From the Bottom Up: Including everyone in development
and growth
Prof. Harry Barkema
Some facts you know…
– Economic growth SA: 3.5% (2011), 2.5% (2012), 2% (2013)?
• About half the growth rate of rest sub-Saharan Africa
– Growth for whom? Gini coefficient 1995: 0.64 – 2005: 0.72
• Bhorat, Van der Westhuizen, Jacobs (2009)
– Richest 10%: + 40%
• Mostly from wages (growth tertiary sector)
• Increasing group of Africans
– Income has increased for everyone – but most for top > 70%
• For lowest 50% of incomes, grant income is > 40% of their income
• Without grants, incomes decreased for lowest 40%; Gini coefficient 0.75
• 5 million tax payers, 10 million on grants
– Story of two economies segregated socially, economically, spatially
– Key question: what can we do about it?
• Crucial for ‘2nd’ economy, overall economy, “1st” economy
How to engage 2nd economy?
– “Normal operations” companies, government…
– Targeted programs: Companies – inclusive supply/ value chains
(mining, FMCG, beer companies), low-cost versions (finance/
insurance…)
– Government (programs / employment, health care, education..)
– My talk: social enterprises (SEs)?
• Really about SEs, NGOs, social business part companies, hybrid forms (partners,
ecosystems): the same insights, concepts, methodologies, tools apply
– Many useful initiatives: solar, part of supply/value chains for
companies / government, handicraft, micro finance (but Capitec)..
– Useful contribution, but SEs usually remain small, effect on poverty
limited
However…
Impact on poverty reduction/ engagement can be increased
through:
I. SEs useful experiments for learning by companies, government
programs (education, health care, etc.), NGOs which do scale up
– Examples India: Gyan Shala (linked to government schools), LifeSpring
Hospitals (30-50% of the costs)
• Create ecosystems of SEs with companies, government agencies, etc.
•  New concepts, insights, methodologies, tools for business model innovation
apply to governments, MNCs (social business part), NGOs, hybrids, design
ecosystems as well
• Examples: MNCs in favelas, Africa/SA; NGOs in India, Uganda; SEs in SA, India, South
America..
Moreover…
II. We’re learning how to scale up BMs for SEs as well – not reach 100s
of clients, but 10,000 .. 100,000 … 1,000,000 ..
– Key insight: Managing organizational growth stages: like butterflies –
qualitatively different stages – not like trees, dogs, humans, …
• Stages type I: One BM: concept  development  launch  scale: different types
of leaders, social networks needed for success
• Stages type II: One BU (geographic area)  next: How to adjust BMs &why & when;
how to transfer knowledge (mechanisms)…
• Stages type III: Entrepreneurial  mature organization
• Helps to manage scaling and growth. Explains ‘missing middle’ as well?
Great…but does it reduce poverty?
– First: What is poverty reduction?
– Lower price for poor people (Prahalad version/ needs-based approach;
cheaper health care, water… )?
– Give them a loan, training, access to markets (resource-based approach:
MF, supply/value chain companies)?
• “Cliché:” don’t give them a fish, but a fishing rod
• However, in reality, there may be many social constraints on ‘freedoms’
– “Integrated approach to remove key constraints keeping people poor
(economic and social constraints; capability approach cf. Sen)
• “Gold standard” according to many
–  How could this work? Let’s take the case of a township here in Cape
Town: Bridgetown (urban poverty)
– Bridgetown: Many “constraints on freedom:” Lack of jobs, education,
crime/ drugs, lack of safe space
• E.g., cf. in-depth ethnographic study of Heideveld (Jensen)
– Part of the problem: Gangs
• But “Skollie” is also son/ family member, member soccer club, hustler.. Role of
gangster may be dormant most of the time
• Key: dignity (respect), safety within own territory (also from stigmatization)
• Alternative hierarchies in township: neighborhood watch with police, church..
– Kids: perceived constraints on freedom: lack of employment,
education, weak communities, broken families
• They suggest many solutions: jobs, education, support (social not economic) to
strengthen families, leadership training (for ‘fathers’), safe space to play and be,
‘soft’ furniture , presence of (supportive) adults
– What to do? Minimum pressure points idea (Juli Huang): let’s start
with the gang members  Rehab program. Then came an NGO / SE
called R-Labs…
R-Labs in Bridgetown
– Rehab PLUS training program (IT)
• Engaging other groups within Bridgetown as well
– Flat structure  merit-based hierarchy
• Emphasis on dignity and respect, additional training/skills, responsibility, respect
– Revenues from web site creation, community building; NGO PLUS SE
– Plus incubator for new SEs
• Our UCT-LSE students work with these SEs  design new business models/ social
businesses
• Work with Francois Bonnici – Bertha Centre for social entrepreneurship
UCT(through Max Price)
– R-Labs used by government for policy development
– Now internationalizing to 20 countries
– In sum: NGO/ SEs; inspires government; is scaling up; engaging 2nd economy
through community change
– Of course would require additional facilities/ government as well
In sum…
We can / need to engage talents of the 2nd economy:
– ….Of course through normal activities companies, government…
– .. dedicated programs government (education, health care etc.)…
– … and probably less spatial (and so economic and perhaps ultimately social)
segregation 1st and 2nd economy
• Thandika Mkandawire
– BUT ALSO increasingly: SEs – NGOs, social business part of companies, lowcost government programs, hybrids/ecosystems
– We’re currently learning better which insights, concepts, methodologies, tools
enable 1) successful BMs; 2) how to scale them; 3) in a way that reduces
poverty through community change
– From the Bottom Up: Including everyone in development and growth
• Key that we do: for the 2nd economy (adults, kids), overall economy/ growth SA, 1st economy