ImplementatIon of the amathole RegIonal economIc Development StRategy (aReDS)

from strategy to action

Results case study

Marianne Sulzer, Swisscontact on behalf of the LED component of GTZ’s

Strengthening Local Governance Programme

november 2008

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Table of Contents

1 Executive Summary.............................................................................................................................................3

2 Introduction..........................................................................................................................................................3

2.1 Context...........................................................................................................................................................3

2.2 Objectives and methodology of the case study.............................................................................................3

2.3 Amathole’s Local Economic Development Agency .......................................................................................4

3 Amathole Regional Economic Development Strategy (AREDS) ....................................................................5

3.1 Background....................................................................................................................................................5

3.2 The Genesis methodology.............................................................................................................................6

3.2.1 What is Genesis?.......................................................................................................................................6

3.2.2 Genesis in the case of AREDS..................................................................................................................7

3.3 Results of the strategy formulation process ................................................................................................11

3.3.1 AREDS Strategy ......................................................................................................................................11

3.3.2 Roles and responsibilities of stakeholders in AREDS .............................................................................16

3.3.3 Resource mobilization .............................................................................................................................20

3.3.4 Catalytic projects .....................................................................................................................................21

3.3.5 Overview of catalytic projects ..................................................................................................................23

4 Interpretation of findings from interviews ......................................................................................................28

4.1 AREDS concept of LED...............................................................................................................................28

4.2 Increased collaboration................................................................................................................................28

4.3 Alignment of local strategies........................................................................................................................28

4.4 Identification of catalytic projects.................................................................................................................29

4.5 Monitoring and impact assessment .............................................................................................................29

4.6 Role and performance of Aspire ..................................................................................................................30

4.6.1 Establishment of Aspire ...........................................................................................................................30

4.6.2 Communication........................................................................................................................................30

4.6.3 Mobilization..............................................................................................................................................31

4.6.4 Expertise..................................................................................................................................................31

4.6.5 HR issues.................................................................................................................................................31

4.6.6 Institutional arrangements and the legislative environment ....................................................................32

4.6.7 Sustainability............................................................................................................................................32

4.6.8 Regional versus local municipalities........................................................................................................33

5 Conclusions .......................................................................................................................................................34

5.1 Areas for improvement ................................................................................................................................34

5.2 Outlook.........................................................................................................................................................34

5.2.1 Performance of Aspire up to date ............................................................................................................34

5.2.2 Future role of Aspire ................................................................................................................................35

5.2.3 Outlook for the Amathole district .............................................................................................................35

Annex..........................................................................................................................................................................36

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List of Acronyms/Abbreviations

ADM Amathole District Municipality

AEDA Amathole Economic Development Agency

ASGISA Accelerated and Shared Growth Initiative of South Africa

BDS Business Development Services

BKCOB Border Kei Chamber of Business

CEO Chief Executive Officer

CMC Community Management Committee

DBSA Development Bank of Southern Africa

DEAT Department of Environmental Affairs and Tourism

DED Deutscher Entwicklungsdienst

DEDEA Department of Economic Development andEnvironmental Affairs

DLPW Department of Labour and Public Works

DPLG Department of Provincial and Local Government

DTI Department of Trade and Industry

DoA Department of Agriculture

DORT Department of Roads and Transportation

ECDC Eastern Cape Development Corporation

ECPB Eastern Cape Park Board

EDA Economic Development Agency

EIA Environmental Impact Analysis

EU European Union

GTZ German Technical Cooperation

IDC Industrial Development Corporation

IDP Integrated Development Plan

IGR Inter Governmental Relations

LED Local Economic Development

LEDA Local Economic Development Agency

MFMA Municipal Finance and Management Act

MLL Minimum living level

NDPG Neighbourhood Development Partnership Grant

PGDP Provincial Growth and Development Plan

PSC Project Steering Committee

RIDS Regional Industrial Development Strategy

Ruliv Promotion of Rural Livelihoods Program

SME Small and Medium Enterprise

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1 Executive Summary

Local Economic Development (LED) has become a critical issue in South Africa in the effort to fight poverty andunemployment. Many institutions, both public and private, at national, provincial, district and local level, are involvedin different aspects of LED. Over the last years, Economic Development Agencies (EDAs) have emerged as newplayers in LED that aim at driving economic growth initiatives in a locality.

In the Amathole district, a multistakeholder process led to the formulation of the Amathole Regional EconomicDevelopment Strategy (AREDS) that is now being implemented. The different role players at local, district andprovincial level contribute to the implementation of the strategy by committing to specific projects. The coordinatingrole is performed by Aspire, the Amathole Economic Development Agency.

One year into implementation of the strategy, this case study looks at the ongoing activities that contribute tostrategy implementation. The findings allow for insights of alignment processes, coordination in projectimplementation and the roles of stakeholders in the district. Special emphasis is given to the role of Aspire as aregional economic development agency.

2 Introduction

2.1 Context

In South Africa, the Constitution gives local and district municipalities the mandate to act as a catalyst forsustainable development. The fundamental objective of local government is to promote localities by facilitating andsupporting Local Economic Development (LED) while ensuring the equitable distribution of benefits. The local levelof government is crucial as this is where interventions take place and impact can be demonstrated most profoundly.

However, local government’s mandate is not only LED as the Integrated Development Plan (IDP) of everymunicipality demonstrates, but also the provision of basic infrastructure and social development. In the view ofcapacity constraints local government is confronted with in South Africa, it tends in many places to focus on thedelivery of basic services only. This results in LED being the worst performing indicator of development at municipallevel.

One response to the need to enhance the development of local and regional economies is to establish a focusseddelivery mechanism that bridges the gap between the private and public sector. Economic Development Agencies(EDAs) are such a mechanism. These are established to drive economic growth initiatives in defined geographicalspaces such as provinces, districts and local municipalities.

The Industrial Development Corporation (IDC), a development finance institution ofthe Department of Trade andIndustry (the dti), has a dedicated unit that supports municipalities with financial resources and technical expertiseto establish and run EDAs. IDC has established 8 EDAs in the Eastern Cape of which Aspire is the only agency.

2.2 Objectives and methodology of the case study

In May 2007, the Amathole District Municipality (ADM) adopted a long term economic strategy for the Amatholedistrict. The strategy formulation process was managed by Aspire and supported by GTZ.

One year into implementation, this case study aims at highlighting the results of the process as well as the activitiesthat came out of the process. Special emphasis is thereby given to the roles that ADM, Aspire, the localmunicipalities and the private sector have in the implementation of the strategy. The time period under review isJuly 2007 to July 2008.

This case study is directed to the broader LED community consisting of practitioners in government as well as in theprivate sector. It looks at the experience made in the implementation of a regional economic development strategyand the role an EDA can play in it. It is a contribution to the broader discussion on EDAs. It is not an evaluation ofAspire or any other role players and their performance.

The information for the case study was collected from:

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AnnexList of References

• Amathole District Municipality – Regional Economic Development Strategy Formulation Process, by ColinMitchell, November 2006

• Amathole Growth and Development Summit process report, ADM, March 2007(http://www.amathole.gov.za/departments/led/grow th__development_summit/gds_report/gds_report)

• Amathole Regional Economic Development Strategy, ADM, March 2007

• Amathole Economic Development Agency – Strategy 2007 – 2014, AEDA, June 2007

• Amathole Economic Development Agency (AEDA, Annual Report 2006/2007(http://www.aspire.org.za/reports/AEDA%20AR%20final%202006_7.pdf)

• Aspire project activities (www.aspire.org.za)

• draft Guidelines on Local Economic Development Agencies as Municipal Entities that were developed by DPLGand IDC, July 2008

• GTZ, Compass of Local Competitiveness, Manual Version 0.2, October 2006

• GTZ, mesopartner, Genesis, Manual Version 0.9, April 2008

• IDC Agency Development and Support (ADS)(http://www.idc.co.za/Agency%20Development%20and%20Support.asp)

• Information on LED in South Africa: see http://www.led.co.za

• International Labour Organization (ILO), Innovations for Development and South- South Cooperation: The LocalEconomic Development Agency, September 2003

• LED Network Case Study Amathole District Municipality – Genesis Process, by Colin Mitchell, March 2007

• Municipal Finance Management Act (http://www.treasury.gov.za/le gislation/mfma/default.aspx)

• National Framework for Local Economic Development, The DPLG, 2006(http://www.dplg.gov.za/subwebsites/led/docs/National%20LED%20Framework%20Jan%2007.pdf)

• National Treasury, Neighbourhood Development ProgramGrant, presentation to municipalities, August 2007(http://www.treasury.gov.za/divisions/bo/ndp/presentations/2007_08_15%20NDPG%20Round%203.pdf )

• Renewal of Small Town Economies, The case of Alice, Eastern Cape Province, South Africa, Mrs. Phila Xuza,Africa Insight Vol. 35, No. 4, December 2005

• Report on Investigation into Institutional Location and Roles of Local Economic Development Agencies (LEDAs)(http://www.thinasinako.co.za/uploads/documents/060608104454.pdf)

• Thinasinako LED Support Program (http://www.thinasinako.co.za/)

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Desk research based on documents provided by Colin Mitchell, facilitator and technical adviser to the AREDSstrategy formulation process;

Interviews with Phila Xuza, CEO Aspire, and telephone interviews with the Aspire Corridor Managers (Julia DuPisani, Saskia Haardt, Nhlanhla Ndebele, Elaine Hann);

Interviews with the main stakeholders at the district level: Mr. Les Holbrook, Executive Director, Border KeiChamber of Business; Mr. Mpumi Fundam, Manager LED, ADM; Councellor Mr. Samkelo Janda, Portfolio HeadLED,ADM;

Interviews with partner local municipalities: Mr. Ondala, Strategic Manager, Amahlathi Local Municipality; Mrs.Bukeka Maliza, LED Manager, Great Kei Local Municipality, Mr. Nako, Acting Strategic Manager, Mbashe LocalMunicipality; Mr. Mxoliswe Waxa, Strategic Manager, Mnquma Local Municipality;

Interviews with implementing partners at the provincial level: Mr. Philip Howes, Amathole Berries; Mrs. NoludweNcokazi, Excutive Manager Development Services, ECDC; Mr. T. Mdunyelwa, Senior Manager, ECDC; Mr. ZongiMbekeni, Director EconomicAffairs, DEDEA.

The interviews covered aspects of LED concepts, strategy alignment processes, project management, partnershipapproach, funding sources, institutional arrangements and sustainability, the legislative environment and developmentalimpact.

Amathole – a short overview

• A region that carries the legacy of the former Transkei and Ciskei

“homeland” areas, which are largely rural with deep-rooted poverty,

as well as the former Cape Provincial Administration areas that

include the highly-urbanised centres of East London, King William's

Town and Mdantsane

The district consists of 8 local municipalities (Buffalo City: East

London, Bhisho, Dimbaza; Amahlathi: Stutterheim, Cathcart,

Keiskammahoek, Kei Road; Nxuba: Adelaide, Bedford; Ngqushwa:

Peddie, Hamburg; Great Kei: Komga, Kei Mouth, Haga Haga,

Morgans Bay, Chintsa; Mnquma: Butterworth, Nqamakwe, Centane;

Mbashe: Dutywa, Elliotdale, Willowvale; Nkonkobe: Alice,

Hogsback).

Government and community spending make up 33% of the

economy, public service sector provides around 35% of formal jobs.

•

•Figure 1: Location of Amathole District in the Eastern Cape Province

• Manufacturing, mostly centered in Buffalo City and dominated by the automotive sector, accounts for 21% of the economy;

agriculture, fishing and forestry together account for just 2,6% of the district value added, pointing to potential for huge growth in a

region with vast rural areas and a long coastline; tourism has grown, now making up an estimated 10% of the district value added.

2.3 Amathole's Local Economic DevelopmentAgency

Aspire, the Amathole Economic Development Agency, was established in September 2005 as a Proprietary Limitedcompany, wholly owned by the ADM – which implies that the agency falls under the Municipal Finance and ManagementAct (MFMA). The agency was established within the operational framework of the Agency Development and Support Unitof the IDC, with initial establishment funding coming from IDC and ADM. The Aspire board consists of six directors drawnfrom the private sector, academia and provincial government. There are two business men representing the private sectoron the board, however currently there is no formal representation of the private sector onAspire's board.

The dti and the dplg developed Guidelines on Local Economic Development Agencies as Municipal Entities whichcharacterize a LEDA. This characterisation of LEDAs provides a benchmark for the work ofAspire:

draft

See link:1

http://www.info.gov.za/acts/2003/a56-03/index.html

435

engage with engineers, architects, constructors, etc. Their language is technical and now all these technical termsfly through our offices. Let’s see what terms come up once we start implementation and construction in 2009.”

5.2.2 Future role of Aspire

Up to 2014 (time horizon of the Aspire strategy), the following main tasks will remain with Aspire:

• Communication: continuous interaction with municipalities to ensure their understanding of LED and their role inLED. Aspire has to ensure that the municipalities understand their role, what they can do and how Aspire canassist them in this.

• Mobilization, facilitation and coordination: for every project, stakeholders need to be mobilized and engaged sothat partnerships for project implementation can be built. Aspire is responsible for the facilitation of stakeholderprocesses as well as for the coordination of these processes.

• Project management: within the existing context, there will remain constraints in terms of capacity andresources for the implementation of LED. Therefore, is it most probable that Aspire will continue managingsome projects under AREDS, while in others Aspire will only support and advice the implementing municipality.

It is difficult and probably also not meaningful to think of Aspire’s role beyond 2014 – too many parameters mightchange until then. Emphasis should be on the consolidation of good practice and the establishment of a system thatallows for learning, monitoring, impact assessment and resource mobilization in coordination with ADM.

5.2.3 Outlook for the Amathole district

As stated by some interview partners, the future of the Amathole district looks bright and is exciting. Stakeholdershave a high awareness of the potential of the region, but also its challenges and the huge amount of work thatneeds to be done. Together, they have to focus on accelerating the pace to ensure the delivery of results asplanned. 2009 therefore will be a crucialyear, since it will focus on the implementation of most projects. An agencylike Aspire is there to guide and ensure this process. But it can only be successful if there is smooth collaborationbetween all partners, in delivery of tasks and results and ongoing political support.

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In South Africa, the MFMA provides for LEDAs as mechanisms preferably in the form of a municipal entity. LEDAsare delivery mechanisms for LED: In order for municipalities to plan and implement LED strategies and instruments,they may choose to establish appropriate service delivery mechanisms to perform a particular service.

There is no single approach to local economic development and it is impossible to be prescriptive about the type ofservices agencies provide. These roles could range from:

• Championing a wide range of activities which emerge as important from the LED strategy;

• Fundraising for specific projects, and potentially project managing some of these;

• Coordinating activities to ensure that an integrated service is provided across providers, eg for business advice;

• Monitoring and quality control of services available in the area;

• Directly undertaking certain functions, eg regional marketing;

• Promoting regional activities, eg collective marketing, regional food brands etc.

Agencies are considered in South Africa for the following reasons:

• Agencies provide a way of establishing a formal and legal partnership between different stakeholders tointegrate development efforts and overcome problems of duplication and lack of coordination;

• Agencies are seen as a way of strengthening the capacity of current LED systems and resources in place withina municipal area, using a semi-external body;

• They can be focused drivers of the economic development agenda within a local area, which can raise externalresources to support LED;

• The ability they have to support specific business sectors or specific geographical areas e.g. a developmentcorridor

• As a possible route to alleviate bureaucratic processes within a municipality, promote a more private-sector typeculture and accelerate investment and public private partnerships.

3 Amathole Regional Economic Development Strategy

(AREDS)

3.1 Background

In late 2006, the Amathole District Municipality (ADM) commissioned Aspire to manage the review process of itseconomic strategy. The overall objective of the strategy formulation process was to develop a strategy that guidesactions by economic stakeholders, especially local government, so that there is an increased number of householdsthat earn a higher income in the Amathole district.

GTZ supported Aspire to fulfill its mandate by financing the strategy formulation process and contracting LEDconsultants as process facilitators and technical support to the process. A process was designed that ensuredparticipatory input and identification of strategic action

2. The specific objectives of the process were:

• An implementable regional economic development strategy for ADM;

• Definition of role and function of Aspire within the regional economic development strategy of ADM;

• Provision of information for strategic decision taking for the ADM IDP processes;

• Identification of projects that will positively influence the competitiveness of the regional economy.

The Genesis methodology was applied to the strategy formulation process.

2The strategy formulation process as well as its outcomes and lessons are documented in more detail by Colin Mitchell.

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5 Conclusions

5.1 Areas for improvement

The AREDS catalytic projects are initiated and on their way. In a next step, it is important to reconsider the followingareas for improvement:

• Overall impact orientation and assessment: ADM is the owner of AREDS and therefore ultimately responsiblefor the results and impact achieved through the AREDS projects. Based on a thorough understanding ofAREDS, ADM has to develop ownership and provide for a system (including transparent responsibilities) thatmonitors the implementation of AREDS and allows for feedback to its stakeholders.

• There is room for improvement in terms of how Aspire communicates with its stakeholders: it has to betterdemonstrate and explain how LED contributes to overall sustainable development and needs to address theconcern of social development and redistribution of many local municipalities. With each project, Aspire canillustrate how the project interventions ultimately lead to increased employment and income opportunities. Thisallows Aspire

• To provide the political leaders with arguments for AREDS;

• To help the local municipalities in their communication to their constituency;

• To contribute to the understanding of what Aspire does and how this contributes to overall sustainabledevelopment.

5.2 Outlook

5.2.1 Performance of Aspire up to date

Some quotes from interviews partners highlight the work and performance of Aspire up to date:

“It’s a people’s business”

All interview partners confirmed that Aspire’s technical expertise as well as facilitation and networking competenceis very high. “Aspire’s CEO Phila Xuza has demonstrated a clever hand in recruiting the right people andpersonalities for this job”, says Les Holbrook of the BKCOK.

“Aspire is Amathole’s flagship”

In order to become this flagship, political support was needed and provided by the district mayor of Amathole. Thisled to the ADM being convinced and not threatened about the role and importance of Aspire. Aspire is competent inpresenting to and engaging with political leaders to get their support and approval to go ahead with projects.However, it is essential that an economic development agency does not become an independent “giant”, but theresponsible municipality has to ensure the capacity to manage in this case Aspire.

“Aspire has the potential to be a centre of excellence”

Aspire envisions for itself a long term role as an adviser and think tank for Amathole. It also has the potential toserve as a reference at national level. Aspire’s staff members have established national networks in LED duringtheir careers which are important and helpful not only to lobby for projects, but also to influence the national agendaon LED. “Other regions are observing the development in Amathole and are in touch with Aspire to learn from itsapproach.”, says Noludwe Ncokazi of ECDC.

With the integration of all role players in the district, Aspire’s role will change gradually: The emphasis of Aspire’swork currently is on demonstrating partnerships in project implementation. The objective of this demonstration effectis to hand over project implementation responsibilities to other role players in the district, especially to the districtand local municipality by providing assistance and capacity building.

As Aspire’s CEO Phila Xuza summarizes: “In 2007, we focused on the mobilization of stakeholders; our vocabularymainly consisted of soft terms like buy-in, stakeholders, facilitation, workshops, etc. It was the time of talking topeople, convincing them, raising awareness and ultimately motivating them to participate and contribute. Then, in2008 we changed our language completely: we are fully involved in the design stage of our projects where we

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3.2 The Genesis methodology

3.2.1 What is Genesis?

Genesis is an approach that addresses the challenge of strategic interventions3. It creates a strategic decision

making framework built around the competitive advantage of a region and those interventions that are likely toprovide the greatest leverage in the medium to long term. At its heart, Genesis is a strategy tool and a methodologyto identify and to prioritise catalytic projects in the context of territorial development initiatives.

It involves a variety of activities, often based on close interaction between government and the private sector, thataim at addressing market failure and build a unique competitive advantage for a given territory, which may be amunicipality, an urban agglomeration or a sub-national region. Genesis addresses a given territory as an entity, nota fragmented agglomeration of disconnected sectors and players.

Underlying Genesis is the insight that there is no point in formulating detailed masterplans and multi-year planningdocuments for the development of a local or regional economy at large in today’s highly volatile globalisedeconomic environment. And individual entrepreneurship and ad-hoc collective action is not sufficient to mobilise anddynamise territories that stagnate or grow only slowly. Strategic interventions with a high leverage potential arecrucial to unlock development potentials in such regions.

Therefore, so called catalytic projects are identified that have a strong leverage and/or multiplier effect byaddressing a critical market failure, or by creating a strong leverage factor. A catalytic project addresses the rootcause of obstacles to development, rather than symptoms. It unlocks resources and business opportunities. Itaddresses issues that will not be addressed through business entrepreneurship because the risk is too high, theamortisation period too long or the immediate profit too low. In other words, it addresses market failures that standin the way of growth.

Catalytic projects can have very different characteristics and prerequisites:

• Major financial resources needed (e.g. investment and infrastructure projects, rehabilitation of abandonedindustrial estates, creating a small business estate);

• High commitment to cooperation needed (e.g. addressing critical gaps in skills development, linking providers ofBusiness Development Services (BDS) and SMEs);

• Very specific know-how needed (e.g. certification, standards, connecting SMEs with research and developmentinstitutes).

• Serious and persistent political backing needed (e.g. land reform)

Genesis addresses the following main objectives:

• Verify the overall economic development vision and strategy of the territory’s stakeholders (or possibly themultitude of visions and strategies), stimulate reflection on it, and contribute to its further evolution (andconsolidation, if there are several competing visions and strategies).

• Create a shared understanding of expectations and aspirations among core stakeholders, and improve thedecision making framework for all decision makers.

• Create a process where local stakeholders consider alternative scenarios before they take decisions onterritorial development.

3This section has been summarized from: GTZ, mesopartner, Genesis, Manual Version 0.9, April 2008

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organisation like ECDC has own financial resources that it can allocate for investments. Thereby, it can influenceinvestment activities in the province.

Aspire, depending on funding based on projects, has no freedom to decide on such own activities. Aspire’s positionin this regard is clear and firm: Aspire’s legitimation is derived from the results in terms of impact of its projects.These results have to contribute to the impact indicators of AREDS. Aspire as an organsiation has no end in itself.In Aspire’s understanding, core funding is important to manage the growth process of the agency in order to copewith the allocated funding for project management. Core funding however is not important to ensure co-funding ofprojects.

4.6.8 Regional versus local municipalities

The experience of Aspire as a regional economic development agency might also influence the discussion of therole of regional agencies in relation to agencies at the local level. This section highlights some important aspects ofthe role of a regional agency:

• First and foremost, regional agencies are not supposed to replace local agencies since there will always betasks and responsibilities that a local agency will have in LED.

• In a globalized world, coordination and collaboration in a region are essential for effective, successful andsustainable economic growth:

• The joint provision of a good like infrastructure or the promotion of the region as a tourist destination haspositive economies of scale (i.e. the joint initiative allows for more of the public good by decreasing overallcosts).

• It allows for increased cost sharing that includes all that benefit from positive spill-overs from one to anothermunicipalitiy – and not only the municipality that originally provides for the good that creates the positiveexternality (e.g. costs for the training of labour force can be shared since they might migrate to other areaswithin the region).

• It allows for optimal allocation for resources, especially if resources like skills, expertise and finance arelimited.

• Direct political influence can be limited if, at a regional level, political agendas can be combined.

• As international experience shows, economic development and promotion of locations in many cases isdone in joint efforts

10: Municipalities establish a joint vehicle to address common issues and to promote

their localities in joint efforts. These agencies go beyond political borders, some of them even cross nationalborders. Most of them are set up voluntarily, there is not necessarily a regulatory framework provided forthis type of agency.

So, complementary to a local municipality’s efforts in LED, it can be meaningful to confederate among localmunicipalities and to establish an agency that serves a common purpose, the one of promoting economic growth ofthe region that consists of the member municipalities. Thereby, the agency maintains the role of a coordinator ofinitiatives and activities of member municipalities in LED and reports to a steering committee consisting ofrepresentatives of the member municipalities. In the case of Amathole district, AREDS is the overarching strategywhich helps municipalities to streamline their strategies and LED initiatives – and ultimately optimize resources andresults.

In recent years, South Africa has gained a number of experiences with Economic Development Agencies (EDAs) –local as well as regional ones. It would be beneficial for those localities or regions considering the establishment ofan EDA to assess the issues surrounding them as well as the impact of economic development policies on both thefunctioning of agencies as well as on regional and local economies.

10The concept of Economic Development Agency (EDA) is applied all over the world and for example Europe has made interesting experiences

with local and regional EDAs that on one side focus on the sustainable economic development of a locality like a city (see www.lda.gov.uk ) andon the other side emphasize regional economic development through national co-operation among EDAs and with different levels of government(see www.eurada.org).

Figure 1: Genesis logic

There are several critical success factors of the Genesis methodology, with the scenario writing and verificationbeing the most crucial one. Scenario writing is about identifying possible and plausible alternative futures for asector. The purpose of scenario writing is

� To help local stakeholders understand that there is more than one possible and plausible future;

� To help local stakeholders to think outside the box;

� To catalyse the process of understanding stra tegic variables and create strategic alignment;

� To create a framework that assists in the prioritisation of catalytic interventions.

In the AREDS strategy formulation process, an approach for scenario writing was used that identifies factors thatwill shape the future and picks the most influential factors. Please refer to the next chapter for illustration.

3.2.2 Genesis in the case of AREDS

This chapter looks at the outcomes of the strategy formulation process applying the logic and methodology ofGenesis; it looks at steps in each phase of the process that are specific to the Amathole district and how theyinfluenced the actual outcome, the Amathole Regional Economic Development Strategy (AREDS). Genesis was thestarting point for the process as well as the underlying logic to the process that developed its own dynamism withinthe Amathole context.

The Genesis process applied to the AREDS strategy formulation consisted of four main phases:

Phase 1: Contracting, organization, mobilisation

Special emphasis in this phase was given on understanding the current thinking and challenges of the ADM andAspire in terms of LED. Main issues which were of concern to the two were:

� There was a conflict between what government can do in terms of legislation and what they believe is theirresponsibility in terms of voter expectations.

7

Phase 1:

Contracting ,

organisation ,

mobilisation of

stakeholders

Phase 2:

Data mining

(identification of

economic potentials )

Phase 3:

Fact finding and

scenario building in

economic sectors with

potential

Phase 4:

Competitiveness and

identification of

catalytic projects

After the process:

Fesaibility studies,

elabroation of business

plans , implementaiton

of catalytic projects

Figure 2: Genesis process phases

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4.6.6 Institutional arrangements and the legislative environment

Key message: There is a need for guidance and coordination in terms of LED tasks and responsibilities and the roleof EDAs. Therefore, the dplg and IDC have jointly developed Guidelines for Local Economic Development Agenciesas Municipal Entities.

Aspire is a Proprietary Limited company, wholly owned bythe Amathole District Municipality (ADM) which impliesthat the agency falls under the Municipal Finance and Management Act (MFMA). Based on the Act, Aspire reportsto the ADM and needs a mandate from the ADM for any work it undertakes. Direct agreements with other partnersare not possible.

• This hampers the flexibility and dynamism of the agency, but at the same time allows for streamlining ofmandates in regional economic development.

• The MFMA is very restrictive in terms of procurement processes. This leads to lengthy and inflexible processesthat forbid long term partnerships with service providers. Aspire’s argument for long term partnerships withservice providers is that service providers learn to apply Aspire’s concepts and this is another form of capacitybuilding for regional economic development in Amathole. Time and resources are lost every time that acompletely new procurement process has to be launched.

• It is problematic for Aspire to implement projects on behalf of local municipalities since under the MFMA, Aspirebelongs and reports to ADM. There is no specification in the MFMA of how a regional economic developmentagency is supposed to deal with this “double mandate”.

Aspire has a board to which it reports. At the same time, as a company owned by the ADM, Aspire reports to theADM council. This reduces the role of the Aspire board to a consultative body while decisions are taken in the ADMcouncil.

As defined in AREDS, the regional economic development builds on corridor as well as sector development. This isa paradigm shift in “doing things” and has implications in terms of institutional set up in the district municipality, thelocal municipalities as well as in Aspire. Aspire has completed its institutional adjustments by assigning corridormanagers. The ADM however is still organized in sectors only, having sector specialists assigned for tourism,agriculture, heritage, SME development and cooperatives.

At national level, there is a need for guidance and coordination in terms of LED tasks and responsibilities and therole of economic development agencies: The dplg promotes and supports the establishment of LED units with anLED manager in municipalities. IDC promotes and supports the establishment of local economic developmentagencies as an implementing arm of the municipalities’ LED units. This is no contradiction, but needs carefulconsideration in practical terms: small municipalities with weak institutional set ups might be overwhelmed with bothtasks. Furthermore, there are 7 development agencies in the Eastern Cape, with Aspire being the only regional one.An important agency is the Buffalo City Development Agency with East London at its heart. Currently, there is noframework in place that specifies Aspire’s collaboration with these agencies. Therefore, the dplg and IDC havejointly developed Guidelines for Local Economic Development Agencies as Municipal Entities.

4.6.7 Sustainability

Key message: Core funding should be dedicated to operational costs related to project management, not to sustainthe organisation as such.

Core funding is a challenge for Aspire. As pointed out by representatives of the Department of EconomicDevelopment and Environmental Affairs (DEDEA), Aspire’s achievement to mobilize funding from a variety of fundsfor its corridor projects makes the agency independent from the funding by IDC. This is unique. As the CEO ofAspire confirms, they assessed the possibility to apply for funding from IDC for the phase of project planning andimplementation. However, their assessment concluded that the eligibility criteria for funding by the IDC are notuseful for Amathole’s approach to economic development. Funding from IDC depends on milestones and is cashflow based. Amathole’s approach to corridor development however is outcome oriented. It would be desirable if IDCcould adjust its funding criteria from cash flow to outcomes.

Having no core funding is a danger to Aspire’s sustainability beyond projects, as has been stated by some interviewpartners. In their view, there is no sustainability model in place on how to sustain operations. For example, an

The following figure summarises the underlying logic of Genesis:

8

The inclusion of development agencies to the Municipal Finance Management Act (MFMA) has createdinsecurity about the role and desirability of Aspire in the district municipality and local municipalities.

� There is “lip service cooperation” on the surface but signs of distrust and passive resistance towards ADM fromlocal municipalities. Political agendas were a threat to many initiatives and discussions.

Based on these concerns which were confirmed by officials and business people, the needs of ADM and Aspirewere:

� To develop a shared understanding of the conceptual positioning of LED with regard to enterprise developmentand social transformation and upliftment;

� To develop a better understanding of the role of government in economic development and of key economicdrivers in the district;

� To develop an improved communication model between ADM, local municipalities and the business sector;

� To clarify the role, responsibilities and delegated authority between ADM and Aspire.

In order to initiate the process, the following stakeholders in the Amathole district were mobilized:

Amathole LED Portfolio Committee, Aspire Board of Directors, ADM LED management team, Border Kei Chamberof Commerce, regional Mayors Forum, regional Municipal Managers Forum, provincial departments andorganisations (Department of Economic Development and Environmental Affairs, Department of Agriculture,Department of Environmental Affairs and Tourism, ECDC).

The process started with workshops at the regional level in which these stakeholders participated. The objective ofthese workshops was to introduce the stakeholders to the strategy formulation process, its goals, steps andmethodology.

Phase 2: Data Mining

The research phase of the Genesis process focused on Amathole as a locality and its economy in the context of thenational and provincial space.

The district has four main routes along which the main development axes lay: R63, R72, N2, N6. Along these routesare situated major urban centres such as East London and smaller towns.

In terms of infrastructure, there is the port located in East London and two airports, one in East London and one inBhisho. Road infrastructure is only recently being upgraded and there are many challenges of long neglectedinvestment and maintenance. In general, there has been a lack of investment in economic infrastructure. This hasalso to do with the fact that there is dispersed settlement in the area and the related agricultural practices of theformer homelands. People in the area have access to land, but do not hold any land titles, so trading of land is notpossible.

An analysis of the economic sectors indicates that the public sector is the most important sector in the district, evenmore important than the service and retail sector. This implies a dependency on funds by transfers from outside theregional economy. Based on an analysis of economic sectors and their importance for the regional economy andtheir capacity to absorb labour, the manufacturing, the agriculture and the tourism sector were identified. Sincemining contributes only a small part to the regional economy, it is not included.

Based on this economic analysis of the Amathole district, the following conclusions can be drawn:

� The bulk of the areas in the district were former homelands. This implies social and economic implications suchas lack of investment in human capital, lack of social capital and lack of infrastructure investment.

� There have been only limited economic infrastructure investments, resulting in ineffective linkages with theeconomic centres in the district.

� There has not been significant investment in agricultural infrastructure in the past so that the potential of thissector has not been realized.

Phase 3: Fact finding and scenario building

In sector workshops, the stakeholders developed different scenarios for the future development for each economicsector: the manufacturing, the agriculture and the tourism sector.

�

31

4.6.3 Mobilization

Key message: Aspire has platforms for interaction with stakeholders in place that allow for awareness creation andmobilization.

Mobilizing stakeholders for new projects or for running projects is an ongoing process that has to ensure thatstakeholders understand what role they have to play in LED and how they can play it. A variety of platforms aremanaged by Aspire for communication with stakeholders at national, provincial and district level, examples are:

• Corridor Summits (stakeholder foras per corridor)

• Events for Service Providers (on project activities and procurement processes)

• Up to date webpage with a section for service providers

• Involvement in strategy planning processes of the ADM and the local municipalities, e.g. review of the ADM IDP

• Annual Small Town conference (on the concept and promotion of small towns)

• Involvement in national foras on LED, e.g. the LED Forum organized by the dplg

This results in the high awareness of local municipalities of AREDS and ongoing activities as well as commitment interms of coordination and collaboration.

4.6.4 Expertise

Key message: Aspire manages to combine expertise in facilitation with technical expertise.

Aspire’s main role is the facilitation of planning and implementation processes for selected projects and coordinationof stakeholders in these processes. As confirmed by interview partners, Aspire manages these processes well. Atthe same time, Aspire staff is regarded highly competent in technical aspects.

Aspire as an organization manages to combine these two very different competences: the one of facilitation with theone of technical expertise. This is highly relevant for Aspire’s task of constantly mobilizing stakeholders andconvincing them about the relevance of projects.

Aspire emphasizes the importance of research: it is often not clear at the beginning of a project intervention what isrequired and what the intended impact will be. Therefore, Aspire applies an approach of research, pre-feasibilities,market analysis, etc. This is at times considered too time-consuming or perceived as unnecessary by Aspire’spartners. However, it is an important investment (in terms of time and financial resources) to assess theappropriateness of projects.

4.6.5 HR issues

Key message: Constant facilitation and coordination can be exhausting, therefore the Aspire staff needs to beinvolved in concrete and tangible project results.

As communication to and mobilization of stakeholders is an ongoing task within the mandate of facilitation andcoordination of LED initiatives in the Amathole district, constant interaction with stakeholders, especially local anddistrict municipalities, is one of the main tasks of Aspire staff. This process can be rewarding as well as exhausting.Sometimes commitments can change due to changed priorities in the municipalities. Then projects turn out to bevery different than originally planned.

This can be tiring and sometimes frustrating for Aspire staff. Therefore, careful management of staff is crucial tomaintain the high level of involvement and motivation in the mid to long run. There is probably no recipe for this, buta good mixture between facilitation and coordination and project management – that allows for concrete andtangible results – might be helpful.

(1)

Phoenix

“a mythical bird that dies in

flames and is reborn from the

ashes”

(2)

Flattering to Deceive

“All dressed up and nowhere

to go”

(4)

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“Without the right players you

only play in the lower

leagues”

(3)

Slim Pickings

“living off, and fighting for

scraps”

Government & Business ...Partners in Growth

LED is the responsibility ofGovernment

Training is awaste of time and

money

Skills Development…We are in this

together

The following scenario framework has been aggregated from the individual sector workshops by Colin Mitchell and

captures the essence of the individual scenarios written during those workshops. It outlines the outlook for the

Amathole economy depending on decisions that stakeholders take. It is an exercise that illustrates how the right set

of decisions can impact economic development positively – or how devastating the wrong decisions can be on

employment and income. It also highlights the consequences of a collaborative versus a non collaborative approach

between the public and private sector.

Figure 3: aggregated Scenario Framework for the Amathole economy

In the following, each scenario is explained:

� Phoenix

Business and regional government commit to working closer together for the economic and social benefit of the

region. Government begins a process of withdrawing from interventions that distort the market, give certain

sectors and people an unfair advantage and waste money on interventions that are not sustainable.

Business commits to the principle of BEE as a means of social transformation. They start to actively seek ways

to build partnerships with emerging business and people in the 2nd

economy.

Within 5 years, graduates from the training schools and mentorship programmes have changed the labour

market, no longer are people dependent on collective bargaining and minimum wages, they now have choices

as business is competing for and rewarding skilled people for their contribution to productivity.

Truly the Amathole region, like the Phoenix has risen from the ashes of its political past and is flying proudly, a

vibrant example to the rest of South Africa.

9

The responsibilities of ADM and Aspire in terms of monitoring and impact assessment need to be clarified and streamlined

– and corresponding systems need to be put in place that are transparent and measurable. In order to do so, Aspire is

currently preparing an application to the EU that ADM would co-finance that aims at establishing a project management

unit especially dedicated to Monitoring and Evaluation and funding mobilization.

This chapter elaborates on the role and performance of Aspire as a regional economic development agency andallows to draw up some lessons for EDAs in general.

4.6 Role and performance of Aspire

4.6.1 Establishment of Aspire

Figure 8: Key Performance Indicators of Aspire

Key message: a newly established LEDA needs resources to develop its strategy on how it will contribute to LED in anexisting context.

When Aspire was established, the agency had no strategy for its mandate in place. It was only with the AREDS strategyformulation process that it was gaining a perspective of its own role and understanding the need for an own strategy thatoutlines its contribution to AREDS. Aspire approached GTZ who at that time was supporting the AREDS process. GTZagreed to support alsoAspire's strategy development by providing an LED consultant.

Any agency that is established needs to undergo a strategy development process in order to understand its mandate withinits context of LED.And it is important that resources are provided to these agencies in order to be able to do so.

4.6.2 Communication

Key message: Communication with stakeholders can be improved by Aspire in order to ensure that stakeholders andthe community understand the role of LED in overall development.

In some municipalities, there is still a lack of understanding of LED and how it contributes to overall sustainabledevelopment. At the same time, the primary concern of many representatives of local municipalities is social developmentand redistribution.

Aspire has a role to play in explaining how LED relates to social development by creating employment and income. It has toanswer the questions:

· How does LED contribute to social development by creating employment and income?

· How do the individual projects contribute to increased employment and income?

This will help to address the concerns in regard to social development and clarify what LED is.

30

10

Flattering to Deceive: Skills, but no co-operation

The skills development programmes are up and running and graduates can be expected within two years, their

guarantee of jobs in the companies where they will be interned is dependent on the economy growing fast

enough to absorb them.

There are signs however that government is finding it difficult to trust market forces as well as business

commitment to growing the economy and labour market. The end result could be that established business

becomes even less convinced of government’s real commitment to the formal economy or its ability and

willingness to play its part in improving the competitiveness of the area. This seriously affects economic

confidence and many of the people who were trained during the heady days after the initial wave of enthusiasm

abandon ship and head for greener pastures. Business withdraws its support for the training facilities and they

close down in frustration.

� Slim Pickings

It is a vicious circle that gets tighter and is plummets in freefall. Business blames government for its inability to

compete because of the local cost of doing business and the fact that they are not training people fast enough

to keep up with those dying of Aids.

Government blames business for shedding jobs, not paying their people properly and making absolutely no

effort to contribute to economic transformation. The gap between the first and second economies grows and

social instability gets to flash point. There is no sign of any real co-operation between established business and

government with the possibility that business will either leave or threaten to do so and government will be forced

to introduce random subsidies for certain large manufacturers.

While this is going on Coega gets stronger, ships bypass East London because the harbour is too shallow,

Durban doubles the capacity of its harbour and wins the 2016 Olympic Games and tourists just stop coming

because the region is just so depressing. As for work opportunities, they are few and far between and the

people that left are squabbling over very slim pickings.

� Relegation Zone: Good governance, but no skills

The National Spatial Development Programme has identified Buffalo City as a high potential node and has

made funds available to fund high potential projects. Government and business have started to talk to each

other with the establishment of the Amathole growth coalition a real possibility.

But, there could be a problem on the horizon where both government and business may be caught by surprise.

Should the plan to fast track skills development not materialize, Amathole could find itself on the back foot and

squeezed between low cost producers of commodities from countries like Mozambique, DRC and Angola and

highly competitive value added producers like China, Korea and India who are likely to sell their product in SA

at lower cost than we can currently produce. Should this happen unemployment will increase because more

businesses may leave, small farmers may have to dump their crops at below cost, value adding processors

may close down and the partnerships and new business ventures built on the back of the infrastructure roll out

may not survive. To survive in the competitive game of world competition you need the best trained team

playing at the top of their game and supported by a great management structure! If not expect to be relegated

to the local league.

Phase 4: Competitiveness and catalytic projects

With these scenarios in mind, the stakeholders made a major breakthrough, based on the fact that the majordevelopment axes in the district are along the four main routes: In sector workshops, the stakeholders realized thata focus on individual sectors did not allow for the fact that in many cases each sector was interdependent on the

�

29

But is also implies major efforts from all role players to constantly ensure mutual information and alignment ofstrategies, plans and processes. In AREDS, projects are defined beyond municipal borders and requirecollaboration between several local municipalities. As a representative of a local municipality put it: “The more roleplayers there are to identify investment and development opportunities, the easi er the job to achieve the mandate.However, the implication in terms of coordination is huge.”

4.4 Identification of catalytic projects

Key message: For new projects, there needs to be a transparent process that shows how those projects are

selected that have the highest potential in terms of leverage and employment and income opportunities.

Responsibilities for the AREDS projects are not always the same since they depend on the best expertise available

for each project. In some cases, the local municipalities are the project managers, with assistance from Aspire. In

other cases, Aspire acts as the project manager on behalf of a local municipality. At the same time, Aspire and its

partners react opportunistically to funding opportunities that may come up and imply new or revised projects or

project components. And there is a lot of dynamism as projects develop that does not allow to stick to rigid project

cycle management: priorities of municipalities may change over time, original ideas need to be revisited, etc.

Regardless of this flexible approach to project planning and implementation, all projects running under AREDS fit

into one or more of the result areas of the AREDS strategic framework. There is coherence in the approach to

project selection within the AREDS strategic framework.

However, the overall impact orientation of projects in terms of increased employment and income opportunities as

defined by AREDS is not always clear. AREDS requires projects that have the potential to:

• Leverage (public and private) investment;

• Leverage impact in terms of quality employment for the Amathole citizens;

• Leverage private sector participation.

For the majority of running projects, it remains unclear how they contribute to these criteria and ultimately to

increased employment and income. For new projects, there is no clear and transparent process defined that

ensures that projects with high impact are selected.

Example: the Butterworth Regeneration project has acquired a budget of R 140 Mio. from the NDPG. While it is

obvious that infrastructure projects are expensive, it is important to show how this investment will contribute to the

economic development of Butterworth and to employment and income in the region, indicators specified in AREDS.

The acquired funding volume is per se no indicator for impact.

4.5 Monitoring and impact assessment

Key message: ADM has no system in place to monitor project progress and measure future impact as contributionto AREDS.

ADM is responsible for AREDS and its implementation. The AREDS strategic framework provides for a monitoringframework for ongoing activities in LED in Amathole by different partners. However, it is not clear how ADM is doingthis monitoring of project progress that would also allow for corrective measures if necessary. And there is noinformation available on how ADM intends to do the impact assessment of these projects.

Aspire has developed a framework to monitor project progress and intends to measure impact in four areas: Places,people, business and partnerships:

11

performance of others. For example,tourism was hardly to succeed without a well performing retail and servicessector.

This led to a move away from sector development to looking at interdependent supply chain opportunities along thefour main routes – or so called corridors – in the district: For each main route, representatives of local municipalitiesand the business sector along the route looked deeper into each economic sector identified as relevant andidentified sector specific constraints and potentials as intervention areas to strengthen the sector. Building on theoutcomes of the aggregated scenario above, the corridor workshops identified common issues that are consideredbarriers to economic growth in Amathole district:

� Infrastructure: outdated, inadequate and poorly maintained infrastructure is an impediment to cost effectiveenterprises;

� Land related issues: this includes the resolution of land ownership and use rights in both rural and urbanlocalities. It relates to the use for agriculture and settlement as well as to land for investment for productionfacilities and offices;

� Lack of competitiveness of the sectors and localities: there is inadequate technical and system support acrossall sectors (e.g. for maintenance) and there are inadequate or inappropriate skills as a main constraint forgrowth;

� Governance: there is a lack of governance systems and capacity that hinder enterprise growth anddevelopment.

These four barriers identified laid the ground for the next and final step of the AREDS strategy formulation process:The stakeholders in each corridor identified key interventions and corresponding result areas based on theCompass methodology in order to tackle these barriers:

The Compass methodology4

addresses local competitiveness and is a performance management tool to monitorand assess the strategic approach to and the progress of LED initiatives, in this case the AREDS. The objective ofCompass is to define the result areas of the AREDS in key intervention areas:

1. Economic sustainability: How can we guarantee sustainable LED?

2. How do we need to interact with other stakeholders to make LED a success?

3. The learning perspective: how to ensure that we constantly upgrade our understanding of our economic realityand of LED?

4. How do we have to organize our LED process and effort internally to assure its effectiveness?

The key idea is to introduce a wider, more balanced set of performance indicators that is not one-sidedly looking atfinancial and other economic indicators but also at other, more qualitative indicators that address the long-termgrowth perspective of the local economy.

In corridor workshops, the guiding question was: what do we want to achieve with AREDS in these four keyintervention areas? This then led to the formulation of a limited number of result areas per corridor. This workprovided the ground for the AREDS strategic framework (see next chapter) that provides guidance for strategyimplementation and for identification of catalytic projects.

3.3 Results of the strategy formulation process

3.3.1 AREDS Strategy

Amathole Regional Economic Development Strategy (AREDS) is a multistakeholder strategy for developing aglobally competitive economy that supports the social and economic aspirations of the district over the next twentyyears.

4This has been summarized from: GTZ, Compass of Local Competitiveness, Manual Version 0.2, October 2006.

28

4 Interpretation of findings from interviews

The information gathered from the interviews with representatives of local municipalities, the district municipality,provincial bodies and Aspire allow for insights into the implementation of AREDS and for recommendations forimprovement.

4.1 AREDS concept of LED

Key message: All interview partners know about AREDS and its ongoing project activities; and they understand itsconcept of corridor development.

In all interviews, there was one outstanding aspect: all interview partners have a well informed idea of AREDS andits corridor development approach that builds on comparative advantages of the Amathole District. Furthermore, theinterview partners were well informed of ongoing project activities in the district.

The interview partners recognize the importance of a spatial as well as a sector approach and the need forcollaboration between all the relevant role players and beyond municipal borders. The concept of corridordevelopment is tangible and helps to specify the roles of each stakeholder in a corridor. As a representative ofECDC states, a focus on key issues like infrastructure and education for example in tourism allows ECDC tocomplement Aspire in bringing issues in terms of tourism development to the provincial and even national level

The concept of corridor development has an immediate effect on thinking of local government: for example in theN2 Corridor, there are three local municipalities. In meetings around the N2 Corridor development, for the first time,the three mayors, three LED managers and the three municipal managers were talking together about an economythat transcends their municipal lines, tackling a lack of coordination and collaboration in interventions as well asavailability and allocation of resources.

This common understanding can be attributed to the effectiveness of the Genesis methodology during the AREDSstrategy formulation process as well as to Aspire’s engagement with and communication to its stakeholders duringthe implementation of AREDS. It lays the basis for the successful funding applications that local municipalities andAspire handed in together to funders such as the NDPG or DBSA.

4.2 Increased collaboration

Key message: There is indication of increased collaboration, for example some strategies at the local and districtlevel are currently being streamlined with AREDS.

AREDS has initiated a wide range of projects that all build on a multi-stakeholder approach. The strategydevelopment process has contributed to an improved understanding of roles and responsibilities between localmunicipalities, the district municipality and Aspire. Indication for this is the fact that currently some strategies at thelocal and district level are being streamlined. It is important to mention that many role players in LED in the districttry to optimize their capacity and resources by collaborating with each other and creating synergies. However,within the existing legislative environment in which each local municipality has a LED mandate and resources cannot be shared or leveraged, there will always be limitations to how far synergies and collaboration can go.

4.3 Alignment of local strategies

Key message: No municipality is obligated to accept AREDS and implement projects within its strategic framework.However, there is much indication for alignment of strategies as well as activities.

The AREDS is a strategic road map for all role players in the region and allows local municipalities to develop theirown LED strategy aligned to AREDS:

In consultative processes, the ADM and Aspire aim at ensur ing the alignment of various strategies in the district.This leads to alignment processes of LED strategies in some local municipalities. Although there is no obligation forlocal municipalities to participate and buy-in to AREDS, there is a big involvement in terms of coordination,participation, implementation of projects and strategy alignment. Municipalities seem to recognize the benefit ofincreased coordination and collaboration that optimizes their scarce resources and that helps them to increase theperformance in LED.

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27

For the different result areas, projects have been identified in the four corridors. The projects in the aboveframework are a selection. Please refer to chapter 3.3.5. for a detailed description of these projects. Note: theprojects may fit into several result areas.

The framework allows stake-holders to focus on their area of interest and expertise, while at the same time allowingthe multiple inputs to contribute to the overall development targets of AREDS. The strategy is the basis from whichto guide economic development planning for all role players in Amathole, as well as resource allocation,implementation and institutional arrangements and to identify catalytic projects.

3.3.1.2 AREDS Concept of LED

According to the Genesis logic, catalytic projects identified within the AREDS strategic framework need to:

� Leverage (public and private) investment;

� Leverage impact in terms of quality employment for the Amathole citizens;

� Leverage private sector participation.

Catalytic projects are allocated in the four corridors along the main routes in Amathole district.

Example of a catalytic project: The Amabele train station development is part of a larger investment: a privateinvestor is investing in a plantation of blueberries. The investment is leveraged with investments by ECDC and IDC.This will create permanent as well as seasonal jobs and will leverage further privateinvestments around the trainstation in Amabele village.

These projects are part of corridor development that aims at ensuring the development of sectors with comparativeadvantage in localities that are linked both spatially and along value chains. In this approach, small towns play anessential role in linking rural with major urban centres. And it aims at ensuring coordination between the various roleplayers in the locality and across local entities such as local municipalities.

Figure 5: Amathole Corridor Management

13

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26

14

The corridors selected in the AREDS follow the main routes in the Amathole district and have priority sectorsidentified:

• N6 Corridor (East London to Cathcart): potential in forestry and timber production

• N2 Corridor (East London to Elliotdale): potential for tourism, livelihood development

• R63 Corridor (East London to Hogsback to Bedford): potential for adventure tourism and forestry, heritagepromotion

• R72 Corridor (East London to Great Fish River): potential in arts and tourism

Within these corridors, there are several small towns that benefit from spillover effects from corridor development.There is interdependence between small town regeneration and corridor development: so called anchor projects insmall towns usher regeneration and can boost development in sectors and value chains related to the anchorproject.

Example: In Hamburg, the establishment of an Arts Colony has been identified as an anchor project for theregeneration of Hamburg, but also has an impact on and leads to interventions in other sectors such as tourism inorder to improve quality of service and products.

AREDS is aligned with the Integrated Development Plans (IDP) of all local municipalities of Amathole5: The

aggregated efforts of all players in the district should contribute to the AREDS impact indicators and targets for

2014:

• 60% of households earn an income

• 50% of households have an income above the minimum living level (MLL for a household of 5 persons isapprox. R 17’000 per year)

5See link to the IDP of Amathole: http://www.amathole.gov.za/documents.asp?cat=3 .

N6

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or

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ve

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me

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25

The overall impact chain of AREDS is illustrated in the following figure:

Figure 6: Impact Chain of AREDS

The impact chain shows how the key intervention areas of the AREDS strategic framework lead to outputs that aim

at systemic change in the regional economy by providing for: business retention and expansion, vertical integration,

new startups, improved supply chain management and business turn arounds. These systemic changes will

ultimately lead to economic and social impact.

15

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24

3.3.2 Roles and responsibilities of stakeholders in AREDS

3.3.2.1 Overview of the institutional landscape of Amathole district

There are many organizations and institutions that work towards the performance of LED:

Support

Functions

Implementation

ADM

Private SectorLocal Communities

Local

Municipalities

Policy framework,

Capacity Building,

National Funds

Performance &

Delivery

National

Treasury

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(EU)

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LED

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oord

ination,

facili

tation,

cla

rification

Figure 7: Institutional landscape of Amathole district

At the national and provincial level, organisations like the dplg or the dti provide the legislative framework for LEDas well as support in terms of resource allocation for implementation. International development partners supportcapacity building for implementation. And at the local level, local and district municipalities have a mandate for LEDperformance. Aspire has a complementary role within this institutional landscape, that of a coordinator andfacilitator.

3.3.2.2 Clarification of roles

An important outcome of the AREDS strategy formulation process is an increased understanding of roles andresponsibilities of role players in the Amathole district. As stated in interviews of stakeholders participating in theprocess, the basis for further cooperation in the district was laid in the workshops:

• Partnerships sparked during the process started to grow and establish themselves, based on high quality ofconversation and dialogue during the process.

• Local municipalities initiated processes and conducted workshops to align their LED strategies to AREDS,based on their involvement and learning in the process.

• The political buy-in led to special council meetings to discuss the outcomes of the strategy process.

• An increased understanding of tasks and roles in the district, including Aspire’s role, implied a collaborativeapproach to economic development in the region rather than in individual localities.

To conclude, the Genesis methodology initiated a change in the mind set and the way of how the different roleplayers work together. The process provided for a good starting base for strategy implementation and enabled thedifferent role players to identify their roles within the AREDS strategic fram ework. The next chapters elaborate onthe understanding of roles of each stakeholder in the Amathole district.

3.3.2.3 Amathole District Municipality (ADM)

The ADM is the actual owner of AREDS and responsible for its implementation. ADM’s principal task is to provide aregional strategy and policies and to give directions in terms of resource allocation and governance. Another task ofADM is to support local municipalities to build capacity and assist them in social and economic development. Aspireis the ADM LED Unit’s implementing arm to perform these tasks.

16

When ADM set up the economic development agency (EDA) Aspire and mandated it with the development ofAREDS, it made an important commitment towards regional economic development. The agency acts on behalf ofthe ADM and reports directly to the ADM’s council via the so called LED and Environmental cluster which is chaired3

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17

by the council’s LED portfolio head. In monthly meetings of the cluster, Aspire reports on progress of projects. Inthis forum, Aspire can get political support from the ADM council as well as technical support from the ADMstrategic manager.

AREDS with its multiple dimensions introduced complexity to the implementation and management of the strategy.For this reason, a “framework” for implementation has been devised for which ultimately ADM is responsible.However, up to date it is not clear how ADM monitors progress in terms of strategy implementation and how it givesstrategic guidance to the different role players working in the AREDS projects.

3.3.2.4 Local Municipalities

Local and district municipalities have a broad mandate to act as a catalyst for sustainable development. In the viewof only 6% of the national budget directly being allocated to local municipalities, there are resource constraints inmunicipalities that lead in many places to underperformance of economic development and growth.

At the same time, local municipalities are confronted with high expectations from their voters in terms of socialredistribution and are held responsible for the state of the economy and the lack of growth. There is a broad beliefthat government interventions are needed for any economic turnaround. In this light, AREDS is broadly accepted bylocal municipalities to bring clarity into roles and responsibilities of the different role players in the Amathole districtin terms of LED. And there is an understanding that an EDA like Aspire can support local municipalities inimplementing AREDS and performing in LED:

• An EDA can act as the project manager on behalf of a local municipality. Some municipal managers and LEDofficers are aware that with the limited resources at hand, a project approach to any development initiative is theonly feasible way. In this case, the role of the local municipality focuses on strategic orientation and monitoringof project implementation.

• In order to implement AREDS successfully, increased coordination among local municipalities is needed. Thiscan have the benefit of streamlining similar initiatives, optimizing resource allocation and focusing oncomplementarities (who can bring in what is best into the collaboration). In this case, municipalities areresponsible for driving and managing this process, while a EDA can ensure this coordination and feed into itwith technical assistance, information and advice.

• An EDA has a stabilizing role to play in the face of high staff fluctuation in local municipality and is seen as aknowledge centre where good practices in LED are fostered and technical assistance and advice can beprovided for (new) staff responsible for LED.

However, there are still some concerns about how AREDS will contribute to improved delivery and increased overallsustainable development:

• The major challenge of social development, service delivery and expectations management from theconstituency are not met with a strategy like AREDS. As some representatives stated, the work that comes withAREDS in terms of coordination and project responsibilities is additional to the job description of staff of localmunicipalities and does not help to deal with this major challenge.

• There might still be a missing understanding of how LED leads to increased employment and incomeopportunities. It seems that the two concepts of economic and social development are still not related to eachother. Economic development seems to be perceived as benefiting some, but not the whole of a constituency.

3.3.2.5 Private sector

The AREDS strategy has identified catalytic projects that have a strong leverage and/or multiplier effect byunlocking resources and business opportunities. The projects address issues that will not be addressed throughbusiness entrepreneurship because the risk is too high, the amortisation period too long or the immediate profit toolow. In other words, they address issues that hinder investment from the private sector. For example, byregenerating retail and services hubs in Butterworth or Stutterheim, space for investment is developed. So, theprivate sector is an investment partner for AREDS:

• For example when the private sector proposes investment initiatives (like in the case of the AmabeleBlueberries) where the local municipality can support this initiative by providing corresponding infrastructure (inthis example by renewing the Amabele train station that is important for the transport of the blueberries).

22

• Existing projects of local municipalities: Before AREDS came into the picture of LED in the Amathole district,there were already many different projects running by local municipalities. Based on AREDS and its four keyinterventions, these projects could be streamlined or are currently in the process of being streamlined.

Examples: The Butterworth Urban Renewal Program (BURP) of the Mnquma Local Municipality was integratedinto the Butterworth Regeneration Strategy that focuses on Butterworth as a whole and not only on factoriesand their utilization. Plans to build milling plants for maize in the N2 Corridor are currently streamlined so thatthere is one plant with a strategic location for all surrounding municipalities.

• Participatory processes to identify new projects and coordinate existing projects: After the identification of keysectors in the corridor, Aspire facilitates participatory processes in the N2 and N6 Corridor that aim at identifyinginvestment opportunities for sector development. These processes are in the logic of AREDS that buildscompetitive advantages of selected sectors through investments with leveraging effects.

Example: The development of the N2 Corridor will be focused on four key interventions: Wild Coast tourism,black granite development, development of Dutwya as a service centre for retail, education, services and agroprocessing, agricultural value chain development. In order to prepare these interventions, Aspire facilitates aparticipatory process that has established the N2 Corridor Economic Summit that will develop the N2 Corridorstrategy. N2 Investment Conferences on key economic areas identified are conducted in November 2008.

• Projects identified by investment partners: some projects have been brought forward by the private sector.

Example: Blueberries are a high value crop that grows very successfully in the Stutterheim area. A businessgroup named Amathole Berries, supported by ECDC and IDC, has recently purchased a 410 hectare farm tobegin a plantation of 250 hectares of blueberries in the Amabele area. The aim is to grow 560 hectares whichwill create permanent, but seasonal (September – March), jobs. Under the overall coordination of the Amahlathimunicipality, Aspire supports the investment by planning the renewal of the Amabele village and train station.

• Projects that increase the revenue base of local municipalities.

Example: The coastal village of Hamburg is developed in to a tourism economy anchored by the Arts colony,accommodation, leisure, etc.

Most projects are currently in their design stage: After the identification phase, Aspire together with partners andstakeholders did further needs and capacity assessments as well as compiled pre-feasibility studies. This projectphase was in its main parts concluded mid 2007. Activities over the last 12 months have focused on the designstage:

• Resource mobilization and stakeholder buy in;

• Contract agreements with funders and service providers;

• Capacity building and institutional preparedness for project implementation.

A main emphasis thereby was on the development of regeneration strategies, spatial development plans andbusiness plans. Over the last few months, the majority of the projects have completed the design stage of theproject cycle. 17 projects are ready to enter the implementation phase which will start with full steam at thebeginning of 2009. The projects can be characterized as regeneration, corridor development, anchor and projectsthat are directed to community development (in terms of empowerment and community management).

18

• In so called Investment Conferences, business opportunities identified by the district municipality, the localmunicipalities and their stakeholders are presented to the private sector for investment (like in the case of theN2 Economic Forum).

• Immediate business opportunities for the private sector arise through the municipalities’ procurementprocesses

6for service provision.

The private sector is supposed to leverage and maintain investments undertaken by public partners in AREDSprojects. However, the long term role of the private sector is not yet straight forward in some projects running withinAREDS. After the initial design stage, these projects are now in the crucial phase of getting the buy-in from privateinvestors. This buy-in needs to be secured before actual project implementation starts, i.e. at the beginning of 2009.The private sector is still in the waiting position and skeptical: “How seriously are they going to take us?” is thequestion some business people ask while they observe the planning processes of projects.

3.3.2.6 Other public sector organisations

In a variety of projects, local municipalities, ADM and Aspi re work closely with public development institutions likethe provincial Eastern Cape Development Corporation (ECDC):

Together with these organisations, investment opportunities are identified in order to share and leverage resourcesfor investment (example Butterworth regeneration: ECDC property for development). AREDS projects complementdevelopment initiatives of organizations like ECDC with projects that focus on the development of soft factors suchas skills (example: A forestry development initiative by ECDC with a wood processing plant in Stutterheim andHamburg is complemented by a skills development initiative by Ngqushwa Local Municipality and Aspire in thearea.). Aspire co-finances together with ECDC feasibility studies and lobbies jointly for public sector infrastructuresuch as transport, water, infrastructure (an example is the feasibility study that was done to analyse the conditionsfor a plantation for blueberries in the Stutterheim area).

3.3.2.7 Civil society

Local communities have to be involved in LED processes as they are the constituency of the municipalities. There isdirect involvement of local communities: There are projects in which Aspire has directly been asked to provideassistance to local communities in terms of empowerment, trust fund management and community management(Examples are the Cebe Community Trust or the Dwesa Cwebe Community Trust). This involves processes thatbring the traditional and the government system closer together in order to ensure inclusion and improved servicedelivery. These projects include economic development, but not as a sole dimension. In other projects, it isimportant to secure the buy-in from leaders of local communities and of the civil society for corridor development.This is a good entry point for the mobilization of the civil society for stakeholder participation and in kind contributionin project implementation.

Indirect benefits for local communities arise from employment and income opportunities created through theAREDS projects. As stated by some representatives from local municipalities, it is important to equip the membersof local communities with corresponding skills in order to enable them to respond to these opportunities. However, itcannot be the role of an agency like Aspire to support communities in organizing themselves. Here, it would beimportant that local municipalities have resources available to work with communities in order to prepare them andenable them to respond to employment and income opportunities.

3.3.2.8 Aspire

Aspire’s role ranges from reactive (as adviser) to proactive (as implementer). This requires an ability to playdifferent roles depending on the context and the set up of projects.

As an adviser

Aspire has competencies in specific areas, such as the understanding of and alignment to the legislative andnational policy environment. Its role here is to advise government at different levels in terms of strategy and policydevelopment and coordination. For example, at regional level, Aspire advises the ADM in the coordination ofdecision makers to inform regional policy (see the Inter Governmental Relations (IGR) Forum). Aspire has technicalknowledge and provides expert guidance to municipalities. Its role here is to advise partners, especially localmunicipalities, in project management.

6See the suppliers’ database on http://www.aspire.org.za/supplier_start.php.

21

The NDPG at a glance9

The NDPG fosters partnershipsbetween key stakeholders at alllevels – project, municipal, provincial, regional and national level– in the public and the private sector to tackle the challenges oftownships, low-income housing estates, areas and town centresas well as informal settlements.

While the NDP Grant does not exclude small towns and its ruralhinterlands, it has a clear focus on interventions in townshipareas and does not elaborate on the challenges that the areasof former homelands face.

The NPDG supports interventions in the following areas:

• Strategic economic development projects: sustainable longterm economic development including regenerationstrategy;

• Land use restructuring: spatial restructuring, diversificationof land use;

• Stimulating property markets: development of a secondaryproperty market;

• Purchasing power retention: increase of share ofhousehold purchasing power;

• Public sector investment as catalyst and leveraging of nongovernmental investment: maximization of leverage of nongovernment funding by private sector, NGOs andcommunities;

• Ensuring municipal support: active and full support andinvolvement of local authorities to bring on board privatesector and community involvement;

• Kick starting regeneration: development of a broadregeneration strategy and kick start as catalytic projects.

The Grant consists of a Technical Assistance Fund and aCapital Grant Fund:

1. Technical Assistance Fund for: preparation of developmentstrategies and plans, identification of projects to supportregeneration plans, feasibility studies, development ofbusiness plans for the release of capital grant funding,funding of training, capacity building, facilitation, projectmanagement.

2. Capital Grant Fund to: construct, purchase, refurbish andreutilize any public facilities or places that local governmentnormally supplies.

Important eligibility criteria:

• An overarching regeneration strategy needs to be in placethat shows the linkages at different levels (local, district,provincial, national), opportunities for learning andinnovation and contributions from local communities, smallbusinesses and other local role players.

• The proposed funding of public infrastructure, places andfacilities needs to show how private and community sectorinvestment will be attracted.

• Investments need to both address a need and contribute tothe economic and social development prospects of an areaand leverage investment from public and private sectors(examples: public transport linkages, tourism precincts,heritage, cultural, traditional amenities, revitalization ofexisting centres, informal trading facilities).

3.3.4 Catalytic projects

The strategy formulation process based on the Genesis methodology had identified catalytic projects that have astrong leverage and/or multiplier effect by addressing a critical market failure, or by creating a strong leveragefactor.

Within the AREDS strategic framework, several projects are running that fit into one or more of the followingcategories:

• Investment and infrastructure projects that aim at the rehabilitation of abandoned industrial estates and land,creating for example a small business estate;

• Projects that address critical gaps in skills development and support services such as linking BDS providers andSMEs;

• Sector development projects that look at the strategic development of a sector like tourism.

All projects are run with a multi-stakeholder approach, including local municipalities and the business sectors. Foreach project, there are different responsibilities. In some cases, the local municipalities are the project managers,with assistance from Aspire. In other cases, Aspire acts as the project manager on behalf of a local municipality.The stakeholders work together in a flexible project approach that aims at identifying the best expertise andadequate role “to get the job done” for a specific project.

In order to know how the running projects were identified, it is important to understand the background of eachproject. Based on this, projects can be grouped as follows:

9See www.treasury.gov.za/ndp for further information.

19

As a facilitator

The role of a stimulator is related to the mobilization of players and project ideas. It contains elements of facilitationand coordination of processes. It is all geared to relationship building and partnerships for project implementation:

• At the beginning of projects, strong political buy-in from all levels of government is a prerequisite that needs tobe assured.

• Establishment of and support to corridor stakeholders associations aim at ensuring that the concerns ofstakeholders are taken up in the implementation of projects.

As an implementer

On behalf of local municipalities or the ADM, Aspire is also a project manager in specific projects. In these projects,Aspire is fully responsible for the project and reports to the client municipality. Aspire understands its role as animplementer also in terms of the mobilization of funds for project implementation.

Based on these roles, Aspire’s service offering to the role players ranges from:

• Development and implementation of regeneration strategies for small towns (example: Alice Regeneration)

• Development and implementation of spatial integration plans (example: Butterworth Regeneration)

• Technical assistance for planning activities for nodal or sector development (example: N2 Corridor Summit)

• Capital expenditure for anchor projects in small towns and local municipalities (example: Stutterheim Petro Parkor Hamburg Arts Colony)

• Economic sector development (example: Amahlathi tourism master plan)

• Services that come with project planning and implementation:

o Stakeholder mobilization

o Capacity building of local municipality

o Support to ADM for the Growth Coalition and the IGR Forum

o Coordination of Corridor Subcommittees

o Organisation of the Small Town conference7

(to advocate for small town economies in policy agenda)

7see http://www.aspire.org.za/news_view.php?id=2 for information on the recent conference in September 2008

20

Aspire’s strategy

As Aspire was managing the AREDS strategy formulationprocess, it was gaining a perspective of its own role. Theprocess was highlighting the need and potential for Aspire tobecome a public private sector enterprise

8that is able to

facilitate interaction and coordination between public sectorstakeholders and private businesses.

In line with AREDS, Aspire has formulated three guidingprinciples for its own work to contribute to AREDS:

• To concentrate economic activities along the regionsprimary logistics corridors in order to elevate theirsignificance and potential as regional supply chains;

• To cluster public good infrastructure to unlock highpotential opportunities for economic value adding andvertical integration;

• To mobilize stakeholders and establish corridorassociations to improve communication, prioritization ofresources and investment leveraging.

To complement other roles and responsibilities, the organizationwill focus on the following:

• Organisational specialization: Aspire aims at positioningitself as a trusted adviser, stimulator and partner in theregional economic environment;

• Relationship Building: Effectiveness of Aspire will beproven by its ability to build capacity to improve theeconomic enabling environment with perceived bettercompetitive advantage. Issues of the business environmentare tackled by engaging with the relevant public partnersand can be seen as a cross cutting issue in all projects;

• Public Good Investment Methodologies: Aspire recognizesthe need to improve the factors of production that will leadto adding value to primary resources and verticalintegration of the value chain;

• Human Capital Development: The strategic approachapplied requires social networking ability of the managersresponsible for the economic corridors as well as theirtechnical knowledge. Aspire aims at ensuring humancapital development, continuous learning, team interactionand knowledge sharing.

The key performance areas of Aspire that contribute to theAREDS targets for 2014 are:

• Places: small towns regenerated, economic value added →

The objective is to stimulate economic development inAmathole region through the regeneration of its smalltowns’ economies;

• People: new jobs created → The objective is to promotethe development of skills that are demanded from privatebusinesses and ultimately contribute to increasedemployment;

• Businesses: new business created, existing businessretained → The objective is to promote business efficiency,investments and competitiveness in the region;

• Partnerships: investment leveraged → The objective is toidentify appropriate and responsive institutional capacityand partners to contribute to the sustainable developmentof Amathole.

Projects managed or assisted by Aspire are organized alongthese key performance areas.

3.3.3 Resource mobilization

In July 2007, the call for proposals for the National Treasury’s Neighbourhood Development Partnership Grant(NDPG) was opened. Several local municipalities in the Amathole district were approached by the NDPG to applyfor funding. In a joint initiative with ADM and Aspire, they handed in five applications for five towns. At the sametime, Aspire, on behalf of ADM, did funding applications for different projects, among them the application to thenational Department of Environmental Affairs and To urism (DEAT) for the Hamburg’s Arts Residency.

In February 2008, Aspire as the project management unit of ADM for these applications had secured about R 300million for project funding of which the majority is NDPG funding. This includes the NDPG funds for the stimulationof development in five small town areas. The grant will be spent over three years and aims at improving the qualityof life of 900’000 inhabitants in Amathole.

Other project related funding comes from local municipalities, Eastern Cape Development Corporation (ECDC),DBSA, DEDEA, Hluma Development Agency, Thina Sinakho (EU- LED Support Program in the Eastern Cape).

8A public private sector enterprise best is defined as a publicly owned enterprise that applies instruments and tools as the private sector does,

e.g. by managing procurement processes and going into partnerships with a variety of players to achieve the enterprise’s objectives.

19

As a facilitator

The role of a stimulator is related to the mobilization of players and project ideas. It contains elements of facilitationand coordination of processes. It is all geared to relationship building and partnerships for project implementation:

• At the beginning of projects, strong political buy-in from all levels of government is a prerequisite that needs tobe assured.

• Establishment of and support to corridor stakeholders associations aim at ensuring that the concerns ofstakeholders are taken up in the implementation of projects.

As an implementer

On behalf of local municipalities or the ADM, Aspire is also a project manager in specific projects. In these projects,Aspire is fully responsible for the project and reports to the client municipality. Aspire understands its role as animplementer also in terms of the mobilization of funds for project implementation.

Based on these roles, Aspire’s service offering to the role players ranges from:

• Development and implementation of regeneration strategies for small towns (example: Alice Regeneration)

• Development and implementation of spatial integration plans (example: Butterworth Regeneration)

• Technical assistance for planning activities for nodal or sector development (example: N2 Corridor Summit)

• Capital expenditure for anchor projects in small towns and local municipalities (example: Stutterheim Petro Parkor Hamburg Arts Colony)

• Economic sector development (example: Amahlathi tourism master plan)

• Services that come with project planning and implementation:

o Stakeholder mobilization

o Capacity building of local municipality

o Support to ADM for the Growth Coalition and the IGR Forum

o Coordination of Corridor Subcommittees

o Organisation of the Small Town conference7

(to advocate for small town economies in policy agenda)

7see http://www.aspire.org.za/news_view.php?id=2 for information on the recent conference in September 2008

20

Aspire’s strategy

As Aspire was managing the AREDS strategy formulationprocess, it was gaining a perspective of its own role. Theprocess was highlighting the need and potential for Aspire tobecome a public private sector enterprise

8that is able to

facilitate interaction and coordination between public sectorstakeholders and private businesses.

In line with AREDS, Aspire has formulated three guidingprinciples for its own work to contribute to AREDS:

• To concentrate economic activities along the regionsprimary logistics corridors in order to elevate theirsignificance and potential as regional supply chains;

• To cluster public good infrastructure to unlock highpotential opportunities for economic value adding andvertical integration;

• To mobilize stakeholders and establish corridorassociations to improve communication, prioritization ofresources and investment leveraging.

To complement other roles and responsibilities, the organizationwill focus on the following:

• Organisational specialization: Aspire aims at positioningitself as a trusted adviser, stimulator and partner in theregional economic environment;

• Relationship Building: Effectiveness of Aspire will beproven by its ability to build capacity to improve theeconomic enabling environment with perceived bettercompetitive advantage. Issues of the business environmentare tackled by engaging with the relevant public partnersand can be seen as a cross cutting issue in all projects;

• Public Good Investment Methodologies: Aspire recognizesthe need to improve the factors of production that will leadto adding value to primary resources and verticalintegration of the value chain;

• Human Capital Development: The strategic approachapplied requires social networking ability of the managersresponsible for the economic corridors as well as theirtechnical knowledge. Aspire aims at ensuring humancapital development, continuous learning, team interactionand knowledge sharing.

The key performance areas of Aspire that contribute to theAREDS targets for 2014 are:

• Places: small towns regenerated, economic value added →

The objective is to stimulate economic development inAmathole region through the regeneration of its smalltowns’ economies;

• People: new jobs created → The objective is to promotethe development of skills that are demanded from privatebusinesses and ultimately contribute to increasedemployment;

• Businesses: new business created, existing businessretained → The objective is to promote business efficiency,investments and competitiveness in the region;

• Partnerships: investment leveraged → The objective is toidentify appropriate and responsive institutional capacityand partners to contribute to the sustainable developmentof Amathole.

Projects managed or assisted by Aspire are organized alongthese key performance areas.

3.3.3 Resource mobilization

In July 2007, the call for proposals for the National Treasury’s Neighbourhood Development Partnership Grant(NDPG) was opened. Several local municipalities in the Amathole district were approached by the NDPG to applyfor funding. In a joint initiative with ADM and Aspire, they handed in five applications for five towns. At the sametime, Aspire, on behalf of ADM, did funding applications for different projects, among them the application to thenational Department of Environmental Affairs and To urism (DEAT) for the Hamburg’s Arts Residency.

In February 2008, Aspire as the project management unit of ADM for these applications had secured about R 300million for project funding of which the majority is NDPG funding. This includes the NDPG funds for the stimulationof development in five small town areas. The grant will be spent over three years and aims at improving the qualityof life of 900’000 inhabitants in Amathole.

Other project related funding comes from local municipalities, Eastern Cape Development Corporation (ECDC),DBSA, DEDEA, Hluma Development Agency, Thina Sinakho (EU- LED Support Program in the Eastern Cape).

8A public private sector enterprise best is defined as a publicly owned enterprise that applies instruments and tools as the private sector does,

e.g. by managing procurement processes and going into partnerships with a variety of players to achieve the enterprise’s objectives.

18

• In so called Investment Conferences, business opportunities identified by the district municipality, the localmunicipalities and their stakeholders are presented to the private sector for investment (like in the case of theN2 Economic Forum).

• Immediate business opportunities for the private sector arise through the municipalities’ procurementprocesses

6for service provision.

The private sector is supposed to leverage and maintain investments undertaken by public partners in AREDSprojects. However, the long term role of the private sector is not yet straight forward in some projects running withinAREDS. After the initial design stage, these projects are now in the crucial phase of getting the buy-in from privateinvestors. This buy-in needs to be secured before actual project implementation starts, i.e. at the beginning of 2009.The private sector is still in the waiting position and skeptical: “How seriously are they going to take us?” is thequestion some business people ask while they observe the planning processes of projects.

3.3.2.6 Other public sector organisations

In a variety of projects, local municipalities, ADM and Aspi re work closely with public development institutions likethe provincial Eastern Cape Development Corporation (ECDC):

Together with these organisations, investment opportunities are identified in order to share and leverage resourcesfor investment (example Butterworth regeneration: ECDC property for development). AREDS projects complementdevelopment initiatives of organizations like ECDC with projects that focus on the development of soft factors suchas skills (example: A forestry development initiative by ECDC with a wood processing plant in Stutterheim andHamburg is complemented by a skills development initiative by Ngqushwa Local Municipality and Aspire in thearea.). Aspire co-finances together with ECDC feasibility studies and lobbies jointly for public sector infrastructuresuch as transport, water, infrastructure (an example is the feasibility study that was done to analyse the conditionsfor a plantation for blueberries in the Stutterheim area).

3.3.2.7 Civil society

Local communities have to be involved in LED processes as they are the constituency of the municipalities. There isdirect involvement of local communities: There are projects in which Aspire has directly been asked to provideassistance to local communities in terms of empowerment, trust fund management and community management(Examples are the Cebe Community Trust or the Dwesa Cwebe Community Trust). This involves processes thatbring the traditional and the government system closer together in order to ensure inclusion and improved servicedelivery. These projects include economic development, but not as a sole dimension. In other projects, it isimportant to secure the buy-in from leaders of local communities and of the civil society for corridor development.This is a good entry point for the mobilization of the civil society for stakeholder participation and in kind contributionin project implementation.

Indirect benefits for local communities arise from employment and income opportunities created through theAREDS projects. As stated by some representatives from local municipalities, it is important to equip the membersof local communities with corresponding skills in order to enable them to respond to these opportunities. However, itcannot be the role of an agency like Aspire to support communities in organizing themselves. Here, it would beimportant that local municipalities have resources available to work with communities in order to prepare them andenable them to respond to employment and income opportunities.

3.3.2.8 Aspire

Aspire’s role ranges from reactive (as adviser) to proactive (as implementer). This requires an ability to playdifferent roles depending on the context and the set up of projects.

As an adviser

Aspire has competencies in specific areas, such as the understanding of and alignment to the legislative andnational policy environment. Its role here is to advise government at different levels in terms of strategy and policydevelopment and coordination. For example, at regional level, Aspire advises the ADM in the coordination ofdecision makers to inform regional policy (see the Inter Governmental Relations (IGR) Forum). Aspire has technicalknowledge and provides expert guidance to municipalities. Its role here is to advise partners, especially localmunicipalities, in project management.

6See the suppliers’ database on http://www.aspire.org.za/supplier_start.php.

21

The NDPG at a glance9

The NDPG fosters partnershipsbetween key stakeholders at alllevels – project, municipal, provincial, regional and national level– in the public and the private sector to tackle the challenges oftownships, low-income housing estates, areas and town centresas well as informal settlements.

While the NDP Grant does not exclude small towns and its ruralhinterlands, it has a clear focus on interventions in townshipareas and does not elaborate on the challenges that the areasof former homelands face.

The NPDG supports interventions in the following areas:

• Strategic economic development projects: sustainable longterm economic development including regenerationstrategy;

• Land use restructuring: spatial restructuring, diversificationof land use;

• Stimulating property markets: development of a secondaryproperty market;

• Purchasing power retention: increase of share ofhousehold purchasing power;

• Public sector investment as catalyst and leveraging of nongovernmental investment: maximization of leverage of nongovernment funding by private sector, NGOs andcommunities;

• Ensuring municipal support: active and full support andinvolvement of local authorities to bring on board privatesector and community involvement;

• Kick starting regeneration: development of a broadregeneration strategy and kick start as catalytic projects.

The Grant consists of a Technical Assistance Fund and aCapital Grant Fund:

1. Technical Assistance Fund for: preparation of developmentstrategies and plans, identification of projects to supportregeneration plans, feasibility studies, development ofbusiness plans for the release of capital grant funding,funding of training, capacity building, facilitation, projectmanagement.

2. Capital Grant Fund to: construct, purchase, refurbish andreutilize any public facilities or places that local governmentnormally supplies.

Important eligibility criteria:

• An overarching regeneration strategy needs to be in placethat shows the linkages at different levels (local, district,provincial, national), opportunities for learning andinnovation and contributions from local communities, smallbusinesses and other local role players.

• The proposed funding of public infrastructure, places andfacilities needs to show how private and community sectorinvestment will be attracted.

• Investments need to both address a need and contribute tothe economic and social development prospects of an areaand leverage investment from public and private sectors(examples: public transport linkages, tourism precincts,heritage, cultural, traditional amenities, revitalization ofexisting centres, informal trading facilities).

3.3.4 Catalytic projects

The strategy formulation process based on the Genesis methodology had identified catalytic projects that have astrong leverage and/or multiplier effect by addressing a critical market failure, or by creating a strong leveragefactor.

Within the AREDS strategic framework, several projects are running that fit into one or more of the followingcategories:

• Investment and infrastructure projects that aim at the rehabilitation of abandoned industrial estates and land,creating for example a small business estate;

• Projects that address critical gaps in skills development and support services such as linking BDS providers andSMEs;

• Sector development projects that look at the strategic development of a sector like tourism.

All projects are run with a multi-stakeholder approach, including local municipalities and the business sectors. Foreach project, there are different responsibilities. In some cases, the local municipalities are the project managers,with assistance from Aspire. In other cases, Aspire acts as the project manager on behalf of a local municipality.The stakeholders work together in a flexible project approach that aims at identifying the best expertise andadequate role “to get the job done” for a specific project.

In order to know how the running projects were identified, it is important to understand the background of eachproject. Based on this, projects can be grouped as follows:

9See www.treasury.gov.za/ndp for further information.

17

by the council’s LED portfolio head. In monthly meetings of the cluster, Aspire reports on progress of projects. Inthis forum, Aspire can get political support from the ADM council as well as technical support from the ADMstrategic manager.

AREDS with its multiple dimensions introduced complexity to the implementation and management of the strategy.For this reason, a “framework” for implementation has been devised for which ultimately ADM is responsible.However, up to date it is not clear how ADM monitors progress in terms of strategy implementation and how it givesstrategic guidance to the different role players working in the AREDS projects.

3.3.2.4 Local Municipalities

Local and district municipalities have a broad mandate to act as a catalyst for sustainable development. In the viewof only 6% of the national budget directly being allocated to local municipalities, there are resource constraints inmunicipalities that lead in many places to underperformance of economic development and growth.

At the same time, local municipalities are confronted with high expectations from their voters in terms of socialredistribution and are held responsible for the state of the economy and the lack of growth. There is a broad beliefthat government interventions are needed for any economic turnaround. In this light, AREDS is broadly accepted bylocal municipalities to bring clarity into roles and responsibilities of the different role players in the Amathole districtin terms of LED. And there is an understanding that an EDA like Aspire can support local municipalities inimplementing AREDS and performing in LED:

• An EDA can act as the project manager on behalf of a local municipality. Some municipal managers and LEDofficers are aware that with the limited resources at hand, a project approach to any development initiative is theonly feasible way. In this case, the role of the local municipality focuses on strategic orientation and monitoringof project implementation.

• In order to implement AREDS successfully, increased coordination among local municipalities is needed. Thiscan have the benefit of streamlining similar initiatives, optimizing resource allocation and focusing oncomplementarities (who can bring in what is best into the collaboration). In this case, municipalities areresponsible for driving and managing this process, while a EDA can ensure this coordination and feed into itwith technical assistance, information and advice.

• An EDA has a stabilizing role to play in the face of high staff fluctuation in local municipality and is seen as aknowledge centre where good practices in LED are fostered and technical assistance and advice can beprovided for (new) staff responsible for LED.

However, there are still some concerns about how AREDS will contribute to improved delivery and increased overallsustainable development:

• The major challenge of social development, service delivery and expectations management from theconstituency are not met with a strategy like AREDS. As some representatives stated, the work that comes withAREDS in terms of coordination and project responsibilities is additional to the job description of staff of localmunicipalities and does not help to deal with this major challenge.

• There might still be a missing understanding of how LED leads to increased employment and incomeopportunities. It seems that the two concepts of economic and social development are still not related to eachother. Economic development seems to be perceived as benefiting some, but not the whole of a constituency.

3.3.2.5 Private sector

The AREDS strategy has identified catalytic projects that have a strong leverage and/or multiplier effect byunlocking resources and business opportunities. The projects address issues that will not be addressed throughbusiness entrepreneurship because the risk is too high, the amortisation period too long or the immediate profit toolow. In other words, they address issues that hinder investment from the private sector. For example, byregenerating retail and services hubs in Butterworth or Stutterheim, space for investment is developed. So, theprivate sector is an investment partner for AREDS:

• For example when the private sector proposes investment initiatives (like in the case of the AmabeleBlueberries) where the local municipality can support this initiative by providing corresponding infrastructure (inthis example by renewing the Amabele train station that is important for the transport of the blueberries).

22

• Existing projects of local municipalities: Before AREDS came into the picture of LED in the Amathole district,there were already many different projects running by local municipalities. Based on AREDS and its four keyinterventions, these projects could be streamlined or are currently in the process of being streamlined.

Examples: The Butterworth Urban Renewal Program (BURP) of the Mnquma Local Municipality was integratedinto the Butterworth Regeneration Strategy that focuses on Butterworth as a whole and not only on factoriesand their utilization. Plans to build milling plants for maize in the N2 Corridor are currently streamlined so thatthere is one plant with a strategic location for all surrounding municipalities.

• Participatory processes to identify new projects and coordinate existing projects: After the identification of keysectors in the corridor, Aspire facilitates participatory processes in the N2 and N6 Corridor that aim at identifyinginvestment opportunities for sector development. These processes are in the logic of AREDS that buildscompetitive advantages of selected sectors through investments with leveraging effects.

Example: The development of the N2 Corridor will be focused on four key interventions: Wild Coast tourism,black granite development, development of Dutwya as a service centre for retail, education, services and agroprocessing, agricultural value chain development. In order to prepare these interventions, Aspire facilitates aparticipatory process that has established the N2 Corridor Economic Summit that will develop the N2 Corridorstrategy. N2 Investment Conferences on key economic areas identified are conducted in November 2008.

• Projects identified by investment partners: some projects have been brought forward by the private sector.

Example: Blueberries are a high value crop that grows very successfully in the Stutterheim area. A businessgroup named Amathole Berries, supported by ECDC and IDC, has recently purchased a 410 hectare farm tobegin a plantation of 250 hectares of blueberries in the Amabele area. The aim is to grow 560 hectares whichwill create permanent, but seasonal (September – March), jobs. Under the overall coordination of the Amahlathimunicipality, Aspire supports the investment by planning the renewal of the Amabele village and train station.

• Projects that increase the revenue base of local municipalities.

Example: The coastal village of Hamburg is developed in to a tourism economy anchored by the Arts colony,accommodation, leisure, etc.

Most projects are currently in their design stage: After the identification phase, Aspire together with partners andstakeholders did further needs and capacity assessments as well as compiled pre-feasibility studies. This projectphase was in its main parts concluded mid 2007. Activities over the last 12 months have focused on the designstage:

• Resource mobilization and stakeholder buy in;

• Contract agreements with funders and service providers;

• Capacity building and institutional preparedness for project implementation.

A main emphasis thereby was on the development of regeneration strategies, spatial development plans andbusiness plans. Over the last few months, the majority of the projects have completed the design stage of theproject cycle. 17 projects are ready to enter the implementation phase which will start with full steam at thebeginning of 2009. The projects can be characterized as regeneration, corridor development, anchor and projectsthat are directed to community development (in terms of empowerment and community management).

3.3.2 Roles and responsibilities of stakeholders in AREDS

3.3.2.1 Overview of the institutional landscape of Amathole district

There are many organizations and institutions that work towards the performance of LED:

Support

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Figure 7: Institutional landscape of Amathole district

At the national and provincial level, organisations like the dplg or the dti provide the legislative framework for LEDas well as support in terms of resource allocation for implementation. International development partners supportcapacity building for implementation. And at the local level, local and district municipalities have a mandate for LEDperformance. Aspire has a complementary role within this institutional landscape, that of a coordinator andfacilitator.

3.3.2.2 Clarification of roles

An important outcome of the AREDS strategy formulation process is an increased understanding of roles andresponsibilities of role players in the Amathole district. As stated in interviews of stakeholders participating in theprocess, the basis for further cooperation in the district was laid in the workshops:

• Partnerships sparked during the process started to grow and establish themselves, based on high quality ofconversation and dialogue during the process.

• Local municipalities initiated processes and conducted workshops to align their LED strategies to AREDS,based on their involvement and learning in the process.

• The political buy-in led to special council meetings to discuss the outcomes of the strategy process.

• An increased understanding of tasks and roles in the district, including Aspire’s role, implied a collaborativeapproach to economic development in the region rather than in individual localities.

To conclude, the Genesis methodology initiated a change in the mind set and the way of how the different roleplayers work together. The process provided for a good starting base for strategy implementation and enabled thedifferent role players to identify their roles within the AREDS strategic fram ework. The next chapters elaborate onthe understanding of roles of each stakeholder in the Amathole district.

3.3.2.3 Amathole District Municipality (ADM)

The ADM is the actual owner of AREDS and responsible for its implementation. ADM’s principal task is to provide aregional strategy and policies and to give directions in terms of resource allocation and governance. Another task ofADM is to support local municipalities to build capacity and assist them in social and economic development. Aspireis the ADM LED Unit’s implementing arm to perform these tasks.

16

When ADM set up the economic development agency (EDA) Aspire and mandated it with the development ofAREDS, it made an important commitment towards regional economic development. The agency acts on behalf ofthe ADM and reports directly to the ADM’s council via the so called LED and Environmental cluster which is chaired3

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23

The overall impact chain of AREDS is illustrated in the following figure:

Figure 6: Impact Chain of AREDS

The impact chain shows how the key intervention areas of the AREDS strategic framework lead to outputs that aim

at systemic change in the regional economy by providing for: business retention and expansion, vertical integration,

new startups, improved supply chain management and business turn arounds. These systemic changes will

ultimately lead to economic and social impact.

15

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14

The corridors selected in the AREDS follow the main routes in the Amathole district and have priority sectorsidentified:

• N6 Corridor (East London to Cathcart): potential in forestry and timber production

• N2 Corridor (East London to Elliotdale): potential for tourism, livelihood development

• R63 Corridor (East London to Hogsback to Bedford): potential for adventure tourism and forestry, heritagepromotion

• R72 Corridor (East London to Great Fish River): potential in arts and tourism

Within these corridors, there are several small towns that benefit from spillover effects from corridor development.There is interdependence between small town regeneration and corridor development: so called anchor projects insmall towns usher regeneration and can boost development in sectors and value chains related to the anchorproject.

Example: In Hamburg, the establishment of an Arts Colony has been identified as an anchor project for theregeneration of Hamburg, but also has an impact on and leads to interventions in other sectors such as tourism inorder to improve quality of service and products.

AREDS is aligned with the Integrated Development Plans (IDP) of all local municipalities of Amathole5: The

aggregated efforts of all players in the district should contribute to the AREDS impact indicators and targets for

2014:

• 60% of households earn an income

• 50% of households have an income above the minimum living level (MLL for a household of 5 persons isapprox. R 17’000 per year)

5See link to the IDP of Amathole: http://www.amathole.gov.za/documents.asp?cat=3 .

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25

For the different result areas, projects have been identified in the four corridors. The projects in the aboveframework are a selection. Please refer to chapter 3.3.5. for a detailed description of these projects. Note: theprojects may fit into several result areas.

The framework allows stake-holders to focus on their area of interest and expertise, while at the same time allowingthe multiple inputs to contribute to the overall development targets of AREDS. The strategy is the basis from whichto guide economic development planning for all role players in Amathole, as well as resource allocation,implementation and institutional arrangements and to identify catalytic projects.

3.3.1.2 AREDS Concept of LED

According to the Genesis logic, catalytic projects identified within the AREDS strategic framework need to:

� Leverage (public and private) investment;

� Leverage impact in terms of quality employment for the Amathole citizens;

� Leverage private sector participation.

Catalytic projects are allocated in the four corridors along the main routes in Amathole district.

Example of a catalytic project: The Amabele train station development is part of a larger investment: a privateinvestor is investing in a plantation of blueberries. The investment is leveraged with investments by ECDC and IDC.This will create permanent as well as seasonal jobs and will leverage further privateinvestments around the trainstation in Amabele village.

These projects are part of corridor development that aims at ensuring the development of sectors with comparativeadvantage in localities that are linked both spatially and along value chains. In this approach, small towns play anessential role in linking rural with major urban centres. And it aims at ensuring coordination between the various roleplayers in the locality and across local entities such as local municipalities.

Figure 5: Amathole Corridor Management

13

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26

3.3

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27

11

performance of others. For example,tourism was hardly to succeed without a well performing retail and servicessector.

This led to a move away from sector development to looking at interdependent supply chain opportunities along thefour main routes – or so called corridors – in the district: For each main route, representatives of local municipalitiesand the business sector along the route looked deeper into each economic sector identified as relevant andidentified sector specific constraints and potentials as intervention areas to strengthen the sector. Building on theoutcomes of the aggregated scenario above, the corridor workshops identified common issues that are consideredbarriers to economic growth in Amathole district:

� Infrastructure: outdated, inadequate and poorly maintained infrastructure is an impediment to cost effectiveenterprises;

� Land related issues: this includes the resolution of land ownership and use rights in both rural and urbanlocalities. It relates to the use for agriculture and settlement as well as to land for investment for productionfacilities and offices;

� Lack of competitiveness of the sectors and localities: there is inadequate technical and system support acrossall sectors (e.g. for maintenance) and there are inadequate or inappropriate skills as a main constraint forgrowth;

� Governance: there is a lack of governance systems and capacity that hinder enterprise growth anddevelopment.

These four barriers identified laid the ground for the next and final step of the AREDS strategy formulation process:The stakeholders in each corridor identified key interventions and corresponding result areas based on theCompass methodology in order to tackle these barriers:

The Compass methodology4

addresses local competitiveness and is a performance management tool to monitorand assess the strategic approach to and the progress of LED initiatives, in this case the AREDS. The objective ofCompass is to define the result areas of the AREDS in key intervention areas:

1. Economic sustainability: How can we guarantee sustainable LED?

2. How do we need to interact with other stakeholders to make LED a success?

3. The learning perspective: how to ensure that we constantly upgrade our understanding of our economic realityand of LED?

4. How do we have to organize our LED process and effort internally to assure its effectiveness?

The key idea is to introduce a wider, more balanced set of performance indicators that is not one-sidedly looking atfinancial and other economic indicators but also at other, more qualitative indicators that address the long-termgrowth perspective of the local economy.

In corridor workshops, the guiding question was: what do we want to achieve with AREDS in these four keyintervention areas? This then led to the formulation of a limited number of result areas per corridor. This workprovided the ground for the AREDS strategic framework (see next chapter) that provides guidance for strategyimplementation and for identification of catalytic projects.

3.3 Results of the strategy formulation process

3.3.1 AREDS Strategy

Amathole Regional Economic Development Strategy (AREDS) is a multistakeholder strategy for developing aglobally competitive economy that supports the social and economic aspirations of the district over the next twentyyears.

4This has been summarized from: GTZ, Compass of Local Competitiveness, Manual Version 0.2, October 2006.

28

4 Interpretation of findings from interviews

The information gathered from the interviews with representatives of local municipalities, the district municipality,provincial bodies and Aspire allow for insights into the implementation of AREDS and for recommendations forimprovement.

4.1 AREDS concept of LED

Key message: All interview partners know about AREDS and its ongoing project activities; and they understand itsconcept of corridor development.

In all interviews, there was one outstanding aspect: all interview partners have a well informed idea of AREDS andits corridor development approach that builds on comparative advantages of the Amathole District. Furthermore, theinterview partners were well informed of ongoing project activities in the district.

The interview partners recognize the importance of a spatial as well as a sector approach and the need forcollaboration between all the relevant role players and beyond municipal borders. The concept of corridordevelopment is tangible and helps to specify the roles of each stakeholder in a corridor. As a representative ofECDC states, a focus on key issues like infrastructure and education for example in tourism allows ECDC tocomplement Aspire in bringing issues in terms of tourism development to the provincial and even national level

The concept of corridor development has an immediate effect on thinking of local government: for example in theN2 Corridor, there are three local municipalities. In meetings around the N2 Corridor development, for the first time,the three mayors, three LED managers and the three municipal managers were talking together about an economythat transcends their municipal lines, tackling a lack of coordination and collaboration in interventions as well asavailability and allocation of resources.

This common understanding can be attributed to the effectiveness of the Genesis methodology during the AREDSstrategy formulation process as well as to Aspire’s engagement with and communication to its stakeholders duringthe implementation of AREDS. It lays the basis for the successful funding applications that local municipalities andAspire handed in together to funders such as the NDPG or DBSA.

4.2 Increased collaboration

Key message: There is indication of increased collaboration, for example some strategies at the local and districtlevel are currently being streamlined with AREDS.

AREDS has initiated a wide range of projects that all build on a multi-stakeholder approach. The strategydevelopment process has contributed to an improved understanding of roles and responsibilities between localmunicipalities, the district municipality and Aspire. Indication for this is the fact that currently some strategies at thelocal and district level are being streamlined. It is important to mention that many role players in LED in the districttry to optimize their capacity and resources by collaborating with each other and creating synergies. However,within the existing legislative environment in which each local municipality has a LED mandate and resources cannot be shared or leveraged, there will always be limitations to how far synergies and collaboration can go.

4.3 Alignment of local strategies

Key message: No municipality is obligated to accept AREDS and implement projects within its strategic framework.However, there is much indication for alignment of strategies as well as activities.

The AREDS is a strategic road map for all role players in the region and allows local municipalities to develop theirown LED strategy aligned to AREDS:

In consultative processes, the ADM and Aspire aim at ensur ing the alignment of various strategies in the district.This leads to alignment processes of LED strategies in some local municipalities. Although there is no obligation forlocal municipalities to participate and buy-in to AREDS, there is a big involvement in terms of coordination,participation, implementation of projects and strategy alignment. Municipalities seem to recognize the benefit ofincreased coordination and collaboration that optimizes their scarce resources and that helps them to increase theperformance in LED.

10

Flattering to Deceive: Skills, but no co-operation

The skills development programmes are up and running and graduates can be expected within two years, their

guarantee of jobs in the companies where they will be interned is dependent on the economy growing fast

enough to absorb them.

There are signs however that government is finding it difficult to trust market forces as well as business

commitment to growing the economy and labour market. The end result could be that established business

becomes even less convinced of government’s real commitment to the formal economy or its ability and

willingness to play its part in improving the competitiveness of the area. This seriously affects economic

confidence and many of the people who were trained during the heady days after the initial wave of enthusiasm

abandon ship and head for greener pastures. Business withdraws its support for the training facilities and they

close down in frustration.

� Slim Pickings

It is a vicious circle that gets tighter and is plummets in freefall. Business blames government for its inability to

compete because of the local cost of doing business and the fact that they are not training people fast enough

to keep up with those dying of Aids.

Government blames business for shedding jobs, not paying their people properly and making absolutely no

effort to contribute to economic transformation. The gap between the first and second economies grows and

social instability gets to flash point. There is no sign of any real co-operation between established business and

government with the possibility that business will either leave or threaten to do so and government will be forced

to introduce random subsidies for certain large manufacturers.

While this is going on Coega gets stronger, ships bypass East London because the harbour is too shallow,

Durban doubles the capacity of its harbour and wins the 2016 Olympic Games and tourists just stop coming

because the region is just so depressing. As for work opportunities, they are few and far between and the

people that left are squabbling over very slim pickings.

� Relegation Zone: Good governance, but no skills

The National Spatial Development Programme has identified Buffalo City as a high potential node and has

made funds available to fund high potential projects. Government and business have started to talk to each

other with the establishment of the Amathole growth coalition a real possibility.

But, there could be a problem on the horizon where both government and business may be caught by surprise.

Should the plan to fast track skills development not materialize, Amathole could find itself on the back foot and

squeezed between low cost producers of commodities from countries like Mozambique, DRC and Angola and

highly competitive value added producers like China, Korea and India who are likely to sell their product in SA

at lower cost than we can currently produce. Should this happen unemployment will increase because more

businesses may leave, small farmers may have to dump their crops at below cost, value adding processors

may close down and the partnerships and new business ventures built on the back of the infrastructure roll out

may not survive. To survive in the competitive game of world competition you need the best trained team

playing at the top of their game and supported by a great management structure! If not expect to be relegated

to the local league.

Phase 4: Competitiveness and catalytic projects

With these scenarios in mind, the stakeholders made a major breakthrough, based on the fact that the majordevelopment axes in the district are along the four main routes: In sector workshops, the stakeholders realized thata focus on individual sectors did not allow for the fact that in many cases each sector was interdependent on the

�

29

But is also implies major efforts from all role players to constantly ensure mutual information and alignment ofstrategies, plans and processes. In AREDS, projects are defined beyond municipal borders and requirecollaboration between several local municipalities. As a representative of a local municipality put it: “The more roleplayers there are to identify investment and development opportunities, the easi er the job to achieve the mandate.However, the implication in terms of coordination is huge.”

4.4 Identification of catalytic projects

Key message: For new projects, there needs to be a transparent process that shows how those projects are

selected that have the highest potential in terms of leverage and employment and income opportunities.

Responsibilities for the AREDS projects are not always the same since they depend on the best expertise available

for each project. In some cases, the local municipalities are the project managers, with assistance from Aspire. In

other cases, Aspire acts as the project manager on behalf of a local municipality. At the same time, Aspire and its

partners react opportunistically to funding opportunities that may come up and imply new or revised projects or

project components. And there is a lot of dynamism as projects develop that does not allow to stick to rigid project

cycle management: priorities of municipalities may change over time, original ideas need to be revisited, etc.

Regardless of this flexible approach to project planning and implementation, all projects running under AREDS fit

into one or more of the result areas of the AREDS strategic framework. There is coherence in the approach to

project selection within the AREDS strategic framework.

However, the overall impact orientation of projects in terms of increased employment and income opportunities as

defined by AREDS is not always clear. AREDS requires projects that have the potential to:

• Leverage (public and private) investment;

• Leverage impact in terms of quality employment for the Amathole citizens;

• Leverage private sector participation.

For the majority of running projects, it remains unclear how they contribute to these criteria and ultimately to

increased employment and income. For new projects, there is no clear and transparent process defined that

ensures that projects with high impact are selected.

Example: the Butterworth Regeneration project has acquired a budget of R 140 Mio. from the NDPG. While it is

obvious that infrastructure projects are expensive, it is important to show how this investment will contribute to the

economic development of Butterworth and to employment and income in the region, indicators specified in AREDS.

The acquired funding volume is per se no indicator for impact.

4.5 Monitoring and impact assessment

Key message: ADM has no system in place to monitor project progress and measure future impact as contributionto AREDS.

ADM is responsible for AREDS and its implementation. The AREDS strategic framework provides for a monitoringframework for ongoing activities in LED in Amathole by different partners. However, it is not clear how ADM is doingthis monitoring of project progress that would also allow for corrective measures if necessary. And there is noinformation available on how ADM intends to do the impact assessment of these projects.

Aspire has developed a framework to monitor project progress and intends to measure impact in four areas: Places,people, business and partnerships:

(1)

Phoenix

“a mythical bird that dies in

flames and is reborn from the

ashes”

(2)

Flattering to Deceive

“All dressed up and nowhere

to go”

(4)

Relegation Zone

“Without the right players you

only play in the lower

leagues”

(3)

Slim Pickings

“living off, and fighting for

scraps”

Government & Business ...Partners in Growth

LED is the responsibility ofGovernment

Training is awaste of time and

money

Skills Development…We are in this

together

The following scenario framework has been aggregated from the individual sector workshops by Colin Mitchell and

captures the essence of the individual scenarios written during those workshops. It outlines the outlook for the

Amathole economy depending on decisions that stakeholders take. It is an exercise that illustrates how the right set

of decisions can impact economic development positively – or how devastating the wrong decisions can be on

employment and income. It also highlights the consequences of a collaborative versus a non collaborative approach

between the public and private sector.

Figure 3: aggregated Scenario Framework for the Amathole economy

In the following, each scenario is explained:

� Phoenix

Business and regional government commit to working closer together for the economic and social benefit of the

region. Government begins a process of withdrawing from interventions that distort the market, give certain

sectors and people an unfair advantage and waste money on interventions that are not sustainable.

Business commits to the principle of BEE as a means of social transformation. They start to actively seek ways

to build partnerships with emerging business and people in the 2nd

economy.

Within 5 years, graduates from the training schools and mentorship programmes have changed the labour

market, no longer are people dependent on collective bargaining and minimum wages, they now have choices

as business is competing for and rewarding skilled people for their contribution to productivity.

Truly the Amathole region, like the Phoenix has risen from the ashes of its political past and is flying proudly, a

vibrant example to the rest of South Africa.

9

The responsibilities of ADM and Aspire in terms of monitoring and impact assessment need to be clarified and streamlined

– and corresponding systems need to be put in place that are transparent and measurable. In order to do so, Aspire is

currently preparing an application to the EU that ADM would co-finance that aims at establishing a project management

unit especially dedicated to Monitoring and Evaluation and funding mobilization.

This chapter elaborates on the role and performance of Aspire as a regional economic development agency andallows to draw up some lessons for EDAs in general.

4.6 Role and performance of Aspire

4.6.1 Establishment of Aspire

Figure 8: Key Performance Indicators of Aspire

Key message: a newly established LEDA needs resources to develop its strategy on how it will contribute to LED in anexisting context.

When Aspire was established, the agency had no strategy for its mandate in place. It was only with the AREDS strategyformulation process that it was gaining a perspective of its own role and understanding the need for an own strategy thatoutlines its contribution to AREDS. Aspire approached GTZ who at that time was supporting the AREDS process. GTZagreed to support alsoAspire's strategy development by providing an LED consultant.

Any agency that is established needs to undergo a strategy development process in order to understand its mandate withinits context of LED.And it is important that resources are provided to these agencies in order to be able to do so.

4.6.2 Communication

Key message: Communication with stakeholders can be improved by Aspire in order to ensure that stakeholders andthe community understand the role of LED in overall development.

In some municipalities, there is still a lack of understanding of LED and how it contributes to overall sustainabledevelopment. At the same time, the primary concern of many representatives of local municipalities is social developmentand redistribution.

Aspire has a role to play in explaining how LED relates to social development by creating employment and income. It has toanswer the questions:

· How does LED contribute to social development by creating employment and income?

· How do the individual projects contribute to increased employment and income?

This will help to address the concerns in regard to social development and clarify what LED is.

30

8

The inclusion of development agencies to the Municipal Finance Management Act (MFMA) has createdinsecurity about the role and desirability of Aspire in the district municipality and local municipalities.

� There is “lip service cooperation” on the surface but signs of distrust and passive resistance towards ADM fromlocal municipalities. Political agendas were a threat to many initiatives and discussions.

Based on these concerns which were confirmed by officials and business people, the needs of ADM and Aspirewere:

� To develop a shared understanding of the conceptual positioning of LED with regard to enterprise developmentand social transformation and upliftment;

� To develop a better understanding of the role of government in economic development and of key economicdrivers in the district;

� To develop an improved communication model between ADM, local municipalities and the business sector;

� To clarify the role, responsibilities and delegated authority between ADM and Aspire.

In order to initiate the process, the following stakeholders in the Amathole district were mobilized:

Amathole LED Portfolio Committee, Aspire Board of Directors, ADM LED management team, Border Kei Chamberof Commerce, regional Mayors Forum, regional Municipal Managers Forum, provincial departments andorganisations (Department of Economic Development and Environmental Affairs, Department of Agriculture,Department of Environmental Affairs and Tourism, ECDC).

The process started with workshops at the regional level in which these stakeholders participated. The objective ofthese workshops was to introduce the stakeholders to the strategy formulation process, its goals, steps andmethodology.

Phase 2: Data Mining

The research phase of the Genesis process focused on Amathole as a locality and its economy in the context of thenational and provincial space.

The district has four main routes along which the main development axes lay: R63, R72, N2, N6. Along these routesare situated major urban centres such as East London and smaller towns.

In terms of infrastructure, there is the port located in East London and two airports, one in East London and one inBhisho. Road infrastructure is only recently being upgraded and there are many challenges of long neglectedinvestment and maintenance. In general, there has been a lack of investment in economic infrastructure. This hasalso to do with the fact that there is dispersed settlement in the area and the related agricultural practices of theformer homelands. People in the area have access to land, but do not hold any land titles, so trading of land is notpossible.

An analysis of the economic sectors indicates that the public sector is the most important sector in the district, evenmore important than the service and retail sector. This implies a dependency on funds by transfers from outside theregional economy. Based on an analysis of economic sectors and their importance for the regional economy andtheir capacity to absorb labour, the manufacturing, the agriculture and the tourism sector were identified. Sincemining contributes only a small part to the regional economy, it is not included.

Based on this economic analysis of the Amathole district, the following conclusions can be drawn:

� The bulk of the areas in the district were former homelands. This implies social and economic implications suchas lack of investment in human capital, lack of social capital and lack of infrastructure investment.

� There have been only limited economic infrastructure investments, resulting in ineffective linkages with theeconomic centres in the district.

� There has not been significant investment in agricultural infrastructure in the past so that the potential of thissector has not been realized.

Phase 3: Fact finding and scenario building

In sector workshops, the stakeholders developed different scenarios for the future development for each economicsector: the manufacturing, the agriculture and the tourism sector.

�

31

4.6.3 Mobilization

Key message: Aspire has platforms for interaction with stakeholders in place that allow for awareness creation andmobilization.

Mobilizing stakeholders for new projects or for running projects is an ongoing process that has to ensure thatstakeholders understand what role they have to play in LED and how they can play it. A variety of platforms aremanaged by Aspire for communication with stakeholders at national, provincial and district level, examples are:

• Corridor Summits (stakeholder foras per corridor)

• Events for Service Providers (on project activities and procurement processes)

• Up to date webpage with a section for service providers

• Involvement in strategy planning processes of the ADM and the local municipalities, e.g. review of the ADM IDP

• Annual Small Town conference (on the concept and promotion of small towns)

• Involvement in national foras on LED, e.g. the LED Forum organized by the dplg

This results in the high awareness of local municipalities of AREDS and ongoing activities as well as commitment interms of coordination and collaboration.

4.6.4 Expertise

Key message: Aspire manages to combine expertise in facilitation with technical expertise.

Aspire’s main role is the facilitation of planning and implementation processes for selected projects and coordinationof stakeholders in these processes. As confirmed by interview partners, Aspire manages these processes well. Atthe same time, Aspire staff is regarded highly competent in technical aspects.

Aspire as an organization manages to combine these two very different competences: the one of facilitation with theone of technical expertise. This is highly relevant for Aspire’s task of constantly mobilizing stakeholders andconvincing them about the relevance of projects.

Aspire emphasizes the importance of research: it is often not clear at the beginning of a project intervention what isrequired and what the intended impact will be. Therefore, Aspire applies an approach of research, pre-feasibilities,market analysis, etc. This is at times considered too time-consuming or perceived as unnecessary by Aspire’spartners. However, it is an important investment (in terms of time and financial resources) to assess theappropriateness of projects.

4.6.5 HR issues

Key message: Constant facilitation and coordination can be exhausting, therefore the Aspire staff needs to beinvolved in concrete and tangible project results.

As communication to and mobilization of stakeholders is an ongoing task within the mandate of facilitation andcoordination of LED initiatives in the Amathole district, constant interaction with stakeholders, especially local anddistrict municipalities, is one of the main tasks of Aspire staff. This process can be rewarding as well as exhausting.Sometimes commitments can change due to changed priorities in the municipalities. Then projects turn out to bevery different than originally planned.

This can be tiring and sometimes frustrating for Aspire staff. Therefore, careful management of staff is crucial tomaintain the high level of involvement and motivation in the mid to long run. There is probably no recipe for this, buta good mixture between facilitation and coordination and project management – that allows for concrete andtangible results – might be helpful.

Figure 1: Genesis logic

There are several critical success factors of the Genesis methodology, with the scenario writing and verificationbeing the most crucial one. Scenario writing is about identifying possible and plausible alternative futures for asector. The purpose of scenario writing is

� To help local stakeholders understand that there is more than one possible and plausible future;

� To help local stakeholders to think outside the box;

� To catalyse the process of understanding stra tegic variables and create strategic alignment;

� To create a framework that assists in the prioritisation of catalytic interventions.

In the AREDS strategy formulation process, an approach for scenario writing was used that identifies factors thatwill shape the future and picks the most influential factors. Please refer to the next chapter for illustration.

3.2.2 Genesis in the case of AREDS

This chapter looks at the outcomes of the strategy formulation process applying the logic and methodology ofGenesis; it looks at steps in each phase of the process that are specific to the Amathole district and how theyinfluenced the actual outcome, the Amathole Regional Economic Development Strategy (AREDS). Genesis was thestarting point for the process as well as the underlying logic to the process that developed its own dynamism withinthe Amathole context.

The Genesis process applied to the AREDS strategy formulation consisted of four main phases:

Phase 1: Contracting, organization, mobilisation

Special emphasis in this phase was given on understanding the current thinking and challenges of the ADM andAspire in terms of LED. Main issues which were of concern to the two were:

� There was a conflict between what government can do in terms of legislation and what they believe is theirresponsibility in terms of voter expectations.

7

Phase 1:

Contracting ,

organisation ,

mobilisation of

stakeholders

Phase 2:

Data mining

(identification of

economic potentials )

Phase 3:

Fact finding and

scenario building in

economic sectors with

potential

Phase 4:

Competitiveness and

identification of

catalytic projects

After the process:

Fesaibility studies,

elabroation of business

plans , implementaiton

of catalytic projects

Figure 2: Genesis process phases

32

4.6.6 Institutional arrangements and the legislative environment

Key message: There is a need for guidance and coordination in terms of LED tasks and responsibilities and the roleof EDAs. Therefore, the dplg and IDC have jointly developed Guidelines for Local Economic Development Agenciesas Municipal Entities.

Aspire is a Proprietary Limited company, wholly owned bythe Amathole District Municipality (ADM) which impliesthat the agency falls under the Municipal Finance and Management Act (MFMA). Based on the Act, Aspire reportsto the ADM and needs a mandate from the ADM for any work it undertakes. Direct agreements with other partnersare not possible.

• This hampers the flexibility and dynamism of the agency, but at the same time allows for streamlining ofmandates in regional economic development.

• The MFMA is very restrictive in terms of procurement processes. This leads to lengthy and inflexible processesthat forbid long term partnerships with service providers. Aspire’s argument for long term partnerships withservice providers is that service providers learn to apply Aspire’s concepts and this is another form of capacitybuilding for regional economic development in Amathole. Time and resources are lost every time that acompletely new procurement process has to be launched.

• It is problematic for Aspire to implement projects on behalf of local municipalities since under the MFMA, Aspirebelongs and reports to ADM. There is no specification in the MFMA of how a regional economic developmentagency is supposed to deal with this “double mandate”.

Aspire has a board to which it reports. At the same time, as a company owned by the ADM, Aspire reports to theADM council. This reduces the role of the Aspire board to a consultative body while decisions are taken in the ADMcouncil.

As defined in AREDS, the regional economic development builds on corridor as well as sector development. This isa paradigm shift in “doing things” and has implications in terms of institutional set up in the district municipality, thelocal municipalities as well as in Aspire. Aspire has completed its institutional adjustments by assigning corridormanagers. The ADM however is still organized in sectors only, having sector specialists assigned for tourism,agriculture, heritage, SME development and cooperatives.

At national level, there is a need for guidance and coordination in terms of LED tasks and responsibilities and therole of economic development agencies: The dplg promotes and supports the establishment of LED units with anLED manager in municipalities. IDC promotes and supports the establishment of local economic developmentagencies as an implementing arm of the municipalities’ LED units. This is no contradiction, but needs carefulconsideration in practical terms: small municipalities with weak institutional set ups might be overwhelmed with bothtasks. Furthermore, there are 7 development agencies in the Eastern Cape, with Aspire being the only regional one.An important agency is the Buffalo City Development Agency with East London at its heart. Currently, there is noframework in place that specifies Aspire’s collaboration with these agencies. Therefore, the dplg and IDC havejointly developed Guidelines for Local Economic Development Agencies as Municipal Entities.

4.6.7 Sustainability

Key message: Core funding should be dedicated to operational costs related to project management, not to sustainthe organisation as such.

Core funding is a challenge for Aspire. As pointed out by representatives of the Department of EconomicDevelopment and Environmental Affairs (DEDEA), Aspire’s achievement to mobilize funding from a variety of fundsfor its corridor projects makes the agency independent from the funding by IDC. This is unique. As the CEO ofAspire confirms, they assessed the possibility to apply for funding from IDC for the phase of project planning andimplementation. However, their assessment concluded that the eligibility criteria for funding by the IDC are notuseful for Amathole’s approach to economic development. Funding from IDC depends on milestones and is cashflow based. Amathole’s approach to corridor development however is outcome oriented. It would be desirable if IDCcould adjust its funding criteria from cash flow to outcomes.

Having no core funding is a danger to Aspire’s sustainability beyond projects, as has been stated by some interviewpartners. In their view, there is no sustainability model in place on how to sustain operations. For example, an

The following figure summarises the underlying logic of Genesis:

6

3.2 The Genesis methodology

3.2.1 What is Genesis?

Genesis is an approach that addresses the challenge of strategic interventions3. It creates a strategic decision

making framework built around the competitive advantage of a region and those interventions that are likely toprovide the greatest leverage in the medium to long term. At its heart, Genesis is a strategy tool and a methodologyto identify and to prioritise catalytic projects in the context of territorial development initiatives.

It involves a variety of activities, often based on close interaction between government and the private sector, thataim at addressing market failure and build a unique competitive advantage for a given territory, which may be amunicipality, an urban agglomeration or a sub-national region. Genesis addresses a given territory as an entity, nota fragmented agglomeration of disconnected sectors and players.

Underlying Genesis is the insight that there is no point in formulating detailed masterplans and multi-year planningdocuments for the development of a local or regional economy at large in today’s highly volatile globalisedeconomic environment. And individual entrepreneurship and ad-hoc collective action is not sufficient to mobilise anddynamise territories that stagnate or grow only slowly. Strategic interventions with a high leverage potential arecrucial to unlock development potentials in such regions.

Therefore, so called catalytic projects are identified that have a strong leverage and/or multiplier effect byaddressing a critical market failure, or by creating a strong leverage factor. A catalytic project addresses the rootcause of obstacles to development, rather than symptoms. It unlocks resources and business opportunities. Itaddresses issues that will not be addressed through business entrepreneurship because the risk is too high, theamortisation period too long or the immediate profit too low. In other words, it addresses market failures that standin the way of growth.

Catalytic projects can have very different characteristics and prerequisites:

• Major financial resources needed (e.g. investment and infrastructure projects, rehabilitation of abandonedindustrial estates, creating a small business estate);

• High commitment to cooperation needed (e.g. addressing critical gaps in skills development, linking providers ofBusiness Development Services (BDS) and SMEs);

• Very specific know-how needed (e.g. certification, standards, connecting SMEs with research and developmentinstitutes).

• Serious and persistent political backing needed (e.g. land reform)

Genesis addresses the following main objectives:

• Verify the overall economic development vision and strategy of the territory’s stakeholders (or possibly themultitude of visions and strategies), stimulate reflection on it, and contribute to its further evolution (andconsolidation, if there are several competing visions and strategies).

• Create a shared understanding of expectations and aspirations among core stakeholders, and improve thedecision making framework for all decision makers.

• Create a process where local stakeholders consider alternative scenarios before they take decisions onterritorial development.

3This section has been summarized from: GTZ, mesopartner, Genesis, Manual Version 0.9, April 2008

33

organisation like ECDC has own financial resources that it can allocate for investments. Thereby, it can influenceinvestment activities in the province.

Aspire, depending on funding based on projects, has no freedom to decide on such own activities. Aspire’s positionin this regard is clear and firm: Aspire’s legitimation is derived from the results in terms of impact of its projects.These results have to contribute to the impact indicators of AREDS. Aspire as an organsiation has no end in itself.In Aspire’s understanding, core funding is important to manage the growth process of the agency in order to copewith the allocated funding for project management. Core funding however is not important to ensure co-funding ofprojects.

4.6.8 Regional versus local municipalities

The experience of Aspire as a regional economic development agency might also influence the discussion of therole of regional agencies in relation to agencies at the local level. This section highlights some important aspects ofthe role of a regional agency:

• First and foremost, regional agencies are not supposed to replace local agencies since there will always betasks and responsibilities that a local agency will have in LED.

• In a globalized world, coordination and collaboration in a region are essential for effective, successful andsustainable economic growth:

• The joint provision of a good like infrastructure or the promotion of the region as a tourist destination haspositive economies of scale (i.e. the joint initiative allows for more of the public good by decreasing overallcosts).

• It allows for increased cost sharing that includes all that benefit from positive spill-overs from one to anothermunicipalitiy – and not only the municipality that originally provides for the good that creates the positiveexternality (e.g. costs for the training of labour force can be shared since they might migrate to other areaswithin the region).

• It allows for optimal allocation for resources, especially if resources like skills, expertise and finance arelimited.

• Direct political influence can be limited if, at a regional level, political agendas can be combined.

• As international experience shows, economic development and promotion of locations in many cases isdone in joint efforts

10: Municipalities establish a joint vehicle to address common issues and to promote

their localities in joint efforts. These agencies go beyond political borders, some of them even cross nationalborders. Most of them are set up voluntarily, there is not necessarily a regulatory framework provided forthis type of agency.

So, complementary to a local municipality’s efforts in LED, it can be meaningful to confederate among localmunicipalities and to establish an agency that serves a common purpose, the one of promoting economic growth ofthe region that consists of the member municipalities. Thereby, the agency maintains the role of a coordinator ofinitiatives and activities of member municipalities in LED and reports to a steering committee consisting ofrepresentatives of the member municipalities. In the case of Amathole district, AREDS is the overarching strategywhich helps municipalities to streamline their strategies and LED initiatives – and ultimately optimize resources andresults.

In recent years, South Africa has gained a number of experiences with Economic Development Agencies (EDAs) –local as well as regional ones. It would be beneficial for those localities or regions considering the establishment ofan EDA to assess the issues surrounding them as well as the impact of economic development policies on both thefunctioning of agencies as well as on regional and local economies.

10The concept of Economic Development Agency (EDA) is applied all over the world and for example Europe has made interesting experiences

with local and regional EDAs that on one side focus on the sustainable economic development of a locality like a city (see www.lda.gov.uk ) andon the other side emphasize regional economic development through national co-operation among EDAs and with different levels of government(see www.eurada.org).

5

In South Africa, the MFMA provides for LEDAs as mechanisms preferably in the form of a municipal entity. LEDAsare delivery mechanisms for LED: In order for municipalities to plan and implement LED strategies and instruments,they may choose to establish appropriate service delivery mechanisms to perform a particular service.

There is no single approach to local economic development and it is impossible to be prescriptive about the type ofservices agencies provide. These roles could range from:

• Championing a wide range of activities which emerge as important from the LED strategy;

• Fundraising for specific projects, and potentially project managing some of these;

• Coordinating activities to ensure that an integrated service is provided across providers, eg for business advice;

• Monitoring and quality control of services available in the area;

• Directly undertaking certain functions, eg regional marketing;

• Promoting regional activities, eg collective marketing, regional food brands etc.

Agencies are considered in South Africa for the following reasons:

• Agencies provide a way of establishing a formal and legal partnership between different stakeholders tointegrate development efforts and overcome problems of duplication and lack of coordination;

• Agencies are seen as a way of strengthening the capacity of current LED systems and resources in place withina municipal area, using a semi-external body;

• They can be focused drivers of the economic development agenda within a local area, which can raise externalresources to support LED;

• The ability they have to support specific business sectors or specific geographical areas e.g. a developmentcorridor

• As a possible route to alleviate bureaucratic processes within a municipality, promote a more private-sector typeculture and accelerate investment and public private partnerships.

3 Amathole Regional Economic Development Strategy

(AREDS)

3.1 Background

In late 2006, the Amathole District Municipality (ADM) commissioned Aspire to manage the review process of itseconomic strategy. The overall objective of the strategy formulation process was to develop a strategy that guidesactions by economic stakeholders, especially local government, so that there is an increased number of householdsthat earn a higher income in the Amathole district.

GTZ supported Aspire to fulfill its mandate by financing the strategy formulation process and contracting LEDconsultants as process facilitators and technical support to the process. A process was designed that ensuredparticipatory input and identification of strategic action

2. The specific objectives of the process were:

• An implementable regional economic development strategy for ADM;

• Definition of role and function of Aspire within the regional economic development strategy of ADM;

• Provision of information for strategic decision taking for the ADM IDP processes;

• Identification of projects that will positively influence the competitiveness of the regional economy.

The Genesis methodology was applied to the strategy formulation process.

2The strategy formulation process as well as its outcomes and lessons are documented in more detail by Colin Mitchell.

34

5 Conclusions

5.1 Areas for improvement

The AREDS catalytic projects are initiated and on their way. In a next step, it is important to reconsider the followingareas for improvement:

• Overall impact orientation and assessment: ADM is the owner of AREDS and therefore ultimately responsiblefor the results and impact achieved through the AREDS projects. Based on a thorough understanding ofAREDS, ADM has to develop ownership and provide for a system (including transparent responsibilities) thatmonitors the implementation of AREDS and allows for feedback to its stakeholders.

• There is room for improvement in terms of how Aspire communicates with its stakeholders: it has to betterdemonstrate and explain how LED contributes to overall sustainable development and needs to address theconcern of social development and redistribution of many local municipalities. With each project, Aspire canillustrate how the project interventions ultimately lead to increased employment and income opportunities. Thisallows Aspire

• To provide the political leaders with arguments for AREDS;

• To help the local municipalities in their communication to their constituency;

• To contribute to the understanding of what Aspire does and how this contributes to overall sustainabledevelopment.

5.2 Outlook

5.2.1 Performance of Aspire up to date

Some quotes from interviews partners highlight the work and performance of Aspire up to date:

“It’s a people’s business”

All interview partners confirmed that Aspire’s technical expertise as well as facilitation and networking competenceis very high. “Aspire’s CEO Phila Xuza has demonstrated a clever hand in recruiting the right people andpersonalities for this job”, says Les Holbrook of the BKCOK.

“Aspire is Amathole’s flagship”

In order to become this flagship, political support was needed and provided by the district mayor of Amathole. Thisled to the ADM being convinced and not threatened about the role and importance of Aspire. Aspire is competent inpresenting to and engaging with political leaders to get their support and approval to go ahead with projects.However, it is essential that an economic development agency does not become an independent “giant”, but theresponsible municipality has to ensure the capacity to manage in this case Aspire.

“Aspire has the potential to be a centre of excellence”

Aspire envisions for itself a long term role as an adviser and think tank for Amathole. It also has the potential toserve as a reference at national level. Aspire’s staff members have established national networks in LED duringtheir careers which are important and helpful not only to lobby for projects, but also to influence the national agendaon LED. “Other regions are observing the development in Amathole and are in touch with Aspire to learn from itsapproach.”, says Noludwe Ncokazi of ECDC.

With the integration of all role players in the district, Aspire’s role will change gradually: The emphasis of Aspire’swork currently is on demonstrating partnerships in project implementation. The objective of this demonstration effectis to hand over project implementation responsibilities to other role players in the district, especially to the districtand local municipality by providing assistance and capacity building.

As Aspire’s CEO Phila Xuza summarizes: “In 2007, we focused on the mobilization of stakeholders; our vocabularymainly consisted of soft terms like buy-in, stakeholders, facilitation, workshops, etc. It was the time of talking topeople, convincing them, raising awareness and ultimately motivating them to participate and contribute. Then, in2008 we changed our language completely: we are fully involved in the design stage of our projects where we

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Desk research based on documents provided by Colin Mitchell, facilitator and technical adviser to the AREDSstrategy formulation process;

Interviews with Phila Xuza, CEO Aspire, and telephone interviews with the Aspire Corridor Managers (Julia DuPisani, Saskia Haardt, Nhlanhla Ndebele, Elaine Hann);

Interviews with the main stakeholders at the district level: Mr. Les Holbrook, Executive Director, Border KeiChamber of Business; Mr. Mpumi Fundam, Manager LED, ADM; Councellor Mr. Samkelo Janda, Portfolio HeadLED,ADM;

Interviews with partner local municipalities: Mr. Ondala, Strategic Manager, Amahlathi Local Municipality; Mrs.Bukeka Maliza, LED Manager, Great Kei Local Municipality, Mr. Nako, Acting Strategic Manager, Mbashe LocalMunicipality; Mr. Mxoliswe Waxa, Strategic Manager, Mnquma Local Municipality;

Interviews with implementing partners at the provincial level: Mr. Philip Howes, Amathole Berries; Mrs. NoludweNcokazi, Excutive Manager Development Services, ECDC; Mr. T. Mdunyelwa, Senior Manager, ECDC; Mr. ZongiMbekeni, Director EconomicAffairs, DEDEA.

The interviews covered aspects of LED concepts, strategy alignment processes, project management, partnershipapproach, funding sources, institutional arrangements and sustainability, the legislative environment and developmentalimpact.

Amathole – a short overview

• A region that carries the legacy of the former Transkei and Ciskei

“homeland” areas, which are largely rural with deep-rooted poverty,

as well as the former Cape Provincial Administration areas that

include the highly-urbanised centres of East London, King William's

Town and Mdantsane

The district consists of 8 local municipalities (Buffalo City: East

London, Bhisho, Dimbaza; Amahlathi: Stutterheim, Cathcart,

Keiskammahoek, Kei Road; Nxuba: Adelaide, Bedford; Ngqushwa:

Peddie, Hamburg; Great Kei: Komga, Kei Mouth, Haga Haga,

Morgans Bay, Chintsa; Mnquma: Butterworth, Nqamakwe, Centane;

Mbashe: Dutywa, Elliotdale, Willowvale; Nkonkobe: Alice,

Hogsback).

Government and community spending make up 33% of the

economy, public service sector provides around 35% of formal jobs.

•

•Figure 1: Location of Amathole District in the Eastern Cape Province

• Manufacturing, mostly centered in Buffalo City and dominated by the automotive sector, accounts for 21% of the economy;

agriculture, fishing and forestry together account for just 2,6% of the district value added, pointing to potential for huge growth in a

region with vast rural areas and a long coastline; tourism has grown, now making up an estimated 10% of the district value added.

2.3 Amathole's Local Economic DevelopmentAgency

Aspire, the Amathole Economic Development Agency, was established in September 2005 as a Proprietary Limitedcompany, wholly owned by the ADM – which implies that the agency falls under the Municipal Finance and ManagementAct (MFMA). The agency was established within the operational framework of the Agency Development and Support Unitof the IDC, with initial establishment funding coming from IDC and ADM. The Aspire board consists of six directors drawnfrom the private sector, academia and provincial government. There are two business men representing the private sectoron the board, however currently there is no formal representation of the private sector onAspire's board.

The dti and the dplg developed Guidelines on Local Economic Development Agencies as Municipal Entities whichcharacterize a LEDA. This characterisation of LEDAs provides a benchmark for the work ofAspire:

draft

See link:1

http://www.info.gov.za/acts/2003/a56-03/index.html

435

engage with engineers, architects, constructors, etc. Their language is technical and now all these technical termsfly through our offices. Let’s see what terms come up once we start implementation and construction in 2009.”

5.2.2 Future role of Aspire

Up to 2014 (time horizon of the Aspire strategy), the following main tasks will remain with Aspire:

• Communication: continuous interaction with municipalities to ensure their understanding of LED and their role inLED. Aspire has to ensure that the municipalities understand their role, what they can do and how Aspire canassist them in this.

• Mobilization, facilitation and coordination: for every project, stakeholders need to be mobilized and engaged sothat partnerships for project implementation can be built. Aspire is responsible for the facilitation of stakeholderprocesses as well as for the coordination of these processes.

• Project management: within the existing context, there will remain constraints in terms of capacity andresources for the implementation of LED. Therefore, is it most probable that Aspire will continue managingsome projects under AREDS, while in others Aspire will only support and advice the implementing municipality.

It is difficult and probably also not meaningful to think of Aspire’s role beyond 2014 – too many parameters mightchange until then. Emphasis should be on the consolidation of good practice and the establishment of a system thatallows for learning, monitoring, impact assessment and resource mobilization in coordination with ADM.

5.2.3 Outlook for the Amathole district

As stated by some interview partners, the future of the Amathole district looks bright and is exciting. Stakeholdershave a high awareness of the potential of the region, but also its challenges and the huge amount of work thatneeds to be done. Together, they have to focus on accelerating the pace to ensure the delivery of results asplanned. 2009 therefore will be a crucialyear, since it will focus on the implementation of most projects. An agencylike Aspire is there to guide and ensure this process. But it can only be successful if there is smooth collaborationbetween all partners, in delivery of tasks and results and ongoing political support.

3

1 Executive Summary

Local Economic Development (LED) has become a critical issue in South Africa in the effort to fight poverty andunemployment. Many institutions, both public and private, at national, provincial, district and local level, are involvedin different aspects of LED. Over the last years, Economic Development Agencies (EDAs) have emerged as newplayers in LED that aim at driving economic growth initiatives in a locality.

In the Amathole district, a multistakeholder process led to the formulation of the Amathole Regional EconomicDevelopment Strategy (AREDS) that is now being implemented. The different role players at local, district andprovincial level contribute to the implementation of the strategy by committing to specific projects. The coordinatingrole is performed by Aspire, the Amathole Economic Development Agency.

One year into implementation of the strategy, this case study looks at the ongoing activities that contribute tostrategy implementation. The findings allow for insights of alignment processes, coordination in projectimplementation and the roles of stakeholders in the district. Special emphasis is given to the role of Aspire as aregional economic development agency.

2 Introduction

2.1 Context

In South Africa, the Constitution gives local and district municipalities the mandate to act as a catalyst forsustainable development. The fundamental objective of local government is to promote localities by facilitating andsupporting Local Economic Development (LED) while ensuring the equitable distribution of benefits. The local levelof government is crucial as this is where interventions take place and impact can be demonstrated most profoundly.

However, local government’s mandate is not only LED as the Integrated Development Plan (IDP) of everymunicipality demonstrates, but also the provision of basic infrastructure and social development. In the view ofcapacity constraints local government is confronted with in South Africa, it tends in many places to focus on thedelivery of basic services only. This results in LED being the worst performing indicator of development at municipallevel.

One response to the need to enhance the development of local and regional economies is to establish a focusseddelivery mechanism that bridges the gap between the private and public sector. Economic Development Agencies(EDAs) are such a mechanism. These are established to drive economic growth initiatives in defined geographicalspaces such as provinces, districts and local municipalities.

The Industrial Development Corporation (IDC), a development finance institution ofthe Department of Trade andIndustry (the dti), has a dedicated unit that supports municipalities with financial resources and technical expertiseto establish and run EDAs. IDC has established 8 EDAs in the Eastern Cape of which Aspire is the only agency.

2.2 Objectives and methodology of the case study

In May 2007, the Amathole District Municipality (ADM) adopted a long term economic strategy for the Amatholedistrict. The strategy formulation process was managed by Aspire and supported by GTZ.

One year into implementation, this case study aims at highlighting the results of the process as well as the activitiesthat came out of the process. Special emphasis is thereby given to the roles that ADM, Aspire, the localmunicipalities and the private sector have in the implementation of the strategy. The time period under review isJuly 2007 to July 2008.

This case study is directed to the broader LED community consisting of practitioners in government as well as in theprivate sector. It looks at the experience made in the implementation of a regional economic development strategyand the role an EDA can play in it. It is a contribution to the broader discussion on EDAs. It is not an evaluation ofAspire or any other role players and their performance.

The information for the case study was collected from:

36

AnnexList of References

• Amathole District Municipality – Regional Economic Development Strategy Formulation Process, by ColinMitchell, November 2006

• Amathole Growth and Development Summit process report, ADM, March 2007(http://www.amathole.gov.za/departments/led/grow th__development_summit/gds_report/gds_report)

• Amathole Regional Economic Development Strategy, ADM, March 2007

• Amathole Economic Development Agency – Strategy 2007 – 2014, AEDA, June 2007

• Amathole Economic Development Agency (AEDA, Annual Report 2006/2007(http://www.aspire.org.za/reports/AEDA%20AR%20final%202006_7.pdf)

• Aspire project activities (www.aspire.org.za)

• draft Guidelines on Local Economic Development Agencies as Municipal Entities that were developed by DPLGand IDC, July 2008

• GTZ, Compass of Local Competitiveness, Manual Version 0.2, October 2006

• GTZ, mesopartner, Genesis, Manual Version 0.9, April 2008

• IDC Agency Development and Support (ADS)(http://www.idc.co.za/Agency%20Development%20and%20Support.asp)

• Information on LED in South Africa: see http://www.led.co.za

• International Labour Organization (ILO), Innovations for Development and South- South Cooperation: The LocalEconomic Development Agency, September 2003

• LED Network Case Study Amathole District Municipality – Genesis Process, by Colin Mitchell, March 2007

• Municipal Finance Management Act (http://www.treasury.gov.za/le gislation/mfma/default.aspx)

• National Framework for Local Economic Development, The DPLG, 2006(http://www.dplg.gov.za/subwebsites/led/docs/National%20LED%20Framework%20Jan%2007.pdf)

• National Treasury, Neighbourhood Development ProgramGrant, presentation to municipalities, August 2007(http://www.treasury.gov.za/divisions/bo/ndp/presentations/2007_08_15%20NDPG%20Round%203.pdf )

• Renewal of Small Town Economies, The case of Alice, Eastern Cape Province, South Africa, Mrs. Phila Xuza,Africa Insight Vol. 35, No. 4, December 2005

• Report on Investigation into Institutional Location and Roles of Local Economic Development Agencies (LEDAs)(http://www.thinasinako.co.za/uploads/documents/060608104454.pdf)

• Thinasinako LED Support Program (http://www.thinasinako.co.za/)

2

Table of Contents

1 Executive Summary.............................................................................................................................................3

2 Introduction..........................................................................................................................................................3

2.1 Context...........................................................................................................................................................3

2.2 Objectives and methodology of the case study.............................................................................................3

2.3 Amathole’s Local Economic Development Agency .......................................................................................4

3 Amathole Regional Economic Development Strategy (AREDS) ....................................................................5

3.1 Background....................................................................................................................................................5

3.2 The Genesis methodology.............................................................................................................................6

3.2.1 What is Genesis?.......................................................................................................................................6

3.2.2 Genesis in the case of AREDS..................................................................................................................7

3.3 Results of the strategy formulation process ................................................................................................11

3.3.1 AREDS Strategy ......................................................................................................................................11

3.3.2 Roles and responsibilities of stakeholders in AREDS .............................................................................16

3.3.3 Resource mobilization .............................................................................................................................20

3.3.4 Catalytic projects .....................................................................................................................................21

3.3.5 Overview of catalytic projects ..................................................................................................................23

4 Interpretation of findings from interviews ......................................................................................................28

4.1 AREDS concept of LED...............................................................................................................................28

4.2 Increased collaboration................................................................................................................................28

4.3 Alignment of local strategies........................................................................................................................28

4.4 Identification of catalytic projects.................................................................................................................29

4.5 Monitoring and impact assessment .............................................................................................................29

4.6 Role and performance of Aspire ..................................................................................................................30

4.6.1 Establishment of Aspire ...........................................................................................................................30

4.6.2 Communication........................................................................................................................................30

4.6.3 Mobilization..............................................................................................................................................31

4.6.4 Expertise..................................................................................................................................................31

4.6.5 HR issues.................................................................................................................................................31

4.6.6 Institutional arrangements and the legislative environment ....................................................................32

4.6.7 Sustainability............................................................................................................................................32

4.6.8 Regional versus local municipalities........................................................................................................33

5 Conclusions .......................................................................................................................................................34

5.1 Areas for improvement ................................................................................................................................34

5.2 Outlook.........................................................................................................................................................34

5.2.1 Performance of Aspire up to date ............................................................................................................34

5.2.2 Future role of Aspire ................................................................................................................................35

5.2.3 Outlook for the Amathole district .............................................................................................................35

Annex..........................................................................................................................................................................36

37

List of Acronyms/Abbreviations

ADM Amathole District Municipality

AEDA Amathole Economic Development Agency

ASGISA Accelerated and Shared Growth Initiative of South Africa

BDS Business Development Services

BKCOB Border Kei Chamber of Business

CEO Chief Executive Officer

CMC Community Management Committee

DBSA Development Bank of Southern Africa

DEAT Department of Environmental Affairs and Tourism

DED Deutscher Entwicklungsdienst

DEDEA Department of Economic Development andEnvironmental Affairs

DLPW Department of Labour and Public Works

DPLG Department of Provincial and Local Government

DTI Department of Trade and Industry

DoA Department of Agriculture

DORT Department of Roads and Transportation

ECDC Eastern Cape Development Corporation

ECPB Eastern Cape Park Board

EDA Economic Development Agency

EIA Environmental Impact Analysis

EU European Union

GTZ German Technical Cooperation

IDC Industrial Development Corporation

IDP Integrated Development Plan

IGR Inter Governmental Relations

LED Local Economic Development

LEDA Local Economic Development Agency

MFMA Municipal Finance and Management Act

MLL Minimum living level

NDPG Neighbourhood Development Partnership Grant

PGDP Provincial Growth and Development Plan

PSC Project Steering Committee

RIDS Regional Industrial Development Strategy

Ruliv Promotion of Rural Livelihoods Program

SME Small and Medium Enterprise

German Technical Cooperation South Africa

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trah@ledproject.co.zawww.gtz.de

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