Vuthela Programme support to Enterprise iLembe

Since 2019, the Vuthela iLembe LED Support Programme has been supporting Enterprise iLembe to better position itself as a sustainable economic development agency with a core role in facilitating and driving economic development, creating an enabling district business environment, enterprise development, investment promotion, and job creation in the iLembe district. Richard Clacey, Vuthela Programme Manager shares insights into the process.

Enterprise iLembe is the District Economic Development Agency for the iLembe district in KwaZulu-Natal. It was established in 2006 and is a special-purpose municipal entity, with the iLembe district as the sole shareholder with a core mandate to drive economic development and investment promotion in the iLembe district.

Overview of DDAs/LEDAs

District Development Agencies (DDAs), or Local Economic Development Agencies (LEDAs) as they are often referred to generically in the international context, have had mixed fortunes in their effectiveness and impact in driving inclusive growth and job creation not only in South Africa, but also internationally.

The genesis of LEDAs goes back to the 1950s in Europe, where they were established to support reconstruction efforts to address the economic devastation of World War 2. Later, with the increasing pace of decentralisation, and the need for local governments to take on a broader role beyond basic infrastructure delivery and service provision, as well as increasing competition between regions for investment in a rapidly globalising world, LEDAs emerged as vehicles for place-based development in more developed economies. In the global south and developing countries, LEDAs have emerged largely as a mitigating response to the negative impact of increasing globalisation and deregulation, and efforts to deal with economic exclusion, marginalisation, and poverty.

South Africa experience

South Africa’s experience with LEDAs was initially driven by the Industrial Development Corporation (IDC) which in 2004 launched the agency concept after visits to Russia and France and committed an initial R240 million to the development of 36 agencies in South Africa over the next decade. The key rationale for the establishment of agencies, according to the IDC at the time, was:

• Leveraging of local assets and place advantages;
• Municipalities were often not focused on economic potential due to extended mandates and were principally focused on addressing basic need priorities;
• Municipalities lacked specific capacity in relation to business and project management;
• Municipalities were too focused on poverty alleviation projects and programmes – not sustainable and viable business opportunities;
• Competitive/comparative advantages lead to skewed investment and development; and
• The need to deal with market failure and the mitigation of risk to promote investment and economic growth.

(S Nel, IDC, Nov 2017)

Core objectives – IDC

For the IDC, the core objectives of development agencies were to:

• Promote and develop economic potential on a local/regional basis by building on opportunities which recognise the unique competitive strengths of a region/district’s economy;
• Leverage public and private resources for development linked to opportunities which offer economic and spatial development potential;
• Manage the spatial organisation of the area in a socially efficient manner, particularly using public land and targeted private projects;
• Develop and foster entrepreneurial potential and innovative activities which support and drive economic growth; and
• Strengthen the respective areas, real and perceived environment, so that they can compete effectively for capital investment necessary to develop their full economic potential.

(S Nel, IDC, Nov 2017)

Key features

The key features of development agencies were that they were to be owned by the municipalities, to be special purpose vehicles straddling both public and private sector, and focused on catalytic initiatives, converting economic development plans into implementation. By 2017, the IDC reported that there were nine fully completed IDC agencies (of which Enterprise iLembe was one), but a further 11 agencies were eventually to be withdrawn (C Nel, IDC, Nov 2017). The Department of Co-operative Governance, and Traditional Affairs (COGTA) Local Economic Development (LED) Framework of 2016 stated that there were more than 30 LEDAs established and charged with the responsibility to implement LED programmes in South Africa.

At the KZN Cabinet Lekgotla held on 11-13 September 2012, it was resolved to establish DDAs in each district of KwaZulu-Natal as key economic drivers as identified in the KZN Provincial Growth and Development Strategy (PGDP). The KZN COGTA thereafter embarked on a programme to establish and support DDAs that would roll out high-impact and catalytic projects per district to address the identified capacity challenges. By 2018, Ugu, iLembe, uMhlosinga, uMgungundlovu, Harry Gwala, uThungulu and uThukela districts had established agencies, while Amajuba, Zululand and uMzinyathi districts had appointed development boards. (KZN COGTA, January 2018)

But development agencies have had to confront the same challenges that have bedevilled the broader policy and practice of LED in South Africa. These relate firstly to the conceptual “dichotomy” or tension between LED as project-oriented poverty alleviation/welfare, on the one hand, and LED as the promotion of pro-growth systemic competitiveness and the creation of a business enabling environment, on the other. Secondly, there is the perennial challenge of ensuring greater integration and co-ordination between LED role players at national, provincial, and local levels.

Furthermore, the current architecture of government, whether by constitutional design or compromised practice, has created an LED institutional environment of multiple contested and duplicated terrains of planning and delivery at the national, provincial, district, local and parastatal levels (IDC, Development Bank of Southern Africa, Small Enterprise Development Agency, etc) where joint accountability is low and sanctions for non-delivery and failure are either absent, or at best opaque. The presence of DDAs and the recent emergence of the District Development Model (DDM) have yet to reflect a material shift in these conditions.

Ongoing distrust

If inter-governmental co-ordination and partnership is hard to achieve, what LED analysts such as C Rogerson (2009) called “Cross Sectoral Partnerships” (CSPs) between government, business and civil society have proved even harder to establish, let alone sustain. A number of the LED assessments over the years have cited the ongoing distrust that exists principally between the business sector and local government, whose inherent tension around the capacity of the local state to deliver an enabling business environment, and the legacy of a predominantly white-controlled private sector, have prevented sustained programmatic partnerships that could strengthen local economies.

Rodgerson 2016 noted that: “Notwithstanding the concerted efforts put into LED interventions, several factors have undermined the general performance of LED initiatives. These often include a poor awareness of what is LED, lack of understanding of local economies, human resource capacity and budget constraints, widespread corruption linked to state capture, the targeting of unsustainable community-based interventions, weak business environments for the private sector, and the challenge of attempting to coerce market-based forces to function in spaces with the limited prospects of profitability.”

Vuthela support

Since 2019, the Vuthela iLembe LED Support Programme has been supporting Enterprise iLembe to better position itself as a sustainable economic development agency with a central role in facilitating and driving economic development; creating an enabling district business environment; enterprise development investment, and job creation in the iLembe district.

The first phase of this Vuthela Programme support comprised a detailed institutional assessment/diagnosis that was undertaken by Sigma International at both a programme and institutional level to determine the relevance, efficiency, effectiveness, and impact of the agency with respect to its mandate, programmes, functions and activities. A key requirement of the assessment was to define specific areas requiring change, with a focus on strategic positioning, mandate, sustainability, and an appropriate funding model.

The key findings related to the need for focus and streamlining the products and services of the agency, as well as finding a better balance between project-oriented poverty alleviation and LED as the promotion of pro-growth systemic competitiveness and the creation of a business enabling environment. Other issues related to governance with recommendations for a balanced Board of Directors drawn from both the public and private sectors and aligned to the key economic sectors in the district (tourism, agriculture, manufacturing, and property development and construction). Other findings related to compliance, performance management and partnerships. Assessments were made of the existing project portfolio and specific recommendations made on how to increase impact, sustainability or establish smart exit plans for non-performing projects.

Strategic model developed

Thereafter, Sigma International worked with Enterprise iLembe and role players to develop a five-year Strategic Plan and Change Management Framework for the organisation. A strategic model based on six key strategic themes was identified relating to relevance, impact, good leadership and governance, income diversification for sustainability, business agility, efficiency and productivity, and human capital development. Both the five-year Strategy and the Change Management Framework were formally approved in a resolution by the iLembe District Council on 19 October 2019.

The leadership of the agency was addressed through the appointment of a new representative Board in January 2021 with private sector representation from priority economic sectors in the district as well as financial, legal, and economic technical competencies. A new Chief Executive Officer, Linda Mncube, was thereafter appointed by the Board in October 2021.

The two key change management projects emerging from the strategy formulation were: a) the design, development and implementation of a Human Resource and Performance Management system and b) the design, development and implementation of an integrated Project Management and Project Finance Information System

Human Resource and Performance Management System

The institutional assessment found several legacy weaknesses relating to the human capacity of the organisation including limited skills in investment promotion, project finance, project management, research, economic and project feasibility, risk management as well as a misaligned organogram for the outputs and objectives of the organisation. Furthermore, the assessment noted that performance indicators at organisational, unit and individual reporting levels were largely activity-based and lacked a results-based orientation. In formulating the five-year strategy, a specific goal, defined as Strategic Goal 03: Strengthening productivity, efficiency, and agility through Human Capital Development was developed, comprising two objectives: a) to strengthen the institutional capacity via an appropriately skilled, experienced, and productive workforce and b) to build an agile and efficient organisation that will enhance the entity’s effectiveness and delivery.

To take this forward, the Vuthela Programme supported an intervention for the design, development and implementation of a Human Resource and Performance Management system assignment which was undertaken by LEAD HR Consulting during 2022 and completed by 28 February 2023. The project involved the following components:

• The formulation and Board approval of 18 Human Resource Policies;
• The review of the organisational structure, including structural organisational review, the formulation of a benchmark review report and the design, development and approval of a new structure aligned to the five-year Strategy and Change Management Framework.
• Following approval of the organisational structure by the Enterprise iLembe Board, a detailed job and competency analysis, and the formulation of 30 job profiles and grading, and finalisation and approval of job descriptions;
• Simultaneously, with the job and competency analysis, a skills audit was undertaken which revealed that in terms of the requirements of the newly constituted structure and job profiles and descriptions, a number of staff lacked or partially lacked the formal educational requirements and technical competence for their posts. Specific recommendations were made to remedy this situation; and
• The design and development of a Performance Management System including training of staff and management, the development of a Performance Management training manual, the formulation and finalisation of signed Performance Agreements which includes progress development plans, Career Development Plans and competency requirements.

The uptake of the Performance Management system is being tested and implemented in the 2022/2023 year, with its formal adoption in the 2023/2024 financial year.

Implementation of Strategic Project Assessment, Project Management and Project Finance Change Management Projects

The assignment was undertaken by Sigma International from 1 June 2022 until 28 February 2023 and comprised the foll­­­owing key requirements:

• To strengthen the strategic project portfolio and project management and information systems with respect to the following:
  • A rapid strategic assessment of the Enterprise iLembe current project portfolio and its alignment with the five-year Strategic Plan in respect of relevance, impact, and performance;
  • Guidance with respect to strengthening the project portfolio through the identification of potential projects and the formulation of at least five concept plans (including a financial plan/identification of potential funding sources) to give effect to the five-year strategy (aligned to key sectors identified and being prioritised);
  • To focus on the Incubator programme, the agricultural section activities (but also including other current and emerging projects), with respect to establishing relevant indicators; establishing database systems, integrating project management and financial management information systems;
  • Designing and establishing a robust Project Appraisal tool and manual to guide processes and criteria for the selection of new projects through Project Identification, Concept Note, Project Feasibility, Project Appraisal including financial impact; and
  • Based on review of existing practices, identify, source and implement a customised project management tool or manual process with templates integrated with financial management software, including Standard Operating Procedures for uptake.

• To strengthen the financial management and information capacity of the organisation through:
  • The development and/or improvement of systems, processes and skills/capacity relating to management accounting, integrated cash flow management, debtors and creditors, and real time management accounting with particular focus on the following: development of a robust (integrated) cash flow tool and processes that need to be adopted by management, financial staff, and project-related staff;
  • The review and alignment of current management accounting practices (for decision-making) to ensure that they are aligned to the decision-making needs of the organisation. e.g., a) by project, b) financial/project reporting, and c) measuring impact; and
  • The development of a comprehensive financial policies manual (aligned to best practice) that is followed and adhered to; and develop Standard Operating Procedures reflecting key financial management systems for standardisation, e.g., debtor and creditor management systems.

Strengths and weaknesses

The project management Status Quo Report reflected on several strengths of the organisation such as its involvement in several impactful socio-economic projects. Beneficiaries expressed appreciation for the organisation in their areas. There has been good progress in the development of strategic partnerships, and there was strong commitment from the management and staff to strengthen the organisation and its impact. In terms of weaknesses the Status Quo reflected on:

• Lack of time management for current projects;
• Siloed mentality across the entity’s departments;
• ISO 9001 implementation (for which the organisation is accredited) which is at higher level and not embedded within Enterprise iLembe’s operational processes; and
• Lack of commercial skills during the business development and project management lifecycle.

In terms of areas for improvement:

Project Identification/Appraisal – it was noted that there was limited evidence of project-structured prefeasibility/feasibility exercises undertaken within the organisation; project costing was not standardised.

In terms of Project Initiation, costing of the projects was not clearly defined and this resulted in the project management fee being arbitrarily set without any link to the total project value and the absorption of project resource’s time (time is not recorded); project measurement appeared to be used in an ad-hoc manner to set performance targets and track project progress (no fixed documented framework in place); existing versions of business plans/project charters which provided the reporting/measurement framework lacked detail regarding resourcing and (in some cases) there was no methodology showing how Enterprise would oversee/manage project implementation.

For Project Planning, no Standard Operating Procedures existed to address work breakdown structure, stakeholder engagement, communication or risk management.

On Project Execution, the key gap related to the lack of automated data integration and reporting systems (between projects and financial reporting) to minimise errors; the need for ongoing project profitability analysis to be conducted and used for decision-making due to the siloed mentality (and operations) among staff and thus departments; and departments reported different project information (often conflicting) on the same project.

On Monitoring and Evaluation, the report noted the need for a structured, automated project level information system to be integrated with financial reporting of the entity. Various existing systems (MUNSOFT, Action Assist) were not being fully utilised to capture/report project level progress. There was no automated performance monitoring and evaluation tool tied to key risk indicators and there was no evidence of structured regular high-level monitoring and evaluation of projects. Hence, there was no proper project information dashboard/system as information was scattered and not systematically collated. The project close-out process was not formalised/standardised.

To strengthen project management systems, the assignment undertook the following:

• Five concept plans were developed providing for a detailed project format for Tourism, Container Economy, an Agri ESD model, Waste Management, and Multi-sector Incubator;
• A detailed Project Identification and Appraisal Framework including an excel toolkit was developed to ensure that only feasible projects were accepted;
• A robust MS-Excel based Project Management Information System (PMIS) was developed with formats populated for the full typology of projects (agricultural projects, incubator project/skills development and infrastructure) to ensure that the organisation became fully data-driven and evidence-based, allowing for integrated reporting and evidence-based impact; and
• Both the Project Identification and Appraisal Framework and the PMIS included a Standard Operating Manual to ensure full ownership and uptake, which was a critical aspect of the project during the latter aspect of the project through training, interactive sessions and the review of populated formats undertaken by Enterprise iLembe project staff.

The finance and project finance components proved more problematic as a result of the challenges of securing the support of the existing finance system service provider, MUNSOFT, to determine the extent to which it could provide a project level capability around project finance, particularly cash utilisation, that could be integrated with the PMIS. Following an extensive delay, it was determined that this facility existed, but could only come into effect once the Enterprise iLembe Chart of Accounts had been restructured for the 2023/2024 budget which would allow for financial information to be fully captured at a project level and thereafter be formally adopted. A report relating to MUNSOFT additional capabilities was developed together with an interim cash flow tool pending the introduction of the new budget for the 2023/2024 financial year.

A further key product of the project was the Finance Manual which provided a fully standardised operating procedure for all financial management aspects including budgeting, debtors, supply chain management, LED projects and cash flow management.

The full results of the Human Resource, Project Management and Project Finance interventions, which are all highly integrated will only become fully evident later in the 2023/2024 year and require a high level of commitment of iLembe Enterprise management and staff.