THE IMPACT OF ECONOMIC SECTORS ON LOCAL ECONOMIC DEVELOPMENT (LED): THE CASE OF THE CAPRICORN REGION, LIMPOPO PROVINCE, SOUTH AFRICA

Abstract

The birth of democracy in South Africa in 1994 guided the introduction of local economic development (LED) to improve local and regional economies. Accordingly, the objective of this study was to analyse the impact of key economic sectors on LED in the Capricorn District Municipality over the period 1996 to 2016. The study also included the development of a LED index for measurement that could contribute to the diverse literature on Development Economics. The methodology included the development of an index to measure LED and also an econometric analysis of the impact of economic sectors on the LED index. The study employed a panel autoregressive distributed lag (ARDL) model. A LED index was composed of economic growth, employment and poverty alleviation. The results show how the productivity of key sectors influence economic growth, employment and poverty alleviation. It is noteworthy that the community service, trade, construction, finance and electricity sectors are positively related to LED. The main economic base sectors, such as agriculture and manufacturing, surprisingly had less of a positive impact on the local economy. Specific aspects have a negative impact on economic sectors, and should be minimized. Thus, the study formulated a strategy for policy implications such as restructuring of the agricultural, manufacturing and infrastructural development sectors, ensuring capacity of all essential services, improving production methods, and investment in technical skills development. It was therefore be concluded that LED is a process and tool in improving local economic growth, employment and poverty alleviation. In light of this finding, key sectors need to play a significant role to improve local economic growth and employment, and alleviate poverty.

Keywords

• ARDL model
• Capricorn region
• Economic sectors
• LED
• South Africa

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