Local economic empowerment is the way
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.