AFRICANUS
Vol 30 No 2 ISSN 0304-615X
AFRICANUS is an annual journal published for the Department of Development Administration by the
University of South Africa. It seeks to publish articles, research reports, book reviews and bibliographies
on subjects relating to developmental problems and strategies in the Third World.
The attention of contributors is drawn to the Note to contributors printed on page 101.
Copies of AFRICANUS can be ordered from the Business Section, Unisa Press, Unisa, PO Box 392,
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Research notes present preliminary and unpublished results of the author's research and are published
to afford the opportunity of gaining information and feedback from fellow researchers; citation from these
should take account of their provisional character.
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Set, printed and published by the University of South Africa, 2000.
INDEXED IN: SOCIAL SCIENCES INDEX; ULRICH'S INTERNATIONAL PERIODICALS DIRECTORY;
AFRICAN URBAN & REGIONAL SCIENCE INDEX.
# All rights reserved.
STATEMENT BY THE DEPARTMENT OF DEVELOPMENT
ADMINISTRATION
The values underlying our teaching of
our subject are as follows:
. We are dedicated to upholding human rights, an open society and
social justice.
. We want to move our subject to a
relevant position abreast of the contemporary sociopolitical situation in
South Africa and the rest of the Third
World.
. We affirm a pragmatic and human
view of development administration
and we reject a technicist approach
to development.
. We want to direct attention to the
sociopolitical climate for change and
the rules of the game within which
development at the local level takes
place.
. We affirm that development occurs
when social forces are generated at
the bottom of society.
. We see development as a popular
process not under the control of
external structures.
. We want to engage with the popular
development process in the larger
society and, within that framework,
with administration-related topics.
With the above values, we wish to
approach our subject of development
administration primarily through the
study of the dynamics of society in its
sociopolitical context.
Journal of Development Administration
Vol 30 No 2 2000
EDITOR
Naas du Plessis
ASSISTANT EDITOR
Linda Cornwell
EDITORIAL COMMITTEE
Frik de Beer
Moipone Rakolojane
Peter Stewart
EDITORIAL ADVISORY BOARD
Jan K Coetzee ± Rhodes University
Richard Cornwell ± Institute for Security Studies
Cristo de Coning ± University of the Witwatersrand (P & DM)
O P Dwivedi ± University of Guelph
Des Gasper ± Institute of Social Studies (The Hague)
Pieter le Roux ± University of the Western Cape
Tom Lodge ± University of the Witwatersrand
Johny Matshabaphalo ± University of the North
Tsitse Monaheng ± University of North-West
Aubrey Redlinghuis ± Rand Afrikaans University
Michael Stocking ± University of East Anglia
Francois Theron ± University of Stellenbosch
Kees van der Waal ± Rand Afrikaans University
Malcolm Wallis ± University of Durban-Westville
Contents
Editorial
5
Informal collection: a matter of survival amongst the urban
vulnerable
8
The role of metropolitan government in the development process
27
Indicators for indigenous financial efforts: theory, evidence and
prospects
38
Gender relations: a missing link in Third World development
planning
50
On the relationship between participatory research and participatory development
64
Revenue and ownership Ð the impact of privatisation in South
Africa: lessons from the UK
76
Michelle McLean
David Mmakola
Jaco Vermaak
Tsepiso Mohapi
Naude Malan
Charles C Okeahalam and Royson M Mukwena
3
Book Reviews
Can the poor influence poverty? Participatory poverty assessments in the developing world by Caroline M Robb, Washington
DC: The World Bank, 1999...
96
Expectations of modernity: myths and meanings of urban life on
the Zambian copperbelt by James Ferguson, Berkely: University
of California Press, 1999...
98
Naas du Plessis
Peter Stewart
4
Editorial
As globalisation is making its importance increasingly felt on the development
debate, local issues become more important within this increasingly complex
and diverse debate. The articles in this edition of Africanus focus on these
relevant issues and give the development practitioner and the academic food
for thought.
Michelle McLean's paper is based on her personal observations of the appearance and subsequent increase of informal collectors in the residential area
of Glenwood/Berea, Durban. The aim of the study was to gather information
from the collectors and their activities in order to help find solutions to a growing
informal sector that needs to be accommodated.
The article by David Mmakola explores options that could be considered in
structuring a metropolitan form of local government in South Africa, as well as
the contribution that metropolitan local government could make in the development process. It further traces the origins of metropolitan government in
developing countries, using Asia as an example.
Jaco Vermaak in his paper evaluates indigenous financial efforts (IFEs) in rural
areas in terms of their contribution to rural community development. He argues
that IFEs are often associated and evaluated with quantitative oriteria in spite of
the profound non-economic benefits such schemes have for community development. Evidence from successful cases of IFEs in the developing world and
fieldwork done in South Africa are presented.
In her article Tsepiso Mohapi attempts to highlight the implications of planned
development for women since the 1950s when development planning first ap5
Africanus 30(2)2000
peared internationally. The purpose of her paper, is an attempt to contribute to
the resolution of mainstreaming gender into development planning.
Naude Malan examines the connection between participatory development
and participatory research. He argues that participation in research is not sufficient to bring about participatory development. In his article he scrutinises
those aspects of development in South Africa that would have a decisive influence on the outcomes of participatory intervention.
Charles Okeahalam and Royson Mukwena use anecdotal evidence from the
United Kingdom to suggest that one of the most trusted ways of ensuring the
long-term development and growth prospects of the South African economy is
to develop the philosophy of the shareholder amongst all South Africans via a
carefully planned and implemented privatisation programme. The paper concentrates on two aspects of privatisation: the impact on government revenues
and the impact on share ownership by employees.
Book reviews by Peter Stewart and Naas du Plessis conclude the issue.
NOTES ON CONTRIBUTORS
Michelle McLean lectures in the Department of Physiology at the University of
Natal.
Devid Mmakola is a policy analyst at the Development Bank of Southern
Africa.
Jaco Vermaak lectures in the Department of Public and Development Administration at the University of Venda.
Tsepiso Mohapi is a documantation assistant in the Institute of Southern
African Studies at the National University of Lesotho.
Naude Malan is a lecturer in the Department of Development Studies at the
Rand Afrikaans University.
Charles Okeahalam is Donald Gordon Professor of Banking and Finance at
the Graduate School of Business Administration at the University of the Witwatersrand.
6
Royson Mukwena lectures in the Department of Public Administration at the
University of Namibia.
Peter Stewart and Naas du Plessis are both lecturers in the Department of
Development Administration at the University of South Africa.
This 2000 edition of Africanus marks the beginning of a new century by appearing in a ``new look'' format. The editor and the Editorial Committee have
opted for an ethnic format that is more suited to the new African Renaissance
approach being adopted by our country.
Erratum
Figure 1 on page 52 of the previous edition should read:
Figure 1: A version of the Toulmin-Dunn model for policy arguments
Given
GROUNDS
(policy-relevant
information)
CONCLUSION
(policy proposal/
claim)
"
~
Therefore
(inference)
And Since
WARRANT
(justification for
the inference)
QUALIFIER
(Modulates strength
of the conclusion)
Unless
REBUTTAL
~
~
Because
BACKING
Because
BACKING
7
Informal collection:
a matter of survival amongst
the urban vulnerable
Michelle McLean
Keywords: informal collectors; integrated waste management; poverty; recyclables; residential areas
ABSTRACT
In the last two or three years, informal collectors have become frequent
visitors to residential areas surrounding central Durban. Twenty of these
collectors (15 males and 5 females) were interviewed in the Glenwood-Berea
residential area, a few kilometres from the central business district. All but
one collector supported dependants, most of whom lived at the permanent
homes of collectors, which were generally in rural areas. Collectors originally
came to Durban in search of employment, which was not forthcoming. As a
result, they have resorted to collecting cardboard and, to a lesser extent,
other recyclables, to generate an income. Several collectors had moved into
the residential area because of the large number of informal collectors operating in more commercial areas. The recent decrease in the wastepaper
price severely affected the income-generating capacity of collectors. As individuals, and also considering the households supported by these collectors, many were experiencing extreme poverty.
INTRODUCTION
On 6 February 1998, President Nelson Mandela addressed Parliament at the
penultimate sitting of the first democratic government of South Africa. Topping
his list of successes was the amelioration of the conditions of the most vulAfricanus 30(2)2000
8
nerable citizens ± the poor, women, the disabled, children and the rural masses
± ``the primary victims of the iniquitous system from which we have just
emerged'' (Anon 1998: 5). The former President provided impressive statistics
for the provision of clean and accessible water, electricity, telephones, as well
as the initiation of primary school feeding schemes, land redistribution and the
building of more than 500 clinics. Despite these documented successes, according to the recent Poverty and Inequality Report (1998), prepared for the
Office of the Executive Deputy President and the Inter-Ministerial Committee for
Poverty and Inequality (PIR 1998a and 1998b), most South African households
still experience outright poverty or are vulnerable to becoming poor (PIR
1998a: 1). Moreover, the poorest 40 percent of households receive only 11
percent of the total income, whilst the richest 10 percent receive over 40 percent of the total income, making South Africa a country with one of the highest
income inequality profiles. Poverty is particularly prevalent in the rural areas,
where 72 percent of the ``poor'' reside (PIR 1998a: 2).
Unemployment is one of the major contributors to poverty, with the current
estimate for unemployment being between 25 and 40 percent (Urban Foundation 1990: 9; PIR 1998a: 6).``Jobs, jobs and jobs is the clarion call that should
guide us'' were President Mandela's words (Anon 1998: 8). Job creation is no
doubt the solution to the alleviation of poverty, but depends on economic growth
(Godsell & Buys 1992: 635). A recent Human Sciences Research Council
(HSRC) media release (August 1999), however, predicts that while the labour
force is expanding at a rate of about 3 percent per annum, employment growth
is negative, with only one in 30 new entrants in the labour market likely to find
formal employment (HSRC 1999a: 1). Rural areas will be particularly negatively
affected (HSRC 1999a: 2). To cast further shadow on an already bleak situation, it has further been forecast that over the next four years, net job creation
will be experienced only in the professional and managerial categories (HSRC
1999b: 1). The information technology sector is predicted to grow by 40 percent, while employment in the mining sector will decline (HSRC 1999b: 1±2).
Job losses are also expected in the manufacturing sector (45 000 jobs), in the
public services sector (74 000 jobs) and in the unskilled labour force. Artisans
can expect only a 10 percent increase in demand for their skills in the 1998±
2003 period (HSRC 1999b: 1±2). COSATU has estimated (confirmed by analysts) that at least 500 000 jobs have already been lost over the past four years
(Sunday Tribune, 18 July 1999: 4), a trend that is likely to continue in the short
to medium term.
9
Thus, despite the Government's Reconstruction and Development (RDP) and
Growth, Employment and Reconstruction (GEAR) Programmes, and the promise of a better quality of life for all South Africans, the economy has failed to
recover sufficiently to make inroads into the high level of unemployment. The
net result over the past few years has been an increasing informal sector,
unofficially estimated to account for 10±40 percent of the labour force (Huntley
et al 1989: 72±73; Roux 1991: 103). From the 1997 October Household Survey, it would appear that 1.8 million individuals generate an income from the
informal sector (CSS 1998: 59), with Africans accounting for 86 percent of the
self-employed (PIR 1998b: 79). Most individuals in this sector are involved in
survivalist activities and therefore represent a severely disadvantaged and
vulnerable group in the labour market (PIR 1998b: 79). Informal employment
would include activities by shopkeepers, street sellers, artisans, shebeen operators, and of relevance to this study, informal collectors. Based on two basic
poverty lines, the Supplemental Living Level (SLL) and the Minimum Living
Level (MLL) (PSLSD 1994), it is estimated that 45 percent of the self-employed
earn below the poverty line, with only informal store-keepers generally earning
above this level (PIR 1998b: 80±81). Poverty is, however, not a static condition.
While some individuals, households and communities may be permanently
poor, others may oscillate above and below the poverty line (PIR 1998b: 5).
These individuals and groups may thus be vulnerable, depending on the prevailing economic, social, environmental and political conditions (PIR 1998b: 5).
Vulnerability therefore implies that an individual, a household or a community is
at risk, being unable to plan for or cope in times of crisis. Vulnerability is also
characterised by a lack of assets or the inability to accumulate different assets,
thereby increasing the risk of and predisposition to poverty (PIR 1998b: 5).
The present study concentrates on the informal collectors in the Durban Metropolitan Area (DMA). As one of the poorest sectors of the urban poor, they
appear powerless to regulate the level of their income, which is dependent on,
amongst other factors, the price and availability of recyclable commodities.
Without any assets, it is unlikely that they (or their families) would cope with a
crisis (eg the recent cardboard price decrease). For many years, informal collectors have operated in the central business district of the city, generating an
income from hawking cardboard and newspaper. In the central Durban area,
over 200 informal female collectors currently operate under the auspices of the
Self-Employed Women's Union (SEWU) (DSW 1998: 3). More recently (2±3
10
years), collectors have become a common sight (and even residents) in residential areas just outside central Durban, particularly those areas close to
shopping centres, which provide a continuous source of cardboard. Early in the
morning, often before first light, collectors rummage through the domestic refuse bags left overnight outside residential properties. Either by means of a
trolley (usually from a supermarket), or by carrying their commodities on their
head, collectors transport their goods to the nearest agent, several kilometres
away. The present study investigates the activities of these informal collectors
in the residential areas of Glenwood/Berea in terms of the effect of the economy
on their poverty status and their contributions to the waste management of the
city.
METHODOLOGY
Study area
Based on a personal observation of the appearance and subsequent increase
of informal collectors in the residential area of Glenwood/Berea, 4±5 km from
central Durban, this study was undertaken to gather information with regard to
these collectors and their activities. The study area of Glenwood/Berea incorporates two shopping centres (Davenport and Berea). Collection agents, to
whom the collectors sell their commodities, are located a few kilometres to the
south of Glenwood, in the Sydney/Williams Road area (Congella), and include a
buyback centre (McLean 1998: 257) and paper and scrap metal merchants.
Questionnaire
A structured questionnaire was completed during interviews with 20 informal
collectors who were encountered in the area during a two-week period in October±November 1998. Interviews were conducted in Zulu and transcribed onto
a structured questionnaire. The responses were then transposed onto an
equivalent questionnaire in English for the purpose of analysis.
RESULTS
Social profile of collectors
Collectors were generally male (75%). Most were between 31 and 60 years of
11
age (table 1). The youngest collector was a 23-year-old single male (with six
dependants), whilst the oldest was a 76-year-old married male.
Table 1 Age and marital status of informal collectors
GROUP
AGE
MARITAL STATUS
Males
(n = 15)
43.0 ‹13.60
(range: 23±76)
8 single; 7 married
Females
(n = 5)
47.2 ‹ 10.23
(range: 34±57)
3 single; 1 divorced;
1 widowed
All collectors
(n = 20)
44.1 ‹ 12.73
(range: 23±76)
11 single; 7 married;
1 divorced; 1 widowed
The permanent homes of collectors were generally in KwaZulu Natal (at least
80%). One collector was a Zimbabwean, and another originated from the
Transkei. A number of collectors returned home only when they could afford to
do so (30%), while others returned home during holidays or at Christmas (35%).
Most lived in Durban during the week (85%), largely in Dalton Road or Warwick
Avenue, which were collection points, or where the merchants who bought
collectors' commodities were located (Dalton Rd). The Warwick Avenue area is
close to the fresh produce market and is a hub for bus, train and taxi transport
into and out of the city. The remaining three collectors travelled into the city from
surrounding townships. The majority of collectors remained in Durban over the
weekend (70%), as many collected on Saturdays and Sundays.
Nineteen collectors (including all the women) had dependants, who were
generally living at the permanent home (80%). Sixty-four children and 19 adults
were supported by 19 collectors (table 2). At the one extreme, a collector, who
claimed he had been collecting for nine months only and earned an estimated
R6.00/day (R168/month), supported six children and three adults. All but one
collector indicated that this collection provided the sole source of income. The
exception was a 76-year-old male who lived with his employed wife in the
Glenwood area, and who had been collecting for two weeks only.
12
Table 2 Dependants supported by collectors (n = 19)
DEPENDANTS
MALE
COLLECTORS
(n = 14)
FEMALE
COLLECTORS
(n = 5)
TOTAL
COLLECTORS
(n = 19)
Adults
16
3
19
Children
45
16
61
TOTAL
61
19
80
>4
<4
>4
Average number
Collection activities: income and areas of collection
Most collectors (55%) had been involved in collection activities for 1±2 years
(figure 1). All intimated that they had originally come to Durban in search of
employment, which had not been forthcoming.
Figure 1 Months or years spent in informal collection activities
Months/years of collection
5 yr
Male
Female
>2yr
2 yr
1 yr
7 mo±1 yr
0±6 mo
0
2
4
6
8
Number of collectors (n = 20)
13
10
Collectors estimated that they earned R6±R30 per day, with 45 percent earning
R6±R10 per day and 30 percent earning R16±R20 per day. Four collectors (one
female) earned R30 per day. If the estimated income is calculated as a monthly
income, based on the number of days worked by each collector, more realistic
figures for income are obtained (figure 2). A male collector, who worked seven
days a week earned R840 from collecting four recyclable commodities (cardboard, newspaper, other paper and scrap metal).
Figure 2 Estimated monthly earnings of informal collectors, based on
their income per day and the number of days worked
Estimated earnings per month
Earnings per month (rands)
801±900
Male
701±800
Female
601±700
501±600
401±500
301±400
201±300
101±200
1±100
0
1
2
3
4
5
6
Number of collectors (n = 20)
For seven (35%) collectors, Glenwood was their first collection area; they had
not collected elsewhere. Two of the 13 collectors who had collected in another
area (mainly in the Warwick Triangle or city centre), prior to moving into
Glenwood, no longer collected in those areas because, in their opinion, there
were too many collectors. In Glenwood/Berea, most collectors spent either five
(weekdays), six or seven days collecting; those collectors spent less time in
their second area of collection, where they had collected prior to moving to the
14
residential area. Twelve collectors (60%), including the five women, still collected elsewhere, with at least 55 percent operating in both areas each day. On
the whole, it would appear that women spent more time collecting in two areas.
Reasons for collection/non-collection on particular days ranged from going
home on weekends (25%), that there was plenty to collect on those days (15%),
or conversely, that there was not much to collect on the other days (10%).
Others visited friends (one collector), went to church on Sunday (one collector)
or claimed that the store from which he collected was closed on a Sunday (one
collector). Almost one-third of collectors (30%) collected material from residences, while at least eight (40%) collected from the Berea or Davenport
shopping centre. Others (25%) collected from smaller shops in the area.
The number of days worked had an impact on the income generated (table 3).
Working for more than two days markedly increased a collector's earnings,
although there was little difference between working three or five days, or six or
seven days. Factors that will have influenced the income generated would
include owning a trolley, recyclables collected, and whether collectors operated
in one or two areas.
Table 3 Average earnings per month in relation to the number of days
spent on collection
Number of days
collecting
Monthly income based
on number of days worked
2 (10% of collectors)
R120 ‹ 56.67
3 (5%)
R360
5 (30%)
R360 ‹ 160.00
6 (20%)
R420 ‹ 229.78
7 (35%)
R432.00 ‹ 266.54
Owning a trolley affected a collector's activities (table 4). Trolley-owners earned
more despite working fewer days, and needed to operate in one area only.
Presumably, a trolley would increase the speed at which cardboard could be
collected and transported to the agent, forcing those without trolleys to spend
more time collecting and to move to another area in order to obtain material. In
the present study, only one woman and eight men had access to a trolley. Most
of those not owning a trolley indicated that they carried their merchandise on
15
their head. Three women sold their cardboard or paper to an agent with a motor
vehicle who called on them on a daily basis in the Warwick Triangle. These
women would therefore have to transport some of their recyclables to the
market area, several kilometres from Glenwood. Interestingly, while two males
also collected in the market area and four others in the CBD, none used the
same pick-up facilities indicated by the women. Instead, they chose to take their
goods to one of the Congella agents. Three of these males owned trolleys, and
another borrowed one. Similarly, the single female collector who owned a
trolley, and who also collected in the Warwick Avenue area, where the pick-up
service existed, chose to sell her commodities in Congella. The agent who runs
the small buyback centre in Williams Road, to whom most collectors sold their
cardboard at the time of the interviews, said that he was paying 8±10c more per
kilogram than other agents. This higher price was sufficient to warrant collectors
travelling the extra distance to hawk their cardboard. At least seventeen collectors (85%) traded their commodities in Congella.
Table 4 Comparison of earnings, number of days spent collecting and
recyclable items recovered by collectors with and without access
to trolleys
Collectors
(n = 20)
Days per week
collecting
Areas of collection*
(maximum = 2)
Monthly
earnings
With trolleys
(n = 9)
4.89 ‹ 2.03
67% in 1 area
R371.11 ‹ 275.52
Without trolleys
(n = 11)
6.0 ‹ 1.0
73% in 2 areas
R342 ‹ 176.94
*Glenwood/Berea + elsewhere
Materials collected
Of a possible seven recyclable items that could be recovered (cardboard,
newspaper, other paper, cans, glass, plastic, scrap metal), the highest number
collected was four (table 5). All collected cardboard, with fewer than half collecting other forms of paper (figure 3). Seven (35%) collected only cardboard.
The women generally collected all forms of paper, with none collecting any
other commodity. Scrap metal was the next most frequently collected (6 males)
commodity, followed by cans. Five scrap metal collectors owned trolleys, which
obviously facilitated transport to the merchants in Congella. When asked where
16
the metal was obtained, one collector indicated the landfill site, two answered
``anywhere'' and two did not respond. Scrap metal, despite a low price per
kilogram, is a valuable commodity because of its mass. It is not uncommon to
see a collector pushing a trolley loaded with old car exhausts, refrigerator doors,
other car parts, or even old lead plumbing pipes to a scrap metal merchant. Of
particular concern, however, is the continued and rapid disappearance of items
such as steel manhole covers and bridge railings, presumably removed for their
worth as scrap metal. Aluminium in particular is highly valued, with some
dealers paying up to R3.00/kilogram. At this stage, the perpetrators responsible
for dismantling public structures have not been identified, as much of this activity takes place at night. It is probable, although there is no evidence forthcoming, that some informal collectors may be involved in such activities. If this
is indeed the case, the blame lies not with the collectors per se, as many barely
exist above the poverty line, but with the unscrupulous scrap metal dealers who
indirectly encourage theft by purchasing the merchandise, fully aware of the
origins.
Table 5 Earnings per day, in relation to the number of recyclable items
collected
Recyclable items
(maximum = 7)
Male: female
Number with
trolleys
Earnings per day
1
2
3
4
5:2
6:0
2:3
2:0
2
5
1
1
R12.71 ‹ 6.99
R16.67 ‹ 8.16
R20.00 ‹ 10.00
R18.50 ‹ 16.30
Not a single collector recovered plastic or glass. Initially, the buyback centre in
Williams Road, where collectors hawked their cardboard, also bought plastic,
cans and glass. Poor support by collectors for these commodities and difficulties
experienced by the owner in disposing of them had forced him to collect only
paper products. Collectors gave three main reasons for not hawking particular
items: the selling price was not sufficiently high (50%); the commodities were
scarce (30%); or they were unaware that these materials could be traded (15%).
A comparison was made between the income generated per day and the
number of recyclable items collected (table 5). Those collecting cardboard only
earned considerably less than those collecting at least two commodities (mainly
newspaper or other paper or scrap metal).
17
Figure 3 Number of collectors recovering recyclable items.
Recyclables collected
Plastic
Male
Scrap metal
Female
Glass
Cans
Other paper
Newspaper
Cardboard
0
2
4
6
8
10 12 14 16 18 20
Number of collectors (n = 20)
Sixteen (80%) collectors removed food from domestic refuse bags. When
asked if collection would be facilitated if ``valuable'' goods were separated from
the general waste by home-owners or storekeepers, two collectors indicated
that this was already done by storekeepers. The other collectors agreed that
this would save time. In general, it would appear that cardboard, because of its
bulk, is separated from the main domestic waste, and that in rummaging
through bags, collectors search for food and other ``valuable'' items (eg clothing,
household goods). In response to whether they minded searching through
someone else's waste, none of the collectors objected. Seventeen (85%)
clarified their response by saying that money was important or that if one
minded, one would not get money. From such responses, which were not
probed further by the interviewer, it is difficult to gauge whether collectors in fact
did not mind, or whether they had no choice. For two collectors, this was a way
of life, and one collector admitted to enjoying it.
Difficulties experienced by collectors
It would appear that the collectors' market is competitive. When asked about
who was entitled to commodities in an area (ie, did collectors operate within
18
territories?), eighteen (90%) indicated that collecting was done on a ``first-comefirst-served'' basis. The remaining collectors had an understanding with a
storekeeper, who kept the goods aside for them. All but one collector indicated
that his or her goods had been stolen, and on all occasions the culprit had been
another collector. The response of most collectors that an organisation of informal collectors would be beneficial is difficult to reconcile in view of the fact
that they cannot trust each other with their belongings. Three collectors believed that such an association would give them voice, which would ultimately
be advantageous to all collectors. The benefits of belonging to an organisation
became clear when SEWU recently secured accommodation for many of the
female street traders in Durban (Lund & Skinner 1998: 21). At least 200 female
informal collectors in the CBD already operate under the auspices of SEWU
(DSW 1998: 3).
Only one collector had been chased by a property-owner. This would suggest
that informal collectors may not be viewed negatively by property- or shopowners. In response to the possibility of establishing an informal association,
collectors felt that recognition by property-owners would facilitate and promote
their activities, resulting in a better return for their labour-intensive activities.
Recognition by property-owners would allow them relatively unrestricted but
presumably controlled access to materials. Of more importance in the long
term, however, would be recognition by local councils and government. A
number of collectors (55%) believed that this recognition might result in some
form of assistance or sponsorship, such as the provision of a trolley. Implicit in
the collectors' desire to be recognised by local authorities lies their belief of the
value associated with the work they undertake (eg cleaning). Most collectors did
not understand the true environmental benefits or impact of their activities. Only
three collectors (two women) understood that ``recycling'' meant reuse of waste.
For most, it was a means to get an income. There is no doubt that collectors
divert several hundred tonnes of recyclable paper products from the landfill site.
A single buyback centre in the Warwick Triangle turns over several tonnes of
cardboard per week (David Cooper, Coopak Recycling, personal communication), while the buyback centre in Williams Road may purchase in excess of 100
tonnes per month from informal hawkers (Jeremy Droyman, Don't Waste
Services, personal communication).
The problems highlighted by collectors were few, but were of a serious nature:
theft, accommodation and transport. One collector believed that the local authority should provide accommodation, while several others felt that trolleys
19
would facilitate their work. Collectors (45%) requested additional buyback
centres, possibly reflecting the long distances they have to travel to sell their
merchandise. Others believed that centres needed to increase prices. At the
time of the study, the highest price paid for cardboard was 24c/kg, but the
average price was 15c/kg. If, as some collectors indicated, they earned R30 per
day, then they were collecting 150 kg of cardboard per day.
DISCUSSION
The increase in the number of informal collectors and their recent appearance
in residential areas reflect the difficult economic climate. The prospect of finding
employment or generating an income in the city will continue to attract people
from impoverished rural and semirural areas, exacerbating the socioeconomic
situation facing city planners. Many flocking to the city have little or no education, many cannot speak English, and most do not have any skills to offer a
potential employer. Since the commercial sector is facing the same economic
constraints as the agricultural sector, retrenching rather than employing, the net
result is that many migrating to urban areas cannot find formal employment and
are forced into the informal sector. Without appropriate skills or finance to start
informal businesses, many have to resort to collecting recyclables to generate
some form of income.
Vulnerability to extreme poverty
Most informal collectors have no visible assets, except a trolley and the clothes
they wear (often in poor condition). At the time of the interviews, the R20 per
day (based on 15c/kg for cardboard) earned from 8 to 12 hours of labour would
barely have covered the costs of accommodation and food, let alone support a
family. Many collectors do not have any formal accommodation, often sleeping
in makeshift shelters. Salvaging food and other usable valuables from domestic
refuse is therefore a survival strategy for most collectors. In the light of the
international ``rule of thumb'' measure that absolute poverty is defined as existing on US $1 per day (R6/day) (Klasen 1997: 54), most collectors met this
minimum requirement. In real terms, however, even if this sum should meet the
daily subsistence requirements of individual collectors, it is unlikely to even
approximate the income necessary to support the families of these collectors.
There is a further consideration. These income calculations are based on a
cardboard price of 15c/kg. Recently (April/May 1999), because of an oversupply
of material, the price decreased by 5c/kg. For many, this may seem incon20
sequential, but for collectors it will have had important consequences on their
poverty status and the wellbeing of their families (figures 4 and 5). If we calculate the earnings of collectors, based on 15c/kg (1998) and 10c/kg (1999),
using two poverty indices (RDP (1995) for households and PSLSD (1994) for
individuals), the vulnerability of these individuals and their families to absolute
poverty is highlighted (figures 4 and 5). The activities of these informal collectors are therefore survivalist in nature, with the level of subsistence highly dependent on market trends.
Figure 4 The effect of a recent cardboard price decrease on the poverty
status of individual collectors (PSLSD (1994) calculations)
Number of collectors (n = 20)
Individual poverty levels
10
Female
6
4
8
Male
8
3
3
2
2
0
15c/kg
10c/kg
Price of cardboard
Cartboard collection: a labour-intensive and competitive market
The collection of recyclables is labour-intensive, with many collectors having to
work seven days a week. With so many informal collectors, the market has
become competitive, as collectors in the present study intimated, many having
had cardboard stolen by another collector. As a result, some have been forced
to operate in two areas on a daily basis, the areas often being several kilometres apart. Residential areas may thus have become a refuge, providing a
source of `valuables' that may not have been available in the city (eg clothing).
Trolley-owners, however, are able to concentrate their activities in one area.
Those without trolleys are forced to move between two collection areas, wasting
valuable time. The lack of trolleys also restricts the volume of merchandise that
can be collected and carried, inevitably reducing the collectors' income.
21
Figure 5 The effect of a recent cardboard price decrease on the poverty
status of collectors' households (RDP (1995) calculations)
Number of collectors with
dependants (n = 19)
Household poverty levels
10
9
8
7
6
5
9
Poor
Ultra-poor
6
5
5
4
3
2
1
0
15c/kg
10c/kg
Price of cardboard
Age may be an important consideration in a competitive market. The average
age of the collectors in this study was 45 years. In another study (October/
November 1998) on the profile of informal collectors visiting a newly established
multimaterial buyback centre in the city centre (McLean 1998: 258), most collectors were 30±39 years old, and had become informal hawkers because
formal employment had not been forthcoming. These younger individuals would
be able to collect and transport greater quantities of paper and cardboard,
which may have curtailed the collecting activities of older collectors, forcing
them to seek new domains further afield (eg residential areas).
Switching collectable commodities: an option?
Cardboard and paper have been collected by informal hawkers for many years.
It has, however, become apparent that with the increase in individuals resorting
to collection as a means of survival, the market has become extremely competitive. In 1998, Mondi Recycling paid out R9 million to small business and
hawkers (approximately 5 000 individuals), with the tonnage of wastepaper
from this segment of the market having increased by 190 percent over the past
22
five years (Anon 1999: 35). Despite this competition and contrary to expectations, the present survey revealed that few had switched to other potential
income-generating commodities (eg glass, cans, plastic). Many collectors interviewed appeared unaware that these commodities could be traded, while
those who knew, regarded these items as scarce, or thought that the prices
paid were too low. The recent wastepaper price decrease may cause some
collectors to reconsider their options. This would, however, depend on the
existence of an appropriate infrastructure for hawking these commodities. The
informal cardboard or paper market infrastructure is well established. The recent concept of small buyback centres, effectively bringing the paper recyclers
to the hawkers, has met with great success (McLean 1998: 257; Anon
1999: 35). The same does not, however, apply to all recyclable commodities.
Of the other possible recyclables, cans may be a viable alternative for collectors. Although Collect-a-Can, the registered beverage can collector, was established only in 1993, it already boasts a 62 percent national can recovery
average (Kock 1999: 40). This non-profit organisation claims to have successfully provided an income for at least 20 000 hawkers and small business
entrepreneurs (largely in Gauteng) by providing a user-friendly infrastructure
(Kock 1999: 40). KwaZulu-Natal does not match this national average, and so
considerable opportunities exist in this province for collectors to include cans
amongst their saleable commodities. A walk around shopping centres and
corner cafeÂs would give one an indication of the potential volume of cans that
can be recovered from the waste stream. Until recently, when the wastepaper
price dropped substantially, the prices paid for cans (6±10c/kg) was almost half
that of cardboard. Prices are currently similar, which might entice collectors to
switch to a less exploited commodity. Can collection may, however, pose a
problem for collectors without transport. Cardboard can be neatly folded and
many kilograms can be carried to the agent on one's head. Cans would be
difficult to transport without a trolley or a bag, and most informal collectors do
not have these.
Considering the difficulties experienced in glass recycling over the past year, it
is not surprising that informal collectors have not considered glass a collectible
item. A recent communication (September 1999) from the Glass Recycling
Association is encouraging, with the infrastructure for glass recycling set to
become more user-friendly (Dick Poultney, Glass Recycling Association, personal communication). However, marketing campaigns will be needed, prices
23
will have to be reviewed and the agents will have to become more accessible to
collectors before informal collectors will recognise the merit of recovering glass.
For informal collectors, plastic recycling is also fraught with logistical difficulties,
making it of little value as a potential source of income. Plastic is bulky and lightweight and large volumes need to be sold to make it worthwhile. In addition,
formal plastic collectors and recyclers generally require certain types of plastic
only, which, for the average person, are not easily distinguishable. The value
associated with the various plastic types is also dependent on the volumes of
used plastic available, often resulting in a market surplus. For collectors,
earning a sustainable income from collecting these commodities is therefore not
viable at present. Market prices need to be stabilised and agents appointed who
will guarantee a permanent market.
Other solutions
There is no doubt that informal collectors are responsible for diverting several
thousand tonnes of cardboard and paper from the waste stream, and with the
appropriate infrastructure, other recyclables could be included. Because of the
current and predicted continued high levels of unemployment, the number of
individuals seeking an income will increase further, with many being absorbed
into the informal sector. The incidence of informal collectors in the city and
residential areas is therefore likely to increase. Local councils need to take
cognisance of the environmental and economic impact of the activities of these
individuals, which are largely twofold: reduced spending on labour for street
litter control, thereby enhancing the overall appearance of the city, and reducing
the impact on landfills. Many collectors have requested formal recognition,
which they feel would facilitate their work. Local authorities and recycling industries should therefore take the initiative to support collectors (eg by providing
trolleys and identifiable clothing); to upgrade the infrastructure for can, glass
and even plastic recycling; to educate collectors in this regard; and to provide
additional, more accessible buyback centres.
It may even be possible to incorporate informal collectors into the wastemanagement systems operating in residential and commercial areas. To this
end, householders and factories could separate recyclables for collectors,
which would include consumable food items, upon which many rely for subsistence. Based on the preliminary results of a survey of Durban businesses,
considerable informal recycling already occurs in the industrial sector (Karen
24
Thomas, DSW, personal communication). If these industry±informal collector
associations could be recognised, encouraged and even legitimised, there
would be environmental, social and economic benefits for all parties.
FINAL COMMENTS
Often, with no other source of income, informal collectors (and their dependants) rely on both domestic and commercial ``waste'' for survival. Since
much of this waste is reusable or recyclable, and since it is unlikely that the
economy will recover sufficiently to improve the quality of life for these individuals and their families, collectors should be incorporated into the waste
management of the city. Local councils should recognise the potential social
and environmental implications of facilitating informal collection. There are
those who believe that one of the most revealing environmental audits of a city
is how efficiently its inhabitants and commercial sector make use of the city's
resources, and how, in what form and on what scale the wastes are generated,
reused, recycled, treated or disposed (Hardoy et al 1995: 132). Durban faces
problems with a growing informal sector that needs to be accommodated and
landfills that are reaching capacity. The challenge which faces local councils is
therefore to manage these problems effectively, concurrently and sustainably.
BIBLIOGRAPHY
Anon 1998. The building has begun! Government's report `98 to the nation. Pretoria:
Government Communication and Information System.
Anon 1999. Wastepaper recycling opens up opportunities for small business. Resource
1(1):35.
Central Statistical Services (CSS) 1998. Employment and unemployment in South
Africa: October Household Survey 1994±1997. Pretoria: Central Statistical Services. (Statistical Release PO317.10.)
Durban Solid Waste (DSW) 1998. Report on Durban solid waste: Waste Minimisation
Office activities, 15 December 1998.
Godsell, B & Buys, J 1992. Growth and poverty: towards some shared goals, in Wealth
or poverty? Critical choices for South Africa, edited by R Schire. Cape Town:
Oxford University Press:635±656.
Hardoy, J E, Mitlin, D & Satterthwaite, D 1995. Environmental problems in Third World
cities. London: Earthscan.
Human Sciences Research Council (HSRC) 1999a. Media release: Unemployed eager
to take any job: HSRC study. http://www.hsrc.ac.za
Human Sciences Research Council (HSRC) 1999b. Media release: Employment forecasts till 2003: HSRC study. http://www.hsrc.ac.za
25
Huntley, B, Siegried, R & Sunter, C 1989. South African environments into the twentyfirst century. Cape Town: Human & Rousseau.
Klasen, S 1997. Poverty, inequality and deprivation in South Africa: an analysis of the
1993 SALDRU survey. Social Indicators Research 41:51±94.
Kock, N A 1999. Recovery of beverage cans in South Africa. Proceedings of the R'99
Congress, vol III, Geneva, February 1999:36±41.
Lund, F & Skinner, C 1998. Women traders in Durban: life on the streets. Indicator SA
15:17±24.
McLean, M 1998. Creating employment opportunities through buyback centres: a pilot
study in central Durban. Proceedings of the Fourteenth Wastecon Congress,
Kempton Park, October 1998, pp 257±268.
Poverty and Inequality Report (PIR) 1998a. Executive summary, in Poverty and inequality in South Africa, edited by J D May. Durban: Praxis.
Poverty and Inequality Report (PIR) 1998b. Poverty and inequality in South Africa, edited
by J D May. Durban: Praxis.
Project for Statistics on Living Standards and Development (PSLSD) 1994. South Africans: rich and poor: baseline household statistics. South African Labour and
Development Research Unit, University of Cape Town.
Research and Development Programme (RDP) 1995. Key indicators in poverty. Pretoria.
Roux, A 1991. Options for employment opportunities, in Redistribution: how can it work
in South Africa?, edited by P Moll, N Nattrass & L Loots. Cape Town: David Philip.
Urban Foundation 1990. Urban debate 2010, part 2: Policy overview: the urban challenge. Johannesburg: Urban Foundation.
ACKNOWLEDGEMENTS
The author would like to acknowledge the Foundation for Research and Development for
financial support. The interviews were undertaken by Mr Emmanuel Cele, a third-year
Environmental Health student, Natal Technikon. Mr Cele was the 1998 recipient of the
KwaZulu-Natal Waste Minimisation, Reuse and Recycling Forum student bursary.
26
The role of metropolitan
government in the development
process
David Mmakola
ABSTRACT
This article explores options that could be considered in structuring a metropolitan form of local government in South Africa, and the contribution that
metropolitan local government could make in the development process. It
traces the origins of metropolitan government in developing countries, using
Asia as an illustration, and it maintains that the uniqueness of South Africa's
political economy, reflected for instance in a particular type of spatial framework, opens a wider scope for a metropolitan form of local government.
Some of the key functions typically performed by metropolitan local government are indicated: economic development, strategic land use, coordination and integration. The options that could be considered in
structuring a metropolitan form of government are identified and evaluated
against a defined set of criteria. These options are grouped into moderate
and far-reaching ones; the article argues that moderate options, when
measured against the criteria, would fall short of unleashing a sustained
process of development in South Africa. Finally, the key requirements are
outlined for a metropolitan form of local government that could be considered
for the South African situation.
1 INTRODUCTION
One of the essential features of the South African system of local government is
the idea of metropolitan government. The Local Government Transition Act of
27
Africanus 30(2)2000
1993 ± as did the 1993 and 1996 constitutions, the 1998 Local Government
White Paper, the Local Government Municipal Demarcation Act, and the Local
Government Municipal Structures Act ± made room for higher local government
structures, below which several structures fell. The argument on the role of
metropolitan government resurfaced in 1999, when the redemarcation of local
authorities began in South Africa. With a recognisably higher emotional content,
intense debates on the workings of metropolitan government have ensued.
These debates have focused on the rationale for a metropolitan government,
the divisions of powers between metropolitan governments and primary structures, criteria to be used in deciding whether an area should be governed in a
metropolitan arrangement or not, and other related matters of concern.
The workability of a metropolitan system of local government remains a challenge South Africa will have to confront now and in the not so distant future. The
purpose of this paper is therefore to identify, against other countries' experiences, the determinants of a workable system of metropolitan government. The
paper addresses this in four sections. The first section looks at the rationale for
a metropolitan system of local government, concentrating on influences that
have necessitated this form of urban governance. Secondly, the paper describes the functions of metropolitan government. Thirdly, attention is focused
on the institutional options for the establishment and maintenance of metropolitan government. Finally, generic requirements for a workable system of
metropolitan government are considered.
2 THE IDEA OF METROPOLITAN GOVERNMENT
The 1993 and 1996 constitutions recognised the existence of integrated metropolitan areas in South Africa and the necessity for local government structures, which would take a metropolitan-wide view of local government in
planning and delivering urban services. These metropolitan areas, as defined in
the White Paper on Local Government (1998:58), are large urban settlements
with high population densities, complex and diversified economies, and high
degrees of functional integration across larger geographical areas than normal
jurisdictions of municipalities. In these areas, residence and work do not necessarily coincide; the settlements have complex overlaps (Wooldridge
1998:3). Use of facilities may also cut across individual municipal boundaries. In
other words, there are clearly recognisable spillovers and externalities. In the
absence of a metropolitan form of government, individual municipalities are
28
likely to embark on irrational land-use planning and public investments, which
do not take these interdependencies into account.
Typically, there are problems that individual units within these larger areas are
not in a position to solve on their own. In the Asian experience, the major
problem that led to the assumed necessity of metropolitan government was
urbanisation (Sivaramakrishnan & Green 1986:5). This problem of urbanisation
confronts the majority of areas in the developing world. As the multitude of
complex factors pushed people to urban areas, existing local authorities became increasingly unable to cope with this in-migration. The growth of slums on
the outskirts of these areas and the consequent demands for housing, water,
energy, sanitation facilities and other infrastructure, made it increasingly difficult
for individual local authorities to maintain a reasonable level of urban governance and service delivery. The absence of area-wide plans also gave rise to
inefficient land use, as individual local authorities continued to take a narrow
view of development problems facing urban areas.
Alternatives other than metropolitan government structures may not be appropriate as responses to these metro-wide problems. The earliest response of
Asian countries was the establishment of special-purpose institutions to provide
housing, water and other services individually. It became increasingly obvious
that there were crosscutting institutional, financial and political issues that these
organisations could not address adequately. These issues included the dominance of bureaucrats in resource allocation, rather than elected representatives, which divorced political accountability from service delivery. This
situation was exacerbated by the tendency of these bodies to focus solely on
the services they were providing, rather than on the relationships of these
services to other services, which led to poor intersectoral coordination and lack
of systematic prioritisation in service provision (Hanson 1974:9). The need for
representative structures that could integrate urban planning and development
became increasingly pressing, as the new structures proved wanting in integrated service delivery. This tended to make these new structures incapable
of dealing with the perceived problems.
Without a metropolitan form of government, economic competitiveness on the
part of municipalities may be less than optimal. Globalisation has made local
government key participants in economic development. Local authorities are
getting more and more involved in the stimulation of the local business sector
and international trade. This calls for competitiveness, so that the local authorities may benefit from international trade, for example. Metropolitan types of
29
local government are better placed to become competitive. When individual
municipalities embark on economic development strategies, they are likely to
do so without taking into account metro-wide perspectives that could harness
the overall growth and development potential of the area. They may even
compete against each other, defeating the purpose of local economic development. According to Wooldridge (1998:4), investors typically take a metrowide view of an area, making municipality-based investment strategies inefficient and thus less competitive.
Within the South African context, racially based settlement patterns in urban
areas and disparities in revenue bases necessitate metropolitan government.
Local authorities derive their revenues from locally raised taxes. There is
therefore the constant temptation to attract residents who can contribute more
to the tax base, and exclude those who bring in less revenue (Wooldridge
1998:1). Local authorities achieve this through land-use regulations that exclude undesirable or low-rateable forms of development or by imposing high
entry costs that exclude poorer communities. This is complicated by the fact
that urban apartheid, through racially based land-use regulations, has ensured
a high coincidence between the spatial concentration of commercial tax bases
and white residents. This means that individual local authorities acting in the
manner described above are likely to perpetuate these inequalities, against
equity goals that may be thought desirable under these circumstances. This
eventually leads to the displacement, rather than the resolution of urban
problems, as poorer communities are pushed to the peripheries of towns, in
informal settlements, with their associated socioeconomic problems.
These and many other related issues are usually considered grounds for the
establishment of metropolitan government. The next section looks at the typical
functions that are performed by metropolitan governments in addressing these
area-wide problems.
3 FUNCTIONS OF A METROPOLITAN GOVERNMENT
In the light of the above, the specific functions of metropolitan government
become discernible. The first function is the integration of economic, social and
political dimensions in the management of a city. By being a political structure,
these organisations are able to reflect local preferences and convert them into
service delivery decisions, through a variety of mechanisms that may be put in
30
place to generate the views of communities, such as consultative land development planning processes.
The second function is the promotion of strategic land-use planning and coordinated public investment in physical and social infrastructure. Most infrastructure provision, especially the capital costs, are likely to be efficiently
provided when big areas are covered, thereby capturing the undeniable
economies of scale considerations. This places metropolitan authorities at
strategic positions to invest in infrastructure. When these investments occur on
an integrated basis, they are much more efficient. Related to the above, metropolitan governments could play cardinal roles in economic development (Sivaramakrishnan & Green 1986:28). This could promote jobs generation through
sectoral investments. Metropolitan governments realise these possibilities
through proper service delivery, infrastructure investments and regulatory
functions that ensure targeted development. They can provide land and infrastructure, and direct business support in the form of credit, vocational training
and the reviews of existing regulations. In certain instances, metropolitan
governments can identify economic ills in the area, and research economic
advantages and opportunities.
In South African, metropolitan government would be particularly critical in ensuring that taxes collected in functionally integrated economies are used in the
whole areas, which would not be the case in the context of individual primary
municipalities. As shown in the preceding section, there are disparities in the
distribution of resources in the substructures within metropolitan areas. In that
context the role of the metropolitan government is to collect all taxes from
individual areas, which would be mainly from richer areas, and use them across
the whole metropolitan area, thereby also benefiting the poor in the broader
jurisdiction.
In addition to the above, a metropolitan government may play many other roles.
For instance, in situations of administratively weak subordinate structures
metropolitan governments could perform some functions on an agency basis,
until the requisite capacity had been built. It is important to note that this is a
particularly acute problem in South Africa, where many municipalities lack the
administrative, managerial and financial management capabilities to run effectively. Once clarity on the functions to be performed by metropolitan governments has been achieved, the next question would be how these
organisations may be structured to perform these functions. The following
section is devoted to this issue.
31
4 INSTITUTIONAL OPTIONS FOR THE STRUCTURING OF
MUNICIPALITIES
There are numerous options for the structuring of metropolitan government,
each with its own strengths and weaknesses. It is important, however, for
policymakers to first spell out considerations to be borne in mind before selecting a particular arrangement. It is particularly necessary to first decide on
criteria for assessing the different options. Goodall (1968:82) proposes organisational simplicity, responsiveness, political acceptability and comprehensiveness as criteria to be used in deciding whether a given metropolitan
structure is desirable. The following criteria may be added: the potential of a
given form of metropolitan government to deal with inequities, spillovers and
externalities, irrational planning and poorly directed public investment, the
displacement of urban problems and reduced economic competitiveness
(Wooldridge 1998:20±7).
Institutional options for the structuring of metropolitan government range from
moderate to far-reaching ones. The former include: annexation, the exercise of
extra-territorial powers, transfer of functions from subordinate structures to
higher local government bodies, voluntary associations between municipalities
and special districts. The more far-reaching options include the consolidation of
areas, the separation of previously joint structures, the metropolitan federalist
structures, as well as the uni-city models.
4.1 Moderate approaches to establishing metropolitan governments
Metropolitan governance may arise through annexation. In this arrangement, a
city brings within its jurisdiction others falling within a metropolitan area. No
major changes in organisation are brought about, and this option is likely to face
less political resistance. In South Africa, the combination of urban and rural
areas has been proposed. The second arrangement is the extension of extraterritorial powers to a new area. The powers referred to may include service
delivery powers and regulations. Typical services for this type of arrangements
are water provision, city dumps et cetera, where these would be efficient. While
the extension of service provision may not necessarily raise political problems,
the extension of regulations may be controversial. The third option may be the
transfer of functions from a subordinate to a high structure. Functions likely to
be taken away from the former may include property assessments. In the White
Paper on local government, the powers of substructures have been withdrawn
32
in the areas of rating, approval of budgets and the raising of loans. The kind of
move may in certain instances trigger political opposition. Another possible
arrangement may be voluntary associations. This should encourage cooperation on area-wide issues. Representatives from member municipalities may
collaborate to facilitate communication and research. While these arrangements may be useful, they are unlikely to address the gross inequities that are
visible in South Africa. It is unlikely that individual municipalities would voluntarily bind themselves to areas not falling within their jurisdictions. Another
option may be the creation of special districts. These are independent, autonomous units of government with own taxing and borrowing powers. Special
districts are likely to be involved in revenue producing activities, such as toll
roads and bridges, tunnels and public transport. In this context, special district
arrangements are able to take advantage of economies of scale as they can
design their own boundaries. Special districts are not very likely to experience
political resistance, as they tend not to be political entities. The major shortcoming of these arrangements, as hinted in the Asian experience, is that they
look at service provision from a narrow perspective. A service may be rendered
efficiently when looked at on its own, but not so when the overall priorities of the
area in question are taken into consideration (Goodall 1968). The need for
complementarity and synergy in the way services are rendered becomes critical.
It seems quite unlikely that the options spelt out above will be appropriate on
their own. These arrangements are unlikely to have the required capacity to
face hard decisions such as land-use planning and redistribution. The voluntary
arrangement, in particular, is likely to concentrate on issues around which
conflict is not likely to surface. Annexation, unaccompanied by a proper system
of intergovernmental transfers from the provincial and national governments,
may simply render a system of local government unworkable. The systematic
collection of socioeconomic information about an area, in order to determine
needs, should form the basis of these transfers.
4.2 Far-reaching approaches to establishing metropolitan types of
local government
The far-reaching changes seem to be more applicable in the South African
context. The first of these may be the bringing together of similar local government structures, into one big metropolitan structure. This may be considered
an option for this particular area. Where this is likely to result in the rationalisation of the elected officials and/or appointed ones, resistance may be ex33
perienced to this form of establishment. In areas of conflict and duplication
between functions performed by the metropolitan council and the substructure,
a possible option may be the consolidation of the two structures into one
metropolitan council. There may be fears of loss of autonomy in this arrangement on the part of a substructure that had been independent. When a metropolitan substructure has attained a state of self-sufficiency, its separation
from the metropolitan councils may be an appropriate option. The potential
danger with this type of arrangement is that it may set a precedent for similar
organisations to secede, which may not always be in the broader, metro-wide
interest. The other option is what may be referred to as the metropolitan-federalist option. In this arrangement, the Metropolitan Council takes responsibility
for general functions, such as the provision of bulk infrastructure, while the
substructures are responsible for very localised functions. The workability of
this arrangement depends on the powers of the said types of local government.
When the Metropolitan Councils do not have sufficient powers, their equalisation efforts may be undermined by lower-level structures. In particular, when the
lower-level structures have the powers to collect rateable property tax, they
may be reluctant to use the tax in other areas.
An option that seems to be gaining increasing favour in South Africa, is what is
referred to as the uni-city, or mega-city option. Under this arrangement, all
powers are vested in the Metropolitan Council, and it is their discretion to decide
which functions may be devolved. The White Paper on Local Government has
in fact even excluded certain powers from those that may be devolved. The
powers that may not be devolved include the approval of budgets and the
determination of property ratings. The uni-city model seems able to achieve
some level of redistribution (Wooldridge 1998:21). It has to be borne in mind on
the other hand that local government cannot be left with the sole redistributive
function. National and provincial governments need to design a proper system
of intergovernmental fiscal transfers, as local authorities cannot address all
poverty problems in urban areas. The major shortcoming of the uni-city model
may be its tendency to become distant from the electorate. For that reason, the
establishment of lower-level structures for the mobilisation of grassroots views
remains a necessity. Hopefully this will be realised through the establishment of
Ward Councils and substructures, as spelt out both in the White Paper and
related legislation. These structures have limited powers, but may also expect
to have certain powers devolved to them.
Whether these arrangements will work remains an issue that needs to be
34
closely monitored. However, it would appear from the Asian experience that for
metropolitan government to be effective, it would need to fulfil certain minimum
requirements ± a subject forming the core of the following section.
5 REQUIREMENTS FOR A WORKABLE SYSTEM OF
METROPOLITAN GOVERNMENT
The minimum requirements for a workable system of metropolitan government,
as evidenced from Asia, are: the need to integrate functions, the filling of gaps
from other institutions, the reflection of tasks in the management structure, the
concentration on capital facilities development as the major function, cooperation and networks with member local authorities, and local level support.
The design of metropolitan management organisations should concentrate on
the overall decisions on metropolitan management plans and policies. In particular, metropolitan government has to develop core expertise in choosing
programmes and projects to be implemented, in allocating the requisite executive roles, and in appropriate budgeting of financial resources. The strength
of a metropolitan organisation lies in its ability to take a metro-wide view of the
area, to identify external opportunities and threats to its survival, as well as
internal strengths and weaknesses, and to formulate clear objectives that would
contextualise programmes and projects to be pursued, with clear priorities. This
can for instance be done through integrated development plans.
The functions of metropolitan government should not be guided by what it can
do, but what others cannot do. It always needs to be borne in mind that the
metropolitan option has a bias in favour of efficiency in the allocation of resources. It is not the ideal form of democratic government. Therefore, in order to
function effectively, the metropolitan government needs to support the efforts of
other organisations that are appropriate for playing a democratic role. It is no
use overloading metropolitan governments with functions other structures can
perform effectively. In a situation of multiple actors, the role of metropolitan
government becomes that of coordination and integration, in order to avoid both
inefficiency likely to result from ill-sequenced urban development, and duplication in urban service delivery.
The tasks of metropolitan government need to be reflected in the organisational
structure. In certain instances, the traditional bureaucratic structure of government may not be appropriate for the proper functioning of metropolitan
government. Given the integrated nature of the functions of metropolitan gov35
ernment, the departmental approach to structuring work organisation may not
be very effective. For instance, in South Africa, one still finds many instances
where infrastructure projects are driven by Engineering Departments, without
cross-fertilisation with other work groups, despite the fact that infrastructural
programmes have wider social, institutional, financial and environmental dimensions. There is a constant need to reflect this integrated nature in the
design of work teams.
In surveys conducted in Asian cities, it has become obvious that capital budgeting should be a principal function of metropolitan governments (Sivaramakrishnan & Green 1986). In a South African survey of local government
budgets for the 1996/7 financial year, it was found that capital investments
constitute a significant proportion of metropolitan budgets, as table 1 shows
(see Sutcliffe 1998:11).
Table 1 Provincial budgets and capital expenditure (in 000's): 1996/97
Province
Budget
Capital
KWAZULU-NATAL
Provincial
1 530 797
(11%)
Durban
5 282 353
1 102 616 (21%)
Provincial
11 982 019
(8,4%)
Metropolitan/urban
17 532 693
3 277 340 (19%)
Provincial
8 882 160
(25%)
Cape Metro
7 458 665
2 039 324 (27%)
GAUTENG
WESTERN CAPE
Adapted from Further Research into metropolitan government systems (Sutcliffe 1998).
Networking and cooperation amongst affected institutions is also crucial for a
system of metropolitan government to work properly. Metropolitan government
relies on its substructures to gauge community views and to collect information
about areas. Unless the cooperation of these structures is sought, the overall
36
functioning of the system may be compromised. Moreover, cooperation beyond
the public sector, that is, with relevant parts of the private sector and civil
society, is of the utmost importance if a metropolitan structure is to succeed.
This is a particularly useful stimulus for local economic development initiatives
and the cultivation of a democratic culture at the local level. Especially in South
Africa, metropolitan governments get a major portion of their finances from
taxes from businesses in the area, making the goodwill of the latter quite critical
to a sustained system of service delivery. Civil society organisations also provide metropolitan government with the requisite information about local conditions. Related to the above is the constant need for metropolitan organisations
to seek legitimacy from the citizens falling within it.
6 CONCLUSION
This paper has attempted to spell out the issues to be borne in mind in designing a system of metropolitan government. It has done so by highlighting the
kinds of factors that make a metropolitan system of government necessary. The
typical functions of metropolitan government have been outlined. It has also
identified, critically, institutional options for the structuring of metropolitan government to enable it to perform the functions outlined in the preceding section.
Finally, it has tried to describe minimum requirements for a workable system of
metropolitan government.
BIBLIOGRAPHY
Bennett, R L 1994. Urban, local and regional restructuring. Paper prepared for IG Regional Conference, Prague.
Cameron, R G 1997. The demarcation of local government boundaries. Research prepared for the White Paper on Local Government, Department of Constitutional
Development, Pretoria.
Goodall, L E 1968. The American metropolis. Columbus, Ohio: Merrill.
Hanson, R, Margolis, J, Levin, M R & Letwin, W 1974. Reform as reorganization.
Washington, DC: Resources for the Future.
Sivaramakrishnan, K C & Green, L 1986. Metropolitan management: The Asian experience. Washington, DC: World Bank.
Sutcliffe, M 1998. Further research into metropolitan government systems: current
realities and responses to the White Paper on Local Government, prepared for
Department of Constitutional Development, Pretoria.
Wooldridge, D 1997. Metropolitan government. Research prepared for the Institutional
Systems Cluster in preparation of the White Paper on Local Government, Department of Constitutional Development, Pretoria.
37
Indicators for indigenous financial
efforts: theory, evidence and
prospects1
N J Vermaak
ABSTRACT
This paper evaluates indigenous financial efforts (IFEs) in rural areas in
terms of their contribution to rural community development. It will be argued
that IFEs are often associated and evaluated with quantitative criteria in spite
of the profound non-economic benefits such schemes have for community
development. Evidence from success stories in the developing world and
fieldwork done in South Africa reveal that successful IFEs are often determined by indicators of a qualitative nature and that the non-economic
attributes of IFEs support and facilitate local development.
1 INTRODUCTION
Since agriculture is an important economic activity in the developing world
(Todaro 1997: 295) and, in South Africa's case, will be so for at least another
two or three decades (Van Aardt 1997: 263), financial initiatives are much
needed to accommodate the rural poor ± something which is often considered
irreconcilable with the objectives of NGOs, such as realising profits in order to
be successful (Schoombee 1998: 390).
During the 1970s, when economic development was recognised to be the
dominant paradigm, scant attention was often paid to non-economic benefits of
financial incentives in rural areas. In this report it will be argued that indigenous
rural financial efforts (IFEs) are in many instances mainly evaluated with
quantitative criteria, in spite of the existence of non-economic benefits that are
Africanus 30(2)2000
38
not only a central success determinant for IFEs, but also support local community development.
Evidence will be presented from successful cases of IFEs in the developing
world and fieldwork done in South Africa. The first case is that of Ghana, where
the Susu collectors are used to mobilise savings in rural areas. Secondly, the
Grameen Bank in Bangladesh illustrates that the loyalty and dedication of the
Bangladeshi women contribute to the success of the financial scheme. The third
case is the South African one, where stokvels, rotating savings clubs and village
banks contribute to community development in a number of ways, such as
employment creation, support for microentrepreneurs, enhancing group autonomy and improving the status of women. The results of fieldwork done in
Levhuvhu in the Northern Province of South Africa will also be discussed.
After the indicators for successful IFEs have been identified both theoretically
and by means of case studies, I will suggest a grouping of the indicators, firstly
to ``create order'' and secondly, hopefully to be of help when the success of
IFEs is assessed in terms of rural community development. The indicators will
be grouped into quantitative, qualitative and partly quantitative categories. I will
also argue that the prospects of sustaining successful IFEs depend on the
interrelatedness of quantifiable, partly quantifiable and qualitative success attributes.
In the next section attention will be given to some viewpoints of what successful
IFEs should entail.
2 IDENTIFYING APPROPRIATE INDICATORS
Biased viewpoints regarding the failure or success of a financial effort and/or
irrelevant indicators may be problematic for evaluators, particularly when one
considers that what matters is not only how financial schemes are evaluated,
but also who sets the evaluation criteria. One of the main dangers, as noted by
Wetmore and Theron (1998: 30) and Conyers and Kaul (1990: 129), is that the
views of ``outsiders'' (such as donors and national governments) will prevail
over those of the intended community members. The researcher's own position
(eg the type of institution represented) becomes questionable and, according to
Oosthuizen and Van der Worm (1991: 14), may facilitate or complicate the
researcher's entrance into the setting.
Since the indicators for community development vary, they may be sifted by
39
dividing them into three interrelated categories, namely quantitative, partly
quantifiable, and qualitative indicators. Conyers and Kaul (1990: 129) point out
that quantifiable indicators reflect an important element of development, ie a
community's wellbeing. Key features of this category of indicators are that they
are concrete, visible and can be measured. Indicators such as health, clothes,
water supply, education, employment, household incomes and demography are
examples of quantifiable community indicators. Partly quantifiable indicators
are indicators that contain both quantifiable and qualitative attributes. This
group of indicators, which may also be labelled intermediate or ``grey area''
indicators, can only be quantified to a limited extent and changes may only be
partly visible. Unlike the quantifiable and partly quantifiable indicators, qualitative indicators are highly abstract and include indicators such as aspirations,
perceptions and attitudes. Swanepoel (1997: 67) notes that the psychological
environments of communities may be different and, because of their abstract
nature, are often ignored. Personal contact between interviewer(s) and respondent(s) is essential to obtain qualitative information which cannot ordinarily
be obtained by means of formal questionnaires (Cobett 1987: 333).
In view of this wide spectrum of indicators, it is ironic that successful IFEs are in
practice predominantly rated in terms of quantitative economic criteria. Adams
(1992: 6±7) points out that two schools of thought exist on how success should
be measured in rural financial activities: the credit-project view and the marketperformance view. Designers and evaluators of rural credit projects, who belong to the first school, view loans in terms of productive inputs such as loans
made to target group members, the inputs purchased with loans, an increased
output through borrowing, and changes in income or employment levels among
borrowers. Supporters of the market-performance view contend that attention
should rather be paid to deposit mobilisation, intermediary behaviour, lowering
transaction cost, effective financial innovations, building sustainable financial
services and the extent to which policies affect the performance of rural financial markets.
Writers also report a substantial number of quantitative criteria: Kraft
(1996: 215±216) lists a number of features which are shared by successful rural
financial schemes, for example conductive macroeconomic, agricultural and
rural policies, and a relatively stable political environment; investment in rural
infrastructure; innovative and flexible (market-oriented) lending rates; strong
controls to limit expenditures and administrative costs; and close monitoring of
loan performance with high collection rates and low arrears. Coetzee and Vink
40
(1996: 257) also use a quantitative categorisation of success indicators, containing popular economic parameters: outreach indicators (such as the number
of branches and deposit accounts, outstanding loans and loan size), productivity indicators (such as loans and volume lent to staff and officers and the
percentage of loans in arrears) and profitability indicators (such as the percentage return on capital, loan and deposit rate and the gross financial margin).
These views suggest that, in measuring the success of rural financial activities,
quantifiable indicators are heavily emphasised. Little or no attention is frequently given to indicators of a qualitative nature, which, hypothetically
speaking, appear to be equally essential not only for financial sustainability, but
also for the development of the broader rural community. In the next section
``success stories'' from the Developing World are offered.
3 FINANCIAL SCHEMES IN THE DEVELOPING WORLD
According to Todaro (1997: 30±31) the Developing Nations of the world are
located in Asia, Latin America and Africa. The following cases, selected from
West Africa, Asia and South Africa, serve as only a few instances of the success IFEs enjoyed in facilitating community development.
Ghana's rural areas are typical of many other areas in the Developing World
where banks are ill equipped or nonexistent and rural communities' access to
formal financial services is severely hampered by infrastructural problems. In
Ghana's rural areas individual mobile bankers (known as Susu collectors) fulfil
a particular useful function (Spio, Groenewald & Coetzee 1995: 257). Susu
collectors collect money from their clients every day. At the end of a preset
period, savings are returned to the depositors, less the commission cost of the
Susu intermediate. This IFE empowers Ghana's rural communities in many
ways, for instance, it helps households to anticipate dry seasons, which, in turn,
provides a form of security and control over the communities' circumstances. In
southern Ghana, for example, incomes are becoming generally less seasonal
and cyclical, although large portions of rural savings are still held in less liquid
forms such as building materials, partially completed construction projects and
cleared land (Aryeety 1996: 129). Susu collectors are widely trusted in Ghana's
rural communities and, latently, also play a role in the communication processes in their communities.
Wahid (1994: 1±14) reports that the Grameen Bank (``grameen'' means rural) in
Bangladesh has initiated a mechanism under which the rural poor may have
41
access to credit on a group liability basis instead of any collateral. Initial loans
are granted to small groups of people. Before loans are allocated, these groups
must first demonstrate a weekly pattern of saving. Since the Grameen Bank
started in 1976, it has expanded to more than 300 branches in over 5 400
villages, catering for 250 000 people in Bangladesh, mostly women. Available
evidence suggests that the repayment rate is much better than in the Bangladeshi commercial banking system: 97 percent of all Grameen loans are repaid
within one year and 99 percent within two years (Todaro 1997: 616). Indicators
such as an unprecedented loan recovery rate, an increase in the Grameen
Bank members' agricultural productivity and their per capita income, and an
improvement in their nutrition, housing and general living conditions, signal that
the Grameen Bank is successful (see Kraft 1996: 215±216). Wahid (1994: 12)
notes that some qualitative indicators such as the loyalty and dedication of the
field workers in particular contribute to the sustainability of the Grameen Bank.
In South Africa different types of savings schemes are commonly used among
rural people. Spio et al (1995: 256) identify the following: savings in the form of
food, cattle and other livestock (see Aryeety 1996: 128), stokvels representing
a type of rotating savings and credit associations (ROSCAs), unorthodox savings which include the hoarding of money in small boxes in the house, under
pillows, buried money or money given to another institution for safekeeping.
People may also trust each other with their savings. Pensioners in particular are
often trusted with loans.
There are three particular examples in South Africa of successful IFEs supporting and sustaining development on the local level. Firstly, in the Eastern
Cape (the southern part of South Africa) Buijs (1998: 55, 63±64) conducted an
investigation among men and women ± all members of ROSCAs ± and found
that participation in ROSCAs act as a support mechanism for poor women's
search for income-earning activities and as a means of maximising their resources. Buijs (1998: 63) also found that the notion of risk featured as an
essential personal ingredient amongst poor women belonging to ROSCAs.
Secondly, stokvels, which are well known to local rural people, comprising
(similar to ROSCAs) saving and credit schemes and also a form of insurance.
Similar associations may be found in Mexico, Bolivia, Egypt, Nigeria, the Philippines, Sri Lanka, China and South Korea (Todaro 1997: 616). Thirdly, village
banks implemented during November 1994 in villages in the Northwest Province, serve as an example of ample community participation and community
support contributing to the success of the scheme. Village banks are commu42
nity-managed savings and credit institutions (Schoombee 1998: 391) and have
already been successfully implemented in several rural villages like Kraaipan,
Modimola, Madikwe and Motsedi. Unlike ROSCAs and stokvels, village banks
offer products such as shares, accounts, fixed deposits, transmissions,
vouchers, loans and insurance to its members (Schoeman 1996: 8±9).
Some other examples frequently cited as successful rural financial institutions
are: the Badan Kredit Kecamatan (BKK) programme of a provincial development bank in Central Java (Schoombee 1998: 391), the Bank for Agriculture
and Agricultural Cooperatives in Thailand and the village banks (``Unit Desas'')
of Bank Rakyat Indonesia (BRI) (Kraft 1996: 215). Despite the significant differences among rural financial schemes (such as size, benefits and operation
mode) trust, participation and internal support are also prominent success indicators in most instances.
The following case study endeavoured to seek additional practical indicators of
community facilitation through successful IFEs.
4 CASE STUDY: THE STOKVEL SCHEMES IN LEVHUVHU
Levhuvhu is situated in South Africa's Northern Province. In 1995 the Development Bank of Southern Africa (DBSA 1995: 15) reported that the Northern
Province remained the poorest of the nine provinces in South Africa. Its
economy also had the lowest labour absorption capacity, resulting in the
highest unemployment rate in the country. IFEs can however be found in the
local rural communities as the case of Levhuvhu clearly shows.
Levhuvhu is situated in the Louis Trichardt municipal area, near Venda, one of
the former ``homelands'' of South Africa's previous dispensation. Levhuvhu is
characterised by two worlds: affluent white commercial farmers and a large
population of black small-scale peasant farmers and workers. Seasonal fruits
such as mangos, litchis, pineapples, macadamia nuts, avocados and bananas
are commercially cultivated on Levhuvhu. Some workers commute from their
villages, but most of them stay on the farms where they work. Low salaries
(resulting from the oversupply of labour), poor drinking, cooking and washing
facilities and generally low standards of living prevail in most of these peasant
households ± circumstances which are worsened by rudimentary services and
the recent catastrophic flooding in the region.
The lack of accurate statistics is often a great problem in rural areas. Levhuvhu
43
is no exception. Since the researcher was residing in Levhuvhu during the time
of the investigation, the data could be collected systematically over an eightmonth period. Semiformal interviews were conducted during this time with 50
men and women in the Levhuvhu district. These respondents were very open
and willing to talk about their membership of rural financial schemes. Notes
were taken during the field work and afterwards the respondents' feedback was
consolidated on a summarised answer sheet.
Independent moneylenders, who charge extremely high interest rates, may be
found in the adjacent villages. Pensioners are paid monthly, mostly at banks in
the formal sector, of which the closest are about 40 kilometres away in
neighbouring towns. On pension payout days, people frequently queue halfway
around the street block. IFEs in the form of informal savings and credit are very
well known in Levhuvhu and, on investigation, proved to be popular activities.
This is evident from the lively discussions during stokvel meetings which take
place regularly, and the respondents' knowledge about the structure and
functioning of savings and credit schemes. Stokvel meetings are entertaining
social gatherings, where talk is not only about money, but also about personal
and communal experiences. Stokvel meetings are mostly held on a monthly
basis. During these meetings food and drinks are provided. The women, who
clearly play a dominant role in terms of ROSCAs membership, displayed an
enthusiastic and proud attitude towards their particular savings and/or credit
scheme.
A number of dramatic cases of financial ``rescues'' were reported by the respondents. In one instance a woman, belonging to a stokvel and selling tomatoes for a living, reported that the money she saved up during the year
contributed to the sustainability of her small business during the post Christmas/
New Year period. Her place on the pavement could stay occupied and therefore
she did not risk losing her trading space. Members of a stokvel are required to
specify their household members, since the stokvel, like many other ROSCAs,
assist their members in times of financial need such as weddings and funerals.
This is covered by a monthly premium of 20 to 50 rand. Savings and credit
stokvels mostly pay individual members on a rotating basis. A number of relatively small stokvels exist in Levhuvhu: some of them have only 3±8 members.
Since we started the fieldwork, it became clear that becoming a stokvel member
depended purely on the personal characteristics of the potential members, such
as their creditworthiness and their relationship to an existing group member.
44
Stokvels and ROSCAs are similar IFEs in the sense that members agree to
contribute money regularly to a common pool. Buijs (1998: 62) mentions that
the risk of loan repayment default is lessened in small towns and that defaulters
are unlikely to be accepted as members of other associations. Members are
keen to keep their status as stokvel members and are likely to conform to the
underlying norms and requirements of the group like honesty, reliability and
discipline.
One also becomes aware of the symbolism and ``invisible'' processes which
appear to be part of the everyday lives of the people in Levhuvhu. Throughout
the fieldwork one word emerged: ubuntu. The term is different in every African
dialect, but the meaning is always roughly the same: a complex, yet highly
nuanced precept governing the way individuals relate to the community. Ubuntu
is a regulatory norm which places the interest of the community above the
individual (McGeary & Michaels 1998: 48). Vhuthu is the TshiVenda equivalent.
Working together helps to foster a climate of consensus, functional conflict and
the achievement of goals. Although there are few if any written instructions
about the stokvel members' use of their money, informal forces such as codes
and taboos require the money to be used in an ``appropriate'' manner, presumably as a countermeasure against bad individual decision making. Stokvel
members mostly spend their money on clothes, food, school books and
household utensils. During stokvel meetings the somewhat conventional, but
highly effective ``bush telegraph'' distributes information quickly amongst the
participants. Information is also shared with other members in the broader
Levhuvhu community. The manner in which economic transactions are carried
out is also often symbolic. Watson (1989: 22±24) notes that economic exchanges such as land, tobacco, cannabis, gold and roosters may occur in rural
African societies. In Levhuvhu, roosters and cows can be identified as having
particular symbolic associations.
From the interviews conducted with the respondents, it seems that the membership of a stokvel association contributes to community development in
various ways. For example, in Levhuvhu access to informal credit has contributed to the support of microentrepreneurs who, in turn, are part of day-to-day
rural community life. Financial incentives such as the Grameen Bank, ROSCAs
and even stokvels may provide a viable platform from which managerial capabilities (such as financial control and innovation) could be supported. Women
are empowered, which may lead to an improvement of their political, social,
economic and health status. This is essential for the achievement of sustainable
45
development and the implementation of population development programmes
(Todaro 1997: 225).
All the cases discussed above suggest that IFEs will succeed in instances
where members share in the benefits offered by such an effort ± direct or
indirect, concrete or abstract. Various rural communities may have different
reasons for participating and different ways of doing so; and the reasons for
failures are not always clear to Western thinkers. The advantages to participants of IFEs are not only quantitative (like money and houses), but also partly
quantifiable (such as community control, autonomy and participation) and
qualitative ( such as the enhancement of social standing, obtaining responsibility, and the building or expansion of social networks). Women are particularly
empowered. From Levhuvhu's case it can be concluded that, despite the incidence of poverty, membership of a stokvel financial scheme fulfils a stabilising, harmonising and supportive function in the Levhuvhu communities'
development discourse. The success indicators, implied collectively by the
successful cases of IFEs discussed above, include: the empowerment of women, the sense of belonging to a community (with the accompanying benefits
such as identity and security), mutual trustworthiness, competition, leadership,
adaptation to local circumstances, capability, risk, morality, social standing and
status, solidarity, reputation, loyalty, honesty, discipline, dedication, community
control and hope.
5 PROSPECTS FOR IFEs IN RURAL COMMUNITIES
For IFEs to succeed, and for communities to obtain support from IFEs on a
sustainable basis, the following has to be considered:
With regard to quantitative, partly quantitative and qualitative indicators it is
especially the latter two categories of indicators which feature as key determinants of successful IFEs and, hence, support development in local rural
communities. In all the cases mentioned above, quantitative indicators of successful IFE schemes do have a significant role to play in terms of community
socioeconomic prosperity. An increase in household incomes is necessary to
satisfy people's basic needs. However, in Levhuvhu's case, the invisible qualitative dimension appears to overshadow materialistic gains. Keeping in mind
that most stokvel members do not receive favourable ratings by formal institutions, the qualitative benefits experienced by these ``uncreditworthy'' par46
ticipants and the way in which rural communities in the developing world adapt
to their circumstances are indeed remarkable.
Furthermore, structural changes in the global economy appear to influence the
prospects for successful rural financing in at least three ways. Firstly, rapid
progress in information technology has opened new possibilities for (and
threats to) rural communities. From advances in telecommunication and information technology it is clear that formal financial services will soon be
available in remote rural areas not previously considered for this purpose. The
rapid pace of global structural development could have severe implications for
the sustainability of IFEs and may increase the marginalisation of rural communities (Van Aardt 1997: 256±257). Secondly, the formal and informal sectors
may be integrated; both Schoombee (1998: 391) and Germidis (1990: 18±21)
advocate this possibility. This integration may be achieved by improving the
formal financial sector, developing the social insurance sector and ``organising''
the informal sector. This may also be done by assisting rural communities with
the establishment of supportive policies, by encouraging appropriate technologies and indigenous knowledge, and by providing managerial training to participants in rural financial schemes. The Strauss Commission (Strauss 1996: 6,
14±15) recommends using the Post Office2 to satisfy the basic financial service
needs of the poorest segment of the rural population. Finally, and most importantly, political interference and state regulation will support financial service
provision in local economies. With the presence of political will, both multidisciplinary research and human-centred development can be brought to the
poor in rural communities.
6 SUMMARY AND CONCLUSION
This article presented theoretical and practical perspectives from which may be
concluded that economic indicators still are the dominant paradigm, in spite of a
reported shift to a human-centred approach in development in the last two
decades. From the case studies in the developing world in which a number of
successful IFEs were introduced, it is clear that indicators of a quantifiable,
partly quantifiable and ± in many instances ± of a purely qualitative nature,
indeed prevail and serve as resources for rural communities in both economic
and social terms. In the cases of ROSCAs and stokvels it is clear that women
are particularly empowered, not only by the increase in their income, but also by
the satisfaction of their abstract psychological needs such as security and
status. In most instances IFEs will therefore require multidisciplinary research.
47
Prospects for the sustainability of IFEs will depend on many factors, of which
internal and external support are the most essential. I conclude by suggesting
that if an IFE is to be ``measured'' against the benefits to the broader community, partly quantifiable and qualitative measures should in all instances (and
in particular) be considered by all evaluators involved.
ENDNOTES
1 An earlier version of this paper was presented as a discussion paper during a
workshop at a conference in Edinburgh, Scotland.
2 Account payments, credit functions and savings mobilisation.
BIBLIOGRAPHY
Adams, D W 1992. Building durable financial markets in Africa. African Review of
Money, Finance and Banking (1):5±14.
Aryeetey, E 1996. Formal and informal economic activities, in Africa now: people, policies and institutions, edited by S Ellis. Portsmouth: NH: Heinemann:119±135.
Buijs, G 1998. Savings and loan clubs: risky ventures or good business practice? A study
of the importance of rotating savings and credit associations for poor women.
Development Southern Africa 15(1):55±65.
Cobett, M 1987. Community projects: the possibilities in South Africa. Development
Southern Africa 4(2):324±340.
Coetzee, G & Vink, N 1996. The efficiency and outreach of rural financial institutions in
South Africa. Agrecon 35(4):256±260.
Conyers, D & Kaul, M 1990. Strategic issues in development management: learning from
successful experience, part 1. Development Management 10:127±141.
Development Bank of Southern Africa (DBSA) 1995. Northern Province: statistical review, compiled by C J Meintjies, B G Rousseau & D J Viljoen. Midrand. (Development Information Paper 103.)
Germidis, D 1990. Interlinking the formal and informal financial sectors in developing
countries. Savings and Development 1(15):5±21.
Kraft, N J 1996. Agricultural and rural finance: some thoughts on the road ahead.
Agrekon 35(4):211±217.
McGeary, J & Michaels, M 1998. Africa rising. Time 151(13):38±48.
Oosthuizen, C J & Van der Worm, Y 1991. Ecosystemic epistemology in community
intervention in Africa: a case report. Paper presented at the Third World Family
Therapy Congress, Jyvaskyla, Finland.
Schoeman, J H 1996. Village bank: project description. Financial Service Association
(FSA), Eldoraigne.
Schoombee, A 1998. The financial systems approach to development finance: origin,
evolution and prospects. Development Southern Africa 15(3):379±398.
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Spio, K, Groenewald, J A & Coetzee, G K 1995. Savings mobilization in rural areas:
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Strauss, C B (Chairman) 1996. Final Report of the Commission of Inquiry into the
Provision of Rural Financial Services.
Swanepoel, H 1997. Community development: putting plans into action. Kenwyn: Juta.
Todaro, M P 1997. Economic development in the Third World. 6th edition. New York:
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Van Aardt, M 1997. Factors influencing development prospects for Southern Africa, in
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49
Gender relations: a missing link in
Third World development planning
Tsepiso Mohapi
ABSTRACT
In the first decades after the Second World War, the pursuit of economic
development was reflected in the almost universal acceptance of development planning as the surest and most direct route to economic progress by
most, if not all, Third World countries. As indicated by UNESCO (1986), from
the 1950s development planning has been oriented towards achieving
economic growth above all, for it was assumed that the benefits of economic
growth had an automatic tendency to trickle down to the poorer sections of
society. Development plans were assumed to benefit all people and affect
them in the same way. Planners have always thought that if men as assumed heads of households benefit from development efforts, so will their
families. Little consideration has been given to the multiple roles of women in
society. Because women's active participation in development activities is
frequently unremunerated, it is often unaccounted for in national statistics.
The underlying reason is that women's activities are home based and related
to taking care of the household, while men are engaged in income-generating activities for their families. The aim of this article is therefore to
highlight the implications of planned development for women since the 1950s
when development planning first came into the international spotlight.
INTRODUCTION
According to Allan and Thomas (1992:294),
gender relations are social relations referring to the way in which the social
Africanus 30(2)2000
50
categories of men and women, male and female, relate over a whole range
of social organisation, not just to interactions between individual men and
women in the sphere of personal relationships or in terms of biological reproduction, but also in all aspects of social activity, including access to resources for production and the distribution of consumption.
For the purpose of this paper, gender relations are used to refer to relations that
emanate from social activities involving both men and women, and which are
aimed at access to resources and their distribution.
As used in this text, development planning refers to
a continuous process which involves decisions, or choices, about alternative
ways of using available resources, with the aim of achieving particular goals
at some time in the future (Conyers & Hills 1984:3).
One may add to this the major components of development planning, which
include the allocation of roles and responsibilities, consultation, communication,
allocating resources, locating work activities in particular places, distributing
time to various activities, and monitoring and evaluating work done.
Women have been excluded from these development planning activities because development planners have ignored their needs and have subjected
them to conflicting demands, such as the need to earn more money and devote
more time to domestic activities. Because development planning has been
gender neutral since time immemorial, development efforts were thought to
affect men and women in the same way before the 1970s, in spite of the fact
that men and women had different perspectives and ways of working. Recently,
there has been increasing awareness that as development proceeds in the
Third World countries, the impact on men and women has been different.
Women's participation in the overall development process has never been
given full weight, because their role has not been fully understood by planners
preoccupied by the need to attain improved economic development, and engaged in alleviating social, demographic and political ills at various levels of the
development process. As stated by Longwe (1991), the general lack of attention
to women's needs within the development process stems from lack of gender
awareness amongst those who plan and implement development programmes.
This therefore poses questions such as: who benefits, who loses, what tradeoffs have been made, and what is the resultant balance of rights and obligations, power and privilege between men and women, and between given social
51
groups? The underlying situation, as stated by Moser (1989), is that women
have lost ground to men in the development process. The issue of mainstreaming gender into development planning may therefore be largely attributed
to the failure of development programmes to spread their benefits equally within
society. What is needed first, is a rational, systematic way of analysing the
impact of development efforts on men and women, and then women have to be
involved at all levels of planning. The purpose of this article is to contribute to
the resolution of mainstreaming gender into development planning.
20th CENTURY DEVELOPMENT PLANNING
During much of the last quarter of the century, development has been viewed
as the panacea for all the economic ills of less developed countries. Yet in
virtually all countries and among all social classes, women have been ignored in
planned development. Development that has resulted in widening gaps between incomes of men and women has not helped to improve women's lives,
but rather had an adverse effect on them. Issues concerning women and their
contributions in the development process have been increasingly examined
over the years. However, ways of dealing with these issues have varied as the
understanding of women's position in development and of gender roles has
grown.
The terms and evolution of debates by scholars and policy-makers on issues of
gender relations in development roughly emerged from the early phases of
development cooperation based on the economic growth and modernisation
theories of the 1950s and 1960s, when development planning first came into
the international spotlight. However, the role of the individual in the development process was barely addressed and even less frequently understood, as it
was assumed that development efforts would benefit everybody (Charlton &
Ellen 1984:1). Development was largely understood in terms of economic
growth measured in GNP, instead of social wellbeing. It was assumed that
economic growth brought about by modernisation would automatically improve
living standards. As stated by Anand (1992:1), since the early 1950s and 1960s
planned development in the North and South has been based on a number of
theories, but predominantly the ``trickle-down theory'' which assumed that as
standards of living in individual countries rose, the benefits would accrue to all,
including women. This belief was based on the assumption that all people are
equal, in spite of the fact that history has proved otherwise and continues to do
so.
52
The modernisation and economic planning theories at this time focused mainly
on increased productivity based on agrarian and land reforms. The green revolution of the 1960s brought about a change in agricultural production and
advocated a shift from subsistence production for the domestic market to extensive production for domestic consumption as well as export, in order to
generate foreign exchange much needed by the state. As indicated by Young
(1992), the early 1960s saw a boom in world economy growth rates and the GIP
increased by a trillion dollars as a result of the modernised agricultural strategies adopted by individual countries in the North and South. Although women
were often the predominant contributors to the basic productivity in their communities, particularly in agricultural production, their economic contribution was
not referred to in national statistics or development projects (Boserup 1970).
The modernised projects, with innovative agricultural methods and sophisticated technologies, were negatively affecting women, displacing them from
their traditional productive functions and diminishing the income status and
power they had in traditional relations. Little attention was also paid to ensuring
the development and integration of local and regional networks and as a result
the benefits of the economic growth were not evenly distributed, with 80 percent
going to the rich industrialised countries of the North and only 6 percent to the
developing countries of the South. This enabled developed countries to move
swiftly ahead (Young 1992).
Although theories of modernisation and economic growth predicted that through
``trickle-down effects'' all social strata would benefit from economic growth
fostered by modernisation, in reality this growth was characterised by the socioeconomic marginalisation of certain sections of the population. In the late
1960s, scholars who investigated quality of life found that the assumed benefits
of the economic growth were in actual fact not reaching the majority of the
people ± especially not the world's poorest; the majority of whom are women.
Boserup (1970) thus argues that neocolonialism as much as colonialism was
contributing to the declining status of women in developing countries. The resultant evidence of increasing income disparities, unemployment, rapid urbanisation and impoverishment of the minority indicated that all was not well. The
``trickle-down effects'' which should have spread benefits of increasing national
wealth to the mass of the population through job creation and service provision
never materialised. As a result, with increasing population and poor economic
performance in the developing countries, poverty, illiteracy, unemployment and
social exclusion of the poor continued, and this led to the criticism and questioning of the trickle-down theory's assumptions.
53
During this period, women and gender issues were largely ignored in development planning. As indicated, planned development focused predominantly on
national economic growth and the individual's role was not given much thought.
However, towards the end of the 1960s issues of class differentiation and socialisation within the family were given top priority. People involved in development practice faced different problems, as development programmes did not
attempt to get local people to identify self-sustaining projects, but concentrated
on the communities. However, this emphasis on the community obscured any
distinctions between interests and concerns of richer or poorer, women and
men. Development thinking drew heavily on the sexual division of labour within
the family, whereby men were assumed to take care of the economic livelihood
of the family and women to engage in tasks proper to the mother. Women were
therefore not included in the development agenda: they were to a large extent
viewed as passive beneficiaries in the development process and much emphasis was placed on their reproductive role.
Development planners considered women's needs as merely family needs to
be taken care of by men as assumed heads of households, who exercised
benevolent authority over the family and control over resources (Young 1992).
As a result, planners saw little wrong in liaising with local male-dominated
organisations to disseminate information, inputs and equipment. The question
of women's participation in supported economic activities appears never to
have arisen. The dominant view was that women's participation in society was
outside the economic mainstream; it was mainly restricted to activities for which
women were stereotypically suited and to which they had been socialised:
family, child welfare and household activities. Women were thus not integrated
in the planners' model, as their work was not remunerated. Also, it was never
contemplated that women would be an integral part and essential element of
development plans and implementation.
By the end of the 1960s it was widely accepted that these approaches to
development planning were not achieving their objectives. It became clear then
that development involved more than just economic growth, and that economic
growth alone could not bring about social equity and the necessary development in society. Therefore, it became obvious that development planners
should adopt a broader but specified approach to development (Conyers & Hills
1984).
It was only in the early 1970s that development discussion focused on the
majority of the human race: women, as highlighted by feminist research and
54
women's organisations. Women's issues and development also became conceptually linked for the first time. Development planners shifted from viewing
economic growth as the only development indicator and focused on equity,
distribution, local capacity as well as cultural autonomy. The approach of the
time was more people-centred and women's contribution to the family economy
as well as family welfare was appreciated. The basic needs approach highlighted women's economic contribution, particularly in the poorest sectors of
society, and their needs as economic actors.
The decade of the 1970s marked a new era of development programmes which
established special units whose responsibilities were to promote and monitor
progress among women as the disadvantaged group most affected by the
majority of development activities. The LJN initiated concerns for gender relations in development in 1975 by declaring it women's year, which was then
followed by the decade of the advancement of women, 1976±1985.
The main objectives of the UN initiatives were to assess the extent to which
women were being integrated into development plans and strategies and to find
out why women seemed to be a neglected resource for development. These
objectives were reinforced by the failure of the modernisation and economic
growth theories of development in the developing countries during the previous
two decades to bring about the anticipated development through trickle-down
effects, and by their lack of consideration of the specific situations and roles of
women in development activities. There was also growing evidence that economic and social development efforts had not benefited women as much as
they had benefited men. The problems of distribution and equity in the development process gained importance; for instance, in seeking better returns on
their investments governments re-examined the roles of women and the gender
notion in development. The UN initiatives further saw a consolidation of Women
in Development (WID), and emphasis shifted from economic growth as a
strategy for poverty alleviation and basic needs, to efficiency by utilising women
more effectively by improving their productive capacity within the framework of
the market system (Young 1992).
It was during this time that the WID group challenged the prevailing assumption
that modernisation was equated with increasing gender equality. They asserted
that capitalist development models imposed on Third World countries had exacerbated inequalities between men and women. They recognised that, in
actual fact, women were active participants in the development process and
provided a critical even though often unacknowledged contribution to economic
55
growth. WID started from the basic assumption that economic strategies have
frequently had a negative impact on women, hence they advocated women's
integration into the development process through employment in the marketplace. They recognised the need for women's practical gender need to earn a
livelihood. The WID approach also focused on issues of equity in both the public
and private spheres of life and across socioeconomic groups. It identified origins of women's subordination not only in the context of the family, but also in
relationships between men and women in the marketplace, and hence it placed
considerable emphasis on economic independence as being synonymous with
equity (Moser 1989).
The UN initiatives and many other women's organisations of the time did not
however bring about the much-sought change in development programmes to
fully integrate women in development efforts. Most organisations and feminist
researchers who advocated the change concentrated their efforts to a greater
extent on women's integration in development activities, rather than on women's actual participation and recognition in various form of development activities. Also, the focus was much more on women as individuals and not as
partners in development, hence the gender relation's notion in development
was not articulated and specifically addressed. As argued by Ostergaard
(1992), the WID concept of feminist researchers has to a large extent contributed to the marginalisation of women, in that it addressed women's issues as
special problems in isolation and thus treated women as a particular species
with inherited handicaps. As a result, at the end of the decade there was still
considerable concern about the lack of understanding of gender relations in
development, since development policies were still gender blind and biased
against women. Even the antipoverty strategies that advocated increased
participation of women in productive activities failed to provide equity in incomegenerating project activities. As stated by Moser (1989:165), `` anti-poverty income generating projects may provide employment for women, and thereby
meet practical gender needs to augment income. But unless employment leads
to greater autonomy, it does not meet strategic gender needs.'' Hence the UN
(1980a) also indicates that, despite an increase in the overall labour force
participation, women worked in the lowest paid and most sex-differentiated
occupations, particularly in the service sector.
Furthermore, the treatment and definitions of economic activity in planning were
still market oriented, thus ignoring much of women's non-market and home
based productive activities. Methodologically, the lack of a single indicator of
56
social status or progress of women and of baseline information about women's
economic, social and political status meant that there were no standards
against which success could be measured. Politically, the majority of development agencies were hostile to equity programmes precisely because of their
intention to meet basic strategic gender needs, whose very success depended
on an implicit redistribution of power (USAID 1978). Therefore, even though
integration of women was the major slogan of the women's decade, at the end
of the decade mainstreaming of gender in development planning emerged as it
became apparent that despite the policies, mandates and strategies initiated
during the decade; women's equal participation still remained a marginal issue
within various development organisations (Jahan 1992).
The decade of the 1990s started with momentous and unexpected changes that
called for a reassessment of established thinking and old methods of development planning. Through a series of UN conferences from the 1992 conference on environment and development, through human rights in 1993,
population and development in l994, social summit and women's conference in
1995, and the habitat conference in 1996; specific thinking on gender and
development gained ground. Also, the concept of WID became an institutionalised aspect of most international agencies, and many national governments have established programmes for women's advancement. The
emphasis shifted from efficiency to empowerment and in some circles to democratisation. Following the decade of women and the series of various forums
to bring women's issues to the forefront, women themselves have become
more organised and are making demands for recognition, consultation and a
greater degree of equality in diverse aspects of their lives with increasing
persuasiveness and strength. Because of the growing strength of women's
organisations throughout the world, Third World women began to make specific
demands for women's voices to be heard in development decision making.
Nevertheless, even though achievements have been marked by gains in terms
of women's health, literacy, economic wellbeing and political participation;
women still constitute the majority of the poor.
WHY GENDER RELATIONS IN DEVELOPMENT PLANNING?
Since 1970, there has been a proliferation of policy pronouncements, research
programmes and publicity forums to promote awareness of, and concern for,
the impact of development planning on women's lives. Thus feminist research
abounds that women have often been the victims of development programmes
57
rather than beneficiaries, and that many of these programmes that were assumed to benefit all people benefited men more and had negative impacts not
only on women but on the entire community. The unintended marginalisation of
women in development planning has also led development agencies to rethink
WID and to develop new approaches emphasising the need to mainstream
women into development activities within a gendered framework, thus advocating a shift from women in development to a focus on gender relations in
development efforts (Charlton & Ellen 1984).
An emphasis on gender relations in development highlights the fact that work is
gendered: that some tasks are seen as ``women's work'' which is demeaning to
men; while others are seen as ``men's work'' and cannot be done by women.
Focus on gender therefore encourages the questioning of the supposed unity and
equal beneficiaries in development planning. The importance of gender in development stems from the fact that both men and women as human beings should
be perceived as means and ends to any development activity, and therefore a
gendered approach will ensure that men and women have equal access and
control over resources. It is an implicit assumption that the effects of most development efforts are potentially beneficial to both men and women. In reality,
quite often the advantages go to men in the form of increased earnings and all the
disadvantages go to women in the form of increased and unremunerated workloads. Even where paid employment is offered in development projects, childcare
facilities are rarely provided and jobs are rarely placed in areas that are easily
accessible from home. The projects often involve opportunity costs different for
men and women; especially if women have children or ailing dependants.
The strength of gender therefore lies in the insistence of mainstreaming women's issues and the belief that special sections in development planning
should be run by women, not necessarily for women, but because the whole of
society needs transformation. In reality most development planners are men
and they collect information and assess the development needs of men;
therefore development programmes continue to be designed in line with the
assumption that they will be carried out by men, whereas 80 percent of the work
is actually done by women. Development planners are often convinced that if
men as assumed heads of households take part in development activities,
women will benefit passively. Little consideration if any is given to the control
and distribution of resources within the household, even though it is likely that
women and children are discriminated against in the distribution of resources
(Venter 1994).
58
According to Momsen (1991), development planners have thus preferred to
define women's needs in terms of practical needs arising from the division of
labour by gender, instead of strategic gender needs that challenge this division
of labour. This therefore reinforces the gender status quo and also discounts
the reality that the gender status quo is actually based on unequal power relations deriving from the unequal distribution of resources, political representation and organisational strength. Even though planners are aware of
these aspects of women's subordination, they find it safer and more expedient
to focus on the needs that will not threaten men's power and privileges in
society. Hence they prefer to overlook women's basic needs that arise from
their subordinate position in society and the needs that require a radical
transformation in interpersonal relations that will allow women greater power
over their lives and in the decision-making process. A gender conceptual framework in development should therefore emphasise that in actual fact women
are incorporated in the development process, but in very specific ways; that a
focus on women alone is inadequate to understand the opportunities for
change; that women are not a homogeneous category but are divided by class,
colour and creed ± that any analysis of social organisation and social process
has to take into account the structure and dynamics of gender relations; that the
totality of women's and men's lives has to be the focus of analysis, not merely
their productive or reproductive activities; and lastly that women are not passive
or marginal but active participants in development activities.
Mainstreaming a gender perspective in development planning should involve
the process of assessing the implications for women and men of any planned
action, including legislation, policies or programmes in all areas and at all levels.
A gendered perspective ensures that women's and men's concerns and experiences are an integral dimension of the design, implementation, monitoring
and evaluation of policies and programmes in all political, economic and societal spheres so that both men and women benefit equally and inequality is not
perpetuated.
CHALLENGES OF DEVELOPMENT PLANNERS IN THE 21st
CENTURY
As indicated earlier, in the first decades after the Second World War the pursuit
of economic development was reflected in the almost universal acceptance of
development planning as the surest and most direct route to economic progress. However, recently people in the developing countries have started
59
questioning the advisability and desirability of formulating and implementing
national development plans.
In the first decades after the Second World War, the pursuit of economic development was reflected in the almost universal acceptance of development
planning as the surest and most direct route to economic progress. People in
the developing countries have recently started questioning the advisability and
desirability of formulating and implementing national development plans, but
even though development agencies and Third World governments are now
trying to formulate and implement new policies on women's development, the
success of these policies largely depends on increased gender awareness
among development personnel. Todaro (1994:565) points out that in spite of
this new awareness, development planning has become a way of life in government ministries and that every five years development plans are paraded
with great fanfare.
Ostergaard (1992) argues that, even today, the target groups for development
efforts are still identified as genderless categories such as ``farmers'' or ``urban
poor''. In the minds of planners these groups are assumed to be male dominated. Planners must therefore realise that development goals will only be
reached by securing the active involvement of women as well as men, and by
bringing women into the mainstream of economic development; so that each
gender plays its own important role in the process.
As stated by Young (1992), involving women at all levels of development
thinking, planning and implementation will make a world of difference, not
merely to women but to the capacity of society to envisage and carry out
planned social change. Development planners are therefore faced with the task
of re-examining social structures, institutions and power relations among different groups in society. This requires a degree of commitment to structural
change and power shifts ± hence the need for planners to fully understand and
recognise the links between women's subordination, continuing poverty, population crisis and unsustainable forms of economic organisation.
Young (1997) further argues that bringing women to centre stage will require
profound changes in the way societies conceive of relations between the
genders: it will require the dismantling of centuries-old structures of thought and
practice. Therefore, in mainstreaming gender in development the focus should
not be on women per se, but on men and women and their relations in the
development process. Hence the unit of analysis should be shifted from the
60
household as a homogeneous decision-making unit to the individual, so that the
needs of men and women may be highlighted and dealt with in a manner that
will not discriminate against either sex, but will be beneficial to all.
Even though it may take time to mainstream gender in development planning, it
has become increasingly clear over the past decades that women are a tremendous social resource which societies can no longer afford to undervalue or
under-use ± hence the need to treat women as partners in development rather
than resources in the overall development processes. Planners have a great
responsibility to listen to women, respond to their articulated needs, involve
them in planning and evaluation, and to build their vision into planning strategies.
It is obvious therefore that development planners should be gender planners.
They should adopt a gender perspective which involves the process of assessing the implications for both women and men of any planned action, including legislation, policies or programmes, in all areas and at all levels.
Planners should ensure that women's and men's concerns and experiences are
an integral dimension of the design, implementation, monitoring and evaluation
of policies and programmes in all political, economic and societal spheres. The
following questions have to be asked in order to assess the success of any
planned action: Have both men and women been consulted equally? What is
the sex ratio of people involved in the decision-making process? What is the
likely impact on gender equality goals? (Moser 1989).
Gianotten (1994:12) recommends that certain activities should be carried out
before the implementation of programmes: firstly, the collection of baseline data
such as gender profiles; and secondly screening with respect to potential effects. This recommendation, in conjunction with the concepts of autonomy and
empowerment of women, clearly shows the necessity of developing a methodology which could serve as a planning instrument and perhaps give an indication of the potential impact of proposed development projects and
programmes on gender relations within a given society.
CONCLUSION
As has been illustrated, a need for gender awareness in development efforts
was recognised some 20 years ago when planners realised that economic
growth and modernisation could not be achieved without the recognition and
participation of both men and women in the development process. When
61
gender differences are overlooked in the planning process, development initiatives are unlikely to respond to women's needs and may have negative
consequences for them. There is some evidence to the fact that development
strategies based solely on macroeconomic theories have failed to solve problems of poverty in developing countries. Moreover, these strategies have had
the unforseen side effects of making the poor and underprivileged even poorer.
A gendered perspective to development should therefore be one in which
women's knowledge, experiences and perceptions are given validity and allowed to come to the fore in analysing and presenting issues. This perspective
should ensure that changes occurring in society ± planned or unplanned ± are
viewed critically, taking into consideration that people are essential elements in
all development activities.
BIBLIOGRAPHY
Allan, J & Thomas, A 1992. Poverty and development in the 1990s. Oxford: Oxford
University Press.
Anand, A 1992. Women in the Third World redefine their environment. London: ZED.
Boserup, E 1970. Women's role in economic development. New York: St Martin's.
Charlton, M & Ellen, S 1984. Women in Third World development. Boulder, Colo:
Westview.
Conyers, D & Hills, P 1984. An introduction to development planning in the Third World.
New York: Wiley.
Gianotten, V 1994. Assessing the gender impact of development projects: case studies
from Bolivia, Burkina Faso and India. London: Intermediate Technology.
Jahan, R 1992. Mainstreaming women in development in different settings. Bangladesh:
Dhaka University Press.
Longwe, S 1991. Gender awareness: the missing element in the Third World development project, in Changing Perceptions: Writings on Gender and Development,
edited by T Wallace. Oxford: Oxfam.
Moser, C 1989. Gender planning in Third World Countries: meeting practical and strategic gender needs. World Development 17(11):1799±1825.
Momsen, J 1991. Women and development in the Third World. London: Routledge.
Ostergaard, L 1992. Gender and development: a practical guide. London: Routledge.
Todaro, M P 1994. Economic development. 5th edition. London: Longman.
UNESCO 1986. Socio-economic analysis and planning: critical choices of methodologies. Paris.
United Nations 1980a. World Conference of the UN Decade of Women: Equality, Development and Peace (Copenhagen). New York.
USAID 1978. Report on women in development. Washington DC: USAID Office of
Women in Development.
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Venter, M 1994. Prospects for progress: critical choices for Southern Africa. Cape Town:
Maskew Miller Longman.
Young, K 1993. Planning development with women: making a world of difference.
London: Macmillan.
Young, K 1997. Planning from a gender perspective: making a world of a difference, in
7he women, gender and development reader, edited by D Visvanathan. London:
ZED.
63
On the relationship between
participatory research and
participatory development
Naude Malan
ABSTRACT
The connections between participatory development and participatory research are examined in this article. It is argued that participation in research
is not sufficient to bring about participatory development. This line of reasoning is pursued to make the point that the social and political context
determines whether the normative claims of participatory development are
attainable through a development intervention. The article then examines
those aspects of development in South Africa that would have a decisive
influence on the outcomes of participatory intervention, such as neoliberal
policy choices, changes in the local government dispensation, the role of
traditional authorities and the state of civil society in the country. The article
concludes that these, and other elements of the social context, need to be
aligned with participatory development interventions for the claims of participation to become feasible.
INTRODUCTION
Participation is often seen by its proponents as fundamental to sound development policy, strategy, practice and research. Within the paradigm of participation, two distinct but possibly related elements are present: participation in
research, and participation in development. Participation is often presented as
necessary for development to be appropriate to those who will be involved in it.
Similarly, participation is presented as necessary for development research to
Africanus 30(2)2000
64
address and reveal the plight of the most needy. This article will take a critical
look at the participatory development paradigm by examining the conditions
under which participatory research interventions could lead to participatory
development. The argument is based on the premise that participatory research
will not necessarily lead to participatory development. This article will try to point
out those aspects of the social context which could be conducive to participatory research crossing the threshold to participatory development. In doing so, I
would like to move away from a discussion of the implementation of these
methodologies, and examine those elements in the social context that need to
be aligned to the wider participatory project for it to become feasible.
My argument, which will be substantiated in the body of the article, is structured
as follows: I will first establish that there is not necessarily a connection between participatory research and participatory development. It is easy to conflate the two elements, with the result that mere participation in research, or
participation in research techniques, is seen as an adequate form of involvement for people in development projects. A development intervention making
use of participatory research would not necessarily lead to participatory development. Similarly, development interventions that do not attempt to structure
participation strategically cannot claim to be participatory. The results of participatory research will not be incorporated in a development project and the
quality of the lives of the people involved will not be affected, unless certain
conditions are met. The crux of my argument is that these factors lie outside the
domain of the development project. These factors include an institutional dimension represented by the implementing agency responsible for development;
a methodological dimension represented by the execution of research; and a
social dimension represented by the local politics of the area in which the
project will be implemented. I suggest that the problems of participatory development may be overcome by interpreting them as problems of civil society.
This forces us to consider the hypothesis that participation in (governmental)
development projects could have important implications for associative behaviour within civil society, which could in turn have negative implications for the
long-term project of social change.
PARTICIPATORY RESEARCH AND DEVELOPMENT
The belief that local people are more aware than outside researchers of local
idiosyncrasies, such as climate, environment, needs that are important for
development projects and similar interventions, is fundamental to the idea of
65
participatory development and research. This belief in the capabilities of beneficiaries leads to the idea that people could be instrumental in the design of
their own development interventions. Concurrent with this, certain researchers
began experimenting with using local people in research for development
projects, frequently without the knowledge of development agencies. It became
clear that certain information could be supplied by local people very quickly and
more accurately than by orthodox social research for development projects.
This considerably decreased the costs and effort of research for development
projects. Once this capability was recognised, researchers began to structure
these contributions to the intended project around certain techniques and
methods. Instead of undertaking, say, an expensive laboratory analysis of the
soils present at a project site, local people could evaluate the soils together with
the researcher using specific techniques, at times incorporating indigenous
concepts and practices into the results and subsequent project design. In most
instances local knowledge was deemed to be as good as scientific knowledge.
The premise was that, because local people would be the ultimate beneficiaries
of the project, their concepts and understanding of the area should be sufficient
and would be particularly relevant to the specific situation. The idea was systematically developed that, armed with the right knowledge and backup, local
people could be the researchers, initiators and managers of their own development projects. That is the classic conception of participatory development
and research. The prime example in this genre is the expatriate researcher
who, when told of research in progress, is reminded that ``You do not need to
come''.
Participatory research as a concept is not new; some people claim that it has
been used since the 1940s (Selener 1997). The paradigm of participatory research has varied origins: Selener (1997) distinguishes four different sources.
According to him, Participatory Action Research (somewhat different from the
varieties discussed in this article) originated from Community Development,
Action Research in Organisations, Action Research in Education and, of
course, from Farmer Participatory Research. Such diverse origins explain the
flexibility and variety of participatory research. An important element of its origin
is social researchers' dissatisfaction with orthodox methods of research for
development (see Chambers 1991). Their criticism has been partly responsible
for the present proliferation of methods. On all these counts, the use of participatory research for development is a liberating experience, both for researchers and participants (cf Martin 1994).
66
Participatory research today is a multifaceted approach to the study of development. Contemporary techniques have been developed primarily by practitioners (Chambers 1994b:1262; Grimble & Wellard 1997:187). Many different
varieties, each suited to a particular application, form part of an extensive repertoire of techniques available to development workers and researchers.
Some of the methodologies in which participation plays a crucial role are: action
research (Fals-Borda 1981; Fals-Borda & Rahman 1991; Selener 1997), Participatory Rural Appraisal or ``PRA'' (Chambers 1994 a,b,c) (also referred to as
``PLA'' ± Participatory Learning and Action) and Farming Systems Research
(Haverkort et al 1991). They are useful for academic inquiry (cf Scoones et al
1996; Scoones 1997; Mearns 1996; Grimble & Wellard 1997; Martin & Sherington 1997); are simple enough for anyone to use (see Mosse 1994:524±526;
Chambers 1991; 1994c); and ideally, would reveal data that would decisively
influence the design of a project (see Chambers 1994a:533; Leurs 1996; Martin
& Sherington 1997).
PARADOXES OF PARTICIPATION
Participatory research undoubtedly has noble qualities, and the word ``participation'' is used in most contemporary discussions of empowerment. However,
participation is also used as a development strategy in many organisations that
are unlikely to consider the interests of the ``target group'' exclusively. Grimble
and Wellard (1997:184) equate Participatory Rural Appraisal (PRA) or Rapid
Rural Appraisal (RRA) with the development strategy used by the World Bank
and the Overseas Development Administration (ODA) of the United Kingdom.
The ambivalent nature of the paradigm of participatory research is particularly
important in evaluating the application of these techniques in development aid
programmes (see Grimble & Wellard 1997; Oakley 1995). These ``social methodologies'' (Cernea 1987) come into their own in the context of a development
project and are concerned with ``the practicalities of consensus building and
developing a workable project'' (Grimble & Wellard 1997:186). Perhaps these
techniques are used for instrumental, rather than for emancipatory reasons.
This disjuncture between the interests of the participants and the implementing
agency becomes even more acute when some of the origins of these methodologies are examined. Biggs and Smith (1998) trace the origins of participatory methodology, specifically Rapid Rural Appraisal (RRA), through case
studies. According to them, the successful use of these methods depends on
the possibility of ``coalition building'' between the people involved and other key
67
stakeholders. These coalitions were built behind the scenes, through lobbying
by influential individuals (Biggs & Smith 1998:246). Unfortunately, they do not
discuss the problem of patronage. According to them the crucial factor in the
success of these methodologies is not the kind of participation by beneficiaries,
but rather the ``social and political context of the methods' application''
(1998:241). In this case, what participation can or cannot accomplish would
depend on the political economy of development aid. From this discussion it is
clear that participatory research, and by implication development interventions
in which participation is strategically structured, will not necessarily lead to the
kind of development that is devoted to the interests of the participants. Participation in a development project could serve interests other than those of the
beneficiaries. I would suggest that we should consider the kind of participation
by beneficiaries as much as the kind of development project itself. In order to do
this, we have to analyse the contemporary political economy, for example, the
type of macroeconomic policy choices made, interest groups relevant to the
project, and their impact on activity at local level.
This ambivalence is highlighted by Selener (1997:203±204), when he distinguishes between technical and political forms of participatory research. Participation as a technical intervention is:
[a] tactic for involving people in practical activities in the process of problem
definition, data collection, data analysis and implementation of results ...
Participation of a technical nature can be manipulated by power holders to
fulfil their own needs and thus may not promote empowerment or social
change (Selener 1997:203±204).
Selener continues:
Participation of a political nature means acquiring power and taking greater
control of a situation by increasing options for action, autonomy and reflection, especially through the development and strengthening of institutions
(1997:204; his emphasis).
Participation, in an ideal sense, is a political strategy that promotes the interests
of participants in development over those who implement projects. The political
nature of participation, however, could also serve as a veil behind which power
could be consolidated and used more effectively (Rahnema 1993).
When we postulate the social context as instrumental to whether participatory
research leads to participatory development and (possibly) positive social
68
change, the problems underlying development change fundamentally. It forces
us to see the social element as determining the direction of development, and
not development as the motive force behind social change. In many ways this is
a classic debate. It is ideological to suppose that only development and development projects would change our social reality. The development project
may all too easily become subservient to the powers that be, or development
may follow contemporary fashions, of which ``participation'' is the most prominent example. The conflation of participatory development and participatory
research is a variation on this fallacy. Participation was suggested as a solution
to development problems decades ago (cf Lele 1975:62±78), but has only recently been examined more rigorously (Mannikutti 1997; Uphof et al 1990). The
paradigm is badly in need of critical scrutiny.
Clearly, the use of participatory research does not guarantee social change
associated with the ``development and strengthening of institutions'' (Selener
1997:204). The strength of participatory research lies in its ability to engineer an
intervention that suits local circumstances. This ability could, however, depreciate the necessity of deeper social change. Social change needs to be
premised upon local circumstances. This is not only a moral, but also an economic imperative as any area has some form of comparative advantage over
others. However, this same point of entry that legitimises participation can also
make such research susceptible to local influences that are less benign and
sometimes destructive (cf Mayoux 1995; Mosse 1994). An appreciation of local
elements as a foundation for development is needed, but also an understanding
that this local nature of development is embedded in a wider context, and that
this wider context could undo any local gains. In order to apply this to participatory development, we will examine the institutional, the methodological and
the social dimensions of development in South Africa.
THE MULTIPLE DIMENSIONS OF PARTICIPATORY
DEVELOPMENT
The previous discussion implies that participatory research and development
must be combined with other aspects of intervention to lead to positive social
change. Creating the right institutional environment is one aspect of this (Martin
& Sherington 1997; Bunders & Broerse 1991). The policy choices any organisation or government makes are crucial in this regard. South Africa, and the
South in general, are at present caught in a hegemony of neoliberal policy.
Consequently, the scope for participation in policy formulation in South Africa
69
seems limited at present, especially for rural people (see Blake 1998; Maganya
1996). It is inconceivable that a government department or a major parastatal
development organisation would be able to go against the grain of these
macroeconomic policy choices.
Besides, the organisational culture of a development agency will have to go
through numerous institutional and ideological changes in order to be able to
implement radical participatory development programmes. The fact that major
international institutions involved in development subscribe to the participatory
discourse, and uphold the neoliberal paradigm as well, makes one wonder
about the authenticity of participatory development.
In South Africa the neoliberal hegemony on policy alternatives is represented by
the Growth, Employment and Redistribution (GEAR) programme. The Reconstruction and Development Programme (RDP) is usually presented as an
alternative to GEAR. What is important for participatory development is how
these two opposites are reconciled in Government policy, and the ways in which
local-level participation may lead to shifts between the RDP and GEAR paradigms. Even within a neoliberal environment, government departments still
have a responsibility to take heed of the alternatives that could emanate from
the participation of people in their development projects. The fact that the RDP
is well known at local level throughout the country makes it almost impossible to
implement development projects without some form of community cooperation.
If participation in this regard leads to more efficient projects, the condition of
efficiency will at least be satisfied. Certain other conditions that are part of
demand-led development, like limited local decision making, will also be satisfied. In certain instances, where the particular service that is delivered is
relatively uncontroversial, like water, these trade-offs do not amount to much. In
other instances, like agricultural technology development, where the links between livelihoods and technology adoption are very controversial, these tradeoffs could have profound implications for the people involved. We still need to
explore the links between our development priorities and their relationship with
different policy alternatives. Then we will be in a position to evaluate how the
neoliberal policy choices we have made will impact on certain segments of the
South African population.
The object of participatory development is to allow beneficiaries to control development. This does not only concern the management of development projects, but also the execution of research. When people other than the ``target
group'' are in control, development could be shaped to suit them. The local-level
70
power play in South African communities on the topic of ``development'' could
create the opportunity for influential individuals to influence workshops and
other methods of participatory research decisively. Because we would want the
community to control development, we would be unaware of the dynamics and
rationale underlying decisions and actions taken. This makes it difficult to know
when the results of participatory research are reliable and valid. The epistemology of participatory research demands that the methodological be subservient to the political. The emphasis on the political, however, could also allow
individuals outside the ``target group,'' or interests outside those of the community, to control research. In this way doubt is cast on the methodological
rigour employed in participatory research, which makes it a less lucrative alternative to orthodox social research.
Participatory development in South Africa, besides being affected by the concerns raised earlier, will be profoundly affected by local-level authority, which
includes traditional leaders and local authorities. It may easily be argued that
traditional leaders constitute one of the most crucial, if not overlooked, aspects
of rural development in South Africa. However, their role in development is not
clear at the moment. Making a commitment to helping the poorest would not
necessarily intrude upon their authority. However, making a commitment
against the better off could well do this. Allowing women access and control
over land would most probably lead to conflict: many men control their own
piece of land, and this will diminish the chances of more men gaining land. On
the other hand, traditional leaders do have a responsibility toward their communities, and it is inconceivable that they would do something that goes against
the wishes of the majority of their ``subjects.'' Opponents of traditional authority
structures often accuse them of playing the role of gatekeepers, as they have
considerable influence over rural life. However, they could be a most important
ally in a market-driven political economy.
Individual headmen and tribal councils could be more or less sympathetic to the
empowerment of target groups such as small farmers. Close cooperation and
strategic trade-offs with individual traditional authorities could create the possibility of a development project under the control of the participants. The peculiarity of this situation is that the possibility of establishing a participatory
development project would depend more on the willingness of individual traditional leaders to grant access to land, than on national policy on traditional
authority.
Local Government in South Africa has been placed on a unique footing com71
pared to the rest of the world (Harris 1999). The process of restructuring local
government in South Africa as developmental local government has only just
started. The efficacy of participatory interventions in development would depend greatly on the demarcation of local government boundaries. The first
priority would of course be that these newly constituted municipal structures do
have the capacity to deliver services to their populations. The question that
concerns us here, is whether service delivery is a developmental category
sufficiently sophisticated and flexible to accommodate specific and distinctive
needs. If participatory development is premised upon local idiosyncrasies, what
scope is there for variation on the themes of sewerage, water, electricity and
roads?
Other factors could also be taken into consideration. ``Local Economic Development'' is one way in which local authorities can ``bend'' the neoliberal development paradigm so that their constituent populations receive a greater
share of the economic pie. The results of such efforts do not always seem to
fulfil the promise of a participatory or a redistributive ideology (see Maharaj &
Rambali 1998). Local Economic Development seems to be more subservient to
broader currents that shape our society than to local level interests. Therefore,
it is doubtful whether such a developmental strategy could satisfy the demands
of the participatory ideology.
The change in demarcation of local government boundaries is bound to have an
effect on people and their organisation that is not necessarily covered by the
participatory paradigm. Local level organisations are often premised against
and/or upon cooperation with local government or traditional authorities. The
new demarcation of local authority areas would have an effect on civil society at
local level. Participatory interventions would have a profound effect on the way
these organisations function. The lack of rigorous discussion in the literature on
the relationship between civil society and social movements and development
is a cause for concern (but see Lindberg & Sverrison 1997). This very important
aspect of associational life, on which the obsession with the ``target group''
directly intrudes, could be negatively or positively affected by participatory intervention. The point needs to be made that there should be room for forms of
associational life other than the development committee to make an impact on
developmental choices. Other forms of civil society and social movements, not
directly related to development, need to be given room to function, as they
ultimately contribute to the virility of civil society in general. An autonomous and
independent civil society is crucial for long-term social change (Young 1994).
72
The long-term health of civil society and these organisations is what participatory development should be about, and not maximising the material gains
from development projects.
CONCLUSION
Agencies which strive to implement participatory development should realise
that more is at stake than participatory needs assessments. It is quite possible
that they should engage in advocacy at higher levels in order to bring about the
social changes needed for successful participatory development. These
changes will most probably not occur with participatory research and development on their own. The notion of ``coalition building'' alluded to earlier points
to the fact that an influential individual in a development organisation would
have to play the role of benevolent gatekeeper. The paradox is that the sense of
conscience of such a person will have to be greater than the sense of accountability of his or her organisation.
We could argue that participatory development could lead to appropriate development interventions, because participation gives a point of entry to the
social context. It is, however, not clear whether this ability of participatory research and development is critical. Will it necessarily challenge the status quo?
For instance, in many parts of rural South Africa, rainfed farming is a common
agricultural strategy. There has to be a reason for this. Given the widespread
poverty, lack of capital, landlessness and shortage of labour characteristic of
rural South Africa (see Marcus et al 1996; Lipton, Ellis & Lipton 1996), is rainfed
farming not a very appropriate agricultural strategy? Without fundamental
change to these aspects of rural life, is it possible to implement true ``participatory development''? Participatory research and development is an excellent
strategy for local or community-based development. However, this local focus
might be completely inappropriate for dealing with structural inequalities such
as the landlessness of rural people. Some issues have to be addressed and
changed at the national and sometimes international level, for participation to
become a viable development strategy.
These comments seem very similar to the ``traditional'' concerns of development. The beauty of the participatory development paradigm is that it points to
the necessity of a much more radical transformation in these traditional concerns than we have envisaged up to now. Participation is only one part of the
participatory development project. This is its true value: because the obstacles
73
to attaining empowerment are still the same, overcoming them will have to be
done all the more radically.
BIBLIOGRAPHY
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economic policy for reducing poverty in South Africa, in Creating action space: the
challenge of poverty and democracy in South Africa, edited by C Baberton, M
Blake & H KotzeÂ. Cape Town: IDASA & David Phillip.
Biggs, S & Smith, G 1998. Beyond methodologies: coalition-building for participatory
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75
Revenue and ownership Ð the
impact of privatisation in South
Africa: lessons from the UK
Charles C Okeahalam and
Royson M Mukwena*
ABSTRACT
This paper uses anecdotal evidence from the United Kingdom to suggest
that one of the most trusted ways of ensuring the long-term development and
growth prospects of the South African economy is to develop the philosophy
of the stakeholder amongst all South Africans via a carefully planned and
implemented privatisation programme. The paper concentrates on two aspects of privatisation: the impact on government revenues on the one hand,
and the impact on share ownership by employees and on the welfare of RSA
citizen stakeholders on the other hand. Market-led proposals are a desirable
method of ensuring long-term benefits for all of South Africa's citizens. Potential consequences of market failure are also discussed.
*
The authors are grateful to Professor Ron Hope of the University of Botswana for his helpful
comments.
1 INTRODUCTION
This paper uses the UK privatisation experience to illustrate some of the benefits and problems of privatisation and it relates this experience to the debate on
privatisation in the Republic of South Africa (RSA). It suggests that determining
an appropriate privatisation policy is difficult, varies from country to country, and
should be influenced by the underlying objective behind the particular privatisation process.
Africanus 30(2)2000
76
Although privatisation policy impacts on a variety of issues, this paper concentrates on two objectives which are important in the South African context.
The first is privatisation as a source of government revenue and the second is
privatisation as a method of increasing employee ownership and perceived
control, so as to increase economic efficiency and labour productivity.
2 PRIVATISATION POLICY
The United Kingdom has played a role in developing and implementing the
ideas and practice of privatisation. Now that apartheid has been overcome, the
next major challenge facing the government of the Republic of South Africa
(RSA) is to improve the economic wellbeing of the many previously disenfranchised citizens. In its 1993 election campaign the African National Congress
(ANC) made several welfare pledges to the electorate. Now that it has formed
the government, their expectations have been kindled.
Privatisation may be used by the government to raise revenues and improve
fiscal balances to meet its welfare policy objectives. As the World Bank (1995)
has argued, privatisation is justified on the ground that state-owned enterprises
(SOEs) are invariably inefficient and therefore constitute a massive drain on
limited public resources. Vickers and Yarrow (1988) and Vickers and Yarrow
(1991) identify three major types of privatisation: firstly, the privatisation of
competitive companies, that is the transfer to the private sector of companies
operating within competitive product markets with low market failure;1 secondly,
the privatisation of monopolies, that is the transfer to the private sector of firms
with significant market power; and thirdly, the contracting out of public services
to the private sector.
The first step in formulating privatisation policy is to decide on the objectives
and type of privatisation programme. When privatisation takes place via state
asset disposal, the government has to decide on the objectives of the exercise.
The objective might be to dispose of a loss-making enterprise to reduce the
negative impact on tax payers. Another objective might be to place governmentmanaged concerns within a market environment, in other words without government subsidy. This would result in increased efficiency, better rates of financial return and improved management. Accordingly, decisions on the nature
of privatisation policy in South Africa need to be seen as part of an overall
economic strategy to improve the performance of the economy.
Veljanovski (1989), amongst others, highlights the success of privatisation in
the developed market economies where active, dynamic capital markets exist.
However, it should be obvious that privatisation policy may not yield the same
77
outcome in a developing economy with a limited capital market. The ``best''
privatisation policy will be determined by the nature of the problems which it
seeks to address, and by the environment within which it is being implemented.
For example, a government may believe that privatisation would improve efficiency and generate higher fiscal revenues. To this effect it may decide to
privatise an inefficient, monopolistic state-owned utility. It might choose to allocate shares to the private sector via a flotation so as to minimise the probability of market failure and loss of the benefits of revenues. On the other hand,
it may choose a voucher system which, in theory, would allow members of the
public equivalent access to a certain number of shares in the utility. Theoretically this would increase the likelihood of maximising the welfare of all taxpayers. However, if the objective of the privatisation is to maximise revenue
from the disposal of the utility, then it is unlikely that the voucher system will
achieve the objective, because the social cost of government intervention, that
is the impact of government failure, will reduce the financial returns. On the
other hand, if a flotation is carried out to attempt to maximise government
revenues, this may have a high welfare cost.
2.1 Ownership
Related to this issue of the ``best'' privatisation policy is the debate on the
impact of ownership on economic performance. The effects of changes in
ownership and competitive market conditions on economic performance are
well documented (Pryke 1982; Fubara 1985; Hartley et al 1991; Vickers &
Yarrow 1991; Okonkwo 1991; Parker 1992). The evidence suggests that the
nominal change of ownership does not in itself guarantee increased performance. What appears to be important, is the impact that the movement to the
private sector has on incentive mechanisms within the organisations. Unlike the
case of the private sector, in the public sector there are limited worker and
managerial incentives, and this reduces labour motivation and managerial initiative. Furthermore, in a highly regulated environment a change of ownership
limits the actual impact which privatisation may make. The paradox is that
governments need not intervene in truly competitive markets unless there are
obvious signs of market failure. Government intervention in the form of regulation is usually only necessary where government has privatised a corporation which is likely to generate market failure, such as privatised monopolies.
The privatisation of a monopoly supplier is evidence of government failure.2 But
it is not best policy to attempt to use regulation to rectify this type of problem,
since in such circumstances market failure will continue and the change of
ownership does not remove it.
78
2.2 Efficiency
There is also debate as to whether privatisation improves efficiency. Parker
(1992) suggests that certain factors, such as improved use of resources and
control of operational cost, may determine the success of privatisation according to the criterion of efficiency. This is particularly so when the incentive to
increase efficiency through the introduction of competition is lacking, especially
if the firms under consideration are large monopolistic suppliers of services,
such as Telkom and Eskom,3 or other highly capital-intensive product suppliers
which have high entry costs.4
Economists have identified two types of inefficiency in a public sector enterprise
which may present a case for privatisation. The first is allocative inefficiency, in
other words an inefficient use of raw materials. The argument is that public
sector enterprises have allocative inefficiencies because of lack of competition;
therefore transferring them to the private sector, where they will face competition, will improve their use of resources.
The second major type of inefficiency is productive or technical inefficiency.
Productive inefficiency occurs when public enterprises do not minimise costs,
since they are shielded from the adverse consequences of such behaviour. De
Borger (1993) and Yosha (1995) have questioned whether productive efficiency
will improve as a result of transfer of ownership. One point of view is that it will
improve irrespective of ownership since it is determined mostly by organisational arrangements. An opposite view is that transferring the enterprise from
the public to private sector should have an effect, since managerial and organisational arrangements are related to the type of ownership.
This debate is very important to privatisation primarily because, as Hutchinson
(1991) suggests, the impetus for privatisation is partly driven by the belief that
public enterprises do not behave in a cost-minimising manner. Accordingly, if
transferring these enterprises to the private sector has no impact on efficiency,
the need for privatisation is reduced. This was the UK Trade Union Congress
(TUC) view in the early 1980s and it has been expressed consistently by the
Congress of South African Trade Unions (COSATU). COSATU suggests that
the inefficiencies of public enterprises in the RSA are the result of apartheid,
and that the recent political changes will enable more efficient aggregate welfare-enhancing economic policies, which will result in increased efficiency and
performance in public enterprises. While this argument does have some merit,
the evidence from the rest of sub-Saharan Africa suggests that political freedom
has not manifested itself in economic rights Ð so there is still ongoing debate
as to the impact which privatisation and ownership have on efficiency.
79
3 A BRIEF OVERVIEW OF THE SOUTH AFRICAN ECONOMY
``Best'' privatisation policy is not designed in a vacuum, so it is necessary to
briefly present some elements of the South African economy.
One of the legacies of apartheid in South Africa is the obfuscation of economic
facts for ideological and political reasons. This has made evaluating true economic performance in the RSA difficult. However, it is still possible to suggest
that the mixture of bad political judgement and the impact of economic sanctions meant that in the past the South African economy performed less efficiently than it might have, given the economic fundamentals of the country. In
addition the South Africa economy is characterised by large disparities which
are readily apparent when economic indicators are disaggregated by race.
Table 1 Summary of relevant economic indicators in South Africa
Black (1997)
White (1997)
Population (1)
36.2 m
8.3 m
GDP per capita: (US dollars)
641
6 350
Savings ratio (2)
1.4%
7.3%
Unemployment (3)
29.1%
6.4%
Percentage owners of private houses
(fixed mortgage investment) (4)
6.7%
39.1%
39,7%
42.4%
17.8%
0.8%
1,3%
38.8%
52.1%
7.9%
87.3%
12.1%
27.4%
61.3%
Level of formal education (4) attained:
Nil
Primary
Secondary
Tertiary/university
Worker population
Blue collar % (5)
White collar % (6)
Notes to table 1
(1) Total population (1997) figures = 44.5 million. This includes the former ``independent''
homelands, which in 1994 had an approximate population of 9.7 million.
(2) Savings ratio defined as ratio of personal savings to personal disposable income. Different
marginal income taxes affect accuracy of this calculation.
80
(3) Source: Economist Intelligence Unit (EIU) (1998), South Africa Chamber of Commerce and
Congress of South Africa Trade Unions (COSATU). One of the many nefarious activities of
apartheid has been to underplay the scale of black unemployment while highlighting
employment difficulties or levels of unemployment among other racial groups.
(4) Sources: World Trade Tables (1997) Ð Johns Hopkins University Press and EIU (1997).
(5) Source: World Trade Tables (1997) Ð Johns Hopkins University Press.
(6) Source: Social Indicators of Development (1995±1997) Ð World Bank and Johns Hopkins
University Press. Includes manual/home help/domestics. This difference reflects the market
mechanism for the manual/non-manual labour relationship. Most whites do indirect manual
work: if their work has a manual classification, then it is usually in a supervisory capacity or other
indirect form.
Table 1 above presents a summary of some economic indicators which reflect
the racial inequalities in South Africa. Economic statistics on the RSA, in particular figures on the level of unemployment disaggregated by race, have been
the subject of much debate and dispute. The figures in table 1 were taken from
the Economist Intelligence Unit (EIU) and from the World Trade Tables published by Johns Hopkins Press. Given the credibility of the sources of the
figures used in this table, they are assumed to be reliable.
Income distribution and racial economic inequality has to be considered when
free market economic policy, such as privatisation, is proposed. For example,
the Economist magazine recently reported that in 1993 South Africa had a per
capita GDP figure of US$3 010. This would place it on comparable terms with
the wealthier Latin American countries and countries in Eastern Europe such as
Hungary. However, this is an aggregated figure. When disaggregated along
racial lines, white GDP per capita rises to US$6 350, similar to the levels of
Spain and Greece, whilst per capita income for blacks drops to US$641, closer
to the levels of Zimbabwe (US$590) and much lower than Botswana
(US$1 400). So by using just the GDP per capita measure it is easy to identify
the obvious demarcation with which the South African economy can be assessed. Morally, and indeed from a sound economic welfare perspective, there
is reason to believe that this extreme difference is not only unjust, but economically inefficient.
Accordingly, moral arguments and economic imperatives call for some form of
economic redistribution in South Africa. Indeed, Perotti (1993) provides evidence that effective redistribution in South Africa may also lead to economic
growth. Perotti also shows that, in theory, with linear income taxes and revenues, there is a strong possibility for the ``trickle-down'' phenomenon to take
place. Furthermore, one of the likely positive spillover effects would be an
81
increase in investment in education by the lower income group, which would
boost their future incomes. It could also be argued that, given their share of
investment capital (see table 1), the higher income group would benefit indirectly as a result of having a better educated and more internationally competitive workforce. Yet for this to take place, the highest income group has to
ensure that the size of whatever ``trickles down'' is large enough to ensure that
the opportunity cost of low income earners seeking further education is not so
high as to dissuade them from doing so; in other words, marginal benefits from
education for the low income group have to increase. Privatisation presents an
opportunity to achieve this objective without policies of overt government intervention, which have been discredited elsewhere.
4 PRIVATISATION AS A SOURCE OF GOVERNMENT REVENUE
4.1 Methods of evaluating the revenue effects of privatisation
A well-managed privatisation programme can be an effective method of revenue generation. Efficient revenue generation is an important aspect of the
South African government's macroeconomic growth, employment, and redistribution strategy (GEAR). Since monopolies are worth more than competitive
firms, a government concerned with maximising the revenue derived from the
sale of public assets is unlikely to implement competitive liberalising policy.5
Some of the evidence from the UK is fairly instructive in this regard. For example, this reasoning led to the disposal of British Telecom and British Gas as
monopolies. It may be safely suggested that the proceeds from the privatisation
of UK government equity holdings through the privatisation process had enabled the Conservative government of 1983±1987 not only to reduce the public
sector borrowing requirement (PSBR), but to place it in a position of debt repayment. For example, Kay and Thompson (1986) show that the sale of British
Telecom reduced the public sector borrowing requirement by $770 million
during the 1985/86 fiscal year.
A government interested in short-term revenue maximisation from the sale of
public assets is unlikely to support extensive liberalisation policy. So one
method of evaluating the revenue effects of privatisation is to examine public
sector performance and the impact it has on the public sector borrowing requirement. According to this method, asset sales may be treated as revenue
receipts and cash transactions are recorded without reference to the impact
they may have on future inflows and outflows of capital, or to the way these
82
transactions alter other short- or long-term properties of the government balance sheet. This method cannot be recommended. It is incorrect to treat these
receipts as one would treat other items of government revenue, because any
advantage of treating the receipts in this way is likely to be short-term. The only
additional benefit is that equity-type asset portfolios derived from shares in state
industries might be more acceptable to the capital market than traditional
methods of government borrowing, such as issuing bonds.
Irrespective of the problems associated with the use of public sector cash accounting or private sector accrual accounting, or whether or not the firm is a
monopoly or competitive market operator, the determination of financial gain or
loss from the asset disposal depends on whether or not the price paid is greater
than, or less than the present value of prospective earnings from the asset.
Since privatisation policy is often used by a government concerned with
keeping its public sector borrowing requirement (PSBR) under control, it is
sometimes necessary to convince investors of the credibility of its low inflation
policy and the positive impact on future corporate earnings, otherwise the
government may still face short-term financing constraints.
Effective economic management requires appropriate control of public sector
borrowing (relative to the GDP), to ensure that income streams (fiscal revenues
and dividends) are able to meet current account demands. A failure to do so
might cause investors holding government securities to reassess the risk premium of holding government debt as collateral. Investors would then either
demand higher real rates of return or, in extreme cases, reduce the demand for
government debt issue, prompting a likely increase in real interest rates.
Accordingly, the disposal of parts of public sector holdings in a privatisation
policy is similar to the selling of equity. However, in a less developed economy
this fact is of little help in deciding on what discount rate to use to price public
sector assets prior to privatisation (Okeahalam 1997). This is a problem even in
developed market economies, where capital markets are relatively liquid, and
bonds (corporate and government) can be priced easily (Menyah et al 1990).
Therefore, using the bond markets to generate borrowing may appear to be less
costly than issuing equity. However, in economies where the bond markets are
less liquid, particularly in highly indebted countries where the probability of
inflation eroding the real value of returns is high, issuing equity, that is privatisation (despite its higher transaction cost) may actually be a cheaper way to
generate revenue than issuing bonds.
83
4.2 Private investor returns and public sector regulation
For this to take place in South Africa, private sector investors will have to be
convinced that there will not be a reduction in the commitment of government to
adhere to the professed economic policy. This will be conditioned by a number
of factors. Firstly, equity investors have to take into account the risk of renationalisation, in the event of a change in government or policy. This applies, in
particular, to foreign investors. Secondly, the probability of government default
would vary from industry to industry.
There is also a need to be aware of changing the regulatory framework. An
extremely profitable or potentially profitable public sector (most probably
monopolistic) operation is likely to be evaluated at a premium by investors.
However, monopolistic profitability is perceived differently when it takes place in
the public sector and profits accrue to the government exchequer than when the
profits accrue to private investors. Both profits are achieved at cost to the
consumer. On the other hand, a public sector monopolistic supplier may not
make as much net profit as it might have realised had it been transferred to the
private sector, yet the true cost to consumers may actually decrease consumer
welfare by a greater extent. In other words, the lower level of profits of the public
sector firm may not be price related, but may be a function of a lower level of
efficiency. Therefore, even if the quality of service level at the financial price
charged is nominally lower, it may actually have a higher economic price.
Profit should be a component of the welfare function of both the public and
private sectors Ð indeed the welfare function is not fully maximised without
profits. However, this does not remove the probability that consumers will rally
against the level of profits of publicly owned monopolistic companies which
have been transferred to the private sector. The evidence (Marsh 1991; Veljanovski 1989) suggests that the best way to overcome this problem is not
through high regulation, but by the introduction of competition. Of course this
will be easier to achieve where cost of entry is low. By definition this is more
difficult in capital-intensive industries with high sunk costs such as electricity
(Eskom), transport (Transnet), and telecommunications (Telkom). One way of
addressing this problem is through franchising. The government has then to
compare the cost of providing true competition (via fiscal measures, differential
rates of tax for startup companies, etc) with the social welfare costs to the
consumer.
Although high levels of profitability or prices do not by themselves provide direct
84
evidence for monopolistic (or lack of competitive) behaviour, they are often
referred to in discussions on consumer welfare. A good example of this may be
found in the experience of the water utilities in the UK. Water supply on the
British mainland used to be controlled by ten regional water authorities which
enjoyed a monopoly because of the nature of water supply. There has been
consumer pressure to improve water quality to meet the European Community
(EC) standard. This would require higher capital investment. To overcome the
problem that privatised water utilities would under-invest, the British government implicitly agreed that price controls would be such that it would allow for
positive returns on investment in new water infrastructure. In effect, the government made ``regulatory contracts'' (Vickers & Yarrow 1991) with the utilities
to enable them to obtain infrastructure finance from consumers. Yet after privatisation the water companies had to make higher, but different levels of investment to achieve the EC standard. Those that had to raise the most finance
to meet the EC standard were not necessarily those that had the largest revenue, the largest number of consumers, or the highest mean unit financial
return per consumer. Furthermore, the intra-industry cost of obtaining commercial finance measured by project finance interest rates varied by as much as
1.2 percent. So, the regulatory contract had created price differentials and
further confounded the consumer-welfare price argument, as it became easier
for the water companies to explain price rises via the cost of improving water
quality. However, the marginal improvement in quality did not compensate for
the marginal increase in price, since the price increases for quality were not
uniform.
Accordingly, De Fraja (1991) has shown that the full privatisation of a large,
inefficient monopoly in the public sector into an oligopolistic market may have
an adverse welfare effect. The argument is that entry by an inefficient but
welfare-maximising public enterprise into an oligopolistic, profit-maximising industry in the private sector may reduce the profit of the market incumbents.6 As
Kay and Thompson (1986) point out,
If as we have argued the privatisation of large dominant firms is at best
pointless and possibly harmful in the absence of effective competition, the
result is that no benefits to economic performance are likely to be achieved.
Privatisation of this type would not be the first ineffectual restructuring of
relationships between government and the nationalised industries ... it is
potentially more damaging than the others because privatisation makes it
more difficult to introduce competitive incentives in the future.
85
Yet for government revenue reasons this is the type of privatisation that usually
takes place. The actual observed social results achieved do not match the hype
which privatisation has been accorded in political economy (Parker 1992).
5 PRIVATISATION AS A METHOD OF INCREASING EMPLOYEE
SHARE OWNERSHIP
5.1 Introduction
The second major area of privatisation which this paper addresses relates to
employee share ownership. This type of privatisation may take several forms,
for instance, (i) a trade union-led employee buyout involving all employees; (ii)
an employee share ownership plan (through a trust) involving all employees;
and (iii) an offered management-led employee buyout involving all employees
(Wright & Buck 1992: 284). Employee ownership in its various forms has the
potential to transform an economy, because it is concerned with the distribution
of future wealth rather than the distribution of present wealth. Furthermore, it
provides incentives both to capital and to labour, through its effect on efficiency,
productivity and motivation. A proposal that seeks to redress the glaring imbalances in wealth distribution in South Africa should consider this form of
privatisation, particularly in the light of the political history of South Africa. It
could reduce the probability of political discord, especially when (for reasons of
government asset sales revenue-maximisation) potential local investors feel
excluded from the privatisation. As Wright and Buck (1992: 286) observe, one
attraction of buyouts is that they offer a significant amount of indigenous
ownership, whereas foreign ownership may pose political problems. It might
also increase industrial efficiency and sectoral competitiveness by increasing
worker commitment;7 reduce the probability of strike action, since the workforce
may on aggregate have a reduced ``them and us'' philosophy; increase the
volume of domestically-derived transactions in the South African equity and
capital markets; and, therefore, lead to a reduction in the perceived opportunity
cost of foreign investment in South Africa. It is noteworthy that when the GNU
was in power, discussions along these lines took place between the GNU, the
Congress of South African Trade Unions (COSATU), representatives of business and the private sector, and other stakeholders.
In the UK, employee buyouts achieved great success when the privatisation
process there was still at an early stage of development. An often-cited example of this period of employee buyout privatisation success in the UK is
86
National Freight Consortium, which was sold to its employees in 1983. Yet the
extensive use of employee buyouts at that time was partially to ensure that any
profits which accrued from privatised public enterprises would be spread as
widely as the income distribution would allow. It was also thought that this type
of privatisation policy in particular might possibly alter the income distribution
pattern Ð this is the Thatcherite ``economic classless society'' argument Ð
and, therefore, increase the probability of participating and receiving the financial benefits of the privatisation.8
5.2 The impact of income differentials and savings on employment
buyouts
The major drawback to the effective implementation of this policy in South
Africa (as it was to a lesser extent in the UK), is the large disparity in personal
income (revenue) and level of capital (savings) among blacks and whites in
South Africa (see table 1). This would have implications for the ability of some
(in particular non-white employees and managers) to take advantage of the
range of financing and institutional structures required to implement an effective
employee or management buyout. Typically employees and managers in British
buyout teams have had to place substantial personal capital at risk when participating in buyout teams. This is because in the UK, the method used has
been for the buyout team Ð usually the management of the firm Ð to establish
a nominally new company which would buy out the business. Members of the
buyout team become the new company's directors (employees, ie non-managerial staff, are usually represented by the most senior manager in their department). This gives the buyout team a limited liability status. Accordingly, it is
the new company which must now raise the necessary finance to acquire the
business. However, some employees in the UK have been unable to participate
in the buyout, particularly when they had no assets as collateral.9 It is likely that
a larger number of employees would have participated in buyouts in the UK,
had they had the collateral with which to raise the finance to participate.
One way of solving this problem of a lack of collateral is to re-mortgage one's
home. Apart from its immediate utility, home ownership serves indirectly as a
typical source of leverage collateral. However, the level of home ownership
among non-whites in South Africa is relatively low. Furthermore, the present
uneven distribution of land in South Africa might also affect the implementation
of employee buyouts and other attempts by blacks to become economic
stakeholders. The Land and Agricultural Bank needs to play a role in estab87
lishing a mechanism for a reasonable market-value based white-to-black private land redistribution in South Africa. This is important, since any bank or
group participating in the financing of black employee buyouts would have to
make broader assessments of the definition of collateral in deciding whether to
finance these interests.
5.3 Government failure in employee buyouts
It seems as though the government should play a greater role in helping to
facilitate employee buyouts, since financiers (banks, building societies and
other private-sector financial institutions) are unlikely to participate, unless their
risks are underwritten by another party. However, that may create government
failure, since there is a possibility that a bureaucratic or political agenda may
interfere with optimal allocation in the underwriting process: the bureaucratic
objective may begin to override the optimal market-derived social welfare
function, resulting in government failure. Furthermore, government underwriting
of the financing in an employee buyout may have an effect on the distinction of
ownership of the company. This matter is important, because as discussed,
earlier research (Vickers & Yarrow 1988; Parker & Hartley 1991; Hartley et al
1991) has shown that nominal change in ownership is unimportant, and that
there is little difference between a private company in a highly regulated industry and a public enterprise. What appears to be most important, is the
perceived allocation of risks and returns.
Overt government intervention (government failure), directly or indirectly, in the
financing of employee buyouts may confound the question of ownership. In
such cases, the change or nominal change of ownership is unimportant.
However, Pirie (1992) suggests that ownership is important and that the very
act of transfer to the private sector yields market benefits. But Pirie does not
fully explain what the social costs of market failure may be if, or when, private
sector ownership is not socially optimal. Bearing in mind the political circumstances in South Africa, it is also naive to argue, as free market theorists such
as Pirie have done, that these social costs are irrelevant since the market
equilibrium in the distribution of ownership rights is the long-term optimal solution.
5.4 Market failure in employee buyouts
With regard to employee buyouts, two forms of market failure may take place.
88
Firstly, the price at which shares in the new company are issued may be so high
that very few employees can actually participate in the issue, or if they do so,
and the issue is a success, they then trade their shares at a profit. This might
defeat the distribution welfare objective for short-term returns. Secondly, the
market price may be so high that the institutions play a bigger role in the
financing of the buyout than the employees. Even if the employees are the
majority share holders, there is still the difficulty that a significant group of share
holders do not take the same view with regard to the management of the
company. This type of division may decrease the expected benefits of buyouts,
such as motivation, increased efficiency, productivity and profits.
There may therefore be a temptation for the mispricing of government assets to
ensure the success of a privatisation programme. From a strictly financial
perspective there is empirical evidence (Menyah et al 1990) of mispricing in the
UK. Indeed Brittan (1986) has suggested that this was carried out to achieve
not only financial objectives of the transfer of ownership, but also political objectives. It is not clear what pricing framework will be used in South African
privatisation, and therefore it is at the moment difficult to see whether state
assets are being mispriced for political reasons.
In any event, apart from the issue of who pays for the difference between the
market price and the socially optimal privatisation price, there should be little or
no reason why the government should not discount the asset cost to local
employees of participating in employee buyouts. This would increase the likelihood of creating a local investor base which might then actively participate in
the other privatisation mechanisms and processes. It is also worth noting that in
the UK, government discount of share prices in direct flotations of shares during
privatisation of enterprises such as British Gas and British Telecom did not
prevent institutional participation. However, the major political problem for the
government is that the vast current racial differences in individual earnings and
savings levels could make this process very expensive. This prompts the
question: what will be the financial cost to the government of reserving or
discounting share prices to allow for wider public take-up?
There is also the question of the role which domestic, as opposed to foreign
financial institutions, should play as intermediaries. One suggestion is that
domestic institutions would market more effectively locally, and so should be
encouraged to participate; to achieve the more social objective of wider domestic ownership, while foreign financial intermediaries with positive economies
of scale and scope should be invited and given incentives to place shares
89
internationally and increase the probability of ensuring higher financial returns.10 Some form of differential pricing would be necessary to achieve this.
Table 2 below illustrates a method via which this might be achieved bearing in
mind the above discussion.
Table 2 Possible structure of wider share ownership scheme
Class of
shares
(A, B, C,
and D)
Number of shares Government
multiplied by
receipts from
share price in
sales (rand
rands
millions)
% of
each
class of
share
% revenue
from each
class (5)
A
1 750 000 6 19
(1)
3 325 m
35%
29%
B
1 350 000 6 22
(2)
3 300 m
30%
30%
C
1 250 000 6 36
(3)
4 500 m
25%
40%
D
500 000 6 2.5
(4)
1 125 m
10%
Total receipts
(A, B, C)
11 125 m
100%
Total capital
12 375 m
Notes to table 2
(1) Not tradeable within 3 months of issue. Perks might include capital gains tax exemption in first
year.
(2) Set period in which shares are not tradeable to foreign investors. Other conditions as for class A
shares.
(3) Foreign investors provide 40 percent of the capital but own and have shareholder voting and
other rights of 25 percent.
(4) The government share price is the mean of the three price entries for class A, B, C. Government
retains 500 000 (10%) with a value of 1 250 million.
(5) May not add up due to rounding by spreadsheet.
Finally, to overcome some of the problems noted above it might be sensible for
the South African government to distribute shares either freely or in the form of
some voucher scheme which allows for the uptake of shares in the previously
90
nationalised corporations. This system is not novel and has been practised very
successfully in the Czech Republic (Svejnar & Singer 1994) and in various parts
of the developing world and emerging markets (Brazil, Hungary, Poland, South
Korea and Turkey). In such emerging, less-efficient capital markets it is not
unusual to find a discrepancy between the implied market share price of the
public sector corporation and the nominal asset-value derived price. The immediate costs to government is a loss of expected sales revenue.
However, whilst this system implies social public funding costs and places
stress on the exchequer, it is more socially fair and may overcome the problem
of the expatriation of any windfall gains, since the vast majority of share holders
would be indigenous. Thus, to reduce the possibility of future government intervention such as nationalisation, it is advisable to introduce some form of a
system of free distribution of shares. In the RSA this may improve the possibility
of acceptance of privatisation, particularly because income and savings differentials are high and average personal savings for the majority are low. In the
UK voucher privatisation was initially resisted by the Trade Union Congress
(TUC); however, the exact current position of COSATU on this issue is unknown.
6 CONCLUSIONS
We suggest that designing and implementing the privatisation programme will
present the South African Ministry of Public Enterprises with significant challenges. Given the economic history and racial inequality in the RSA, the complexity of effective privatisation would present major challenges to any new
administration. It has already been argued that the prospect of the white
business community benefiting from privatisation has been one of the main
hurdles preventing RSA from embarking seriously on a privatisation drive
(Bennel 1997: 1786). These challenges may be overcome if proper consideration is given to the issue of individual economic welfare.
This paper has discussed some of the issues that should be considered in
evaluating and deciding on privatisation policy for South Africa. There is still
much debate as to whether or not allocative or productive efficiency is improved
when public enterprises are transferred to the public sector. Similar arguments
apply to the issue of ownership, where it would appear that intra-organisational
incentives are more important than actual ownership. The paper also suggests
that introduction of competition is an effective and enlightened method of reg91
ulation. The drawback is that firms in competitive markets are usually less
valuable than monopolistic supplier firms, and therefore governments might
lose revenue if competition is introduced before privatisation. Consequently a
trade-off is often made between the cost to be borne by the consumer for
monopolistic practices, in comparison to the increased revenues to be derived
by the government. Pure market mechanisms for privatisation usually raise
more money for the government, but they tend to prevent the full participation of
citizen stakeholders. Therefore, the other major trade off for the government is
usually to decide whether to make the privatisation process as inclusive (vouchers) as possible, and accept the higher probability of lower revenues, or to
use market mechanisms such as flotations and initial public offerings to raise
higher revenues and risk increased alienation of low-income citizen stakeholders. The latter course of action may have large political and consumer
welfare implications. Accordingly the debate on efficiency, ownership, competition, regulation and distribution was used to concentrate on two important
aspects of privatisation policy: the impact on government revenue and the
importance of wider share ownership via employee buyouts. We used examples from the UK, where privatisation has been extensive, to further illustrate
these points.
This paper also implies that it is difficult to reverse a well-analysed and implemented privatisation policy, because the large number of citizens that become shareholders acquire financial interest in the continuation of such
economic policy, and therefore in a democracy are less likely to support political
parties or interests which are likely to change such policies. Anecdotal evidence
from the UK suggests that a well-planned and effectively implemented privatisation policy, which takes into account the economic inequalities and political
history and reality of the RSA, can serve as a prudent economic management
tool for wealth creation, and long-term economic growth.
ENDNOTES
1
2
3
Strictly speaking, market failure occurs when the forces of supply and demand do not yield the
optimal economic outcome or where the optimal economic outcome is itself not the most desired
outcome. Thus the phrase ``market failure'' is also used in the context that unfettered economic
forces do not necessarily bring about desired results, hence even where these forces are
allowed to prevail with limited regulation misallocation of resources may still take place.
Government failure arises where government intervenes in areas which it can be argued are
best left to market forces. Due to bureaucracy, public sector crowding out, or reduced profit
incentives, the welfare objectives are not attained, neither are market returns.
The British government would argue that British Telecom (BT) and BT itself are operating in a
92
4
5
6
7
8
9
competitive market due to the presence of Cable and Wireless Mercury. However, although
efforts have been made by the authorities via the regulatory Office for Telecommunications
(OFTEL), true domestic competition to BT is limited, even though Mercury has made inroads in
international services. British Gas continues to be a monopolistic supplier of gas energy.
Competition purists would argue that it is in indirect competition with other forms of energy.
However, this overlooks the fact that there are energy applications for which the unit cost, and
therefore potential marginal price of gas, is less than other alternatives. Consequently the
dominance of market supply by one producer distorts optimal consumer choice and welfare.
This is why (despite the announcement by the South African Minister for Telecommunications
that there is to be a telecommunications regulatory authority) Telkom continues to be a
monopolistic land-based telephone operator, in spite of the presence of cellular entrants. This is
likely to remain the case until privatisation.
It is assumed that firms in such an industry do not have profit levels which deviate substantially
from the mean. The profits of the private sector are such that a slack exists. This slack can be
proxied as a vector of variable costs which may be (but are more likely not to be) directly related
to output, and may entail some form of managerial incentive to the workforce. However, on entry
and with its pricing policy, the privatised public enterprise firm reduces this slack. So first the
slack erodes, followed by the profits. Exit of firms begins to take place as profits decline. The
true level of consumer choice is reduced as firms exit. The firms that exit may have been fairly
efficient, but in the new competitive framework were unable to make adequate risk-free rate of
return profits. In the short term, industry efficiency would increase as incumbent firms try to
compete with the new entrant. However, in the long term industry structure output and market
supply may then well be left to firms which can best mimic the revenue-maximising marginal
price strategy of the new entrant. They may not be the most efficient firms. Since industry output
is dominated by inefficient firms, the overall efficiency of the industry has declined. For this
argument to hold more fully, the privatised public enterprise must be capable of supplying
greater output than its private sector competitors. It could be suggested that ``long run industry
efficiency increases with privatisation if and only if the long run pre-privatisation output of the
public firm is lower than that of the private oligopolist'' De Fraja (1991). The marginal price may
not cover fixed costs, and in effect the newly privatised firm will be running a budget deficit. It
may very well be possible to finance this deficit through general taxation, but some individuals
would suffer negative welfare effects.
A 1986 study (see references) carried out in the US by the National Centre for Employee
Ownership set out to establish whether employee ownership improves commercial performance. A representative sample of employee owned firms was adjusted for size, trade sector
and location and compared with non-employee owned firms. The results of the study suggest
that over a five-year period employee owned firms outperformed non-employee owned firms by
40 percent with regard to sales growth and by 46 percent in employment growth. The study also
showed that on the same criteria employee owned firms which had employee participation in
decision making performed better than employee owned firms with limited or, in extreme cases,
no participation.
Data from the United Kingdom's Treasury office and the London Stock Exchange (LSE) indicate
that the number of individual shareholders increased from 3 million in 1979 to 9 million in 1988.
Thompson (1993) suggests that the primary reason for this rate of growth has been employee
ownership incentive schemes.
It would usually be possible for employees to participate at a later date. However, if the buyout
was successful, the price of shares in the business would have increased, so the amount of
capital required by an employee to participate in any subsequent equivalent tranche of shares
93
would also increase. In South Africa the unions are increasingly using their pension fund assets
to participate in buyouts.
10 This might explain why the Mossgass corporate restructuring deal was awarded to the
consortium of Rand Merchant Bank and Deutche Morgan Grenfell in 1996. The Telkom deal
was won by a Malaysian-led consortium, and Hong Kong and Shanghai Bank having acquired
Simpson Mckie, James Capel was appointed as privatisation advisor to the Ministry of Public
Enterprises.
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Book reviews
Can the poor influence poverty? Participatory poverty
assessments in the developing world, by Caroline M
Robb, Washington DC: The World Bank 1999.
As the title states, the book deals with participatory poverty assessment (PPAs)
and more specifically looks at the use of participatory techniques in poverty
assessment work. A poverty assessment that uses the PPA research method
gives the poor, marginalised and excluded a say in the making of policy. In the
past too much of the analytic work on poverty, which is critical to an understanding of the nature and causes of poverty, has unfortunately treated the poor
as an object of inquiry.
Poverty has become vital to the World Bank in the past decade since it has
reaffirmed the reduction of poverty as its central purpose. The Bank has become one of the major agents and supporters of the study of poverty and has
looked at poverty assessment in a number of countries. The Bank has mainly
used traditional household surveys, especially multipurpose surveys that use
questionnaires in order to record a series of measurements of wellbeing in a
household. As a result The World Bank has often been blamed for working too
much with a consumption-based definition of poverty.
The World Bank has increasingly started using participatory techniques in
project and related work. The study that is reviewed here surveys one part of
this trend. The author of this book, Caroline Robb, shows that the use of participatory techniques in poverty assessment has become a general practice in
the late 1990s. Many of the results attained have in some cases confirmed and
in others contradicted the conclusions reached in the older questionnaire-type
Africanus 30(2)2000
96
national household surveys. The results often confirm that the poor themselves
see poverty as having many dimensions. What is important here is that the
traditional household surveys and participatory poverty work can complement
one another.
This book consists of a summary, three core chapters and various annexes
dealing with technical issues. In the summary the meaning of participatory
poverty assessment is explained and the variety of outcomes and impacts that
it has had in the world are discussed. Finally, emerging lessons for good
practice are briefly summarised.
As its heading implies, chapter 1 sketches the present status by firstly providing
the background on PPAs. The chapter also elaborates on the meaning of PPAs
and summarises the experiences of some of the PPAs by examining the
methodologies used, time spent in the field, number of communities assessed,
agencies conducting the fieldwork, cost and year of fieldwork. The status report
(in question form) also briefly discusses the three main issues to be considered
when conducting participatory policy research, namely sequencing and duration, research teams and methodologies.
Chapter 2 discusses case examples to explore the diverse array of observed
impacts of the PPAs in the context of the following categories: the extent to
which PPAs have deepened the understanding of poverty; their impact on attitudes and consequent policy change; and the extent to which frameworks for
policy implementation have been strengthened. Criteria are given for each
impact type and applied at three levels, namely World Bank, country and
community level, and their implications are discussed.
Chapter 3, entitled Emerging good practice, identifies good practices that
should be considered when undertaking participatory policy research for policy
changes. Emerging good practice builds on the impact of key variables discussed in chapter 2 and are clearly summarised for the various levels.
Several useful annexes on PPA methodology, impact and country case examples are included after chapter 3.
In general, this publication provides a useful summary and survey of numerous
PPA experiences around the world up to the present. A particular characteristic
of this book is its useful tables, figures and boxes illustrating key issues.
Some objections that may be raised are inter alia that critical challenges facing
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PPAs could have been elaborated on and practical difficulties such as cost, time
and management skills in meeting principles of good practice could have been
more readily acknowledged.
What is clear, is that by using the knowledge gained from the experience of
previous PPAs, future PPAs can make more informed decisions. Therefore this
publication may be viewed as a starting point for future reflection on the role of
PPAs.
NAAS DU PLESSIS
Department of Development Administration
Unisa
Expectations of modernity: myths and meanings of urban
life on the Zambian copperbelt, by James Ferguson,
Berkeley: University of California Press 1999.
If the modernist story of development has lost its credibility, the most
pressing question would appear to be not whether we should lament or
celebrate this fact but rather how we should reconfigure the intellectual field
in such a way to restore global inequality as ``problem'' without reintroducing
the teleologies and ethnocentrism of the development metanarrative
(pp 249±250).
This important new book by James Ferguson is symptomatic of new social
conditions emerging at the end of the twentieth century, in Africa in particular,
and is reflective of new bodies of anthropological literature which offer new
perspectives on social processes and human choices.
Ferguson made a name for himself in post-development circles with his The
anti-politics machine: ``Development'', depoliticization and bureaucratic power
in Lesotho (Minneapolis: University of Minnesota 1994). In certain respects this
book on the copperbelt continues a post-development argument. The face of
the real future and even the optimal future must be reconceived. The future will
not be one of nuclear families, English, increasingly urban consumption patterns, and the welfare state. Further, the conceptualisation of current social
process must change in favour of an anthropological and Foucauldian disillusionment, where the theoretical heroics of liberation, development opportunities, modernisation and national progress (ie, the discourse of modernity) are
98
suspended, and the space for social choice and creativity is rather elucidated in
relation to the near-absolute horizon of local social and economic hierarchies.
The central theme of the book is that the Zambian copperbelt has experienced
a near-catastrophic retreat of development and modernisation as conventionally understood: ``life expectancies and incomes shrinking instead of
growing, people becoming less educated instead of more, and migrants moving
from urban centres to remote villages'' (p 13). And women, rather than becoming modern housewives, ``were trading in used goods, making smuggling
trips to Zaire or Malawi, or juggling lovers who might be persuaded to help out
with the bills'' (p 167). Yet both official and academic interpretation of the situation, and the understanding of some on the copperbelt, continues to assume
that the fundamental processes that have occurred and will occur in the future
are processes consistent with the ``modernist metanarrative''. Ferguson further
argues that this interpretive misidentification serves a conservative ideological
purpose and hinders appropriate change.
Can we distinguish Ferguson's argument from an underdevelopment argument? Is he not providing an ethnography of decline caused by world market
conditions? As Ferguson is aware, the situation is one of ``disorganised capitalism'' (Lash and Urry) and ``informational capitalism'' (Castells): we are in a
stage of capitalism which creates informalisation throughout the world economy, and which may create zones of exclusion which the North has little interest
in exploiting. If so, Zambia's drop in income, education and life expectancy is
intimately linked to the rise of China's economy. I would argue that the argument diverges from an underdevelopment perspective in that proletarian and
peasant actors, each rooted in economic sectors moving towards greater capitalist rationalisation, and each galvanised to enter public politics, fail to
emerge in Ferguson's account. Rather, the pressures of underdevelopment
impact on a complex web of differences located in specific contexts and discourses on the copperbelt, which must be recursively traced, and which are
highly unlikely to lead to a consistently progressive politics, let alone increasingly urban/ individualist/nuclear/ post-mythological social traits. In addition, the
reading of the situation of underdevelopment is systematically social and anthropological, in distinction to the economism ± and political economism ± of the
underdevelopment school.
Ferguson's use of recent social and anthropological theory, and studies of
Zambia ± such as the work of Pierre Bourdieu, and the feminist perspectives of
Henrietta Moore, Megan Vaughan and Jane Parpart ± shows a creative coa99
lescence of new perspectives in Ferguson's work. Despite Ferguson's theoreticist tilting at the windmills of ``modernity'', much of this text manages to reflect
some of what is known by ordinary people, and his use of new theory seems to
clarify rather than obfuscate.
At the same time, Ferguson indulges in a negative populism which at least
implicitly denies the relevance of formal, modern structures such as formal
democracy, government structures and the formal economy, weak though it be.
There is an uncomfortable disjuncture between western scholars illustrating the
pathos of African states, and those scholars, politicians and organisations in
Africa endeavouring to take responsibility for these troubled and pluriform
states and social economies. One thinks here of efforts of CODESRIA, the
efforts of the Economic Commission for Africa, the OAU's program for an
African Economic Community, and the work of scholars such as Thandika
Mkandawire and Achille Mvemve who are associated with these organisations
± one even thinks of certain political leaders and governments. What is the use
of a politics which occludes the terrain of government?
PETER STEWART
Department of Development Administration
Unisa
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NOTES TO CONTRIBUTORS
Contributions to AFRICANUS are welcomed and should be submitted in English. The length of an average article
is 4 000 words, research notes 2 000 words, and book reviews 500 words, but in exceptional cases longer
contributions could be accepted.
AFRICANUS aims to be a conduit between the academic debate on, and the practice of, development. Therefore,
contributions should reflect
. practice (case studies dealing with practical aspects of development)
. theory (debate and reflection on development theory in respect of the Third World in general but southern Africa
in particular) ± in other words, the application and interpretation of theory in the Third World and particularly in
the southern African context.
Contributions are subjected to peer evaluation. The manuscript should be typed in one-and-a-half or double
spacing. One hard copy and one electronic copy of the manuscript, preferably in WordPerfect 6.1, should be
submitted.
This journal uses the Harvard reference technique. This technique involves inserting, in the text, the author's
surname, the year of publication of the source and the page number(s) on which the information appears. An
alphabetical list of sources consulted should be provided at the end of the article, containing all the relevant
information such as the author's surname and initials, date of publication, full title of the book or article, place of
publication, and publisher. Contributors are requested to follow the format indicated below.
Direct quotes from books, edited contributions and periodical articles used in the manuscript:
``Ignorant of the law, without legal advice, competing for employment and services with others in a similar
condition, the household is an easy victim of predation by the powerful'' (Chambers 1983:110).
Paraphrasing or indirect references:
Chambers (1983:110) points out that poor households are powerless and vulnerable.
Example of a list of sources consulted:
Chambers, R 1983. Rural development: putting the last first. London: Longman.
Griffen, K 1986. Communal land tenure systems and their role in rural development, in Theory and reality in
development: essays in honour of Paul Streeten, edited by S Lall and F Stewart, London: Macmillan.
Rogerson, C M 1992. Feeding Africa's cities: the role and potential of urban agriculture. Africa Insight 22 (4).
Contributors of articles, research notes and book reviews accepted for publication will receive two copies of the
number.
All contributions, books for review and other editorial correspondence should be addressed to the Editor,
AFRICANUS, Department of Development Administration, University of South Africa, PO Box 392, Unisa, 0003,
Republic of South Africa.
101
CHECKLIST FOR CONTRIBUTIONS TO AFRICANUS
(Please photocopy, complete and include with manuscript)
1.
Original contribution
2.
Of interest to development debate and practice
3.
References (Harvard technique)
4.
Not exceeding 4 000 words
5.
One and a half (or double) spacing
6.
Sequence of headings correct
7.
Printout (hard copy)
8.
Floppy disc (in Word Perfect clearly marked)
9.
Kept own copy
103