Management through decentralisation and local economic development: A...

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This paper is based on the premise that, urbanisation could be effective only if decentralisation policy is at the centre of development initiatives. In this way the paper argues, local authorities could utilize local resources to ignite local economic development (LED) through for instance trade activities and investments.LED initiatives aim at empowering local stakeholders to utilise business enterprises, labour, capital and other local resources effectively to maximise local benefits in order to contribute to poverty reduction and the uplifting of citizens life conditions. The paper is divided into four major parts. The first part gives a background of the notion of decentralisation, urbanisation and local economic development. The second part provides an overview of the review of the related literature while the third part gives an account on how the above are inter-related. The fourth part provides the challenges faced by urbanisation in achieving local economic development and part five is presented as conclusion and recommendations.

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Risk governance & control: financial markets & institutions / Volume 7, Issue 1, Winter 2017
MANAGEMENT THROUGH DECENTRALISATION
AND LOCAL ECONOMIC DEVELOPMENT:
A CONDITION FOR SUSTAINABLE
URBANISATION IN AFRICA
Emmanuel Innocents Edoun*
* The University of Johannesburg, Johannesburg, South Africa
Abstract
This paper is based on the premise that, urbanisation could be effective only if decentralisation
policy is at the centre of development initiatives. In this way the paper argues, local authorities
could utilize local resources to ignite local economic development (LED) through for instance
trade activities and investments.LED initiatives aim at empowering local stakeholders to utilise
business enterprises, labour, capital and other local resources effectively to maximise local
benefits in order to contribute to poverty reduction and the uplifting of citizens life conditions.
The paper is divided into four major parts. The first part gives a background of the notion of
decentralisation, urbanisation and local economic development. The second part provides an
overview of the review of the related literature while the third part gives an account on how the
above are inter-related. The fourth part provides the challenges faced by urbanisation in
achieving local economic development and part five is presented as conclusion and
recommendations.
Keywords: Developing Countries, Marshall Plan, World War II, Africa, Decentralisation, Urbanisation,
Local Economic Development, Corruption, Good Governance, UCLG
JEL Classification: D73, G3
DOI: 10.22495/rgcv7i1art3
Acknowledgement
This article was initially presented in a conference in Tetouan Morocco in November 2015. Part of it is also an
extract from my PhD thesis. It was improved for submission and consideration in your journal
1. INTRODUCTION
economic and political power. Organisations such as
the United City of Local Government (UCLG) based in
Many developing countries including those in Africa
thrive to provide decent public services to their
citizens; this includes the provision of basic services
such as water and electricity. However, the initial
findings revealed that, lack of capacity, adequate
leadership; corruption and good governance are
some of the reasons why these countries failed to
achieve their development objective, especially in
most African countries. Western countries after the
World War II (WWII) put in place the Marshall Plan to
assist countries in Europe that were seriously
damaged by the atrocities of the War. The Marshall
Plan was a whole developmental package for
reconstruction and development strategy; this
included the rebuilding of infrastructures, schools,
hospitals and the entire reorganisation of state
apparatus. From there on many international
organisations were created to entrench and
consolidate the notion of democracy in most of
Spain and its related organs across the world have
encouraged cities of countries members to develop
through decentralisation strategies since
decentralisation is perceived in the current context
as a condition to sustainable urbanisation and local
economic development. This paper is therefore
based on the premise that, urbanisation could be
effective only if decentralisation policy is at the
centre of development initiatives. In this way the
paper argues, local authorities could utilize local
resources to ignite local economic development
(LED) through for instance trade activities and
investments.LED initiatives aim at empowering local
stakeholders to utilise business enterprises, labour,
capital and other local resources effectively to
maximise local benefits in order to contribute to
poverty reduction and the uplifting of citizens life
conditions. The paper is divided into four major
parts.
these European countries. The notion of democracy
and good governance therefore became the flagship
2. REVIEW OF LITERATURE
for
administration
in
Europe.
Since
then
nation
building and societal cohesion initiatives have assist
This
paper
argues
that,
urbanisation
could
be
local, provincial and national governments to adopt
effective only if decentralisation policy is at
the
policies that use national resources effectively for
centre of development initiatives. In this way the
continually building Europe in order to maintain its
paper
argues
that,
local
authorities
could
utilize
26
Risk governance & control: financial markets & institutions / Volume 7, Issue 1, Winter 2017
local resources to ignite local economic development
accountability,
this
is
referred
to
as
de-
(LED)
through
for
instance
trade
activities
and
concentration.
Equally,
Dyer
and
Rose
(2005:)
investments. Dawking (2003) argued that, the result
describe
de-concentration
and
delegation
of
of free trade among regions actually reinforce the
authority, as involving the shifting of management
process of cumulative causation where growth is
responsibilities from the center to the lower level,
catalysed
in
the
more
developed
regions.
For
but the center still retains the overall control of
instance, according to Cumulative Causation Theory
powers.
When
responsibility,
authority
and
(Myrdal, 1957), some markets and places or nodes
resources
are
transferred, but
accountability
still
attract capital and skilled labour force accumulating
resides in the centre, there is delegation. This is
competitive advantages compared to other locations.
equally confirm by Dyer and Rose (2005) who argue
The theory argues that, less developed localities can
that delegation involves leaving a degree of decision
have advantages from growth in developing areas
making to the lower level but the delegated system
due to spread effect that derived from diffusion of
still rests on the central authority where the power
innovations
in
lagging
areas
and
rise
in
export
can be withdrawn.
markets for products from these lagging areas.
However
this
article
argues
that,
However,
the
argument
from
Dawking
decentralisation
policy
has
become
increasingly
experience is that that, free trade usually generate
apparent in facilitating local economic development.
economic growth at local level, helping lagging areas
It considers decentralisation as a condition to local
to develop overtime, which in turn may trigger local
economic
development.
To
ascertain
the
above
economic development. Dawking further contended
statement,
this
study
examines
the
impact
that
that, the implementation of decentralisation policy
decentralisation has had locally and at international
may
liberalise
the
economy
and
open
it
to
levels in terms of urbanisation. This article argues
international trade, to agreement between local and
that if decentralisation has succeeded to stimulate
foreign municipalities. He argues that, foreign direct
LED in other countries and facilitate urbanisation,
investment (FDI) may have direct impact locally, due
the same could be possible in Africa. Therefore, a
to technology transfer. Even though, the study is not
number of recent studies have explored the impact
concern
about
export
activities,
this
article
of decentralisation in various countries.
recognises
that,
trade
activities
within
a
Hussein (2004) found that decentralisation had
decentralised area can have positive impact on local
a positive impact on targeting social assistance in
economic development.
Malawi. Christopher Polllit (2007) similarly using the
LED
initiatives
aim
at
empowering
local
new
public
management
approach
found
that,
stakeholders to utilise business enterprises, labour,
decentralised
management
advanced
poverty
capital
and
other
local
resources
effectively
to
alleviation goals in Europe. The same results were
maximise local benefits in order to contribute to
confirmed by Reddy (1996) for South Africa. Habibi
poverty reduction and the uplifting of citizens life
et al (2001) studied the impact of devolution on
conditions. With the above in mind, Edoun ( 2012)
social sector outcomes in Argentina for the period
argues that , decentralisation should be assessed
1970-94 and concluded that fiscal decentralisation
within the context in which it is defined if it is to be
had a positive impact on delivery of education and
used
as
an
instrument
for
local
economic
health services as well as reducing intra-regional
development
leading
to
sustainable
urbanisation.
disparities.
Hussein,
(2004)
argues
that,
an
effective
The above studies are therefore of the view
understanding
of
the
context
in
which
that, decentralisation is an important element for
decentralisation
initiatives
are
undertaken
is
local
economic
development
which
is
why
this
important, so too are their forms and their major
article considers decentralisation as a condition to
outcomes. This is critical as decentralisation may
LED.
However,
the
article
argues
that,
the
state
contribute
to
local
economic
development
(LED).
should put in place democratic instruments for a
Many forms of decentralisation may be useful for
better implementation of decentralisation policy.
LED.
Decentralisation
may
be
political,
Decentralisation is a process that takes into
administrative and fiscal. Political decentralisation,
account the transfer of authority and power to plan,
as described
by Work
(2002) and Lauglo
(1995),
make decisions and manage resources, from higher
refers
to
the
devolution
of
political
power
and
to lower levels of government, in order to facilitate
authority
to
sub-national
levels
of
government,
efficient and effective service delivery (Smith 1985).
usually by election. However, when there is transfer
However,
the
major
form
of
political
and
by law and other formal actions, of responsibility,
administrative
decentralisation
that
has
been
resources,
and
accountability,
this
is
viewed
as
adopted by most developing countries is devolution.
devolution
(Smith,
1985);
(Adamolekun,
1999).
Eyoh and Stren (2006), argued that, political and
Furthermore, devolution, as defined by Dyer and
administrative decentralisation is important for the
Rose (2005), refers to the power formally held at
promotion of local development. According to them,
sub-national level, where local decision makers do
decentralisation
has
operated
at
many
different
not need to seek higher level approval for their
levels
and
in
different
ways
in
particular
local
action. According to Work (2002) and Lauglo (1995),
contextual situations. The involvement of citizens in
administrative decentralisation refers to the transfer
development planning and implementation enables
of
decision
making
authority,
resources
and
the formulation of realistic plans that are in line
responsibilities for the delivery of selected number
with
local
circumstances
and
conditions.
of public services from central government to other
Administratively, Decentralisation is considered as a
levels of government agencies.
key strategy that provides solutions to overloaded
Oluwu
(2004)
argues
that,
according
to
and over-centralised agencies (Olowu 1994; Pillay
conventional
definitions,
when
responsibility
or
2009).
authority is transferred, but not resources or local
Pillay (2009) argues that, to allocate greater
27
Risk governance & control: financial markets & institutions / Volume 7, Issue 1, Winter 2017
powers
to
local
government
would
signal
a
He
inferred
that,
poor
services
may
reduce
corresponding diminution of provincial government.
attractiveness of a place for external investors and
This dilemma also plays itself out in the case of
raise costs for the ones operating from there. For
particular service delivery, for example, in the case
instance road maintenance or the lack of it; Orderly
of primarily healthcare provision in South Africa.
territorial development, through physical and land
UNDP
(1999)
argued
that,
the
responsibility
for
use
planning
and
development
control
reduces
primary
health
care
(largely
pre-emptive
and
uncertainties
for investments
by
households
and
diagnostic
services
provides
at
clinics)
is
being
firms and potential social conflict about negative
devolved from regional to local authorities, often at
externalities by virtue of their public interest role,
the insistence of the regional authorities, as the local
Local
Governments
have
a
‘capacity
to
convene’
authorities are better able to manage these services.
other social actors to define the local public interest
Although
a
wide
range
of
political,
and
the
broad
direction
of
local
economic
administrative
and
socio-economic
merits
are
development; lastly, Local Governments can enable
attributed
to
decentralisation
and
participatory
or facilitate other actors to make a more effective
approaches,
a
number
of
scholars
have
raised
contribution towards solving LED problems.
criticisms relating to their technical, theoretical and
Devolution,
by
giving
local
institutions
the
conceptual
limitations
(Cook
and
Kothari
2001;
power to make some decisions without consulting
Smith
1985).
Smith
(1985)
states
that
authorities at the centre, bureaucracy is minimised
decentralisation
appears
to
be
parochial
and
and
decisions
become
flexible
and
adjusted
to
separatist as it threatens the unity of the general
respond
to
situations
at
hand.
In
this
context,
will, reinforces narrow sectional interests especially
decentralisation
is
viewed
as
an
approach
to
and
encourages
development
inequalities,
among
facilitate
the
even
distribution
of
resources
and
others,
due
to
its
emphasis
on
local
autonomy.
minimising the development of regional inequalities
There
are
a
number of
critiques
relating
to
the
(Oyugi 2000 , L’Oeil 1989). For instance, as local
quality,
validity,
ethics
and
operations
of
economic intervention, the decentralisation process
participatory
approaches.
These
approaches
to
entails
establishing
or
decentralising
small-scale
development are methodologically considered to be
projects close to the grassroots (Nicholas, 2007).
parochial (Cook and Kothari 2001). For instance, the
Furthermore, Oyono (2004) argued that, local
current study argues that participatory strategies
economic development can only take place when
generate poor standards and practice and lead to the
power is decentralised, giving local authorities the
abuse or exploitation of the people involved.
platform
to
exercise
their
power
without
any
Lemarchand (1998) argues that despite claims
manipulation
from
the
national
government.
that participatory approaches to local development
However
Cheka
(2007)
argues
that,
if
national
improve efficiency and effectiveness, and promote
government influences decisions at local level, local
processes
of
democratisation
and
empowerment;
economic development may suffer some setbacks.
there is little evidence about the effectiveness of
For
example
in
Cameroon,
the
Government
participation in ensuring sustainable development
Delegates
are
appointed
by
the
State.
These
and
material
improvement
among
poor
and
Government
Delegates
are
in
charge
of
marginalised people.
implementing some key projects at local levels and
There
is
debate
over
a
number
of
issues
reporting
directly
to
the
central
government
including
the
use
terminology
like
‘community
(Ministry
of
Territorial
Administration
and
participation’, the objective of participation as to
decentralisation,
2004).
Clearly
then
for
whether it is a means or an end, and the applicability
transparency
sake
local
governments
should
be
and the appropriateness of the techniques and tools
involved in
implementing
these
projects
at local
(Cook and Kothari 2001). For instance, it is argued
levels rather than government delegates
that the term ‘community’ masks power relations,
This article then argues that, decentralisation
biases in interests and needs based on ethnicity, age
and local economic development are a condition for
and
class.
It
is
also
suggested
that, in
practice,
sustainable urbanisation. The equation related to
participatory
approaches
simply
mask
continued
this argument holds that:
U= f(D)+
f(LED),
this
centralisation in the name of decentralisation.
means that, in the current context urbanisation (U) is
function to decentralisation (D) and local economic
3. ANALYTICAL ARGUMENT ON THE LINKAGES
BETWEEN DECENTRALISATION, LOCAL ECONOMIC
DEVELOPMENT AND URBANISATION
development (LED). The argument to support the
above statement is that, the current study is of the
view that, devolution of power should be a useful
approach to stimulate local economic development
The linkage between decentralisation and local
economic development is very significant in this
article since Local Governments who are viewed as
decentralisation agents play an important role on
LED. Edoun (2011) in quoting (Bennett & McCoshan,
1993; Helmsing, 2002c ) inferred that, the literature
on local economic development revealed that, Local
Governments play decisive role on LED initiatives.
Helmsing (2005) argued that, Local Governments
have a direct role through service delivery, which
potentially provides a source of economic
opportunity; the delivery of services may enhance or
inhibit local economic development and
competitiveness.
since power is transferred by law, so too are the
resources and accountability. With devolution
triggering local economic development, local
authorities are able to collect revenues from tax.
These revenues if well managed are ought to be
injected in projects such as infrastructures to
support the urbanisation strategy and processes.
The investments on infrastructures by local
authorities in return will attract foreign direct
investments. These foreign direct investments
activities on the other hand will have a
multiplication effect through job creation. Once
unemployment becomes under control through
sound macroeconomic policies, this may lead to
28

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