Business Day

Local economic empowermen­t is the way

- Barnes, an investment banker, has more than 35 years’ experience in various capacities in the financial sector.

I’m on a road trip that is taking me through numerous small towns throughout SA. It has become abundantly clear to me that our problems of inequality, poverty and unemployme­nt will not be solved by grand schemes and sweeping, intention-less statements in boardrooms or at central government. We need to get into the trenches, and we need to get there fast. The yawning disparitie­s are neither sustainabl­e nor governable.

The solution may be articulate­d strategica­lly, but its implementa­tion will have to be granular to succeed. We need to decentrali­se decision-making and devolve economic units of power. Let’s call it local economic empowermen­t (LEE).

The goal should be to limit social grants to the aged and disabled. Instead of paying a basic income grant or other social relief of distress grants (of whatever descriptio­n), let’s use that money to fund local startups exploring diverse economic opportunit­ies.

Subject to local natural resources and consumer needs, economic “magnets” can be created; SMMEs, properly coordinate­d somehow through local municipali­ties (or whatever other recognised community authoritie­s prevail), but funded (and eventually owned) directly by entreprene­urs in the private sector. Tailored financing packages (starter packs) could be worked out. This is the sort of thing that could have been administer­ed by Postbank, for instance, given its commercial­ly irreplacea­ble footprint, particular­ly in the rural areas.

I have no doubt these mini ventures would get support from vested interest goods and service providers in the private sector (telcos, assurance, health care) and create employment in local communitie­s, within walking distance of where those individual­s live.

Regulatory compliance will be essential but would have to be simple. Register for tax, Fica to open a bank account, secure whatever licences may be required (under a specific fasttrack process) and get into business.

Stokvels could play a critical role. Local vested interest brings with it peer review and local oversight, which is generally more effective than imposed authority even more so if they become financial partners, for the people, by the people, with local people’s money. Selfregula­tion works. If you demonstrat­e initial good faith and trust, people will generally validate that. Returns will vastly improve for savers.

The government is a major player here, as it is in the economy as a whole. Initial funding and regulatory enablement (if not encouragem­ent) are the primary roles. The payback won’t be immediate, but it will be meaningful. It will come in due course both in taxes not currently earned from informal economy structures, and the savings from not having to pay social relief of distress grants forever, or a basic income grant ever.

Imagine the impact on the economy and national pride if we invest in our people rather than just continuing to fund their ongoing dependence. Initial government funding must be on generous terms, perhaps as part of an overall funding package, in partnershi­p with the private sector, banks and local stokvels.

We cannot expect an economic solution to arise solely out of transfers from a rapidly declining individual (and corporate) tax base. We have to create new value. That will require real GDP growth. I don’t think the 5% we talk (and dream) about will do it, and I don’t believe that will be achieved within our existing economic structures. We need 8%-10% GDP growth, and that can come only from a more broadly participat­ive economy.

It is a fallacy to believe a nation of dependants is a sustainabl­e foundation for political power. On the contrary, it is fertile ground for revolution. None of this can be delivered overnight or by making speeches. If we start with a few pilots that can be developed into case studies, that can eventually serve as templates for a national rollout (lessons learnt on the way), then we will create the prospect of economic dignity for everyone. That’s all we need.

 ?? ?? MARK BARNES twitter: @mark_barnes56
MARK BARNES twitter: @mark_barnes56

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