Abstract Power relations between state and locality have a significant influence on the structure of participatory development at the local level (Abbott, 1996). In South Africa, changes in the balance of power between national government, local government and the locality, have had a fundamental impact on the extent and quality of participation, mediated through projects’ changing institutional structures (Lyons, Smuts and Stephens, 1999). Elsewhere, we identified some generic problems in the management of participatory development (Lyons and Smuts, 1999). In this paper, we take that analysis further, examining the impact of national-policy changes on management issues within participatory development. Our focus is on their contribution to the strengthening of a participatory and inclusive culture in isolated communities. Four South African participatory development projects, all sited in Kwa Zulu-Natal are examined. Findings are that the national policy changes have largely failed in isolated communities, while for communities which have structured themselves in particular ways, the benefits have been mixed.