Small is beautiful

2013-04-19 00:00

MARGARET Thatcher may have been buried this week, but her legacy remains. So-called “neo-liberal” economic policies, which she and Ronald Reagan championed as leaders of the “free world”, promised a “trickle-down” effect of cascading economic benefits which would eventually reach the world’s poor, but this did not happen.

Quality of life for most did not improve and there was an overproduction of consumer goods. Local markets became saturated and industries were forced to cut down on labour. Rich people sat with lots of money and poverty got worse.

South Africa has not escaped the influence of neo-liberal economic instruments. Our Local Economic Development (LED) priorities can be traced to World Bank economic-development instruments such as structural adjustments.

These are part of a neo-liberal economic approach that calls for countries to cut public expenditure and import tariffs, reduce tax and privatise most social services provided by government institutions. Proponents of this argue that it will provide more room for the private sector to drive the economy, create employment and eventually reduce poverty.

But the world is seeing a different picture. Poverty is deepening and inequality is widening. This leads us to the most sensitive question: is our LED agenda paying a decent social wage?

The public sector has commissioned numerous studies on LED. Barriers, gaps and opportunities to sustainable LED have been well documented.

Legislative instruments have been developed to support its implementation. But our LED agenda is based on two strategic assumptions.

First, it assumes that the transfer of knowledge, capital and technology from the developed localities will provide the necessary launch-pad for poor communities to participate in the mainstream economy.

Second, it also assumes that the wealth of the rich will trickle down and have a compounding effect of improving the incomes and living standards of every citizen.

Experience shows that this has remained an impossible task to accomplish. Skyscraper economies continue to dominate every commodity value chain, with little evidence of the “trickle-down” effect.

LED requires serious pro-poor investments. These include a basket of conflicting priorities. Should the state prioritise public-infrastructure investment over other pressing needs such as poverty alleviation?

Has social investment led to a convincing absorption of newly skilled people into private-sector employment?

We know that the state cannot be the lead employer, but the private sector can, and should be.

Closely related to this, there has been too much expectation and pressure for development programmes to deliver quick-wins. The land-reform programme is one. When land is transferred to new owners, the common view expects them to maintain or improve on production levels.

We have learnt our lesson: we don’t have a silver bullet, only the land to utilise. We should be concerned about the on-going disconnect between small producers and buyers of produce.

Lastly, there is too much pressure on the public-sector tendering system. Some individuals have been turned into millionaires by it. Do state tenders even generate new money, or are they just reshuffling it on an ever-diminishing tax base?

It is not all bad.

Rural development presents a number of economic opportunities and most of them remain undetected on the radar.

I believe we should redirect our energies to rural commodities that are produced on small scales and provide necessary and structured support to them.

Think of the fresh-produce vendors found at all taxi ranks. What do you make of a small baker who produces 30 to 50 loaves per day? What about those small bakers who supply scones to many local weekend ceremonies and events? Can they draw a sustainable income from it?

There is a list of commodities that we can identify and many small but informal industries can be developed as springboards for people to start participating in the formal economy.

We should be ready to deal with the pressures that may come from established businesses as this may shake their traditional markets.

Finally, some investment should be made in shifting attitudes and values necessary to reproduce required modern-business behaviours.

This should begin with changing the mind-set of the officials who are charged with driving the development agenda.

• Nqe Dlamini is a rural development consultant.

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