Working with communities and the informal economy: challenges and opportunities in South Africa
From www.entrepreneurstoolkit.org
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Working with communities
Your type of business may involve working with communities, for example if you decide to start a tourism business. Your business can be of benefit to local people, if it provides them with income opportunities or if your products or services are needed in the area. On the other hand, your business may cause competition with other businesses, or have an impact on the lives of people who surround it.
Starting a business in the field of sustainability therefore also involves the social aspect of business planning. You need to ask yourself what negative or positive impacts your business could have in the community, and in what ways you will avoid the negative impacts. In strong communities, it is also relevant to get the support from local people. If you are perceived as an intruder, your business may not be successful in the long run. The following links give you some ideas about how to work with traditional authorities, communal property associations and townships.
Working with communities in rural areas and townships
Working poor communities, it is relevant to get into a mutually supportive relationship with the local people. Since unemployment levels are high, communities are in dire need of job-creating businesses. At the same time, it is relevant that your business is well accepted and embedded in the community and does not disregard local values and customs. Mutual respect is one of the building blocks of a good working relationship, and this requires the ability to listen to people and be sensitive to what is ethical and useful for the community.
On a very practical level, you may need the buy-in from the leadership in the area, and this involves both the political and traditional leadership. In rural areas, the traditional leadership is usually more influential than the political authorities. You should however consult and involve both to achieve broad acceptance of your business plan.
When you enter a rural community, visit both the traditional and political leaders. If your work stretches beyond the community, you may want to speak to the District Municipal Manager (DMM) and Local Municipal Managers (LMM). At Ward level, you will need to consult the Councillors. Ask the DMM to put you in contact with the LMM, and then further with the Councillor. He or she can then also refer you to the Community Development Workers (CDWs) in the area. Be aware that there might be gatekeepers involved, or that at times the leaderships tries to take ownership of the idea. Also note that each community may have several Wards, so there may be more than one councillor to talk to.
At the same time, at community level you should contact the local chiefs. This can be done through the House of Traditional Leaders at Provincial and District level. In rural areas, chiefs are often more powerful. So if you can convince them to call a community meeting on your behalf, there is a strong likelihood that all community members will appear. Alternatively, the councillor and CDWs can call a community meeting. You can use such a meeting to present your business idea and consult the community regarding their concerns and suggestions. Once they support your idea, the chances of success are higher. You should however be conscious that it is not simply about ‘selling’ your idea to them, but also about listening and taking their concerns into consideration.
Note: Most rural people in South Africa live under some type of common property regime or group ownership system. This is likely to continue into the foreseeable future for three main reasons. Firstly, the titling and registration of individual freehold remains unaffordable for the majority of South Africans. Secondly, land reform policy allows programme applicants to choose to live under communal property associations. Thirdly, traditional authorities will remain an important institution in managing land and access of the rural poor to land. [1]
When working with communities in townships, you will also need to consult the political authorities as when working in rural areas, but there is usually not a strong traditional leadership.
You should further contact civil society organisations active in various sectors in the community (rural community as well as townships). Try to find them through the Prodder Directors, the database of the South African NGO Coalition (SANGOCO), as well as databases from other networks in the area. Civil society organisations are generally divided into larger Non-governmental Organisations (NGOs) and Community-based Organisations (CBOs). While NGOs are more formal and operate funded programmes, CBOs are informal organisations made up of local community members. Involving them may be helpful, as they are already groups of people who support their communities and may be wiling to cooperate if they see the benefit for the people. They can also be important intermediaries between you and the community, as they are often well known and trusted.
You can also use the media to reach community people, such as newspapers or community radio stations.
Understanding the differences and linkages between the formal and informal economies
South Africa’s economy is divided into a formal and informal one. With the lack of formal employment opportunities for many people, there is a growing number of people who run informal businesses to survive or who work in low paid unregistered jobs. Disadvantages of this economy are there for both government and poor people: on the one hand, informal businesses do not pay tax. On the other hand, poor people often use informal income opportunities for survival in the absence of opportunities in the formal sector. They however remain trapped in low paid, insecure jobs. It has however been recognised more recently by government, that the informal economy serves as a bridge between formal employment and unemployment.
South Africa: No Second-Guessing Value of Informal Job Creation
From: Business Day, November 23, 2006 [2] [3]
THE government appears to be changing its attitude to the so-called "second economy"
Speaking earlier this year about the Accelerated and Shared Growth Initiative for South Africa (Asgi-SA), the Deputy President, Phumzile Mlambo-Ngcuka, said that "the goal of addressing and ultimately eliminating the second economy cuts through all our strategies". Earlier this month, however, she said the government expected to be some 2-million jobs short of its target of halving unemployment by 2014 but that she was confident "we can pick those up in the second economy". The government hoped "the creation of informal jobs will plug the gap" of 2-million between its jobs target and those created in the "first" or formal economy. The second economy, in other words, is here to stay.
The informal sector - officially defined as businesses that are not registered in any way - currently accounts for some 2,9-million jobs. Official statistics on the size of its contribution to total employment have fluctuated wildly over the past decade, from 11% in 1996 to a peak of 29% in 2001, then down to 19% in 2004 before climbing to 23% this year. Without these jobs, most of which pay very little and many of which are often described as little more than "survivalist enterprises", unemployment would be much higher than it is. Moreover, they account for a hefty share of total job increases. At current rates of economic growth, the formal economy can make only a limited contribution to total net new job creation - and Mlambo-Ngcuka's statement is a necessary recognition of this sad reality. How many new jobs are being generated overall is not clear. Mlambo-Ngcuka speaks of a current rate of job creation of more than 500000 a year, but that holds true for only the last two years. Many of these were presumably temporary jobs on the expanded public works programme. Prior to that we had two years of decline.
Looking over the whole four-year period from March 2002 to March 2006, the number of people in employment grew only 834000. Many of these new jobs were informal jobs generated within the second economy. Even so, growth in employment in both the formal and the informal sectors has not prevented an increase in the number of "discouraged workers" - those out of work and available for work, but making no effort to find work. Their number has grown from 2,2-million in 2000 to 3,7-million this year.
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