The gap between public finance legislation and local economic development in South Africa

Abstract

Background: Local structures or institutions are widely regarded as crucial agents in the redistribution of financial resources that are key to local economic development (LED) in municipalities within developing countries. Despite this, the gap between public finance legislation (which needs local structures for its implementation) and LED persist in developing countries. Aim: The article aims to understand how municipalities from developing countries may narrow the gap between public finance legislation and LED. This article focusses on the Ulundi Local Municipality in northern KwaZulu-Natal, South Africa (a developing country with a constitutional democracy) to extract relevant lessons for developing countries. Methods: Following a qualitative research method, primary data in this study were collected through semi-structured interviews and secondary data through relevant reports and literature. Results: The findings reveal that a combination of dereliction of duty, local structures’ lack of capacity and political will is responsible for the gap between public finance legislation and LED in Ulundi Local Municipality. Conclusion: It is concluded that the gap between public finance and LED renders public finance legislation ineffective towards LED in the developing countries’ municipalities. Contribution: The suggestions on the process to narrow the gap identified are drawn from Ulundi Local Municipality stakeholders with the guide from both the Sustainable Livelihoods Framework (SLF) and the Institutional Theory.

Keywords

• municipalities in developing countries
• local economic development
• local structures
• public finance legislation
• sustainable livelihoods framework
• institutional theory