Stimulating the development of small enterprises in mining dependent regions

Wilfred Wentzel, Director, Centre for Integrated Rural Development,

1. Introduction

This brief essay sets out to integrate local developmental issues and challenges with more global and national matters of concern. It will adopt a subnational, municipality level case study approach but will remain mindful of thematic, policy, programme design and operational matters with broad appeal and significance. The case study material will be used to ground the analysis in practical, programme design and development management considerations. In turn, these developmental issues reverberate with thematic and policy interfaces covering a very different and much wider institutional constellation.

Public sector institutional decentralization and local economic development will be the twin substantive topics of this paper. The Mbashe municipality in the eastern region of the will serve as the local, resident host of the case study. The Eastern Cape is the poorest province in South Africa1.. It is also South Africa’s second largest province. The Mbashe municipality is comprised of the magisterial districts of Idutywa, Willowvale and Elliotdale. Geography and poverty seem to conjoin fatalistically and ineluctably in Mbashe since it hosts the poorest (Elliotdale) and second poorest (Willowvale) magisterial districts in the country2.. Idutywa, by comparision, ranks eighteenth in the Eastern Cape magisterial district poverty league (out of its 78 magisterial districts)3..

Local economic development and poverty reduction will be key figures in the script that unfolds. A declining, labour shedding, gold-mining industry that drew its “unskilled” labour force from a politically, militarily and administratively regulated and controlled labour reserve, in South Africa’s former Bantustan areas, including Mbashe in the former , provides the mining context. The other side of this economic coin is the structural, socio-spatial impoverishment inflicted on rural, resident communities which provided an extremely cheap migrant labour force for the mines. This “black gold” of the infant gold-mining sector in the Witwatersrand of over a century ago was a crucial area of “cost minimisation” in a mining sector with a poorly endowed natural resource base. The Chamber of Mines acknowledged that4. :

The grade of ore worked on the Witwatersrand is much lower than is considered profitable in other parts of the world. For example, in Western Australia, the average grade of ore worked is 12.91 dwts. per ton; and in the Hollinger Mine in Canader, the grade ore is 10.28 dwts. per ton. The average on the Witwatersrand is 6.537 dwts.

And, the Chamber’s oft repeated refrain that5. :

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It was not so much the richness of these fields that attracted the necessary capital as it was their apparent continuity and the fact that they could be worked efficiently by cheap native labour ……… There is no factor in the industrial fabric of the mines of greater importance than the native labour supply.

“Cheap native labour” was not volunteered easily or readily. Nor could the invisible hand of the capitalist commodity market be entrusted to resolve the labour supply and labour retention problems which accompanied the development of these mines. Numerous “push” and “control” instruments of a quite brutal kind were designed to sort out these labour market problems. Remember, the desertion rate of black mine- workers in 1910 amounted to 30, 000 out of a total black labour complement of 180, 000, a rate of about 16 per cent.6.

The scars of these earlier, historically crafted socio-political, administrative, military and economic interventions to ensure a ready, tightly controlled and cheap labour supply to the mines, factories and commercial farms remain indelibly imprinted on Mbashe’s lanscape. The case study material in section three will add flesh to this broad observation.

The architecture of this paper is comprised of the following components:

§ An overview of the South African economy to sketch the developmental landscape within which the case study is located. This summary overview will focus on the enterprise types and labour absorption capacity of the economy. § A socio-economic profile of the Mbashe municipality to provide a contextual setting for the discussion of local economic development. § Case study material of local economic development interventions – constraints and challenges. § Reflective comments to round off the discussion.

Impoverishment and strategies and programmes which enhance or reduce levels of poverty will be constant themes throughout the paper.

2. The South African Economy : A summary diagnostic overview.

The South African economy is characterised by an extreme dualism. This dualism is compounded by a strong socio-spatial dimension which remains one of the most pernicious, enduring and corrosive legacies of the Apartheid and colonial eras. 7. Mbashe’s socio-economic profile, discussed in section three, displays characteristics ever so typical of the black rural side of this coin.

The two sides of this dualistic coin are vastly different: A modern first world system with good physical, social and communications infrastructure conjoined, inextricably, with a typical third world type, resource poor economic sector. The large – scale, capital-intensive enterprise model remains the dominant and most prevalent business form in both the agricultural and non-agricultural modern economic sectors. The table

2 below furnishes a summary overview of the distribution of enterprise types by scale in the South African economy.

8.Table 1: SMMEs: Distribution Profile

Scale: No of Enterprise Type No. of such No. of % employees Enterprises % Employees

1. Survivalist (1) 184, 400 20% 184, 400 3%

2. Micro – enterprise (2-4) 466, 100 51% 848, 549 11%

3. Very small (5-10) 180, 100 20% 1, 068, 431 14%

4. Small (11-20) 58, 851 7% 1, 225, 972 17%

5. Medium (21-100) 11, 322 1.3% 909, 880 12%

6. Sub Total 900, 673 99% 4, 237, 232 57%

7. Large (101 +) 6, 017 0.7% 3, 159, 931 43%

Total 906, 690 7, 397, 163

The following structural features of the profile are noteworthy :

· Large-scale enterprises account for 0.7% of the total number but 43% of the jobs. · Medium-scale enterprises account for 1.3% of the total number but 12% of the jobs. · Survivalist businesses account for 20% of the total number but 3% of the jobs. · Micro businesses account for 52% of the total number but 11% of the jobs.

Levy cautioned that the picture may be worse and that the South African data are misleading since it conceals ownership and control patterns: Four giant business conglomerates have controlling interests in a large number of firms engaged in a variety of businesses unrelated to their core activities. In addition, Levy’s9. analysis of “high fliers” within the small, medium enterprise sector yielded the following sobering insights, inter alia: “insofar as South Africa’s SMMEs are skewed toward older firms, and insofar as the older firms tend to be larger, the recent underperformance of older firms complicated the challenge of employment creation”. And: “The share of manufacturing employment in establishments of 100 or more workers was higher in South Africa, than in Korea, Singapore ….. Malaysia, or the average for a group of nine countries with per capita incomes in the US $ 2000 - $ 5000 range”.

The significance of the scale imbalances evident in the South African economy is cause for severe discomfort: Accumulated job losses from the third quarter of 1989 to the end of the first quarter of 1999 totalled nearly 850, 000 and “reduced the number 3 of gainfully employed to a level last seen in 1979. 10. The mining sector contributed its fair share to this trend, shedding 254, 856 jobs over the period 1991 – 1998.11.

The re-entry of South Africa into the global market place within a less protected and subsidised national economic framework has been a far from painless process. The old style, national, modern business sector has proved itself far from competitive economically and is wilting in the face of new economic and social challenges. Nationally, labour retention and absorption capacities have declined dramatically at a time when transformation, poverty reduction, equitable economic growth are top priority policy and social issues.

The survivalist and micro links in the economic chain provide much needed coping instruments to impoverished urban and rural households. These instruments are crafted, more often than not, from a severly constrained menu of opportunities and range of options. It is not unusual for the actors in these segments to be badly exploited, labour sub-contractors for large-scale enterprises as in the construction, clothing, manufacturing, fresh fruit or retail sectors. They are poor dogs in a wealth creating chain where wealth and comfort “trickle-up” with fatalistic disdain for those small actors in the front line or at the coalface. This kind of uni-directional flow of economic benefit streams does have adverse macro-economic consequences viz., low levels of reinvestment in the human and institutional capital of these small-scale economic actors, sacrificing quality for quantitatively tight production cycles, no breathing space for creativity and innovation.

The small-scale business sector often falls victim to similar business hazards afflicting their survivalist and micro colleagues.

The small to medium scale business sector should be a robust, dynamic, flexible and innovative economic live wire of economic growth, job creation and business development. This is of strategic importance in an ailing economy like South Africa’s, where job shedding and jobless growth have become macro-economic trends. Alas, as exemplified by Levy’s findings and analyses, such robustness is conspicuously absent from this segment of the business sector. In quantitative terms, the segment accounts for a mere 8% of the total number of enterprises and an unflattering 29% of jobs.

It is evident from the above submissions that structural surgery of a drastic type is warranted to recast the South African economy in a mould befitting the challenges. A series of policy initiatives have been fashioned but the socio-economic fit remains somewhat clumsy. We will return to this theme in section four when the substance of local economic development is discussed. For now, let us turn to the lanscape of our case study to deepen the structural dimensions of the discussion. It will also add social spice to the theme.

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3. Mbashe Demographic, socio-economic, institutional profile

According to the 1996 population census, the distribution of Mbashe’s population over its three magisterial districts by former “racial” classification, gender and thereafter “tribal areas” exhibit the following characteristics:

Table 2: Gender by Population Group by Magisterial Districts12.

Area African/ Black Coloured Indian/ Asian White Unspecified Male Female Male Female Male Female Male Female Male Female Willowvale 45673 57790 27 34 13 13 35 21 210 231

Idutywa 41616 51205 35 25 5 9 22 14 156 203

Elliotdale 32486 41122 45 42 3 6 7 6 203 242

Total 269892 208 49 105 1245

Table 3: Population Group by “tribal area” by Magisterial District12.

African/ Indian/ Area Black Coloured Asian White Unspecified Totals

Tribal - Willowvale 101517 34 11 34 430 102026

Tribal - Idutywa 83286 21 10 6 335 83658

Tribal - Elliotdale 69144 87 7 12 334 69584

Total 253947 142 28 52 1099 255268

Impoverishment is a multifaceted process. It encompasses diverse dimensions of individual, household and community life. The social, physical, infrastructural, institutional, economic, cultural, spiritual, economic, recreational and socio-political all matter. Income poverty is but one dimension, albeit an important facet. Income levels and sources can provide useful indicative, first level guides to levels of impoverishment as well as to the relative robustness or otherwise of local economies.

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Table 4: Monthly Individual Incomes – Age 16 +13.

Areas Income Band Elliotdale Idutywa Willowvale Total

No Income 60.53% 70.73% 70.25% 67.75%

R 500 – R 1 16.51% 22.36% 19.95% 20.17%

Unspecified 13.15% 0.92% 3.36% 5.23%

The income distribution curves for each of the individual magisterial districts as well as for the Mbashe municipal area (the total column) reflect high levels of income poverty: between 60% and 70% of individuals fall in the no income band. The Elliotdale and total columns for this category are likely to be higher since 13.15% of the individuals in the 16 and over age cohorts from Elliotdale failed to provide income information. Monthly household income levels are equally important indicators of income poverty. The following tables are derived from the rural household survey conducted by Statistics South Africa in 1997.

Table 5: Statistical Profiles: Monthly Household Income Levels14.

Areas Category Elliotdale Idutywa Willowvale

None 5.68%

R 1 - R 200 4.32% 5.75% 6.73%

R 201 - R 400 5.68% 15.01% 31.86%

R 401 - R 800 17.84% 43.49% 30.42%

R 801 - R 1 500 37.84% 27.50% 17.22%

R 1 501 - R 3 000 22.95% 5.01% 13.76%

R 3 001 - R 6 000 5.68% 3.25%

The above household income bands can be recast into the following income clusters to sharpen the poverty dimension of the profile:

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Table 6: Monthly Household Income15.

Areas Income Band Elliotdale Idutywa Willowvale

R 400 and under per month 15.68% 20.76% 38.59%

R 800 and under per month 33.52% 64.25% 69.01%

R 1 500 and under per month 71.36% 91.75% 86.23%

R 1 500 - R 6 000 per month 28.63% 8.26% 13.76%

Acute income poverty afflicts 33% of Elliotdale’s households, 64% of Idutywa’s households and 69% of Willowvale’s households according to information furnished in table 6 above. The findings in the Elliotdale case are suspect but more about this later.

What are the primary sources of individual and household income in the Mbashe municipality? Responses would furnish indicative information on the relative robustness or fragility of the respective local economies. It may also shed light on the household income variances highlighted above as well as on policy orientated lessons for local economic development and poverty reduction programmes. Table 7 below summarises the primary sources of household income using data from the rural household survey:

Table 7: Mbashe: Primary Income Sources16.

Areas Category Elliotdale Idutywa Willowvale

Salaries and Wages from live-ins 21.37% 7.50% 3.40%

Pension 60.79% 67.50% 51.34%

Remittances/ Allowances from elsewhere 12.16% 21.75% 41.13%

Farming Activities 5.68% 3.25% 4.12%

The profiles suggest the following:

· Pensions are a primary source of income for between 51% - 67% of the households. This represents a fragile but important income source. The level

7 of vulnerability is high given the age group and the average life expectancy levels in the Eastern Cape of 60.7 years, the second lowest in the country.

· Salaries and wages from local residents who live in the community and work within commuting distance is high in the Elliotdale profile (21%) but relatively low in the other two cases (7.5% and 3.4% for Idutywa and Willowvale respectively). This probably accounts for the relatively high monthly household income levels recorded for Elliotdale by comparison with those of Idutywa and Willowvale. My own suspicion is that employment in the public sector administrative centre of Elliotdale – public services, magistrate’s court, teachers – as well as taxi owners and retail stores could account for Elliotdale’s income profile. This would suggest sample biases in the Elliotdale case since such economic diversity is not characteristic of the socio-spatial universe of the area.

· Willowvale, on the other hand, has a relatively high dependency rate (41%) on incomes from migrant workers’ remittances.

· A noteworthy and significant feature of the table is the extremely low ranking (3% - 6%) of farming activities as an income source. This does not mean, however, that farming activities play an accordingly low role in the household economy. The provision of household consumption goods remains an important economic contribution to the well-being of household members. It also supplements significantly the use of household financial assets or incomes.

The latter point is confirmed by the reasons furnished below for engaging in farming activities: The table is derived from the 1997 rural household survey of Statistics South Africa.

Table 8: Farming Activities: Reasons for Farming17.

Areas Category Elliotdale Idutywa Willowvale

To produce enough food for household to eat 100.00% 100.00% 96.85%

To earn a living by selling farm produce 3.15%

The entire Mbashe district is characterised by an extremely fragile, narrow and vulnerable economic base. This much is clearly demonstrated by the primary sources of household income, the levels of household and individual income as well as by the exceptionally high proportion of economically available persons who are unemployed with no source of income.

The prime economic activity of the Mbashe population is subsistence farming. Vegetables - a limited range – and livestock are the key land use activities practised. 8 These keep resource poor, rural households alive at sub-poverty income levels. Informal and formal social networks lubricated by in – kind exchanges of goods and services between and within households are important instruments with which to craft coping strategies for Mbashe’s resident rural population. These multi-layered networks incorporate cash injections in the form of transfer payments (pensions, welfare grants), remittances from kin in distant places of employment (mines, factories and commercial farms), wages from commuters who work outside the villages in relatively closer peri-urban centres. These cash contributions represent by far the lion’s share of household income but they are extremely vulnerable sources of income since elders will not be around forever (Eastern Cape life expectancies are the second lowest in the country at 60.7 years), mines, factories and farms are shedding labour at alarming rates and local economies fail to create employment for an expanding labour force.

The fragility and extremely low labour absorption capacity of Mbashe’s local economy is demonstrated by the community “labour force” profile in the table below:

Table 9: Employment Status of Mbashe's Population18.

Area Category Elliotdale Idutywa Willowvale Total

Employed 2186 4797 3852 10835

Unemployed, looking for work 8400 9164 8047 25611

Not working - not looking for work 2784 3180 3607 9571

Not working - housewife/ home-maker 5214 6082 8918 20214

Not working - scholar/ full-time student 7697 14323 14932 36952

Not working - pensioner/ retired person 6439 8473 8604 23516

Not working - disabled person 909 962 1452 3323

Not working - not wishing to work 1634 1799 1926 5359

Not working - none of the above 4126 1513 3681 9320

Unspecified 55 57 28 140

NA: Aged <15 34568 42940 48837 126345

NA: Institution 150 0 159 309

Total 74162 93290 104043 271495 The table masks a social time bomb ticking away with the detonation point too close for comfort. Consider, for example, the following instructive features of the profile:

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1. The present employment capacity is 10,835 jobs.

2. The present, actively seeking work, unemployment tally is 25,611 persons.

3. The scholars/ full-time students, aged 16 and over, who are not yet on the labour market but due to seek work soon, number 36,952.

4. Pensioners who provide the primary and most vulnerable source of household income account for 23,516 persons presently.

Two triggers of this social time bomb can change the poverty landscape dramatically:

· The passing away of pensioners. · The escalation of new, youthful entrants on the already saturated, local labour market.

The latter could easily result in an unemployment rate of 70% - 80% over the next three years if the present economic, job creation status quo remains.

The threat to economic and social development posed by HIV infections and AIDS is not yet fully appreciated in South Africa. The present and future trend of this “impending catastrophe” is captured in a recent survey19:

Approximately 13% of all South African adults aged 20 – 64 are currently infected and these levels could rise to 20% - 23% by 2005 and 22% - 27% by 2010. HIV mostly affects younger people with around half of all adults who acquire HIV becoming infected before they turn 25. Over 50% of these young people will die of AIDS before their 35th birthday.

Predictions of this type and scale add to the social imperatives warranting urgent attention. They compound, too, socio-economic challenges since the disease has very pronounced economic implications as well as public sector allocative, budgetary consequences. The local economy of Mbashe is in no position to shoulder either of these threats. This fragile local economy is comprised of the following economic sectors:

10 Table 10: Economic Sector by Number Employed20.

Areas Category Elliotdale Idutywa Willowvale Total Agriculture, hunting, forestry and fishing 72 169 258 499 Mining and quarring 321 141 124 586 Manufacturing 28 143 69 240 Electricity, gas and water supply 1 22 16 39 Construction 113 258 295 666 Wholesale and retail trade 176 840 351 1367 Transport, storage and communication 50 155 121 326 Financial, insurance, real estate and business services 29 161 46 236 Community, social and personal services 868 1627 1408 3903 Private households 244 568 722 1534 Exterritorial organisations 2 3 0 5 Representatives of foreign governments 0 1 2 3 Industry NEC or unspecified 285 715 448 1448 Not applicable 71824 88487 100024 260335 NA: Institution 149 0 159 308 Total 74162 93290 104043 271495

All of this is exacerbated by labour market shrinkages evident in the national economy. The formal, national economy has shed about 850,000 jobs over the last ten years, taking us back to 1979 levels of employment. This pattern, and the threat it imposes on the Idutywa district, is captured by Schmidt21.:

Bongco says unemployment runs as high as 60%, the result of the devastating impact of mine closures on the Reef and Goldfields and retrenchments in industry in Johannesburg, Durban and Cape Town. Whereas previously most young men went to work on the mines and sent contributions to their families back home, they now drift into petty thievery or loiter discontentedly, living off their grandmothers pensions – the biggest contributor to the town’s household incomes, which average R 1 800 a month.

A qualitative poverty assessment of South Africa’s rural communities, inter alia, yielded a surprise finding articulated by rural women: “Useless men”, retrenched men – some were former mineworkers now HIV positive – who returned to their rural communities and idled their time away drinking and disrupting rural household activities. This social dimension of the labour shedding problem has been spirited away to remote rural villages

11 in many a case. Such issues have a habit of migrating back to peri-urban and urban centres regardless of lack lustre employment prospects.

Declining rural household and individual income sources and levels (income poverty) is but one dimension of the multifaceted process of impoverishment. Shrinking household incomes are required to cater for expanding items of expenditure. According to Father John Huppa of the Holy Family Catholic Church in Idutywa22.

Every week funerals are held for young people who have died of AIDS, even if people say they died of tuberculosis or of a stomach ailment.

Funeral ceremonies cost money. They also eat into the social insurance capital, the livestock, of households. The cost of a coffin, let alone a funeral ceremony, exacts a heavy price from meager household budgets. Local rumour has it that the “recycling” of coffins has become a cost cutting expediency in such circumstances. An informal and ghostly trade in exhuming coffins – a night or two after a burial – has become a nocturnal business. This, we were told, reduces considerably the financial cost of the ceremonial splendour bestowed on the dead.

According to recent poverty estimates based on three sources23.– the October Household Survey, the Income and Expenditure Survey (both for 1995) as well as the 1996 Population Census – the Mbashe municipality boasts the rare distinction of hosting the two poorest magisterial districts in the country, Elliotdale and Willowvale. The latter have imputed mean monthly household expenditure levels of R 746,00 and R 792,00 respectively. Idutywa, by comparison, is the eighteenth poorest magisterial district in the Eastern Cape (out of its 78 magisterial districts) with an expenditure level of R 904,00. Is geography and poverty conjoined ineluctably, fatalistically and inevitably in the Mbashe municipality?

4.2 Local Economic Development: Lessons and Constraints

Poverty is structurally embedded in the fabric of this Mbashe developmental universe: rural infrastructure, social infrastructure, income poverty, economic services, communications, human capital, organisational capital, basic services. Poverty is also extensive – over 60% of households are victims of income poverty. Formal sector labour absorption capacities are extremely slender – 67% of the population aged 16 and over have no source of income. Transfer payments and remittance constitute significant but vulnerable sources and shares of household income.

Resource deficits of a multi-dimensional kind bedevil even public sector administrative, technical and economic support services: office space, telephones, computers, fax machines, transport were hard core infrastructural deficits identified by district level rural government senior staff in welfare, health, agricultural extension. Such staff were responsible for managing service delivery programmes covering over thirty administrative rural areas – around 150 vastly dispersed rural villages.

Idutywa dwarfs the size, scale, economic diversity and pulse rates of her magisterial district neighbours in the Mbashe municipality. Idutywa, populated with about 6000

12 “urban” residents, is the capital of the newly constituted municipality. The present town clerk of Idutywa, Mr. Mlami Bongco, will assume the mantle of “interim manager” of this new municipal council. He commented on some of the matter of fact challenges awaiting the new council:24.

The task of now servicing an entire region with almost no industry, no national hotel chains and little development is almost frightening.

And on a more immediate, practical note:

We have six councillors for the town and 14 for rural Idutywa but soon we will have 46 councillors (for the Mbashe municipality). We have a shortage of office space, and I don’t know where we will put them when they need to meet in full council.

Public sector market failure is all too evident, and visibly so, in Mbashe – very few and very poor access roads linking villages; poor main roads; physical inaccessibility in inclement weather; rural areas have practically no economic infrastructure; fencing and irrigation are conspicuously absent; district level agricultural extension offices have to share one vehicle between at least seven staff members; public sector staff in charge of poverty alleviation programmes and projects often lack transport, and so on…………..

Poverty reduction, reconstruction and development, equitable economic growth, the provision of basic services, the compelling imperative for service delivery – these are all writ large in government policy documents. Mbashe still runs the risk of socio-spatial marginalisation and excommunication from these policy imperatives. The social time bomb alluded to in section three cannot be defused by policy documents or political invective.

There is something perplexing about Mbashe: Land is available – in abundant supply it seems. The same holds true for labour. Yet both remain un- and underutilised amidst acute impoverishment. We conducted qualitative resource and micro – project scans in order to get a better feel for local economic development potentials. The results were surprising and promising:

§ One vegetable gardener specialised in cabbages on a 3 ha plot of communal land. The annual harvest was 315, 000 cabbages which he sold at R1.80 per cabbage and he created jobs for 14 full-time workers (we translated seasonal work into full-time equivalents) at a wage rate varying from R500. 00 – R300. 00 per month. He planned to expand his plot by an additional 6ha and diversify his commodity range. § There were other small-scale market gardeners, including small groups and solitary entrepreneurs, cultivating a range of vegetables (spinach, carrots, cabbages, beans) on very small plots ranging in size from 0.5ha – 1.5ha. Job creation was at the 3-5 full-time equivalent levels with wages averaging R300.00 – R400.00 per month. § We came across local fisherfolk in the Elliotdale area who sold their two-day catch for around R450.00 but then months would pass by without any fish taking to their bait. A modest boat, we were told, would improve the harvest in both

13 temporal and quantitative terms. There were about 100 such fisherfolk in the village of Elliotdale.

· 29 micro-bakeries providing bread, around 200 loaves a day each, to local junior schools and employment to over 110 persons, mainly females. Public – sector payment arrangements involve complicated institutional procedures and payment agencies are based in East London, a city far removed from the baking activities. Four to six month delays in payment are common. · Dairy farmers in Willowvale who are striving to form a co-operative as well as a community based abattoir.

Many of these initiatives enjoy public sector support, principally financial support to poverty alleviation micro-projects. The projects exhibit characteristics ever so typical of their rural genre- in scale, product range, market segment and impact. In absolute terms, these projects are neglible in their social and business impact. They are tiny microscopic nodes in much broader, informal networks. They hardly qualify as robust local economic development initiatives since they fail, by far, to provide significant levels of compensatory relief to threats presently inflicted on rural households.

The public sector micro-projects reflect strategic weaknesses in programme design of the following type:

· Critical mass and systematic clustering are required to generate significant economic and social impact. Both are conspicuously absent in the project universe reviewed. · Ad hoc allocative and investment strategies dilute impact and result in socio- spatial fragmentation and dispersion. These, in turn, increase the cost of support and business services especially so in a situation where public sector transport and support are constraining factors. · The latter also dilute and render costly inter-project mutual learnings, resource pooling (bulk buying of inputs, for example), institutional networking, the formation of business alliances and lobbying groups, the local integration of different components of the value chain – sourcing supplies, sourcing technologies, production, processing, marketing. · Organisational and business leadership skills, the critical, “soft side” of business growth and development, are sadly lacking in far too many micro-projects and the lack of systematic, local clustering exacerbates this problem. · The system of land tenure, communal in character, does not seem to be a critical variable or determinant of economic performance. In fact, communal tenure lends itself to a host of diverse economic arrangements and does not necessarily end up in Harding’s ill-considered “tragedy of the commons” Harding, of course, conflated open access and common property systems. · The absence of systematic inter-sectoral horizontal co-ordination within the public sector: Many of the agricultural micro-projects are funded by the departments of health or welfare without any inputs from the department of agriculture. The latter is a serious and strategic structural problem since local economic development necessitates multi-sectoral and multi – stakeholder integration at local government level, albeit of a facilitative kind only.

14 In 1998, M. V. Moosa, then Minister for Provincial Affairs and Constitutional Development commented on the role and powers of municipalities in development:25.

Local government is at the heart of the development process in South Africa. Through its grassroots linkages, infrastructure investment programmes, local economic development strategies, partnerships with the private sector, and integrated development planning, local government is best placed to be able to have a direct and enduring impact on the lives of its citizens. The new Constitution and local government legislation give municipalities significant powers to meet these challenges. But these powers mean nothing without the capacity and resources to implement them.

The citation above comes from a book assessing the track record of local economic development (LED) and poverty reduction in South Africa. Three of the eleven lessons highlighted from the national landscape of case studies covered in the book are worth recalling here: 26.

1. The most striking lesson is that hardly any of the municipalities reviewed in this project have made any formal attempt to explicitly link economic development with poverty eradication ………. 2. The second lesson flows obviously from the first; a strikingly low level of awareness and knowledge exist among all local stakeholders (local government, community associations, private sector, etc.) of anti-poverty policy framework instruments and opportunities ………… 3. …… LED has fast become one of the great virtues of South Africa development – speak, along with ‘participatory development,’ ‘empowerment’ and ‘consultation’. It is in danger of loosing its relevance because it is frequently devoid of content …………………

The old belief in the corrosive, poverty reducing, trickle-down effect of economic growth as a panacea for impoverishment has been dispelled brutally. In fact, more often than not, the trickle-up effect was a pronounced companion of economic models of the latter type- with enhanced inequality and impoverishment.

Economic development and growth are necessary conditions to transform the poverty-stricken landscape of the Mbashe municipality, inter alia. But they are far from sufficient conditions to produce poverty reduction effects or impacts. This derives from the simple fact that economic growth cannot predetermine distributional outcomes or allocative shares. Historical evidence compels a cautious warning about faith in the equitable trickle-down effect of economic growth. This obtains especially in highly inequitable societies like South Africa:27.

For a given rate of growth, the extent of poverty reduction depends on how distribution of income changes with growth and on initial inequalities in income, assets and access to opportunities that allow poor people to share in growth ……. If growth bypasses poor regions and poor people

15 cannot easily migrate to regions where opportunities are expanding, growth can lead to rising in equality.

Do the above submissions imply that Mbashe’s economically active population should migrate in search of more favourable institutional and economic pastures?

4.2 Local Economic Development: Oases of Opportunity

Flaws in programme design need not be fatal. The district is pregnant with untapped reserves of economic potential. Mbashe is located in a sub-tropical, agro-ecological belt. It also shares a slice of the Eastern Cape’s 800km coastline. Its rustic beauty, coastline and history invite eco-tourism, cultural tourism and conference, event organisation. Roadworks, construction and agro-economic infrastructure development present additional economic, business opportunities.

Changes in the design, targeting and conceptual approach to public sector poverty alleviation programmes could enhance business and social efficiency and impact significantly. If 3ha can be used productively and efficiently to yield a harvest of 315, 000 cabbages and 14 full-time job, a 100 ha of such 3 ha micro –enterprises would make a substantial difference to wealth creation, wealth redistribution and job creation. In fact, microplots could vary in size from 0.5ha to 10ha or more. A few conditions in programme design and programme management must be satisfied to effect the change viz.;

§ Socio-spatial clustering and allocative targeting must be built into the design side to give critical mass in order to maximise business and social impact and efficiency. § The design and implementation of a community based business model which integrated production, quality control, quantitative and qualitative product targeting, bulk input supplies, marketing, maybe even processing and distribution would maximise local wealth creation, wealth redistribution and job creation. It would also integrate local micro-enterprises and small to medium-scale enterprises. § The above design of integrating micro and medium scale enterprises in a community based business model would both concentrate and disperse business leadership and administration through resource pooling, risk and responsibility sharing. It would also engender a spirit of local competition, information sharing and mutual learning. Institutional networking, lobbying, communications and information sourcing would be enhanced and rendered cost effective. It would provide a powerful economic argument and justification for lumpy infrastructural investments (roads, buildings, telecommunications, fencing, irrigation systems). § Intra-sectoral (horizontal) and vertical integration and management of public sector institutional actors are imperative. The public sector local government agencies must assume responsibility for a facilitative management role in this scheme of things. Local economic development with a prominent poverty reduction dimension cannot be relegated to a Cinderella side-show as appears to be the case presently.

16 § Multi-sectoral and multi-stakeholder partnerships must be established and managed in an integrated, people centred, activity based and results orientated institutional framework. Benefit streams – incomes, training and educational allowances / subsidies – must be allocated and understood to correlate with performance and outputs to discourage free – riders and sleeping partners.

Is any of this possible in the poverty stricken, developmental desert of Mbashe?

The natural resource base of Mbashe lends itself to business development over the following economic sectors – agriculture, mariculture, aquaculture, tourism, mining and quarrying. Roadworks and construction should be added to this sectoral list in respect of acute socio-economic priority needs. This presents a broad-based, multi-sectoral platform for local economic development. In addition, intra-sectoral, commodity diversification adds colour and spice to the developmental menu viz., within agriculture the commodity range includes vegetables, pecan nuts, macadamia nuts, guavas, mangoes, papaya, citrus fruits, dairy produce, coffee, chillies, litchis, advocados, herbs. Moreover the area lends itself to organic farming since low levels of chemical inputs are amongst the rare, favourable, unintended consequences of Apartheid marginalisation.

All of the above commodities can be farmed in micro productive regimes and integrated with local medium scale, input supply, marketing, processing and distribution business units. The same holds true for mariculture. The experience of the Centre For Integrated Rural Development, hereafter the CIRD., with innovative, labour-intensive, mussel farming is instructive. Eighteen months of experience with community based, mussel farming yielded some surprising results: The productivity yield in physical output terms was 42 per cent higher than that of Sea Harvest, a neighbouring, established, capital-intensive firm. Quality, too, was superior in the labour-intensive mussel enterprise.

We are once again with the issues of development methodology or disposition and programme design. Lipton highlighted the following two significant dimensions of South Africa’s present and historically crafted macro-economic disposition and orientation:28.

In middle-income countries with real output per person around South Africa levels, the agricultural sector typically generates about 15% of Gross Domestic Product (GDP), and employs about 25% of the labour force …… Yet the country’s agriculture is exceptionally small, accounting in a typical year for only 5% of GDP and 14% of the labour force.

And:

There also remains a mind-set, even among life-long opponents of racism, that equates small-scale farming with backwardness, rather with efficient growth, as elsewhere in the developing world.

It does seem as if the “Apartheid” economic paradigm has captured its fair share of victims, even in post – Apartheid South Africa. Mbashe has no sub-tropical

17 research station. District level agricultural extension managers and staff have been starved of technical training and information in this field. The CIRD facilitated two-way visits between the sub-tropical division of the Agricultural Research Council in Nelspruit, Mpumalanga province, local farmers and extension officers from the Kei and Mbashe districts. The CIRD had to fund such educational, training and practical demonstrations, albeit that public sector staff were involved. Within one year, eleven demonstration orchards have been established, amidst excitement from local farmers, agricultural extension staff and professional scientists who specialise in sub-tropical and exotic commodities.

The entire programme remains in its infant stages – barely one year old. The fact that it happened at all and ever so quickly demonstrates the potential and the commitment. The programme is a modest start on an extremely modest scale in a much bigger scheme of things but it has sunk tender roots.

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Endnotes

1. May, J. Poverty and Inequality in South Africa. 1998: 4. 2. Statistics South Africa, Measuring Poverty in South Africa 2000: p1 of Executive Summary. Pretoria. 3. Ibid., pp 30-31. 4. Citied Johnston, F. A. Class, Race and Gold. Routledge and Kegal Paul. London. 1976: 18 5. Ibid., pp 47- 48. 6. Johnston, F. A. Class, Race and Gold. P37. 7. Wentzel, W. South Africa: A country profile. CIRD document. April, 2000: 9. 8. Ntsika. State of Small Business in South Africa. Department of Trade and Industry. Pretoria. 1998 : 50. 9. Levy, B. The Business Environment For South Africa’s Small and Medium Enterprises. World Bank Discussion Paper No. 11. 1996. Washington. 10. Cited in: Menk, K. W. Growth and the Eradication of Poverty in South Africa: A study commissioned by the Konrad Adenauer Stifting. 1996: 7. 11. Statistics South Africa. Stats in Brief – 1999. Pretoria. 12. Tables 2 & 3. CIRD. 2000. 13. Table 4: C.I.R.D. Derived from 1996 population census. CIRD. 2000. 14. Table 5: C.I.R.D. Derived from 1997 Rural Household Survey of Statistics South Africa. 15. Table 6: C.I.R.D. Derived from 1997 Rural Household Survey of Statistics South Africa. 16. Table 7: C.I.R.D. Derived from 1997 Rural Household Survey of Statistics South Africa. 17. Table 8: C.I.R.D. Derived from 1996 Rural Household Survey of Statistics South Africa. 18. Table 9: C.I.R.D. Derived from 1996 population census. 19. The Impending Catastrophe: A resource book on the emerging HIV/AIDS epidemic in S.A. 7 June, 2000. 20. Table 10: C.I.R.D. Derived from 1996 population census. 21. Schmidt, M. The Sunday Times, 19/11/2000: 29. 22. Ibid., p. 29. 23. Statistics South Africa. Measuring Poverty in South Africa. Pretoria. 2000. 24. Schmidt, M. The Sunday Times, 19/11/2000: 29. 25. In, Pieterse, E. et al. Case studies on LED and Poverty. Department of Constitutional Development. Pretoria. 1998: Foreward. 26. Pieterse, E. et al. Case studies on LED and Poverty. Department of Constitutional Development. Pretoria. 1998: 5. – 6 27. The World Bank. World Development Report 2000/2001. Attacking Poverty. Oxford University Press. New York. 2000: 52 – 53 28. Lipton, M. et al. Land, Labour and Livelihoods in Rural South Africa. Volume 1: Western Cape. Indicator Press. Natal. 1996 – pp. v-vi.

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