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

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

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’

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

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

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

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

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

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

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)

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.

Contact details:Lu Heideman

luheid@mweb.co.za

www.projectp3.org

+27 (0)82 7052145

Cape Town, South Africa

Skype lu_heideman

NEF info: www.pluggingtheleaks.org