Sep 21, 2012
Structural inequality constraining prospective microenterprise sectorBack
Africa|Environment|Systems|Africa|South Africa|Local Economic Systems|Manufacturing|Systems|Philip|Power
© 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 (150 word limit)
Other Video News
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
The broad-based black economic-empowerment (BBBEE) alignment process in the con-struction sector has begun, dur-ing which the sector codes of the Construction Sector Charter Council (CSCC) will be aligned with the revised Codes of Good Practice (CoGP), which come...
It is second time lucky for Toby Venter. Ten years ago he negotiated to buy the Kyalami racetrack, but “the deal did not materialise”.
Environmental solutions company I-Cat started construction work on its R22-million, 1 949 m2 environmentally sustainable office and warehouse facility, commissioned by I-CAT Environmental Solutions, at a launch event in October. The new sustainable I-CAT campus,...
Effective file synchronisation and sharing across an organisation’s structures can provide the basis for robust mobile-device and document management while maintaining proper backup, version control and content distribution. These are the lessons learned by complex...
Hotel group Carlson Rezidor currently holds the largest hotel pipeline in Africa with 30 hotels and 6 300 rooms under development. The hotel group develops and operates Radisson Blu in the upper upscale segment and Park Inn by Radisson in the mid-market segment. With...