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.

Members of the Limpopo LED Programme team
(from left) Andrea Baldan, Head of Procurement in the Programme
Management Unit (PMU); Maria Mampane, PMU Finance and Administration;
Tim Wilkinson, PMU Team Leader; Alfred Netshifhefhe, Senior
Manager LED at the Limpopo Department of Local Government
& Housing; Andre Bakker, PMU Leader of the Local Competitiveness
Fund; Francis Dube, PMU Monitoring and Evaluation expert;
Mark Priestley, PMU Head of Stimulation & Awareness;
Katie Pierce, PMU PA to the Team Leader; and Phillip Ratlhagane,
PMU Leader of Local Government Support Fund and Capacity
Building Programme.
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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.
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