Khanya-aicdd is committed to the promotion of sustainable livelihoods and the Sustainable Livelihoods Approach pages give a good introduction to this concept. The challenge is how we can help influence people's capabilities and activities to create greater assets and to reduce their vulnerability. In the LED context we need to:

• Understand the livelihoods in a community, as well as of individuals;
• Recognise the importance of human capabilities as central to the debate on poverty; understand the different types of capital (or assets) that people have and their vulnerabilities;
• Understand how policies, institutions and processes support/hinder access to these capitals, increase or diminish people's vulnerabilities;
• Understand the parallel worlds of formal and informal, urban and rural, westernised and African and that municipal economic development must work with both;
• Identify and build on the preferred outcomes of our people (and not decide them for them);
• Understand people's livelihoods strategies and how they can be enhanced.

We need to see how LED can assist with delivery of these livelihood strategies, and how, and where to intervene (e.g. through social channels such as creating interest groups, through financial initiatives such as access to microfinance, through options related to natural resources e.g. land reform)

Building bridges

LED will often include local level strategic functions to promote an enabling environment and infrastructure and to enhance competitiveness, and thus sustainable growth. These are often carried out by local government and the private sector and include functions such as planning, infrastructure provision, real estate development, enterprise development, finance and human development, and providing a suitable legislative environment. However a purely top-down, macro-level perspective has been shown to be largely ineffective in generating growth (de Janvry & Sadoulet, 2003, Satterthwaite & Tacoli, 2003, Grimm, 1999, Pedersen 2003). LED should be complemented by a bottom-up dimension, mobilising local people to recognise and build on their strengths, enhancing their livelihoods and creating incomes in the process. In this way LED can promote the operationalisation of pro-poor growth.

LED needs to bridge the divide between people focusing on creating appropriate systems and structures (for example promoting decentralisation and local government) and those focusing on economic development. Traditionally these have different mindsets, both within national governments for example Ministry of Local Government and Ministry of Trade and Industry, and within the aid community, for example agency Governance Advisors and Enterprise Development Advisors. Effective LED requires a good understanding of how to create a responsive and inclusive government operating at all levels that works with the private sector, communities and other stakeholders, as well as an understanding of the processes of private sector development and growth.

Another key challenge is around urban-rural links. In most of Africa much of the population still lives in rural areas or smaller towns and secondary cities intimately linked to their surrounding rural areas. A greater proportion of the poor live in rural areas; in 1997 37% of the rural population of sub-Saharan Africa lived below 2/3 of national mean per capita income, while this was true for only 22% of the urban population [1]. So a particular challenge is to ensure that LED is pro-poor, and does not just support existing elites, who are predominantly urban. Urban bias critiques first formulated by Michael Lipton in the 1970s brought about a reassessment of the rural-urban dichotomy. The impact of the globalization process with the homogenisation and integration of economies also had an enormous effect on the way development has come to be understood.

The need for directing local economic development programmes to rural areas has become widely accepted in recent literature (de Janvry & Sadoulet, 2003; World Bank, 2003; Grimm, 1999). Often governments have neglected the role of municipal authorities and non-urban planning frameworks which support the economic development of peri-urban and rural regions, their inter-connectedness (often through rural towns), and for example trade and remittance networks which themselves enhance growth and income generation opportunities for the rural poor.

There is also often a divide between urban planners and rural development agencies. The former tend to suffer from urban bias, often neglecting the interdependencies between urban centres and their rural hinterlands, whereas the latter are essentially concerned with development at village level, ignoring the importance of small and medium towns to the livelihoods of rural households and the rural economy as a whole. The role of small and medium size towns in the provision of services, incentives and capabilities through rural-urban linkages are seen as a key to the wider rural development processes. Both rural and urban planners lack a full understanding of LED and its rural-urban connectivity and have a weak capacity to mainstream LED principles within sub-national structures including local government. The multi-sector nature of local economic development processes also poses major challenges, especially in contexts characterised by centralised decision-making systems and limited inter-agency and inter-departmental coordination.

Work on LED must embed an understanding of the engines of growth for example tourism, transport hubs, pr major industrial clusters. These drivers and incentives often lie outside of the local municipality and or territory and require equal attention in the building up of the tools and capacities in LED.