Why in Tight Budget Times, Funding for Economic Development Is More Important Than Ever
In South Africa, national and provincial Economic Development Organizations (EDOs) and Investment Promotion Agencies (IPAs) starts their financial years from April 1 and isn’t not April fool’s joke! For municipalities, their financial year begins on the 1st of July each year. After the State of the Nation Address (SONA) delivered by the President of the Republic in February, comes the budget speech by the Finance Minister.
Provinces then hosts their State Of the Province Address (SOPA) followed by municipalities with State of the City of Address (SOCA) or State of the District Address (SODA). MECs (Members of Executive Committee) at provincial level and MMCs (Member of Mayoral Committee) at local government then table their budgets, which I have been following with keen interest.
Everywhere you look with these national, provincial and local speeches, budgets are on the chopping block from the three spheres of government (national, provincial and municipal). Government tax revenues are hit by the weak economy, personal taxes are cut by rising layoffs and sales tax receipts decline with lowered consumer spending. Add to that higher fuel transportation and health care costs, all the three spheres of government are buckling under the stress.
As budget go under the knife, many EDOs and IPAs will find themselves vulnerable, if they haven’t already. Yet it’s now, more than ever, when investment in economic development is critical to maintaining our economy’s short-term and long-term health. That’s why it’s up to the EDOs and IPAs to make the case.
There are three things Economic Development Organizations (EDOs) and Investment Promotion Agencies (IPAs) should be doing right now to protect the future of their respective local/regional economies:
- Review your strategic plan for opportunities and challenges given current economic conditions. What was relevant to the EDO’s work two to five years ago won’t prepare your EDO for immediate challenges or the next growth cycle. Do your homework, make adjustments and double down where your efforts are going to make the biggest difference.
- Work to solidify the value proposition for economic development in your area/region/location. This is where a strong catalogue of past successes and outcome measures prove their value. Craft a sharp message that builds on your efforts to date and provides a convincing argument for continuing them.
- Meet with key partners and stakeholders to leverage external funding and support. This is where you earn your stripes as a marketer. Now is the time to meet with elected leaders, MECs, MMCs, senior officials like Heads of Departments, Director-Generals, City Managers, Municipal Managers, key investors and non-profit organisations to convey the importance of maintaining – if not increasing – investment in economic development. Sending a message of confidence is important as well.
The following talking points and strategies can help solidify your value proposition and project confidence:
The time to invest is at the bottom of the cycle
If you don’t stay invested, you lock in your losses and miss out on the rebound. Warren Buffett once made this case in a column published in the New York Times: “Be fearful when others are greedy, and be greedy when others are fearful…bad news is an investor’s best friend.” This applies to economic development in multiple ways. Now is the time to help that strong company increase its market share, to help laid-off workers hatch business ideas they’ve incubated for years, to ensure you’re creating the supply of workers and buildings that will put in the strongest possible position for recovery.
Investing now is an opportunity to difference your location
As others cut back on economic development marketing and promotion, Economic Development Organisations that stay in the game have less competition and more opportunities, for investment attraction or building international trade relationships, for example. While business wont’s go on as usual, there still will be companies looking to move and expand – and your location is more likely to stand out as one of fewer in the marketplace.
In tough economic times, your work is more important than ever.
Cutting economic development programs is akin to killing the goose of golden-egg fame. Who else is going to secure jobs and investment in your local economy? The blows brought by the economic downturn would hit your location even harder if it weren’t for existing economic development programs and the work done to date.
Indeed, there are logical arguments for investing in nearly every area of economic development right now:
Business retention and expansion
You need to gauge the health of your businesses, give a boost to the weak ones and save those jobs. Conversely, you may have other businesses that have hoarded cash and are ready to expand or buy other companies – you need to know which they are and get in front of them.
Economic development marketing and investment attraction
As mentioned above, if you can preserve your budget for these programs while others’ are slashed, your location and economy are more likely to stand out in a less-crowded field. Showing up is half the job.
During economic downturns, many workers go back to school. In light of the current economic times, do you know what the demand industries of the future will be? You should be playing a role to nurture the workforce that will be ready for these jobs – creating internships, career programs in high schools, TVETs colleges and universities.
Entrepreneurship and small business programs
If your local economy is experiencing major downsizing, this is a good time to get laid-off workers into entrepreneurship programs. You may not be able to do much to help major, multi-national corporations that are subject to global trends – but you can help your small businesses, with government grants and incentives, incubator support, trade shows, and more.
This is not an exhaustive list of economic development programs that are worthy of continued investment – and you are in the best position to determine, which of these strategies will bring the best return on investment (ROI) for your organisation. The hard work of figuring that out may be the most important thing you do right now.
A few other things to keep in mind
Are you serious about measuring your organisation’s impact? If you’ve put off this difficult task, now is the time to quit procrastinating. Collect the evidence that you are making a difference – and be specific.
Compile figures for the private sector investment leveraged by every economic development spend in your area; numbers of jobs created; and – if you can put the figure in a good context. Use that data to promote your success widely in the media, thorough your board, strategic partners and other networks, in every way you can.
The key message to those who control the public purse is: You Can’t Cut Your Way to Recovery and Prosperity!
Finally, don’t forget that GROWTHMAP INFONOMICS is a key resource for you and your organisation.
Thokozani Thwala is the founder and CEO of GROWTHMAP INFONOMICS. He helps his clients with economic and business growth strategies, tools, speaks at seminars and writes on macroeconomics, business internationalization, and public policy.