Section 152 of the Constitution of the Republic of South Africa, 1996 (hereafter referred to as the 1996 Constitution) makes provision for municipalities to work with other relevant stakeholders within their jurisdiction in matters of local government. Further, the section indicates that municipalities must ensure that they promote social and economic development to create business and employment opportunities for the local populace. One of the strategies used by municipalities to enhance their local economies is Local Economic Development (LED). However, there are many challenges associated with LED in South Africa that prevent these municipalities from achieving their constitutional mandate to promote economic development within their localities. This article, which is theoretical in nature, highlights some of these challenges. It contends that good governance can address LED challenges as a mechanism through which state institutio