It is essential that LED promotes growth, and that by increasing the size of the 'pie', the incomes and wealth available are increased. However it is well-established that approaches which just promote growth do not necessarily reduce inequality and address poverty. In the context of developing countries with high levels of poverty it is important that approaches to growth are implemented which reduce inequality. This means that measures also need to address the informal sector, where much of the African population operate.

Thus South Africa's policy paper on "Refocusing Development on the Poor", argues a case for promoting 'pro-poor' LED which would explicitly target low income communities and the marginalised as the policy focus of government policy. At least six 'developmental' LED strategies are suggested for support, namely: community-based economic development; linkage; human capital development; infrastructure and municipal services; leak plugging in the local economy; and, retaining and expanding local economic activity. Three critical policy areas are those which relate to improving regulatory frameworks, municipal services delivery, and issues of employment creation through the stimulation of local economic activities.

A key challenge in making such an approach a reality is the capacity to support integrated and strategic approaches to LED. Khanya-aicdd is a partner in a national study of Pro-Poor LED in South Africa funded by the World Bank. This looked at the 30 most significant urban centres, and how they were approaching pro-poor LED (note a similar study is now underway looking at rural municipalities, funded by DBSA). Some of the findings of this study were (Nel, E, Rogerson, C and Goldman, I, 2005):

• LED is unevenly developed and operationalised across the South African urban system;
• Major divides exist as a group between the largest, most well-resourced and capacitated municipalities and the smaller urban centres in terms of policy development, institutionalisation of LED and applied practice. This is even true for some of the larger secondary cities. However there are some exceptions to this general picture;
• The definition and understanding of LED exhibits considerable variation, a finding which reflects the absence of national LED guidelines, and the short time with which municipalities have been actively taking forward LED approaches;

This study refers to South Africa with well established urban local governments in South Africa, which are struggling to broaden their impacts on social and economic development, and where the importance of LED is recognised explicitly. Some conclusions from this study are:

• It is essential that municipalities do not just conflate economic growth and poverty objectives. There is widespread international evidence that trickle-down of wealth is not significant, and specific activities are needed to promote pro-poor growth. Thus it is important to address growth of the formal economy, but also to target specifically the small-scale and informal economy, and the case studies have indicated some means of doing so. Concentrating support for the poor on basic services will not create economic livelihoods, and may continue to foster a dependency on the state;
• A supportive policy environment is required, including: national/state laws and policy which clearly and specifically empower local authorities, define their powers and duties, encourage interaction outside of the public sector, provides adequate financial support and training and allow for external support/advice. Much of this is potentially available in South Africa;
• However, having a policy in place does not guarantee that there will be pro-poor outcomes. There are real applied constraints, notably on implementation capacity which impact on the ability to implement change. Municipalities must be encouraged to devote realistic budgets and staff to LED Units, and LED services if results are to be attained. Pro-poor LED services and projects also need to be adequately financed.
• The current bias in favour of pro-growth economic activities and pro-poor spending on basic needs will, in many cases, not have significant pro-poor economic impacts. Developmentally interventions need to be accepted as part of all municipal functions in practice and policy. LED officials also need to conceptualise of the broader range of interventions which impact on poverty as being part of LED;
• It is critical that local governments initiate defined monitoring and evaluation programmes to gauge the success of their initiatives. This should be based on both financial criteria and social impact assessment. Initially there may need to be experimentation to develop ideal methodologies;
• There is still far too much competition between levels of government including local and district municipalities, and between these municipalities and provinces. There is inadequate involvement of the private sector, with severe implications in terms of duplication and lack of synergy. Partnership formation/growth coalitions need to be encouraged and the private sector in particular, where it exists in significant strength, needs to be encouraged to contribute more meaningfully to local development, either through corporate social responsibility or coalition formation. The private/community/NGO sectors all have key roles to play. They should be supported and encouraged to engage in collaborative and independent action;
• A clear case can be argued for a LED Fund which targets support to economically sustainable services, as well as projects.

In other parts of Africa where local government has a much lower level of resourcing, this still does not mean that no support can be provided to LED. It is still important to have an approach underlying LED, as the effect of our interventions are not value-neutral. Municipalities still have a key role to play as the only level where policy downflow meets aspirations from citizens. LED is less recognised, but local governments still influence the local economy through:

• Infrastructure (which often favours social rather than economic infrastructure);
• Support to economic services, eg agriculture;
• Impact of local taxation;
• Influence of planning legislation, as well as regulations on establishment of small businesses;
• Support for business services;
• Local purchasing; and
• The planning system, and the allocation of resources that results.

The use of the sustainable livelihoods approach can help us to ensure that what we do will:

• Both promote growth and address poverty, building on local strengths so that economic development is broad-based and built on a solid foundation rather than a single skyscraper;
• Suggest how municipalities must approach their own role, notably being responsive, effective, promoting co-ordination and accountability.