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Municipal Local Economic Development and the power of the local multiplier
effect: piloting a community enterprise identification method in South Africa
and Namibia
Lu Heideman
LED Expert
P3 Project: Partnership – Participation – Progress
SALGA, BALA, ALAN, SALAR
March 2011
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What is ‘Plugging the Leaks’?• NEF-developed LED tool based on Keynesian local
multiplier effect• Piloted in South Africa and Namibia as an instrument of
policy implementation for broader uptake by municipalities
• Utilises the analogy of a local economy as a leaky bucket• Bottom-up approach to LED that does not rely on external
experts• Community-based strategy that works directly with low-
income communities
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LED as a contested concept in South Africa• Ten years of community development projects of dubious
economic sustainability and limited stakeholder partnership
• Polarised policy positions of social welfare versus competitive approach
• Plugging the leaks returns enterprise support into the municipal sphere without crossing the line of job creation through projects
• Battle for LED as a series of systematic processes to improve the BEE, rather than ‘projects’
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Adapting Plugging the Leaks• Intention: build economic literacy and empower
communities to better utilise existing resources toward local enterprise
• NEF approach includes a full-time enterprise coach and finance through micro-finance players offering small loans
• The need to mobilise other entrepreneurial support meant municipalities facilitating and coordinating multiple agencies with a common goal
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Municipalities• Namibia: Walvis Bay and Arandis
dependent on natural resources • lack of economic diversification• High GINI coefficient, poverty, low population density• Dessert challenges• Namport opportunities
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Municipalities• Theewaterskloof and Cape Agulhas: Caledon, Grabouw,
Bredasdorp, Napier• Agricultural and trade (tourism)• Southern-most point in Africa• Small population, unemployment,
inequality, race-class correlations
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Responses to Plugging the Leaks• Initial workshops in Grabouw, Caledon, Napier,
Bredasdorp, Arandis and Walvis Bay• Similar contexts: unemployment and poverty• Inequality endures in race-class correlation• Largely white-owned private sector and predominantly
black public sector• Neither SA nor Namibia offer an effective social welfare
net• Limited UIF, no BIG
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Responses to Plugging the Leaks cont...• Most workshop participants involved in the ‘second’
economy in survivalist or copy-cat ventures due to absence of wage employment
• Limited regular cash income leads to limited individual spending choices and exclusion from the cash economy. LM3 has limited traction
• Analysing markets and networking highly successful• Funding for enterprise development through grants
undermines sustainability and distorts markets
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Responses to Plugging the Leaks cont...
• Can municipalities change the way LED officials work to incorporate coaching activities ? Can municipalities facilitate enterprise development without becoming project implementers?
• It is viable to build groups of passionate, aspiring entrepreneurs to support each other and pool resources?
• Identify markets before starting a business• New understanding of competitiveness• Look inward and maximise value – balance to FDI• Local experts empowered instead of passive grant
dependent recipients
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Uniqueness of local
• Xenophobia• Degrees of localness• Co-operation for competitiveness• Small business challenges different to established
business (BR&E versus PtL)• Mistrust between business and government (welfare
versus profit)
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Prospects for PtL as a municipal approach to LED
• Emphasis on local knowledge gives meaning to participatory LED methods
• Locals have been relegated to the role of workers in projects, rather than owners
• PtL an effective tool to harness ‘indigenous’ knowledge accessibly
• Delivered through NGO’s and CBO’s to date, but can be an institutionalised policy instrument for the local state to work directly with low-income communities in future.
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Contact details:Lu Heideman
www.projectp3.org
+27 (0)82 7052145
Cape Town, South Africa
Skype lu_heideman
NEF info: www.pluggingtheleaks.org