From the Bottom Up: Including everyone in development and growth

Prof. Harry Barkema

– 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

Some facts you know…

– “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

How to engage 2nd economy?

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..

However…

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?

Moreover…

– 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)

Great…but does it reduce 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…

– 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

R-Labs in Bridgetown

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, low-cost 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

In sum…