Can Manuel finish what Mbeki started?

By Norman Reynolds

DUAL ECONOMY: 2001 Female Farmer of the Year NoSandla Kali and her sister Nophelo Kali stand next to their Nqamakwe region food and sunflower display at an expo mounted by farmers and Department of Agriculture officials at the opening of the Bisho Legislature last week.
Picture by WILBERFORCE MDODA

In his State of the Nation address, President Mbeki, for the first time, referred to South Africa as having a dual economy and society in which most citizens are now trapped in marginalised areas.

Rather than reflect upon the meaning of a dual economy, Mbeki went on to argue: "No economy can meet its potential if any part of its citizens is not fully integrated into all aspects of that economy.

"Equally, it follows that an economy that is not growing cannot integrate all its citizens into that economy in a meaningful way ... Interventions must aim at ensuring that as many as possible of those who fall within this (latter) category move out of the trap within which they are caught."

The president, despite acknowledging the dual nature of our economy, still sets policy and programmes as for a single economy in two parts. Nothing changed because of the new insight.

South Africa is still to follow a "redistribution through growth" model.

Mbeki still wants the single global national economy to absorb those millions, towards half the adult population, who are presently economically trapped in non-functioning local township and rural marginalised economies.

The president, at the ANC congress, coined a new watchword, a "people centred" economy.

RISING PROFITS : Thobeka Bam shows off a new batch of bread dough at Nonkululeko Women's Bakery in Mdantsane, which was started by volunteers.

Yet the model in use is about the state supply, the "delivery" of public infrastructure and social services into areas where there is no economy to enable people to use or to pay for the same.

Mbeki must be extremely frustrated when he discovers that in many ways "delivery" is like pushing a piece of string.

The bureaucracy "eats" funds before it "delivers" -- cellphones, salaries, transport and the like. Little cash flows out the bottom to the field so that little actual delivery takes place.

The supply-side model, in the face of a poorly experienced, educated and largely passive society, is open to patronage and corruption by local political and traditional elites. The main weakness, which sets up the other weaknesses, is that it fails to spin local economic activity and thereby to build people.

The high levels of dependency on the global economy, the inactivity and poverty of most people in these areas and the fact that in the model the numerous poor are a "cost" to the state opens up an unnecessary tension between the two economies.

Without unlocking the capabilities of ordinary people, for how long will the global be able and willing to provide, and that inefficiently, for the non-contributing marginalised economy?

What happens when the economy fails to perform so that, unlike now, there are hard choices, class war if you like, to be made?

The dual economy model requires a set of "localisation" policies and programmes that address the non-functioning nature of local economies.

It is only once the marginalised areas become economically active that the national economic potential can rise to the point where the global can begin to absorb the marginalised.

This conundrum, the need for a dual development strategy, sets the challenge, the economic background against which to measure the methods and results of state action.

The opportunity to correct the present policy limitations lies within the legal requirement for local government to partner its residents in the formulation and execution of Local Economic Development (LED).

At present LED is a mess of "supply-side" community level projects with a horrific failure rate. Local economies suffer from a lack of local demand and so are unable to sustain local production.

Accepting a dual economy, the economic aim of the LED is twofold:

* To maximise exchange, achieve economies of scale, lower unit costs, circulate cash and add to the diversity of goods and services produced or made available locally; and

* To lower all transaction costs so that the region becomes competitive within the wider regional and national economies. That is, to ease the personal and other costs of selling, buying, gaining information, receiving services, meeting for social, community and cultural purposes, and of all forms of participation.

The expectation by commentators is that Trevor Manuel in the Budget will reveal the same lack of reflection as the president. He will once again give away tax breaks to those already in the economic swim, by-passing the many who are economically marooned. He will not ask those in the swim to go out and earn more from a bigger economy.

In addition, he will spend more on "delivery". Neither action is able to incorporate all South Africans or to grow a larger national economy.

The ill-fit of policy to the dual economy and society of South Africa will remain until national leaders reflect on its meaning. The dual economy is, in fact, highly programmatic in its implications.

The main implication flows with the core of the Constitutional aims of the country -- namely that it is about the "dignity" of each life and how citizens become the central "actor" at each point of daily life.

It is about "getting behind" people, giving them the lead and the appropriate resources to act, and so letting them develop by "doing", by experiential learning.

It is not about the "delivery" of objects and services.

That, with its controlling and patronising nature, belongs to another era.