Local economic development (LED)

Anti-poor, Cities, CITIES, TOWNS AND SETTLEMENTS, Construction services, Consumer-led development, Demographic-entrepreneurial relationships, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise regularities, Enterprise research, data and statistics, ENTERPRISE SECTORS, Entrepreneurial space, Local economic development (LED), Population size, Predictive capabilities, Pro-poor strategies, Trading services, Urban economy and growth

Pro-poor LED fails our cities, towns & the poor: Enterprises of the right kind generate city growth

Johannes Wessels
@johannesEOSA1

There is an intriguing symbiosis between cities and towns on the one hand and enterprises on the other. As the world population urbanise, so are business activities.

Physicist Geoffrey West in his “Scale: The Universal Laws of Life, Growth and Death in Organisms, Cities and Companies” says based on city growth one can state precisely what will happen with the number of businesses in that city: a doubling of population does not require a doubling of grocery stores or filling stations, economies of scale kick in in a predictable manner. The reverse is also true.

Unfortunately, South Africa’s economic and enterprise development policies and strategies ignore these predictable realities. In addition, LED plans by municipalities in the main demonstrate a lack of understanding of what drives development.

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Anti-business, Black economic empowerment (BEE), Black-owned businesses, Business incubation, Company tax, Crime against business, ECONOMIC POLICY AND STRATEGY, Home-based businesses, Informal businesses, Job creation and unemployment, Local economic development (LED)

The folly of creating businesses whilst tolerating a criminal-friendly environment

Johannes Wessels
@johannesEOSA1

The South African enterprise world remains in critical condition despite numerous initiatives to cultivate entrepreneurship and new businesses since the real causes undermining its well-being are not addressed. One of the fundamental causes for a struggling enterprise world is the fact that SA is more criminal-friendly than enterprise friendly.

We’ve seen that:

as the belief in the (unproven) curative powers of bloodletting had prevented an active search for medical applications that could cure the range of problems bloodletting was supposedly curing, the paradigm of small enterprises as the knight that will overcome unemployment and economic stagnation comforts its adherents in their belief that they are on the right track.
Repetitive incantations of beliefs embolden policymakers and administrators that there’s no need for them to consider alternatives and that they can ignore evidence to the contrary. Why seek solutions acknowledging the data-supported evidence of regularities that shape entrepreneurial space if you “know” that all that is required is the “massification” of new businesses through state-induced enterprise creation?

Comfortable in this paradigm, Government embarked on an interventionist road to transform the economy in accordance with its perceived reality. It launched a range of black enterprise incubation programs with massive grants, prescriptive procurement strategies, BEE, industry charters, interference with IP and a commitment to even expropriate without compensation.

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Free State, KwaZulu-Natal, Local economic development (LED), Municipal audits, Municipal efficiency, Municipal governance, Municipal legislative compliance

If you think a clean municipal audit is scarce, try to get a call answered quickly

Are we becoming a nation that celebrate losses? After each of the many Springbok losses ex Bok coach Allister Coetzee oversaw, he found “much positive to build on”. When reacting to the Auditor General’s scathing report about the financial management at local level, Zweli Mkhize, Minister of Cooperative Governance & Traditional Affairs and his deputy Andries Nel reminded me of Coetzee.

The Auditor General (AG) reported:

A 75% deterioration in in unauthorised expenditure to a level of R28.3 billion – a figure higher than the expected income from the increase in the VAT rate;
Team Failing Clean Audit Municipalities trumped team Clean Audit Municipalities by 224 – 33, a loss comparable to the All Black’s 57 – 0 trashing of the Boks, though damaging not only South Africans’ enthusiasm, but their financial well-being too;

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Accelerated and Shared Growth Initiative for South Africa (ASGISA), Anti-business, Corruption, ECONOMIC POLICY AND STRATEGY, Investment/Divestment, Job creation and unemployment, Local economic development (LED), Pro-growth strategies, State Capture

State Capture disguises the devastation by anti-business policies: Bafana-Bafana fared better than the economy

The anger because of billions lost through corruption and state capture comes at an enormous opportunity cost. The focus on the Zuma-Gupta-axis acts as blinkers that prevent a focus on the massive cost of adhering to failing economic policies and strategies – a cost far greater than the billions swindled away through corruption.

Three figures show clearly that the economic malaise is much deeper than the damage caused by corruption parasites and that the impact of poor policies started long before corruption landed under Government privilege at Waterkloof. Blaming the economic ills of South Africa on State Capture is a massive over-simplification.

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CITIES, TOWNS AND SETTLEMENTS, ECONOMIC POLICY AND STRATEGY, Enterprise dynamics, Enterprise regularities, Local economic development (LED), Population size, Pro-poor strategies, Spending power (wealth/poverty)

Is a pro-poor LED stance justified?

Nel and Rogerson (2016) reviewed Local Economic Development (LED) policy and practice in South Africa. They reported that results have been modest despite the significant support for nearly 20 years put into applied local economic development. They suggested that a potential over-focus on pro-poor local economic development at the expense of simultaneously working with the private sector on pro-market interventions, could be a stumbling block to the potential success of LED.

Mason (2018) stated that poverty is a multifaceted phenomenon and the condition of poverty often entails one or more of these realities: a lack of income (joblessness); a lack of preparedness (education); and a dependency on government services (welfare).

I asked if our research on enterprise dynamics that reported a wide range of regularities in the enterprise structures and dynamics of South African towns and municipalities (some of which have already been discussed here) could help to shed light on a question whether a pro-poor LED stance might be justified.

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CITIES, TOWNS AND SETTLEMENTS, ECONOMIC THEORY, Enterprise regularities, Entrepreneurial activity, Local economic development (LED), Predictive capabilities

A LED puzzle

Looking for work Because of high unemployment and poverty levels, all South African municipalities have been tasked to promote local economic development (LED) as part of their integrated development plans (IDPs). Various central and provincial government departments, organizations such as SALGA as well as consultants provide LED guidance and support to the municipalities. And academics do research on LED and small towns in South Africa and publish their results in scientific journals. Yet, given the above, there is an aspect that really puzzles us.