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Economics column: Framework for a shared destiny 2006-10-18
Johan van Zyl

*Community economist


1.  Introduction: a telling official viewpoint

The important government review “Towards Ten Years of Freedom”[1] (1994 to 2003) highlights two major issues: 

(a)      it admits openly that the proportion of households living in poverty has risen from 28% in 1995, comprising just under half the population, to nearly 33% in 1999, over half the population.  Since then the poverty situation has continued to worsen.  

(b) “the advances made in the First Decade by far supersede the weaknesses. Yet, if all indicators were to continue along the same trajectory, especially in respect of the dynamic of economic inclusion and exclusion, we could soon reach a point where the negatives start to overwhelm the positives. This could precipitate a vicious cycle of decline in all spheres”. It goes on to call for "a major intervention to consolidate democracy and to integrate citizens as beneficiaries of a growing economy". However, this will  require "a framework defining a shared destiny" [2]


This is surely a serious and thought provoking warning about South Africa's future. A deep-going set of economic policy reforms - "a major intervention" - is urgently needed. The focus must be on finding a new framework for the economic inclusion of all citizens. However, the Review is quiet on howthis is to be done. Clearly, for all South Africans the economic and social stakes are high !   


2.  South Africa's basic economic and social problems

The most important, often interdependent, national issues that currently prevent the effective economic inclusion of all citizens are outlined below.


(a) High and increasing levels of poverty and unemployment.  Over the last decade, jobs increased by 12% but the economically active population grew by 35%. Average unemployment is now more than 40%. In many communities it is above 50% and even 60%. A more telling figure is that, in many townships and rural communities over 80% of families enjoy no significant economic activity, despite the presence of one or more adults in the household.

(b)   Local community economies do not work effectively. If it is accepted that in today's age of globalisation the broad business sector can and will no longer provide jobs for all - as it always did in the past - there is now little alternative but for local-level economies to take up the slack.    

        However, these still remain highly dependent on the external modern commercial sector of the economy i.e. for work, incomes and for supplying even the essential goods and services consumed daily by local-level citizens. Whatever spending takes place by the locals soon flow out to external shops and other commercial providers. Any new spending has little opportunity to circulate internally and thus stimulating further local economic activity.

        In short, the local 'income multiplier' is very low. Raising it from about 1.3 to 4.0, a quite modest target, would triple the internal economic activities of many poor communities.  

        South Africa's huge marginalised sector of townships and many rural areas, the other part of South Africa's sharply dualistic or double-layered economy, house some 75% of the population, and most of the unemployed and the poor. In fact, such people have practically become economic prisoners where they live.

        Analytically, it is this basic culture of economic dependency, historically generated in and by our dualistic economy, that is the root cause of the huge poverty problem in South Africa. Unless this structural issue and the related need to build up more self-reliant local community economies is honestly and firmly addressed, we will never be able to eliminate (not just alleviate) widespread poverty in this country. Nevertheless, if we know why we are poor, we can do something positive about it. 

 (c) Large numbers of economically excluded citizens.  Today, most of the people on the ground have little influence over their own economic and social destinies. The decision-making gap between officialdom and the people that they serve has widened considerably. Much of this is a direct result of the insistance by government to deliver services mainly through officials plus external commercial suppliers i.e. today's popular supply-side approach. The locals are given little opportunity of active involvement in meeting their own needs. Despite what our Constitution promises, communities enjoy no basic economic rights that they can act upon and secure for themselves. For most local  services, they remain externally dependent upon the government.

        Such strangling of local initiative impacts seriously upon a wide range of key aspects of ordinary community life eg. local investment and job creation, setting up new local and regional markets as well as local citizens taking responsibility themselves for managing their own education, health and bringing up pre-school children. These kinds of activities are urgently needed to stimulate the much neglected demand side of local economic development - crucial to making it a more self-reliant and sustainable process..  

(d)   Wide-spread crime and corruption. Johannesburg has been labled the Crime City of the World. Hardly a title to be proud of ! However, if the serious problems of the economic exclusion of so many ordinary citizens outlined above could be resolved, it should contribute significantly to fighting this modern-day scourge.

(e)    Funding for citizens to become economic actors. To place new challenges as well as  responsibilities firmly into the hands of (local) communities - to realise the government's "major intervention" of building a new "framework for a shared destiny" - will require substantial funding.

        Yet, an important point to make is that much if not most of this funding is actually already there ! In essence, it requires to be re-directed and spent in more dynamic and socio-economically effective ways.  Hence this is not a huge add-on financial burden. 

        In many ways, meeting the great challenge of creating a genuine economic democracy alongside our generally successful political democracy implies a brave new course - courageously employing new innovative policies to solve old and persistent economic problems.   

(f)        Democratic/co-operative ownership - the high road to effective economic inclusion. The ownership of wealth in South Africa is skewly and unfairly distributed. The holdings of stocks and shares mainly by the affluent few is a clear example. Yet it is quite possible to advance constructively towards a wider 'national ownership culture'. The famous Mondragon Co-operatives in the Basque province in Spain point the way ahead. The advantages of such a process of "integrating citizens as beneficiaries of a growing economy" (see above) should be self-evident. This can be done via (a) democratic or co-operative employee ownership in the business sector and (b) community ownership through co-operative investment programmes (CIP's) at local level. These major solutions will be briefly referred to later.



3.  New innovative economic ideas and policy approaches

The basic viewpoint on socio-economic development and uplifting all the people of South Africa - the point of departure here - is more in line with modern-day sustainable development thinking (cf. the 2002 Johannesburg Global Summit on Sustainable Development).  This is in contrast to today's dominant neo-liberal paradigm of orthodox, conventional, neo-classical economics. The main reason for this preference lies squarely in the practical domain. The new development thinking simply seems much more practically useful to resolve our long-standing structural problem of the economic exclusion of so many South Africans - see the 'telling' Government viewpoint above.


Hence FOUR  new policy approaches or policy thrusts are proposed:

(a)       Development is about people and not about objects

(b)   Striking a new balance between Globalisation and Localisation in our country

(c)  Pursuing a more effective co-operative, social compact manner of delivering the basic
       economic rights of all citizens 'guaranteed' in our Constitution

(d)  Promoting a new Learning Society

These new policy approaches are outlined below. The many important and often unfamiliar implementation details, the key 'how to' aspects, will have to stand over for later.


(a) Development is about people and not about objects.

        Development is a process of change that happens inside people. Unless people grow and develop inside themselves along the way, there can be no (people-centred) development. Getting a professional outside contractor to build houses, schools or clinics with little or no decision-making input by the recipients, is a focus on objects. This has often been the conventional way. It does stimulate economic growth but there is no development. 

        The key difference lies in attention to process. Project outcomes in terms of outputs  produced (GDP growth) could well be the same. But direct participation by the beneficiaries also generates development.  Top-down decision-making does not. 

        Perhaps of particular significance for South Africans is that a focus on people-centred development pursues much the same basic ideals as Ubuntu.        



(b)   Striking a new balance between Globalisation and Localisation.

        Government's main macro-economic policy, GEAR, has provided much useful support to business in the modern commercial sector to ensure its competitiveness in the new globalised economy. However, it largely ignores South Africa's other sector i.e. our large marginalised or lower-layered economy. This approach has serious implications for the economic opportunities and needs of many ordinary citizens. At home, unemployment and poverty has escalated and will continue to do so. .

        The major way out of this serious dilemma is a new thrust towards Localisation. This would mean actively promoting more self-reliant and sustainable working local economies i.e. SLED instead of the orthodox LED. Such an approach should aim at   substantially increasing the local income multiplier.  In operational terms this implies 'plugging the (many) leaks' in any local-level community economy. 

        There are many ways of doing this. Modern-day policy instruments or techniques widely employed overseas include (a) the local production of many essentials of life currently 'imported' from outside, (b) promoting local banking, often to re-invest local savings in the local economy, and (c) introducing local currencies, to assist in multiplying local rounds of spending before leaking out to the external economy. Importantly, these actions can be pursued without first obtaining approval or support from government.

        An innovative way of achieving the effective economic inclusion of all citizens is to enable local-level people to realise for themselves their basic economic and social rights - in a new co-operative social compact partnership with the government. (See below). This would happen, quite naturally, if most local development initiatives were allowed to be decided upon by the locals and not by government - with the locals financially enabled and rewarded for doing so.     

  (c) A more productive, co-operative way of delivering the key socio-economic rights 
 'guaranteed' in our Constitution.

        The fundamental basis of such an innovative policy approach is contained in the South African Constitution - in its 'guarantee' of the basic economic rights of all citizens. At present, government is supposed to deliver these rights through its budgetary spending. 

        Yet, partly because of the usual constraints on budgets, this 'guarantee' has often had limited operational impact. 

        In practice, there are more effective ways of setting up the delivery of socio-economic rights. Citizens should become active and responsible partners in a co-operative delivery process, rather than being forced to rely passively on government alone to do the job. In fact, they should be deliberately enabled to do so. Government offering a range of specific programme rights and budgets to the locals is the way to go.

        For example, local community groupings could, by way of investment rights, become organised and funded to decide upon local investment projects of various kinds. These could facilitate the local production of many of the essential goods and services currently 'imported' from outside, investing in new periodic market places to assist trade and also to become cultural events on market days, and investment in new local and inter-regional transport. As indicated earlier, communities could also promote local banking to help plough back local savings into the local economy, and decide to use a local currency to stimulate local economic activity directly. 

        Backed by other programme rights - with resources attached - local groups can also accept new responsibilities for looking after their own health, schooling and child care.

        Such a process would create many new livelihoods and jobs locally, all essentially under the decision-making control of the locals.

        Indeed, there is no reason why most poor areas could not become socio-economically self-reliant and vibrant communities in, say, ten years or so. 

        A particularly important dimension of this approach is ownership rights. It was indicated earlier that it is quite feasible to move towards a new national ownership culture, instead of today's dominance by non-involved external shareholders. The trick is to go for democratic or co-operative ownership. The major international example is the famous Mondragon Co-operatives in Spain. Such a thrust would involve two broad areas of implementation viz. (a) greater employee ownership in the business world, of the co-operative or democratic kind, not the generally failed individual share-holding options tried so far and (b) local citizen ownership via community development associations or CDA's. 

        Again, details are important but will have to stand over for later.    

(d)   Promoting a new Learning Society.

        At present South Africa is a society in which project failure is simply not tolerated. Any such failure whether by government, donor or community initiative is usually denied, covered up or hidden. The public at large seldom learns the real truth !

        Contrast such a narrow approach with one in which there is much more tolerance for local communities to explore economic rights solutions - and to make mistakes along the way. Much could be gained, provided that such failures are clearly understood as useful opportunities for finding out why things went wrong, to correct mistakes, and then to disseminate such current best practice information widely to all interested parties. 

        Surely, in practical terms such a learning society approach accords more realistically with South Africa's basic profile of large numbers of developing citizens. Are they still to be practically ignored in most of South Africa's development initiatives ?  

        No doubt, the professionals will object. But actively involving such non-conventional resources i.e. those that can be obtained either for nothing or at rates below those that prevail in the formal commercial economy, is a clear bonus. Involving such resources plus appropriate training - also to be decided by the locals - can only ease the basic constraint of limited resources.  It makes much fundamental economic sense !




4.  Some key outcomes

If the above ideas and approaches are effectively implemented, South African citizens will experience the following considerable advantages: 

·          A real economic democracy in which all citizens are actively involved in daily pursuing their own economic and social rights, and are resourced to do so.

·          Raising the local-level income multiplier by a factor of three within some ten years -  which might well add about 1% - 2% to the annual GDP.

·          An opportunity to regain the ownership of most of South Africa's resources and productive assets - as democratic business employee owners and/or at local level as members of registered co-operative Community Development Associations i.e. CDA's. These two major ownership programmes are the key vehicles to realise "the major intervention" called for by government to bring about "a new framework defining a shared destiny". (See above).

·          Much income returns from ownership and/or investment, as profit and rent, would flow among members and not as dividends paid out to distant investors.

·          Along this path, ordinary people will learn to use investment capital and markets for the good of all, rather than largely for the benefit of the affluent few. Considerations of quality of life - arising from a genuine people-centred development approach - will  prevail above today's narrow materialistic focus on standard of living. Perhaps surprisingly, the economy will probably grow faster and certainly more equitably than present policies will allow.

        But above all, the major constraint of the economic exclusion of so many ordinary South African citizens will be effectively resolved.

[1]  TOWARDS TEN YEARS OF FREEDOM - 'Progress in the First Decade - Challenges of the Second  Decade', South African Government, 2003. 
[2]  Cf. pages 101 to 102.




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