe and North America.
LED is about local people working together to achieve sustainable economic
growth that brings economic benefits and improvement in the quality of life for
all in the community (Davis. 2005). What is referred to as LED dates back to
the 1960s and 1970s and since then LED went through a number of stages
and waves;
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Table 2.1: Three waves of LED.
WAVE
FOCUS TOOLS
First
1960 to early
1980
During the first wave the focus was on
the attraction of:
• Mobile manufacturing
investment, attracting outside
investment, especially the
attraction of foreign direct
investment.
• Hard infrastructure development.
To achieve this cities used;
• Mass grants
• Subsidized loans
usually aimed at
inward investing
manufactures.
• Tax breaks
• Subsidized hard
infrastructure
investment.
• Expensive low road
industrial recruitment
techniques.
•
Second
1980 to mid
1990s
During second wave the focus moved
towards;
• The retention and growing of
existing local businesses.
• Still with an emphasis on inward
investment attraction but usually
this was becoming more targeted
to specific sectors or from certain
geographic areas.
To achieve this cities
provided;
• Direct payments to
individual businesses
• Business incubators
• Advice and training
for small and medium
size firms.
• Technical support
• Business start-up
support.
• Some hard and soft
infrastructure
investment.
10
Third
Late 1990s
onwards
The focus then shifted from individual
direct firm financial transfers to making
the entire business environment more
conducive to business. During the
current wave of LED, more focus is
placed on;
• Soft infrastructure investments.
• Networking and leveraging of
private sector investments for the
public good.
• Public Private Partnerships
• Highly targeted inward
investment attraction to add to
the competitive advantages of
local areas.
To achieve this cities are;
• Developing a holistic
strategy aimed at
growing local firms.
• Providing a
competitive local
investment climate.
• Supporting and
encouraging
networking and
collaboration.
• Encouraging
workforce
development and
education.
• Closely targeting
inward investment to
support cluster
growth.
• Supporting quality of
life improvements
Source: World Bank (2004) www.worldbank.org/urban/led/
Despite the different approaches, the common theme was about local actors
in defining their autonomy. Over the past decade, the local economic
development (LED) has being a major policy issue in many developing
countries of Europe, North America, Australia and Asia (Rogerson, 1999). In
many countries economic policy has become a very important and central
issue in all spheres of governance.
It is no longer the responsibility of the central government only to deliver on
economic growth and poverty eradication it is a decentralised responsibility
Local Economic Development Performance Evaluation Model
The model shows both Structural (external) and Agency (internal) factors
having an impact on LED performance in the municipality.
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3.4.1 Structure (External Factors)
The structure represents external factors of the organisation. The structural
factors are socioeconomic conditions of the municipal jurisdiction. Socio
comes from the word social and include conditions like education, age
structure, race, health, population, crime and violence. The economic
conditions are such as saving rate, unemployment rate and income.
Competition for economic development refers to the municipality’s
competitiveness to attract investments for economic development. Other
factors that determine the competitiveness of the municipality include
infrastructure, political stability, tax and lease rates. A municipality that is on
structural good standing will be on a better position to have a good
performance on LED than the municipality that is not.
3.4.2 Agency (Organizational/Internal Factors) The agency is defined as an organisation providing a specific service in this
case it is the municipality. Agency represents the organisational
characteristics of the municipality. These include the economic development
staff size, economic development budget and activities in place to promote
economic development. Inside the organization there are things like formal
planning (e.g. LED strategic plan) and partnering and pooling resources which
refers to things like public, private partnership with businesses, NGO, and
communities to bring together the necessary resources for economic
development. The organisation should also consider the incentives given
towards the achievement of economic development.
The combination of the structure (external factors) and agency (internal
factors) should result in either effective and efficient LED performance or
ineffective and inefficient LED performance. When the LED performance is
effective, there will be enough job creation and that will lead to the reduction
of both unemployment and poverty. When the LED performance is efficient,
35
the costs will be low and the LED benefits will increase. But when there is
neither effective nor efficient performance, LED will not be able to create jobs,
both unemployment and poverty will rise, the costs will be high and there will
be no benefits on LED.
3.4.3 Independent Variable
This is the variable that influences the behaviour/ pattern of the dependent
variable in a negative or positive way. LED program is an independent
variable that influences poverty level in the locality.
3.4.4 Dependent Variables Dependent variables are all the factors and attributes that are responsive to
the independent variable. The researcher is interested in the impact of LED
on poverty in the local government. Then poverty becomes the dependent
variable for the researcher. The dependent variable are the outputs from the
LED program under which its performance towards poverty eradication can be
measured in different ways such as employment rate, skills level,
infrastructure development, establishment of SME to mention but few, would
be very important to determine LED effectiveness and efficiency.
3.4.5 Moderating Variables
These are the variables other than the independent variable which might have
an effect on the dependent variable (Hussey et al. 1997). The moderating
factors which influence the performance of LED on eradicating poverty will be
environmental factors like socioeconomic conditions, availability of resources,
36
location and competitive attractiveness of the area as factors outside the
municipality (organisation).
3.5 RESEARCH ASSUMPTIONS The researcher made a major assumption that rural based municipalities are
not able to alleviate poverty through LED. The assumption is based on the
following:
• Majority of people in rural areas live in poverty.
• Many rural municipalities don’t have financial and human capacity to
carry economic development
• There are small chances for rural municipalities to attract investors.
The assumption is also based on extended exploration of literature about
limited funding of local government activities.
3.6 RESEARCH LIMITATIONS The researcher is limiting the study to one rural municipality of Greater
Tubatse Municipality (GTM). GTM is a rural municipality in Limpopo province
where poverty is still high. The limitation is based on the time constraint and
financial resources allocated for the study.
3.7 RESEARCH QUESTIONS
3.7.1 Major Research Question 1. How does LED assist in problems such as poverty eradication
(employment generation, skills development and infrastructure
development) in the rural municipality?
Poverty in South Africa is still high even after the much said achievements
by the ANC led government. Municipalities are charged with
37
responsibilities among others is the development of economic activities in
their area of jurisdiction to eradicate poverty and the imbalances of the
past apartheid government. The government introduced LED as a tool to
help municipalities to facilitate economic development in their areas, yet
poverty is still high especially in the rural municipalities. The researcher
needs to find out if LED as a tool to facilitate economic development is
doing well especially to eradicate poverty.
2. To what extent does local government implement LED? The success of LED will go with the level at which it is implemented. The local
government is the coordinator of all local economic development activities.
Therefore the local government should go an extra mile in encouraging the
communities, the business and NGO to full participate in LED.
3.7.2 Minor Research Question
1. How does private business get involved in the LED?
2. What is the major LED challenges facing the local government?
3. How does the local community get involved in the LED process?
4. What business support system exists for LED?
The minor research questions seek to find ways of answering to the main
research question. For LED to succeed on eradicating poverty there is a
need for government to create a policy framework that will guide
municipalities know what and where LED should go in the municipality. As
the LED definition says that all local role players needs to be involved in
the process it is important also to check the level of PPP and community
involvement towards achievement of economic development. Lastly all the
challenges and constraints facing the rural municipalities in achieving LED
have to be explored also.
38
3.7 RESEARCH METHODOLOGY Research methodology is the reflection of the entire approach for the
research process (Hussey et al. 1997). The research methodology in this
research is concerned with the data collection, the sampling and data
analysis methods.
3.8.1 Data Collection The researcher will have the data collected from the primary sources,
through respondents, individuals and selected groups that will provide
data. In these case sources of the primary data are the citizens of the
GTM from different villages, municipal employees, NGOs and business
people.
A structured questionnaire has been designed for this research. The
questionnaire has been developed based on the research objectives and
questions so that it provides answers to the research question. The
questionnaire is divided into four sections that cover the youth of GTM, the
elders at GTM, GTM employees and business and NGOs.
The researcher hired a consultant to facilitate the data collection process
because the rural areas do not have infrastructure such as internet that
can fast track the data collection process. The sample of 50 people filled
the questionnaire and all respondents are assured of confidentiality of their
information. The research questionnaire is compiled by the researcher for
this study.
39
3.8.2 Sampling Method
Table 3.1 Sample
CATEGORY NUMBER
1. Youth 20
2. Elders 10
3. GTM Employees 5
4. Business & NGO 15
The researcher decided to use a sample size of 50 due to limited
resources on conducting this study. The researcher divided the sample
into four categories: 1. youth is the future of the country and is the active
human resource in the economy. Youth are also eager for economic
opportunities and they still have long live ahead so they looking forward to
work and provide for their needs, 2.
Elders have responsibility over their families, when there is no income in
the house it’s the elders who suffer most because they have to find a way
of providing for their families therefore they are also the relevant source of
economic development, 3. GTM employees knows all their economic
development programmes and know the strengths and weakness of their
organisation and getting information from the main sources is very
important, 4. Businesses and NGOs are the central part of PPP and are
very important for the growth of the economy and it is therefore relevant to
also get information from them.
40
3.8.3 Data Analysis Method The researcher used the data reduction analysis method and explaining
analysis method. Data reduction method is about sorting, categorising,
prioritising and interrelating data through the use of matrices (Hussey.
1997). Explaining method is about understanding the coherence of
meaning and action in the case under study (Hussey. 1997).
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CHAPTER 4
DATA ANALYSIS, FINDINGS AND DISCUSSION
4.1. INTRODUCTION The analysis of the researcher is made from data collected using
questionnaires filled by the youth, elders, businesses and NGO, and
employees of the Greater Tubatse Municipality. Ten questionnaires were
received from the GTM youth, eight received from the GTM elders, five
received from the GTM NGO and businesses and five received from the GTM
employees.
The respondents to the questionnaire come from different villages around
GTM and each person filled the questionnaire independently. The discussion
on the analysis has been made based on chapter 3 of this research in
collaboration with the research objectives and questions of the study.
Table 4.1 Education information in GTM. Population 270 122 Education of over 20 years old No Education/ schooling Primary Schooling Complete Primary schooling Secondary schooling Matriculation Tertiary education
119 507 40% 13% 5% 28% 10% 4%
Source: Gaffney 2008 There is high level of illiteracy in the communities of the GTM. Only 10% of
the population manages to obtain school leaving certificate/ matriculation.
This is a very small number considering the shortage of skills that the region
42
is experiencing. There is only 4% of the population that manages through the
universities and colleges it is also a very small number looking at the size of
the population. However most respondents are cite shortage of money as a
resultant factor to this small number of people reaching through tertiary
education. This result in highly skills jobs being taken by people outside the
municipality.
Education is very important in LED. When the structural environment has
educated people there are always many alternatives towards problem solving
and economic development. People without education find it hard to
understand basic requirements for economic development. Most villages in
GTM are found without educated people who can also help the municipality
towards unleashing the LED potential.
The 4% of people who reach through tertiary education are mostly migrating
to bigger cities for jobs and end up leaving their communities being brain dry.
People with no education to those who reach secondary schooling without
matriculating are mostly people who find it difficult to acquire skills. They
become hopeless jobseekers.
4.2 LED AWARENESS, COMMUNICATION AND PROMOTION Communication, promotion and making the communities and stakeholders
aware of LED are one step towards achieving an effective and efficient LED.
This answers to the researcher’s objective of assessing the depth of local
community participation in LED. Participation comes with being aware of what
is happening around you. The local community participation becomes easier
when good efforts are made to communicate and promote LED.
This also extends to potential investors, donors and other possible private
partners. The investors and other private partners respond mostly to
promotions and communication made by the municipality on LED. Some
43
municipalities in Russia have a dedicated marketing and public relation offices
that promotes economic development. The researcher’s analysis on
promotion of LED is based on the four categories that were chosen through
the questionnaire. The following table shows how different categories rate the
level of awareness, communication and promotion of LED.
Table 4.2 Awareness and Promotion of LED PROMOTION STATUS
YOUTH ELDERS GTM BUSINESS & NGO
TOTAL
YES 35% 10% 100% 40% 46%
NO 65% 90% 0 60% 54%
The researcher’s data shows that 54% of the people who answered the
questionnaire seem to not agree that there is enough effort from the
municipality to promote, communicate and make people aware of LED in the
municipality. There is 46% who are saying that there is awareness,
communication and promotion of LED.
4.3 LED SUPPORT SYSTEMS Successful LED also needs well organised and coordinated support systems.
These systems can be both within the organisation (GTM) and outside the
organisation (community). As I can define a system to be a set of interrelated
components that forms a unit, when good support systems are in place then
LED will show its effectiveness and efficiency by reducing the levels of
poverty, reducing unemployment and increase skills development.
44
4.3.1 Municipal LED unit. This is the central point of LED. Its role is to coordinate the whole LED process for the municipality. Table 4.3 GTM staff competency STATUS YOUTH ELDERS GTM BUSINESS
& NGO TOTAL
EXCELLENT 10% 0% 0% 0% 3%
GOOD 20% 0% 40% 40% 25%
FAIR 50% 37% 60% 60% 52%
POOR 20% 63% 0% 0% 21%
The analysis from the respondents on the researcher’s questionnaire shows
that people see small percentage (3%) of excellence from the municipal staff
when it comes to LED execution. 25% of the respondents are saying that the
municipality is good in LED delivery while 52 percent is saying that the
municipality is only fair and 21 percent says that the municipality is poor in
executing LED.
This is attributed to the comments made by respondents in which the
respondents shows two reasons for the problem; one thing indicated is that
the municipality do not have well skilled staff to execute LED and the second
comment is that there is shortage of staff for the LED unit to carry out an
excellent job on LED.
The LED performance measurement model that the researcher is using for
theoretical framework shows under agency that the local economic
45
development unit has an important role towards achievement of efficient and
effective LED. The finding by the researcher is that the municipality is not well
capacitated and shaped to deliver on the effective and efficient LED. This
finding answers to the researcher’s objective of assessing whether LED
strategies are well coordinated in rural municipalities.
4.3.2 LED Strategic Plan The GTM has a well developed LED strategic plan. The respondents from the
municipal side are aware of the current strategic plan in place towards
achieving a successful LED. The GTM LED strategy follows a four stage
process.
• Stakeholder mobilisation and baseline review
• Development potential analysis
• LED strategy formulation
• Implementation plan and institutional options.
However the strategic plan process is very quiet on important issues such as
monitoring and evaluation. Most respondents from the interviews the
researcher has conducted shows that there is no proper control, monitoring
and evaluation of economic development initiatives and this results in LED
initiatives losing track and failing. The findings here answers to the
researcher’s objective of finding out if the LED strategies are well coordinated
and also the research question on what LED support system exists.
4.3.3 Public Private Partnership (PPP) PPP is an economic development support mechanism in which private
business is funded and operated by partnering with government. According to
Van Dijk (2006) this is also called Public Private Community Partnership
(PPCP) in countries like Indonesia. This stresses the need to bring all
stakeholders into the process of economic development.
46
Table 4.4 Public Private Partnership at GTM. STATUS GTM BUSINESS & NGO TOTAL
YES 38% 57% 28%
NO 62% 43% 72%
The respondents shows that PPP is practiced (28%) at GTM towards the
achievement of LED, however there is also a high (72%) number that shows
that PPP is not practiced. Most commented partners of GTM are LIBSA,
LIMDEV, Modikwa Mine, MQA and Anglo-Zimele mines. These help the GTM
with entrepreneur training and funding, and funding for community
development projects. However the problems are that the mines most of the
time do not work with municipality instead directly link with communities which
results in conflicts between the mines and the communities.
The other resultant factor is that funding is not well administered or monitored
and result in failing economic development projects. The findings here
answers to the researcher’s objective of assessing the role private enterprise
on LED and answer the research question on how do the private business get
involved in the LED.
4.3.4 LED Budget LED budget is very important towards the realization of effective and efficient
of LED. The higher the budget especially in rural disadvantaged
municipalities, the higher the chances of achieving a poverty eradication
economic development. GTM has no money budgeted for LED purposes. The
municipality is however depended on the money that the private businesses
like mines are offering for economic development purposes.
47
Since there is no formal partnership agreement the mines are most of the time
overlapping the LED office in the municipality and directly interacting with the
communities on LED matters. Therefore the municipality has no financial
capacity to carry LED in the communities except by just coordinating training
on entrepreneurial skills with the help of LIBSA and LIMDEV.
4.4 COMMUNITY INVOLVEMENT IN LED The community’s involvement and reaction towards LED is very important
towards the successful LED at GTM. The municipality has to have the support
of the community and the community should show a will to be part of the
process towards economic development in the locality. At GTM this will be
villagers from all the villagers of GTM. After being made aware and
communicated to about the LED, there should be a direct involvement from
the community.
The involvement according to UN-HABITAT has to start from the LED
strategic planning by involving and getting the views of the community
regarding the economic development needs that will benefit the communities,
participating in projects implementations and rewards structures.
Table 4.5 Community Involvement STATUS YOUTH ELDERS GTM BUSINESS
& NGO TOTAL
YES 52% 15% 80% 25% 43%
NO 48% 85% 20% 75% 57%
48
The results from the filled questionnaires shows that less (43%) than half of
the respondents have been involved in LED, the respondents shows that
community is highly not involved in the LED. However the municipality shows
80% confidence that the community is involved while the elders in the
community disagree 85% that the community is involved in LED. There is
52% of the youth who says that the community is involved in the LED while
48% says there is no community involvement. This result is not inline with the
objective of South African LED framework (see chapter 2), which states about
encouraging the involvement of communities and community organisations in
the matters of local government.
The findings by the researcher answers to researcher’s objective of assessing
whether LED strategies are well coordinated and also the assessment of the
depth of local community participation on LED. Coordination of LED without
full involvement of the community is not enough therefore the researcher finds
that not much effort is put to coordinate well the LED. The other finding is that
participation of the communities is very minimal.
4.5 IMPACT OF LED AT GTM LED as economic development activity should have a positive impact in the
society. This will be reflected through increase in employment, skills
development, increase in income and general increase in the standard of
living.
Table 4.6 Annual Household Incomes at GTM INCOME NUMBER PERCENTAGE NO INCOME 24065 42.8% R1- R4800 4228 7.5% R4801- R9600 12536 22% R9601- R19200 6426 11% R19201- R38400 4637 8%
The researcher’s findings are in relation to the research objectives and
questions in chapter one. The findings are also made based on the framework
in chapter 3 of the research.
4.6.1 Findings on Structure The structure represents the external environment of the municipality, the
important part of a successful LED. The findings on labour shows that there is
high level of illiteracy and skills shortage in the communities with a small
percentage (10%) being able to obtain school leaving certificate and 4% able
to reach tertiary education. This finding put a strain on capacity to achieve
effective and efficient LED. The finding answers to the assessment of
community participation on LED. People in these communities take long to
understand basic concepts of economic development because of their
illiteracy level.
The second finding is that there is no sufficient LED awareness,
communication and promotion from the municipality which result in community
not being well informed and not involved in LED activities. The community is
the one in need of economic development therefore it is very important that
they get involved fully in addressing their economic needs. This finding
answers to the depth of community participation on LED.
The third finding is that there is still lack of infrastructure such as roads,
electricity, telecommunication, water and sanitation which makes it difficult for
the achievement of effective and efficient LED. Infrastructure is very important
in the development process. Without good infrastructure many projects might
fail because the cost of operating such projects might be high when
infrastructure is poor. Infrastructure is a basic support system in any
development and with poor infrastructure development might be slow because
even investors will not be attracted to invest where there is poor infrastructure.
53
4.6.2 Findings on Agency These are findings which are internal to the municipality responsible for LED
coordination. The first finding is that the LED or municipality does not have
sufficient human capacity to achieve effectiveness and efficiency. This result
in LED activities not being well coordinated to the fullest and result in projects
collapsing. This finding answers on the objective of assessing LED strategies
and answers to the question on what LED support system exist and what are
the major LED challenges facing local governments.
The second finding is that GTM has no budget allocation for LED unit and
activities except sourcing funds from mines which happens slowly. Therefore
the question on LED support system is answered by this finding. LED’s
success is based on the availability of funds and without proper and reliable
funding the chances of achieving effective and efficient LED are very less.
The third finding is that there is formal planning in a form of LED strategic plan
however the strategic plan does not state anything about control, monitoring
and evaluation of LED. This resulted in lot of projects failing and funds
channelled into wrong hands. There has been a collapse of projects as a
result of lack of clearly stated monitoring and control measures. This finding
answers the objective on whether LED strategies are well coordinated and the
question on to what extend does the local government implement LED.
The fourth finding answers the role of private enterprises on LED. There is a
little interaction between the municipality and the private business. However
the mines most of the time creates a direct link with communities than the
LED unit in the municipality. As a result there is little monitoring when the
municipality is not involved which result in projects not having a positive
impact on the lives of the citizens.
The last finding answers to the main research question on the impact of LED
on poverty at GTM. The researcher’s finding is that there is very little success
of LED on poverty. There is very few skills trainings coordinated, some
54
funding have been secured for economic development projects although
some were not sustainable. Most of the projects results in little income which
does not make a difference in the standard of living for the citizens. There is
still a huge number of unemployment and infrastructure backlog. The finding
is that there is very little that LED is doing on poverty eradication.
The researcher finds that the combination of all findings results in LED not
having impact on poverty eradication at GTM.
4.7 CONCLUSION The researcher has analysed the data in relation to the research objectives
and research questions stated in chapter two. The researcher also made the
analysis in this chapter basing on the theoretical model used in chapter 3. The
findings in this chapter reflect the data received from respondents to the
questionnaires and the telephone interviews conducted during the course of
the research.
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CHAPTER 5
CONCLUSION, RECOMMENDATIONS AND FUTURE RESEARCH.
5.1 CONCLUSION The purpose of the research was to study the role of LED on poverty in rural
municipalities. In earlier chapters it was stated that municipalities in South
Africa have constitutional mandate to promote socio-economic conditions of
the citizens. The researcher raised four research objectives with research
questions.
To answer to the objectives and questions a theoretical model of LED
performance measurement was used with the concept that if the municipality
carrying LED (agency) and the environment where LED is carried (structure)
are all well organised then there will be effective and efficient LED that will
eradicate poverty.
Looking at the earlier assumptions the respondents agree that there is still
poverty in communities and that there is lack of capacity in the municipalities
to deliver LED. The human capacity is both internal and external. Looking at
earlier chapters as stated that many small municipalities are not well funded
to deliver their expected mandate then it becomes difficult for LED to be fully
functional. In chapter 2 the Bulgarian case states well that the municipalities
are brought down to a mere distribution of scarce budget funds and delivery of
limited resources.
The researcher has established that the LED unit at GTM has no budget
aiming at projects for economic development except through seeking funds
from mines and other potential funders. Adding to that is that the municipality
56
is small and has very little revenue that it generates for itself. While one of the
principles of LED framework in chapter 2 states that through a developmental
approach, Government has a decisive and unapologetic role to play in
shaping the economic destiny of our country, this theory seems not to be true,
because not putting a budget to achieve one of your principles shows a
compromise to that principle and therefore it becomes apologetic.
The researcher also managed to establish that private business do not want
to be abide or play openly on PPP agreements with the municipality and that
sometimes the private business prefer to deal directly with the communities
than going through municipality except when there is conflicts between the
businesses and the communities. The researcher also found that the
strategies for LED are developed at GTM however there is no clear
monitoring, control and evaluation of processes and as a result LED projects
become unsustainable. LED processes can start but will not end with their
intended results as a result of lack of monitoring and evaluation.
The researcher learned also that there is high level of illiteracy and skills
shortage in the communities and result in many citizens being unemployable,
however the skills development programmes are not communicated enough
as such many communities are not aware of such programmes. Therefore the
skills development interventions do not make a much of a difference because
many people are still found unskilled. However in Philippines (see chapter 2)
the case was achieved very well through skills development and production
management trainings.
The GTM does not fund projects but coordinate private funders to fund
potential economic development project and there is slow funding from private
funders because funders are sceptical to fund people without skills necessary
for the proposed projects. In Togo as stated in chapter 2 many young
entrepreneurs emerged as a results intensive training and skills development
that was carried for young students. This also helped creating more
opportunities and avoided mono profiles in many municipalities in Russia.
Therefore low skills it’s a problem for GTM, when it comes to LED.
57
The unemployment rate and the disparity in income level clearly reflects that
many citizens live in poverty and since the introduction of LED in South Africa
with the ANC government very less is being said to have been achieved
within GTM in fight against poverty. In general looking at the statistics from
the respondents LED is failing in poverty eradication because none of the
structural and agency factors are favourable for the achievement of effective
and efficient LED.
Therefore in conclusion poverty is still high at GTM. The municipalities should
be looked at especially for the lack of human capacity especially in their
recruitment system. The central government since is the one responsible for
allocating resources to the municipalities should give a better look at the rural
municipalities since they can hardly generate their own revenue. The rural
municipalities are as a result of apartheid system and needs special financial
and human resource attention from the national government otherwise the
problem of poverty will not be reduced in the rural areas.
5.2 Recommendations
5.2.1 Community Involvement
LED is about developing economy for the communities in the locality. It is very
import that the GTM involve and encourage the communities in all steps of the
way in the LED. As practised in the Philippines, the GTM should move for a
PPCP (Private Public Community Partnership). The municipality should take
in to cognisance the educational status of the communities and bring
measures that will match the status of the communities in economic
development.
5.2.2 LED Budget
58
Without a reliable funding source for economic development, LED will not
succeed. The municipality should find a way of creating a specific budget for
LED purposes only. That could be achieved by applying funds with national
treasury, the province and department of provincial and local government and
also by marketing the municipality to attract local and international donor
organisations and investors in LED projects. This will help the municipality to
acquire more private funding because there will be ongoing projects that
potential funders will see that their funds will not be taken for a waste.
5.2.3 Monitoring, Control and Evaluation
The municipality should develop an LED monitoring and control program for
all LED intended projects. There is no meaning of giving money that you will
not know if it is used for the intended purpose. With clearly set monitoring and
control systems in place that should form an integral part of the LED strategic
planning all LED projects will be geared towards community development.
5.2.4 Skills development and Illiteracy reduction
The municipality should accelerate on skills development and reduction of
illiteracy level. This can be done by creating and increasing partnerships with
universities, colleges, research institutions and training and skills development
institutions for vocational training to fast track the pace of reducing illiteracy
and skills shortage. This will help communities to have understanding of their
economic development responsibilities and be in a position to also add value
in the LED process. This can also be enhanced by developing infrastructure
to support things such as internet access where communities will be able to
access information without the municipality having to directly visit the
communities.
59
5.2.5 Municipal LED unit
The municipality should expand the LED unit so that the staff can be equal to
the challenges facing the unit. Currently the LED unit has only two staff.
Therefore it is needed that the current structure of the unit be reviewed and
additional posts should be created and filled so as to enable the unit to
execute its tasks. The current staff should also be further trained and
developed.
5.3 Future Research Rural areas are large in South Africa and this study covered only a small part.
The remaining parts need to be researched. This study was carried in a very
short time and there is a need to further extent the time for this study so as to
cover all aspects necessary in LED. The researcher recommends that further
research should be carried out in a more detailed manner, in the area with the
use of a more detailed quantitative and qualitative analysis. Future research
should also look into including various municipalities and the sample be
expanded.
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6. References and Bibliography ANC (1999) Election Manifesto www.anc.org.za Bond .P. (2002) Local economic development debates in South Africa. Capkova .S. (2006) Local government and economic development. Open Society Institute, Budapest. http//lgi.osi.hu Constitution of the Republic of South Africa, 1996. www.info.gov.za. Retrieved 30 May 2009 Davis J.R (2005) Addressing poverty through local economic development. www.nri.org Davis J.R (2006) Evaluating and Disseminating Experiences in Local Economic Development: Observations on Integrated Development Programmes of the Free State, Republic of South Africa. Davis J.R & Rylance .C. (2005) Addressing poverty through local economic and enterprise development: A review of conceptual approaches and practice. www.nri.org Domianovo .A, Tzvetkovska .M & Ivanovs .S. (2005). The role of local government in local economic development in Bulgaria. http//lgi.osi.hu DPLG (2006) National Framework for local economic development in South Africa. www.dplg.gov.za DPLG (1999) Municipal structures act. www.dplg.gov.za DPLG (2004) Project Consolidate www.dplg.gov.za DPLG Local Economic Development www.dplg.gov.za Dijk .M.P (2006) Managing cities in Developing Countries. Renmin University Press
Gaffney’s Local Government in South Africa Official year book. 2008. www.gaffney.co.za Hussey .J & Hussey .R. (1997) Business research: A practical guide for undergraduate & post graduate students. MacMillan press LTD. Lafferty .M.W (2001). Sustainable Communities in Europe. London, Earthscan Publications Ltd. Lindblad .R.M. (2006) Performance measurement in local economic development. Urban affairs review, Vol 41. Nr 5. p 653. Mufamadi. S. DPLG (2006) Stimulating and Developing Sustainable Local Economies. www.dplg.gov.za retrieved on 05 March 2009. MunicipalIQ. (2009). The state of local economic development in South Africa. www.municipaliq.co.za retrieved 16 July 2009 Nel.E.L (2001) Local Economic Development: A review assessment of its current status in South Africa. Nel E.L & Bins T (2002) Evaluating local economic development initiatives in South Africa: Evidence from the cities. Persky. P, Ranney. D and Wiewel. W. (1998) Import substitution and Local Economic Development. Economic Development Quartely, Vol. 7 No, 1, p 4, February 1993. Prahalad .C.K (2006). The fortune at the bottom of the Pyramid. USA, Wharton School Publishing Pretorius .A & Blaauw .D (2005) Local Economic Development agencies in South Africa- six years later. Durban Rogerson C.M (1999) Local Economic Development and Urban Poverty Alleviation: The Experience of Post-Apartheid South Africa. Pergamon. www.elsevier.com
Swinburn .G. (2006) Local economic development quick reference. Urban Development Unit. The worldbank. Washington DC. www.worldbank.org/urban/led Swinburn .G, Goga .S & Murphy .F. (2006) Local economic development: A primer developing and implementing local economic development strategies and action plans. Cities of Change. Worldbank. www.worldbank.org Tamasane.T. (2007) Sustaining Livelihoods in Southern Africa. www.khanya-mrc.co.za retrieved 11 January 2009 Visgalov D.V. (2005). The role of local government in local economic development in Russia. http//lgi.osi.hu Wandschneider.T. (2004) Small rural towns and Local economic development: National Resources Institute. www.nri.org retrieved 22 February 2009