Strengthening local government capability for inclusive economic governance: an analysis of local economic development and rural entrepreneurship in South Africa

Abstract

This article examines how local government capability shapes inclusive economic governance, local economic development (LED) and rural entrepreneurship in South Africa’s periphery. Despite comprehensive LED frameworks, strategies often prioritise attracting formal, private-sector businesses while neglecting the development of rural entrepreneurs. This oversight undermines rural entrepreneurship’s potential to drive job creation, poverty reduction, and inclusive growth. By systematically reviewing peer-reviewed and grey literature, the study identifies institutional constraints affecting LED and rural development. Anchored in Institutional Capacity Theory and Economic Location Theory, the findings reveal significant capability deficits in rural municipalities, limiting their ability to support grassroots entrepreneurship. The paper advocates for recalibrated LED approaches that prioritise institutional strengthening, context sensitivity, and targeted support for rural entrepreneurial ecosystems. Strengthening municipal planning and investing in local capabilities are essential for enabling rural communities to thrive in a globalised economy.