Municipal Development Partnership www.mdpesa.org
The World Bank Institute WWW.worldbank.org/wbi
6th URBAN & CITY MANAGEMENT COURSE FOR AFRICA FACE TO FACE AND DISTANCE LEARNING VERSION
11 - 15 APRIL 2005
Ethiopia, Ghana, Kenya, Tanzania, Uganda
KEY STRATEGIES OF PROMOTING PRO POOR LOCAL ECONOMIC DEVELOPMENT FOR POVERTY REDUCTION
By: John M. Lubuva firstname.lastname@example.org
In collaboration with Prof. J. M. L. Kironde and Mr. Severine S. Kahitwa
Sub-Saharan Africa has witnessed dramatic shifts in development paradigms including rural transformation strategies during the 1960s, nationalization and state control over the economies in 1970s, structural adjustments and economic liberalization from the 1980s through 1990s and the current focus on Foreign Direct Investment (FDI) in an integrated global economy.
This paper traces the evolution of the various development concepts in the light of current situations of widespread poverty and increasing polarization of income between few competitive groups within and also between nations, and proposes internally driven development strategies using Local Economic Development (LED) as a most appropriate tool not only for reducing poverty but also for reversing cumulative patterns of inequality that are emerging from globalization, particularly in the rapidly growing urban centers (Stren, 2001). The paper, however, identifies several capacity gaps likely to inhibit LED and recommends policy and strategic measures to redress the shortfalls. Best practices are identified from among current initiatives in LED.
Review of Past Strategies: From Rural Transformation to Nationalization
In the 1960s many of the countries in Sub-Saharan Africa began their long, post-independence march towards economic development from a rural transformation strategy. This approach failed to stimulate economic growth due to a myriad of internal and external problems including low growth in rural productivity, low literacy levels, inappropriate agricultural technology, poor farming methods, poor savings and the attendant lack of credit for capitalization of the agricultural sector, inappropriate communal land right systems that inhibited marketable property rights, unfavorable commodity prices and unstable conditions of weather (Collier and Gunning, 1999).
The second phase of Africa’s development effort was characterized by state control over the so called commanding heights of the economy that became fashionable in the 1970s. Many state enterprises were formed in the process and Tanzania had more than 400 of them, which turned into inefficient and corrupt institutions that survived only because of regular, massive injections of public funds as well as protections against competition through import restrictions, foreign exchange controls and overvalued exchange rates. These enterprises ultimately collapsed in the face of increased competition following trade liberalization, structural adjustments and globalisation pulling down the national economies and causing loss of millions of jobs in the region.
Globalization Leaves Sub-Saharan Africa Out in the Cold
The currently phase of development is epitomised by globalization, a development process, which is defined as the integration of economies with regard to markets for goods, factors of production, technology and capital that flow freely across the globe (Bigsten and Duval, 2002). The globalization process has had the most dramatic impact on national economies in recent years and it appears to have made the world “more fragmented - between rich and poor, between the powerful and the powerless” (UNDP, 2002). This trend has caused international public concerns and demands to reform global trade institutions and policies, often expressed through high profile demonstrations in, for example, Prague, Seattle and Stockholm (Barney, 2002). The negative impact of globalization on the weaker among society and countries has made even the most ardent proponents of the free market economy to doubt the fundamental tenets of the new global economy, admitting to a need for regulatory mechanisms through “effective multilateral rules made by an institution in which developing countries are properly represented and an institution capable of enforcing them for poor countries and rich countries alike” (Clair Short, 2001). Managing the process of globalization to minimize its negative impacts and to more fairly distribute the benefits now appears to be a key challenge to governments and to global policy makers (Barney, ibid).
Globalisation in Sub-Saharan Africa is closely linked to the structural adjustment programs (Bigsten and Durevall, ibid.), but Africa, unlike most other parts of the world including developing regions, has not gained any significant economic improvement from the process. Collier and Pattillio (2000) observe for example, that private investment in Africa was on average only 10% of GDP in 1994, while it was 18% of GDP for other developing countries. According to the United Nations Conference on Trade and Development (UNCTAD, 2000) FDI inflows to Africa was a paltry US $ 10 billion or 1.2% of the world total of about US $851 billion in 1999. More significantly, Africa’s share of FDI inflow of all Trans-National Corporations Investments to the developing world dropped from more than 25% in 1970 to 5% in 2000 (UNECA, 2002; Bond 2001). While global FDI inflows grew more than 15% a year during the 1980s and 1990s, in Sub-Saharan Africa (excluding South Africa) there was a net decrease over the same period. The irony in all this is that some studies have established it as a fact that returns on investment, which is the key motive for the flow of capital across nations as determined by access to markets, natural resources and low cost labour, are estimated to be higher in Africa than in any other developing area (Collier and Pattillio, ibid).
Inadequate and declining FDI inflows to Sub-Saharan Africa is a matter for serious concern and it affects development in many other sectors of the economy, especially manufacturing and export trade because FDI is perhaps the single, most important source of external finance, skills, knowledge and technology transfer to developing countries (UNECA, 2002; UNIDO, 2002). Consequently industrial performance in Africa (excluding South Africa) fell from about 3% in 1985 to only 1% of the developing world’s Manufacture Value Added in 1998 (UNIDO, ibid) and its share exports also fell from 3.5% of the world total in 1970 to 1.5% in 1997 (Bigsten and Durevall, ibid).
Foreign Assistance to Sub-Saharan Africa: A Dismal Performance
Foreign aid features prominently in the development process in Sub-Saharan Africa yet many studies cast doubt on its impact due, among other factors, to the project approach of aid funding and the manner of its disbursement that excludes recipient communities from effectively participating in decision-making, implementation or evaluation of the donor funded projects. Human resource constraints and the pressure on the part of the donors to disburse funds without sufficient personnel and time for consultation, inadequate and poor quality of the information that is made available to recipients and the use of inappropriate language result in most decisions on aid being incompatible with local priorities while lack of in-built operations and maintenance programs, use technology that is not available locally and heavy reliance on the relatively expensive European consultants not only reduce the scope and impact of the projects but also inhibit local capacity building, thereby undermining the capacity of recipient governments “to set priorities and to manage their own, coherent development programmes” (van Diesen, 2000). Poor co-ordination of aid also reduces its effectiveness while discrepancies have been observed between the stated poverty reduction objectives of the donors and the practice of aid allocation and its distribution - globally to countries in different income groups; and geographically as well as across sectors within countries (See Christian Aid, 2000).
Trends indicate that foreign aid is a very volatile source of development funding. Worldwide, Official development assistance (ODA) peaked in the early 1990s but subsequently declined in the later part of the decade as all major donors reduced ODA relative to gross national income (GNI). By 2000 for example the DAC states were providing a smaller share (0.22 per cent) than at any time since the late 1940s (Burnell, Peter 2004). Over the decade, annual ODA flows in real terms declined by around 10 per cent globally, and by 40 per cent to Sub-Saharan Africa. In absolute terms, aid to Africa declined from $32 billion in 1991 to almost half that level by the end of the 1990s (UNECA, 2002) as the attention of major donors shifted to the Mediterranean, Central and Eastern European countries and to the newly independent states (van Diesen, ibid). Recent developments suggest that the climate for aid has improved after 2000 with the combined US and EU pledges likely to raise the DAC ODA/GNI ratio from 0.22 per cent to 0.24 per cent by 2006. This, however, is still a long way from the 0.33 per cent of 1990-92 and falls far shot of the UN’s Millennium Development Goal of halving the proportion of people living in extreme poverty by 2015, which is reckoned to require at minimum a doubling of world aid. Meanwhile Japan, hitherto top donor, is set to make further reductions in its ODA (Burnell, Peter ibid).
Managing Poverty Alleviation through LED
The dismal performance of past economic development policies in Sub-Saharan Africa and the bleak prospects for the region that is depicted in the declining inflows of all major sources of external development finance call for a radical departure in favour of internally driven development strategies to revive the region’s economic growth through sustainable poverty reduction based on LED concepts. ILO defines LED as: “A participatory development process to create decent jobs and stimulate economic activity, LED encourages partnership arrangements between the main private and public Stakeholders. LED enables the joint design and implementation of a common development strategy, by making use of the local resources and competitive advantage.” The LED process, which establishes partnerships between local governments, community organizations and the private sector to exploit and manage locally available resources to create jobs and stimulate the economy of a well-defined territory (RLDS, 2002) presents itself as a viable tool for sustainable poverty alleviation, which creates opportunities to offset the negative incidence of globalisation upon the poor.
The Urban Context of LED
LED is particularly relevant to the cities of Africa because of rapid urbanization and the importance that cities play in national economic development, as well as due to the unique features of urban poverty and widespread unemployment in Sub-Saharan African cities. Though currently Africa is least urbanized continent with only 37.9% of the population of 784,445,000 living in urban areas in 2000 compared to the developed world where 76.0% of the population of 1,187,980 lived in cities (UN, 2000), estimates indicate that by 2006 half the world population of 3.2 billion is expected to live in urban areas with the most explosive growth, taking place in Africa and Asia (O’Meara, 2001). In Sub-Saharan Africa, the urban population is expected to double, approaching 440 million or 46% of the region’s projected total of 952 million by 2020” (UN, 1999).
Cities are powerful engines of economic growth (Cohen, 2001), and as countries develop, more of the national income is produced in urban areas, accounting for 55% of gross national product (GNP) in low-income countries, 73% in the middle-income countries and 85% in the high-income countries (World Bank, 1999). In Sub-Saharan Africa also, the urban areas, though accounting for 34% of the total population, are already credited with 60% of the region’s GNP (UN, 1999). Nevertheless, Africa’s urbanisation is taking place in the context of stagnated or shrinking economies, widespread unemployment and poverty and acutely scarce resources in the urban LGAs. Consequently investment in infrastructure including housing has failed to keep pace with the growth in population in most cities, which affects living conditions. Urban poverty represents a potentially serious political problem not only because monetary income is crucial for urban survival, in the absence of opportunities in the rural areas for subsistence and assistance by community and family members (Kironde, 2001) but also because it limits the scope for mobilizing revenues of urban LGAs (Sethuraman, 1997). Moreover income disparities are more acute and obvious in the urban than in the rural areas.
While employment is the most effective instrument to attain sustainable poverty reduction, lack of formal employment drives the majority of the urban dwellers in Sub-Saharan Africa very small-scale informal activities where both productivity and incomes are low, even though worldwide, the informal sector plays a crucial economic role, providing “the goods and services that are consumed by about one third of the world’s population and adding billions in value to the mainstream economies” (Wickware, 1998) and even though its share in the non-agricultural workforce ranges from 55% in Latin America to 45 - 85% in Asia and Africa (Carr, M. et al, 2002). On average, 30% of workers in developing-countries cities are informal and in the Sub-Saharan African cities, the informal sector accounts for as much as 80% of employment (See Table 1).
Table 1: City Informal Employment
Addis Ababa 61.0%
Dar es Salaam 56.0%
Source: The Global Urban Observatory. Urban Indicators Programme, Phase One 1994-1996, UNCHS.
Trends indicate that informal activities will continue to expand (Carr et al, ibid). Therefore, strategies to reduce urban poverty in Sub-Saharan African countries should pay due attention to this sector (Sethuraman, ibid), which is at present “unseen, uncounted and unrecognized” (Wickware, ibid) with traditional methods of information collection also failing to count the informal economy and thus they are frequently overlooked in a stakeholder consultation process (World Bank, 2001). The informal sector operators and the other lower income and the poverty-stricken rural and urban groups hold a sizeable stock of assets that cannot be capitalized. The fact that such assets cannot be used to access to capital, amounts to saying that the value of assets in question is limited to only its use value, thus restricting the ability to maximize the potential economic rent. The intervention is to create that access to capital through formalizing lesser forms of property rights used by the marginalized economic group in the rural sector as well as their urban poor counterparts in the so-called informal sector economy. A precondition for bridging these small and informal economies to the capital markets will be the registration of those assets as a step towards creating values from them (ACB 2003).
Studies of the assets formalization process in Egypt indicate, however, that it is necessary to reform the current regulatory framework in order to realize the potential net benefits of formalization that “are positive and substantial, with gains accruing to entrepreneurs, workers, consumers, and the government. At the level of the economy, formalization would also lead to higher economic growth, poverty alleviation, and an improved business environment” (Galal, A. 2004). Tanzania has initiated two projects to formalize informal business and to register informal houses and other physical assets and has engaged The Institute for Liberty and Democracy (ILD), based in Lima, Peru, that is accredited with creating a key in through formalization to open the system to everyone under the leadership of Professor Hermando de Soto.
The Role of LGAs in Managing LED
LGAs are indispensable for implementing nation-wide policies (Wohlmuth, 1999) and according to J. H. Hofmeyer (1926); efficient systems of local government are crucial for the prosperity of nations. LGAs provide essential public services, ensure safety and security and promote local economic development. In respect of managing LED, which focuses on local control and use of resources and on exploiting local institutional capabilities to create employment (Helmsing, 2001), the LGAs have a comparative advantage over central government institutions on account that they operate within communities. The mandates of LGAs for decision-making and for the control of resources is also expanding as a result of ongoing decentralization programs in most of the Sub-Saharan African countries, which strengthens their central position in managing LED. Poverty reduction requires a participatory framework for inclusion of the affected communities and other stakeholders for which the LGAs are vital.
It being a consultative process LED requires specific effort to involve all stakeholders, and especially the informal sector operators, who in the case of cities of Sub-Saharan Africa contribute significantly to the aggregate economy (World Bank, 2001). Effective participation requires good governance and capacity to effectively and efficiently manage participatory programs at the local level. These prerequisites are not always assured in the region’s LGAs due to many limitations of political, financial and technical nature. Removing all impediments to good governance is therefore an imperative for successful implementation of LED. Good local governance reform is also a noble cause since “it is the poor and vulnerable people who tend to suffer most, when institutions function badly” (UNDP, 2002).
Capacity Limitations of LGAs
LGAs in Sub-Saharan Africa are politically weak as a result of the post-independence tendency to emphasise on national public administration systems that expanded rapidly at the expense of local and regional administration systems that remained weak (Wohlmuth, ibid). This tendency was based on a fear of strong centripetal forces that threatened to break-up newly independent African nation-states, which created around artificial colonial boundaries. In Tanzania for example, local governments were abolished from 1972 to 1984, in favour of a ‘dicentralization policy’ that failed because all powers for decision-making and control over the allocation of resources was retained at the center. Abolition meant that much of the knowledge, practical experience, expertise and institutional memory on local government was lost. Elsewhere in the countries of the Great Lakes Region, the local governments suffered from protracted civil strife and intermittent conflicts have had the same effects in several other countries in the region.
LGAs in Sub-Sahara African countries do not have adequate financial resources needed at their disposal for them to be able to provide services and to improve living conditions. Specifically the urban authorities, have very little revenue of their own, ¬ far less than what they would require for providing even a minimum level of basic services and the revenues have failed to keep pace with the rate of urbanization (Sethuraman, ibid). Estimates show, for example, that local government spending per capita in the mid-1980s on services and infrastructure were $68 in Nairobi and $5.80 in Dar es Salaam; compared to $1210 for Ontario (Canada) in 1988. Urban LGAs in the region capture only a small percentage of GDP - $14 per capita in revenue compared to $248 in Asia (Pacific), $252 in Latin America and the Caribbean and $2763 in the industrialized countries.
Taxes of the LGAs are not only low yielding, unstable and inelastic; they also are cumbersome, unpopular, costly and difficult to administer. Central government often determines local tax rates and periodically imposes restrictions on the enforcement of the tax laws as during elections while changes in tax laws can be made without consulting with the LGAs. “One reason for the inelasticity of local government revenue noted above seems to be that an increasing proportion of the urban population, being poor, falls outside the taxable category” (Sethuraman, ibid). Low revenue planning and enforcement capacity, and lack of information on taxpayers make it easy to evade local taxes while poor remuneration and low morale, indiscretions and corrupt practices make revenue management inefficient in the LGAs.
Since they also lack access to commercial sources of finance (Sethuraman, ibid), the LGAs depend heavily on central government transfers, which reduces their parameters of financial autonomy. Uncertainty in the level, timing or prioritization of the transfers, affects their annual budgets, long-term development and investment plans. Prior to current reforms in Tanzania, for example, there was no clear formula on which grants from the central government were based, even though they constitute the major source of revenue for urban authorities (Kironde, 2001). The situation is worse for urban authorities because aid organizations also “tend to ignore the city as an engine of social and economic development” (UN, 1999).
LGAs in Sub-Saharan Africa lack technical capacity because they cannot compete for qualified personnel in the job market due to their weak financial positions. In some countries line ministries still allocate technical staff to the LGAs and this affects accountability of staff to the LGAs. On the other hand, few governments in Sub-Saharan Africa clearly understand the LED concept on account of its relative novelty. Few of the local authorities are, therefore, able to build an explicit anti-poverty focus into their LED strategies (Islanda Institute 1998a & 1998b). Generally there is a poor understanding of poverty-eradication frameworks and of the tools and techniques to develop and implement coherent anti-poverty strategies (Pieterse, E., Parnell, S. & Wooldridge, D. 1999). Many governments also lack experience in participatory mechanisms, while the lack of transparency and accountability breed mistrust, which affects participation on account of poor relations between the LGAs and civil society. Inability to manage and disseminate information to a diverse public and unstructured civil society compounds the problem even further. The tendency to centralize decision-making authority, archaic regulations and complex bureaucratic formalities make participation even more difficult.
Capacity Building Strategies for Good Local Governance
In the cities, the LGAs are unable to deal with emerging urban problems and this has played an important role in worsening the urban living and environmental conditions in Sub-Saharan Africa. Therefore the need to build or strengthen the financial and managerial capacity of the urban authorities to cope with massive population increases is now widely recognized (Sethuraman, ibid). Capacity building in this context should aim to enhance good governance, which requires “fostering fair, accountable institutions that protect human rights and basic freedoms” (UNDP, 2002). Unfortunately there is little evidence of concerted effort to build the institutional and human resources capacity of LGAs in Sub-Saharan Africa to enable them effectively cope with new demands on them arising from decentralization including the promotion of LED. Few countries, for example, have concrete programs for training of local government personnel. The universities and other institutions of higher learning in the region have no established departments or specific curricula for training in local government.
Local government practitioners can, however, learn from several reform models and international best practices such as the reforms undertaken in the Brazilian city of Porto Alegre, which enabled participatory budgeting, that combined representative democracy with control by society of public policy, thus empowering groups normally excluded from public influence (Conger, 1999 & Abers 2001). Many countries in sub-Saharan Africa are also implementing good governance reforms. The experience of Tanzania is presented in the case study to demonstrate how capacity building can be achieved through such reforms.
Capacity Building Strategies for Community Participation in LED
LED empowers communities to take control of their own destiny by fostering local ownership of the development activities through a process of participation, exchange of ideas and coordination of initiatives by the local actors” (ILO). The process to effectively reduce poverty through LED must therefore be complemented by a parallel process to enhance management skills that strengthen the capacity of people to participate in organized action and to harness their productive potential. Such popular initiatives are incomplete and less sustainable without the support of government (UN, 2002), which must work with communities in more effective ways by creating channels of access for civil society to influence policy agendas (WDM, 2001). In Tanzania the government has made it mandatory for LGAs to implement participatory budgeting and national guidelines have been issued based on the Obstacles and Opportunities to Development (O&OD) planning tool, which is a simplified model for making a Strength, Weakness, Opportunities and Threats (SWOT) analysis, that focuses on identifying and exploiting existing opportunities that are available to the community, to overcome major constraints to local development in service delivery, infrastructure or economic development deficiencies. Communities prioritize their problems for budget allocation by the LGAs and identify resources they can contribute to the solutions (URT 2004).
Effective civic engagement in the life of the community and society does strengthen the responsibility of citizens to manage their communities and to shape a political and economic agenda conducive to social progress and development but it requires access to appropriate, adequate, properly structured and easily discernible information on all issues that concern them. Ordinary citizens in Sub-Saharan Africa need to be trained in government operational procedures and formalities, policy, legislation, rules and regulations. Training is also necessary to enable them interpret and make constructive use government financial and budgetary information, in participatory local government, in partnering with government and other agencies in co-management of projects.
Training of communities is more effective when they are organized into civil units including neighborhood associations; business, professional, trade, sports or cultural associations; NGO’s and CBOs. Strong civil society organizations facilitate dialogue with government; provide the requisite structure for efficient and effective dissemination of public information and enable communities have a collective impact on government and on the LED process. Communities in Sub-Saharan Africa are not organized into structured civil units and the LGAs do not have a focal point in their organizational structure to facilitate effective interface with civil society. Enhancing civil society institutions remains one of the major challenges in the post-centrally-planned societies of the region. LGAs therefore, have a responsibility to undertake capacity building for communities to facilitate the formation of strong civil society organizations with adequate capacity to influence local policies and operational decisions, in a structured and constructive engagement with government. It is important that the capacity building ensures transparency, accountability and adequate representation of community members in the civil society organizations.
Paternalism, which destroys civil society organizations and corrupts local authorities, bureaucracy and divisive factors such as political party interests, racial, tribal or religious influences, must be avoided. Autonomy of the organizations must be developed and retained, lest they become appendages of the government. Emphasis must be laid on fairness, democracy and the spirit of cooperation. Social programs for sustained capacity building assistance to civil society ought to be designed in a participatory manner, by promoting strategic alliances with NGOs, CBOs, universities and other public and private agencies.
Role of Universities, Research and Training Institutions in LED
Universities, training and research institutions have an important role in capacity building for community participation in LED programs. Economic and political changes that are taking place in Sub-Saharan Africa including decentralization, good governance reforms and poverty reduction programs call for universities and other training institutions to review their role and to reposition themselves in a manner that enables them to contribute towards capacity building for LED. A study of three major training institutions out of Tanzania’s 13 universities and colleges and 12 training institutions shows, for example, that the reforms they have implemented has focused on curriculum review to address local institutional and market needs; including establishing entrepreneurship centers; providing continuing education, research and consultancy services on LED; developing local technology and promoting the use of locally available resources to support civil society on poverty related issues.
The University of Dar es Salaam
Established in 1961, the University of Dar es Salaam (UDSM) has, for example, implemented many changes following the 1985 political and economic transition towards multi-party democracy and economic liberalization, which redefined its mission, objectives, functions, curricula and training programs to suit new market needs, to adapt to new technologies (UDSM, 2001), contribute to economic development and poverty reduction through research, consultancy and policy advocacy in enterprise development and to provide demand driven quality training in order to develop the capacity of Tanzanian citizens and enterprises to create jobs (UDEC, 2002). Several small business operators have benefited from skills development training on basic bookkeeping and business management through its outreach services in training, consultancy and contract research on enterprise development. A program for capacity building in enterprise support targets managers of institutions that support small and medium enterprises, exposing participants to methods of strategic business planning, negotiation and leadership skills. Several research studies that are relevant to LED have been conducted into the influence of policies, laws and regulations on employment in small and medium scale enterprises in Tanzania; base-line surveys on small business sector activities and studies on the barriers to entry, performance and upward mobility of female entrepreneurs in Tanzania.
The Centre for Continuing Education provides many tailored courses for professionals and non-professionals including skills development to effectively impart knowledge in LED technologies. Local community organizations and government officials are given short courses that enable them cope with the requirements of LED. Besides training, the university creates innovative consumer products using raw materials that are found locally including locally engineered solar appliances; health care and food products developed from local plants, trees and fruits (UDSM, ibid). New technologies for recycling agricultural waste and by-products, treatment and refining wastewater to make it wholesome have also been introduced. The University enters into contracts with local firms for production on a large scale, which creates capacity within local enterprises.
The University College of Lands and Architectural Studies (UCLAS)
UCLAS, which specializes in providing the labour market with competent professionals in land, environmental and human settlements development and management disciplines (UCLAS, 2001) has remodeled its traditional programs towards project-oriented training that combines theory with practical application within local communities, enabling students to work with communities to find solutions to specific problems and provide feedback to the community, which contributes significantly to capacity building of the communities for LED. UCLAS has created three units for building capacity of communities through short courses through the Center for Continuing Education, the Institute for Human Settlement Studies that undertakes community based research and consultancy and the Geo-Information Center (GIC) that promotes computer and information technological development among central and local government employees as well as the general public (GIC, 1998). UCLAS undertakes community-based research and consultancy, which strengthens capacity of local communities to solve their own problems and improve their living conditions. Two urban based community projects in the ‘Tujenge Pamoja’ (Meshack, M.V. & Sheuya, S.A. 2001) and the Hanna Nassif Community-based Settlement Upgrading (UCLAS &. NIGP, 2000) projects demonstrate how such interventions can significantly improve living conditions as shown in Case Studies 2A and 2B.
Technical Training as a Strategy for Promoting LED
Technical training is a very important strategy for capacity building of the individuals and communities to enhance LED. In Tanzania, technical training is mainly provided by the Dar es Salaam Institute of Technology (DIT) and the Vocational Education and Training Authority (VETA). DIT provides training in a wide range of engineering services, conducts research and advisory consultancy services to the public and promotes local manufacture of machinery and equipment. In order to contribute more effectively towards poverty reduction and sustainable industrial and economic development, the institute has reviewed its curriculum, introducing new entrepreneurship courses that turn out job creators rather than job seekers. Its department for continuing education has introduced new programs to train electronics technicians specializing in cellular phone and computer aided machining that directly benefits informal and formal small business operators and to train small business entrepreneurs in basic management skills. DIT’s innovative engineering products and services have introduced new affordable consumer products such as solar incubators, sun tracking solar panels, satellite dishes, hearing aid units, electrical mosquito repellents, soil testing equipment, maize miller and maize lancer machines (DIT, 2001).
Vocational education and training is among the most effective means for building technical capacity in LED, but according to Haan (2002) traditional vocational training and education systems in most countries have many deficiencies including inability to respond to the changing labor market needs, severe capacity limitations that can serve only a small section of the total population, post-training failure by many of its graduates to find employment, small range of training options offered mainly in conventional trades, with little or no attention to business skills, focus on pre-employment training for young school leavers at the expense of those already working in the informal sector, inflexible and inadequate training curricula, sub-standard infrastructure and lack of qualified and motivated training staff, placing a high value on examination grades over employment results, inadequate links with the local business community, leading to a lack of opportunities for practical training and post-training employment and declining budgets in the wake of structural adjustments, which makes it difficult to change and upgrade the training programs.
Tanzania, Kenya and Uganda initiated a “process of restructuring their training institutions and reformulating training policies with a view to addressing some of these shortfalls and Tanzania set up a new Vocational Education and Training Authority (VETA) to coordinate and support public and private sector training providers with programs geared towards informal sector development (Haan, ibid). The main objectives of VETA which are to provide basic and specialized training to meet the needs of the formal and informal sectors and to enhance access to technical education and training for disadvantaged groups are consistent with those of the LED process. As a result of the need to impart new skills to retrenched employees and the un-employed, for example, the Authority has reviewed its curriculum, to create a new focus on promoting entrepreneurship in the informal sector. VETA addresses community needs through a wide range of short, tailor-made entrepreneurship skills training, which enhance employment opportunities for job seekers and develop capacity for self employment. VETA has enacted a training levy that caters for both government and private institutions. These training centers have become instrumental in the manufacturing of machinery and spare parts and the majority of operators in the building and furniture making services, which are largely informal in all urban centers, are VETA graduates (VETA, 2002).
Policy reforms as a Strategy for Promoting LED:
Ongoing decentralization and reforms have redefined the primary role of central government towards policy formulation and creation of legislation that facilitate effective and efficient delivery of public services and encourage participation of civil society development programs. New relations are emerging between the government and civil society that create opportunities for government to formulate policies and other regulatory instruments that devolve authority over management of resources directly to local communities. This relationship has many benefits including skills for integrated planning, managing and use of natural resources, income generation for local communities who are also empowered by developing community institutions with a common purpose, accountable leadership, participatory decision-making and inclusion of women, greater local autonomy and freedom to decide on the use of resources and income, community gains in recognition, experience and confidence in dealing with outsiders, partnership between various agencies has contributed towards good governance principles of equity, poverty reduction, decentralization, democracy and community involvement (Jones, B. T.’ B. 1998). The Namibia's Community-based Natural Resource Management program (CBNRM) is described in Case Study 3A.
Bridging the Gap between LED Policy and Operational Realisation
Experience shows that even with a good LED policy deliberate effort must be made to link it to its aims and operational realization. Gaps often exist between policy and practice due to many implementation constraints, including policy and planning constraints such as resource constraints, bureaucratic tendencies and poor coordination among various actors; skills constraints such as lack of entrepreneurial and technical skills for developing competitive businesses and services constraints such as fragmentation and weakness of service providers and lack of access to credit for business development or start-up capital (UNOPS 1999). Case study 3B demonstrates an attempt to bridge the gap between policy and practice by contributing to remove implementation constraints in the South African Small Enterprise and Human Development (SEHD) program.
Private Sector Strategic Interventions to Promote LED
Privatization continues to concentrate more resources in the hands of the private sector. Although poverty alleviation is not the prime objective of most businesses, the role of the private sector businesses in respect of people’s livelihoods is emerging as an important area of international development thinking. The interface between responsible business and sustainable livelihoods is becoming increasingly important due to the sheer scale of foreign direct investment (FDI) in development and the power of private sector activities to affect people’s lives (Barney, 2002). The traditionally passive attitude of private business to conform only to legal requirements and avoid obviously adverse affects on communities is changing to a more active engagement in society” (Warhurst, 1998) through, for example the Sustainable Livelihood Approaches (SLA). Private business can play an important role in promoting LED through provision of capital, markets and technology to SMEs as shown in the following example from Tanzania (See Box 1):
The Methodological Approach to Building Sustainable LED Partnerships
LED is a methodological process that involves many and varied actors from the public, private and civil sectors including local and central government institutions, business organizations, professional associations, trade unions, producers associations and cooperatives, civil society organizations, research and training institutions, and donors (Fig. 1). That partnering has the benefits of making it possible for public resources to go further and that local development is important and achievable have been demonstrated in many LED initiatives. In Bolivia, for example, a partnership program was established, that aims at mainstreaming gender issues into urban development and poverty-reduction by building a mutual relationship between civil society and governments to address critical problems of access to urban services by the poor (O’Manique, 2001). The program initiated training of local government functionaries to develop their capacity for participatory planning and the beneficiaries were also provided with training in productive enterprises.
Fig. 1 Methodological Steps of the LED Process
Territorial diagnosis, Sensitizing, Promoting a Forum, Designing LED Strategy, Creating Implementation Structure ,Coordinating Activities
Source: ILO: http://oracle02.ilo.org/dyn/empent/empent.Portal?p_prog=L&p_subprog=LE&p_lang=EN
Sustainability of LED initiatives, however, depend on the ability to maintain stable partnership among all stakeholders, which along with coordinating their activities, is the primary function of LGAs. The methodological steps for creating sustainable partnerships between the various actors in the LED process, which involves sensitisation and promotion, design, establishment and consolidation, are demonstrated in the Local Economic Development Agencies (LEDA) model.
The main objectives of LEDA are to promote economic growth and diversification; disseminate information on economic potential and opportunities; provide technical and financial assistance for the creation and reinforcement of micro and small enterprises; promote cooperatives and associations, which contribute to the economic development of the community; manage, mobilize and canalize financial and technical resources; and to promote a network of technical, financial, commercial and administrative cooperation in support of the enterprises promoted by LEDA. (See EURADA-ACP, 2000. http;//www.ilo.org/public/English/index.htm)
The prevailing poverty in Sub-Saharan Africa is a sum of the legacy to cumulative effects of successive failures in development strategies pursued since independence of many of the countries in the 1960s and of recent developments including globalisation that have marginalized the poor countries’ economies and accentuated income disparities, particularly in the rapidly growing cities.
The decline in nearly all major sources of external development funds, be it from donors, FDI and export earnings, makes it imperative for these countries to adopt internally driven development processes. LED, which places emphasis on exploiting local resources and building local capacity to stimulate economic development and poverty reduction, presents itself as a viable alternative. Foreign sources of development funding will continue to play an important role in the region. Strategies need to be designed to integrate aid into the poverty reduction objectives of LED, to to attract more FDI inflows and to ensure that benefits of globalization are more fairly distributed, at least internally.
Being an inclusive process, LED requires continuous sensitization, awareness creation, information-sharing and training for communities and other stakeholder to facilitate effective participation in sustainable partnerships that must be built by the LGAs. Central governments have an important role, to create an enabling regulatory environment that supports LED, while private sector institutions should contribute financial resource, technology, marketing and supply linkages to support LED. Ordinary citizens have to take on new responsibilities to participate in decision-making, in executing of partnership programs and to exercise oversight to government. Training institutions are indispensable for capacity building for all stakeholders in the LED process. In view of the ongoing decentralization and reforms, it is imperative to develop adequate capacity for specialized training of local government personnel in the region. The LGAs, which occupy a pivotal position in the LED process, need to overcome their lack political power, authority, financial resources and technical capacity through good governance reforms. Indeed the realization of the objectives of LED will depend on sustained commitment to good governance at all levels of government.
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