Sep 21, 2012
Structural inequality constraining prospective microenterprise sectorBack
Power|Systems|South Africa|Local Economic Systems|Philip
© Reuse this
Since 1994, structural inequality in local economic systems has not only endured in the South African context but has also been reproduced in newer, more complex ways, says adviser in The Presidency Kate Philip.
“Explanations for South Africa’s underdeveloped microenterprise sector in the face of rampant unemployment have typically focused on the lack of requisite skills and entrepreneurship, the historical exclu- sion of black people, access to credit, issues around ease of market entry and regulation barriers. While these issues are relevant, more attention should be paid to the impact of structural inequality on economic opportunity on the margin,” she asserts.
Philip advocates that three legacies dictate the deeply structural nature of local inequality.
Firstly, the highly concentrated structure of the core economy, with high levels of monopoly, capital intensity and increasing levels of vertical integration, has created what some refer to as two economies – the formal and informal economies.
Secondly, the critical legacy of spatial inequality, which has created ‘apartheid cities’, brings with it considerable economic costs, which are borne disproportionately by the poor.
“The third key legacy is the significant inequality of all human developmental indicators across socioeconomic divides,” says Philip.
These dimensions negatively reinforce each other and have ultimately resulted in the current economic marginalisation.
Capital-intensive industries, a feature of the South African economy, exclude small enterprise participation and are a focus of corrective economic policy mechanisms – such as the introduction of competition policy, the reduction of prospective tariffs, and the formulation of sector strategies – in the core economy.
Moreover, Philip emphasises that it is difficult for smaller enterprises to compete with the manufacturing and distribution power of large-scale producers.
“Branded goods and purchases from branded stores are often the choice of poor people because brands provide a level of quality assurance,” she points out.
Small-scale producers have to compete with price, quality and brand recognition, which is not always possible.
In addition, engaging in formal business- to-business transactions and formal value chains requires a certain degree of business sophistication, which is lacking quite often in the microenterprise environment.
“Any strategy that relies on poor people self-employing their way out of poverty won’t succeed because of the structure of the economy. The bar is simply too high,” Philip warns.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines
Other Video News
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
This Week's Magazine
The Electronic Systems Laboratory (ESL) of the Department of Electrical and Electronic Engineering at Stellenbosch University is strongly reaffirming its position as one of South Africa’s leading centres for satellite technology and expertise. It is currently...
The world’s lowest-cost diesel-electric locomotive is not made in China, but in Pretoria, at RRL Grindrod Locomotives’ newly upgraded 30 000 m2 plant. The company’s locomotive pricing is “more competitive than any other original-equipment manufacturer (OEM)...
The South African Defence Review 2012, released to the public at the end of last month (despite the year given in its title) recommends the creation of the post of Chief Defence Scientist. This official would be responsible for the management of defence technology...
AltX-listed engineering technology company Ansys has been awarded an R188-million contract by Transnet to supply integrated dashboard display systems to the freight rail utility’s locomotives. Black-owned and controlled Ansys developed the bespoke integrated system...
South Africa’s sole nuclear power station Koeberg, which is located in the Western Cape, breached a major operations milestone on April 4, which marked the thirtieth anniversary of Unit 1 having been connected to the grid. Eskom, which operates the two-unit plant,...