LIMPOPO
AT A GLANCE

At-A-Glance

* Location
The northernmost of South Africa's nine provinces; borders Botswana in the west, Zimbabwe in the north, Mozambique in the East, and Gauteng province in the south. Promotes itself as the "Heartland of Southern Africa".

* Government
Provincial government based in Polokwane. Five district municipalities: Capricorn, Waterberg, Vhembe, Mopani, Sekhukhune; 26 local municipalities.

* Population
4,9 million, living predominantly in rural areas; 43% of the population comprising children of 15 years or younger; one of the poorest of South Africa's nine provinces, with the lowest personal income per capita (38% of the South African average).

* Economy
Recorded annual average growth of 4% between 1996 and 2005, higher than the national average. Key sectors:
- Agriculture (predominantly citrus and sub-tropical fruit).
- Mining (platinum group metals, coal, diamonds, copper).
- Tourism (wild life focused).

LIMPOPO

Its Economy,
Its Challenges,
and the role of the Limpopo Local Economic Development Programme

Limpopo reflects in a dramatic way the dichotomy of South Africa's economy. On the one hand, Limpopo recorded annual average growth of 4% between 1996 and 2005, higher than the national average over that period, according to Premier Sello Moloto in his recent State of
the Province address.

At times during this period, Limpopo's growth rate reached 6%, making it the fastest growing of South Africa's nine provinces. Growth seems set to be maintained at high levels as investments of upwards of R60 billion are being implemented or planned in the province. New investment is being made mainly in Limpopo's mining sector. It is being led by:

* Construction of the new R26 billion Medupi power station near the Matimba power station in the Waterberg coal field which contains some 50% of South Africa's remaining coal reserves. This is driving a R7 billion expansion of coal mining, exploration for coalbed methane gas, and interest in establishing coal-to-liquids, gas-to-liquids, and petro-chemical plants in the area. These developments have the potential to transform Limpopo into South Africa's new electricity generation centre, with added potential to become the country's synthetic fuels and petro-chemical production hub.

* Construction of the R7 billion De Hoop Dam and associated water works which is enabling expansion of platinum group metal mining in central Limpopo involving investment of some R20 billion.

On the other hand, despite its high growth rate and the inflow of large-scale investment, Limpopo remains one of South Africa's poorest provinces, with personal income per capita estimated at only 38% of the national average.The Limpopo Provincial Government therefore faces the challenge to
ensure that the benefits of economic growth flow to increasing numbers of its citizens. In line with Limpopo's Provincial Growth and Development Strategy, the key focus is to move the province away from being an exporter of unprocessed minerals and agricultural produce. The emphasis now is on value-added processing and manufacturing as a means of creating much-needed jobs and generating new wealth within the province.

The Limpopo Provincial Growth and Development Strategy

Limpopo offers significant competitive advantages in agriculture and agri-processing, mining and tourism. The challenge in Limpopo is to support growth in these sectors in such a way that it maximises the development impact and addresses the high levels of poverty in the province.

The reduction of unemployment through the stimulation of the local economy has become the central policy objective of the provincial government through its Provincial Growth and Development Strategy (PGDS) and its Vision 2020 economic policy. In particular, the PGDS proposes a strategy of cluster development in the three priority sectors of mining, tourism and agri-business. The PGDS also identifies a range of barriers to sustainable Local Economic Development (LED) in the province. Some of the more significant obstacles include an inadequate regulatory and enabling environment; lack of public sector institutional capacity; lack of entrepreneurial skills; barriers to accessing business services and finance; and inadequate information. The PGDS proposes a combined strategy centred on pro-poor economic growth through the development of clusters in the priority sectors of comparative advantage while at the same removing the barriers to investment and business. This approach includes working with poor people to support their entry into the economy through unblocking income generating activities; supporting the emerging business sector through working to unblock markets, developing linkages to established partners and access to business development services, finance and access to markets; and creating an environment in which the role of government evolves to become supportive of LED.

The Limpopo Local Economic Development Programme

Local Economic Development (LED) has become an essential means to create more equitable economic growth in South Africa. LED is an integrated, multi-disciplinary approach aimed at poverty alleviation through pro-poor economic growth.

On the one hand this involves supporting sustainable economic activities in municipalities and, on the other hand, it involves integrating the marginalised second economy with the developed first economy.

Central to this approach is support for Small, Medium, Micro Enterprises (SMMEs) as a source of wealth and job creation. LED places particular emphasis on creating partnerships between all stakeholders in a provincial economy and creating location-based clusters using local resources. Specific target groups are poor, marginalised local communities, particularly women, the unemployed, the landless, survivalist entrepreneurs, and people working in the emerging enterprise sector.

Specific problems that LED seeks to address include:

* High levels of poverty and unemployment.
* Limited public sector support for sustainable development projects.
* Lack of business support services and inadequate entrepreneurial skills.
* Lack of articulation between the formal business sector and the survivalist emerging business sector.
* Limited private investment in jobs-rich sectors, despite significant business opportunities.
* An unconducive business environment for local economic development (e.g. poor urban planning, lack of access to information, administrative barriers to doing business).
* Weak capacities in government to perform a new developmental role.

Against this backdrop, the South African government has recently undertaken a process of fundamental restructuring of the municipal sphere of government guided by the Constitution and 1998 White Paper on Local Government. The Department of Provincial and Local Government (DPLG) is revising the draft national LED policy, in order to provide a strategy and implementing guidelines to create a better understanding of LED and clarify the role of Provincial, District and Municipal government in supporting LED.
Under this new approach to LED, there is a shift away from project interventionism towards municipal-led development, which requires municipalities to assume a pro-active and facilitating role in supporting LED and creating a conducive business environment.With limited government funds directly available for LED, municipalities will be required to leverage these funds to mobilise greater financial flows from the public and private sector to support LED. There is an urgent need to capacitate government stakeholders to allow them to perform their new roles as facilitators of LED in their respective municipalities and provinces.

THE LIMPOPO LOCAL ECONOMIC DEVELOPMENT PROGRAMME

In response to South Africa's efforts to address the challenge of LED, the European Union (EU) has agreed with the government to support LED programmes in three provinces: Limpopo, Kwa-Zulu Natal and Eastern Cape.

The Limpopo LED Programme is a 34 million Euro initiative to support LED in the province. The programme is being implemented by the Limpopo Department of Local Government and Housing. The main objective of the programme is to support pro-poor economic growth and job creation through an integrated approach, which will support five core areas:

* Supporting Sustainable Community Economic Development:
As part of an effort to integrate the second economy closer to the first and create sustainable jobs for the poorer, more disadvantaged segments of society, this activity focuses on smaller scale economic development initiatives in poor, rural communities.

* Strengthening Local Competitiveness of SMMEs:
In line with the Provincial Growth and Development Strategy (PGDS), this will primarily focus on business development and retention and expansion of SMMEs, particularly through cluster development in sectors of comparative advantage: mining, agriculture and agribusiness, tourism, construction and manufacturing.

* Enhancing the LED environment:
This area is primarily aimed at supporting local government to improve the business environment, remove investment barriers and facilitate investment:

* Strengthening LED capacity:
This aims to assist a range of LED stakeholders to facilitate LED, create awareness of LED, and to undertake research and develop LED strategies and policies as well as to implement LED. Stakeholders include local government, quasi governmental bodies, local service providers, associations and NGOs.

* Management, Monitoring and Co-ordination:
This focuses on management of the overall programme, including procurement of services, stimulation and awareness, mobilisation of stakeholders, generation of a pipeline of projects and monitoring the programme.

Instruments of the Limpopo LED Programme

In order to undertake an integrated approach, the programme has deployed a number of instruments to support each of these core areas. They include grant funds (15 million Euro), credit lines (5 million), and technical assistance (14 million).For the most part the instruments complement each of the core
areas. Specifically, the following instruments plan to be mobilised:

* Marginalised Community Fund (MCF) to support small-scale initiatives in poor rural areas and to help integrate the second economy into the first economy.

* Local Competitiveness Fund (LCF) to support a range of competitiveness activities linked to SMME and cluster development. Type of actions which this fund might support are business plans, feasibility studies, improving design, quality, products and services; outsourcing; business development services and access to finance.

* Local Government Support Fund (LGSF) to support local government and governmental bodies in two key areas: improving the business environment; and developing LED capacities. Examples of actions covered by this fund are the drafting of LED strategies, creating LED forums, providing business support services, training and organisational strengthening.

How LED In Limpopo Can Assist The Poor To Enter The Mainstream Economy

by Tim Wilkinson
Team Leader Limpopo Local Economic Development (LED) Programme.

The objective of the Limpopo LED Programme is to "reduce poverty through pro-poor economic growth". Limpopo has the highest percentage of people in poverty of all the provinces in South Africa and therefore the objective seems desirable.However there is little debate about what pro-poor growth is; how to achieve it locally; and the extent to which specifically LED initiatives and strategies in Limpopo explicitly address pro-poor growth.

Essentially pro-poor growth occurs when growth in the economy achieves an increase in the incomes of the poor and lifts people out of poverty: in other words, when an economy creates opportunities for people to participate and benefit from growth.A key aspect of this is securing access to opportunities for people in Limpopo. Normally the market would do this, and where the market is not working well, government can assist. It raises questions as to whether markets are working well locally to promote growth and participation, and what the role of government is in alleviating blockages to growth.

This is particularly important for Limpopo as there are indications that while growing, Limpopo's share of the South African economy is declining, and that poverty in the province is not reducing. Additionally there is evidence that the economy is not creating jobs as fast as it is growing.What is the focus of LED if we want to reduce poverty and create a prosperous future? Luckily there is considerable evidence from Africa and Asia to indicate what works to create pro-poor growth and impact on poverty. So what do we know? Firstly economic growth locally is a pre-requisite for poverty reduction. Growth results from being competitive, which in turn comes from improving productivity. A productive local economy is one which has an excellent infrastructure, educated, skilled and flexible people, competitive local markets, and good governance.

This holds true of both rural and urban economies. So we know where to begin, but will this alone secure access to opportunities and reduce poverty?
To some extent the answer is yes. An environment conducive to improved competitiveness creates the conditions for people to access opportunities and reduce poverty. Jobs are created and people can get work.

For instance: we know that literacy and numeracy improve the pro-poor benefits of growth by allowing people to access jobs. This emphasises the importance of education and skills in reducing poverty locally. Infrastructure is critical to both growth and poverty reduction to the extent that some people consider infrastructure to be top of the poverty reduction agenda. In simple terms, better access to electricity allows more time for study; better transport increases school attendance.

We also know that when the business environment is good and government institutions are efficient, poverty reduces faster. Government spends wisely on things which matter, such as education and skills. Investment increases locally and talent is attracted, thus supporting growth. Surely this is what we want from LED in Limpopo?

Land reform is another important component in the development of local economies in Limpopo. Successful land reform will secure quality marketable produce for the new owners, which in turn creates incomes. However evidence indicates that land reform only works where there is effective support for the new owners combined with development of markets and access to finance.

Overall this suggests that if we want to reduce poverty in Limpopo, LED cannot be considered an optional "add on" to government functions. LED is not just about a project here and a project there. It is a core function encompassing the delivery of services which will alter the fundamentals determining the competitiveness of the local economy. This includes education, infrastructure,health and skills. These are the key things whichunderpin growth and promote access to jobs.

Join our mailing list and receive the latest news on the Limpopo LED Programme.

more info...