A CASE STUDY OF MINEWORKERS DEVELOPMENT AGENCY

Kate Philip

Mineworkers Development Agency, South Africa

 

Abstract

 

Mineworkers Development Agency is the job creation wing of the National Union of Mineworkers, in South Africa. The South African mining industry has shed an estimated 300,000 jobs in the last decade. Most of these miners are rural migrants, and these job losses have precipitated a social crisis in rural Southern Africa. MDA has piloted innovative strategies to respond to this crisis, including a rural enterprise support programme.


JOB CREATION THROUGH RURAL ENTERPRISE SUPPORT

A CASE STUDY OF MINEWORKERS DEVELOPMENT AGENCY

Kate Philip

Mineworkers Development Agency, South Africa

 

Abstract

 

Mineworkers Development Agency is the job creation wing of the National Union of Mineworkers, in South Africa. The South African mining industry has shed an estimated 300,000 jobs in the last decade. Most of these miners are rural migrants, and these job losses have precipitated a social crisis in rural Southern Africa. MDA has piloted innovative strategies to respond to this crisis, including a rural enterprise support programme.

 

MDA’s programme started as a co-op development programme, but shifted to the delivery of services to rural entrepreneurs in general, from the base of a network of Development Centres. These centres offer a range of services, including ‘economic services’ that act as a trigger and catalyst for local economic activity, but are themselves viable business units. This concept of ‘economic services’ is a key element contributing to the growing track-record of sustainability of MDA’s Centres. MDA’s Business Supply Stores are an example of these ‘economic services’; they supply the input and packaging needs of rural entrepreneurs, and are themselves serviced by a central buying agency, called Ethaleni, at national level. In this way, national economies of scale are passed on to rural producers.

 

Following an impact assessment of MDA’s programme, MDA is also focusing on facilitating access to higher-value niche markets, with a product development and marketing support strategy; as well as innovative methodologies for building the capacity of MDA trainers to identify new business opportunities at local level.  The paper draws lessons from experience.

 

 

 

 

 

 

 

 

 

 

 

Key Words: rural, enterprise, sustainability, LED

 

 

1.         Introduction

 

Mineworkers Development Agency (MDA) is the job creation wing of the National Union of Mineworkers (NUM). MDA began as a unit within NUM in response to the dismissal of 40,000 workers in the aftermath of South Africa’s largest national mining strike in 1987. The majority of these workers were migrants, sent home to rural areas throughout Southern Africa, and our task was to develop job creation programmes for them. In the decade that followed, some 300,000 jobs have been lost to the process of restructuring in South Africa’s mining industry. Our strategies have been focused on creating jobs through self-employment and small enterprise support, in the rural areas from where South Africa’s migrant work force is drawn. We don’t pretend to have been able to stem the impact of this social crisis; we do believe we have developed innovative models of rural enterprise support that need wider policy and resource support, as one aspect of a wider Social Plan to mitigate the impact of this crisis.

 

There is a debate about the role of small enterprise in job creation. This paper is not going to address this debate from the perspective of whether or not small enterprise is the most effective or most desirable way of creating jobs, but from the perspective that for those currently unemployed, it is often the only option for survival, in a context in which jobs for all who need them simply do not exist, and South Africa has extremely limited welfare nets in place for the unemployed. For those ex-miners or their wives who come to our offices for advice on how to put food on the table today, tomorrow and next week, a debate on the relative merits of inward industrialization policies, on export lead growth strategies, or on the dangers for the poor of the neo-liberal globalisation agenda, holds little immediate nutritional value – important as these debates may be for the creation of formal jobs in the medium term. But in the mean-time, we have to deal with a constituency of 300,000 mineworkers who have lost their jobs - as well as more than a million rural people whose fragile livelihood security has disintegrated as a result.

 

Historically, South Africa’s mining industry determined much of the structure of apartheid, and certainly of the structure of South Africa’s relations of poverty and inequality. The mining industry initiated the migrant labour system, and it is on this system that the Bantustan system was built, and from it that the huge gulf between urban development and rural poverty has become an institutionalized feature of South Africa’s wealth gap. Today, the retrenchment of rural migrants from the mines is plunging rural Southern Africa even deeper into poverty, and the dispersed nature of this has masked much of the impact from general view.

 

But we see simple indicators that tell a larger picture. Lesotho’s economy is very dependant on the remittances from migrants working on SA’s mines. For ten years, we have nurtured a thriving sector of self-employed poultry entrepreneurs, selling live chickens, in Lesotho.  It has been a success story. Now, they cannot sell their chickens. We have analysed the situation: it’s not dumping of surpluses by the European market or by SA; its not a cultural shift away from slaughtering birds at home to buying supermarket chickens; it’s not a result of greater electrification. The reason appears to be quite simple: families can no longer afford to buy a whole bird for the family pot anymore. Where before, purchase of a live bird was very common practise, now, people can’t afford a whole chicken, and are forced to buy chicken pieces. It’s a simple indicator of growing poverty.

 

Our focus is on self-employment because for many people, this is the only terrain on which they can take the initiative to support their families. Most other strategies require waiting for someone else to take the initiative: waiting in the job queues, waiting at TEBA[1], waiting for jobs to be created by government, by the private sector, by GEAR[2] or by Godot. And a cost/benefit analysis of this kind of waiting shows that for mineworkers, with 60% illiteracy rates in an economy that now needs skills, the wait can be long and fruitless. Unfortunately, the tendency is to invest all hope into this waiting, and to look at alternative strategies only when resources are severely depleted, but the investment in waiting has shown no return.

 

So, our focus on income generation and enterprise support strategies is not an argument for or against small enterprise support as the job creation policy approach of choice; but as an alternative to waiting, within the confined parameters in which unemployed people themselves are able to act to influence the quality of survival of their families.

 

Within this framework, this paper looks at MDA’s experiences; at what has worked, what has failed, and what can be done to build on all of it.

 

2.         MDA’s Co-op Development Strategy

 

MDA started as a co-op development programme; and set up some 30 producer co-ops, involving over 500 people at the height of the process. Five years later, NUM took a policy decision to shift focus away from co-ops, and seek alternative strategies, not because we no longer supported co-ops as a form of enterprise, but because the co-op development strategy was not an effective mechanism for responding to the scale of the crisis.

 

Some of the key problems are outlined below; and are relevant partly because the next phase of our approach was built on our attempts to respond to these issues, and partly because the problems experienced then are recurring in a new context now.

 

  • The co-ops were ‘exclusive’: in any given district, a maximum of 40 people were in the NUM co-op, but as many as 4,000 retrenchees in that district were not, and for them, no programme was on offer at all: creating the basis for organisational conflict between ex-miners.
  • As relatively large-scale collective enterprises, the co-ops required significant capital to start. This capital was largely donor funded, with the funds raised by NUM. Members rarely participated in the capital formation in the co-op. This created ambiguity about ownership of the assets of the co-op. 
  • Where ownership relations are unclear, then so are employment relations. In practise, when the co-ops did well, they were ‘owned’ by the members; when they did badly, they were ‘owned’ by NUM, with the consequent expectation that NUM would pay wages. This created the basis for conflict between NUM and the co-op members, and an unsustainable dependency on NUM in a context in which there were problems of productivity in many of the co-ops.
  • The emphasis on the co-ops as a mechanism for job creation lead to a tendency to set them up with an oversupply of labour, with the result that many collapsed under the sheer weight of excess labour; with the market unable to absorb the scale of production needed for the co-op to support all its members.
  • A producer co-op with 20-40 members is a complex economic entity, and the chosen form of collective ownership and control required significant management skills. Most of the members had no prior business experience, leading to dependance on external or funded technical skills support. This dependency was unsustainable.

 

There were other issues, relating both to the internal organization of the co-ops and external factors, which are not the focus here; but in short, after extensive policy debate in NUM, it was agreed that we move away from co-ops as the main focus of our programme and explore alternative strategies for rural job creation.

 

We needed to develop a programme that was inclusive, involving not only ex-mineworkers, but also the community at large; we needed to find a way to break through the attitudes of dependency on NUM that had been a factor crippling the co-ops; and given the scale of the crisis of job losses in the mining industry -  120,000 by then and mounting – it was clear that we would have to rely to a far greater extent on local resources and local initiative. With workers dispersed across Southern Africa, we were also under pressure to spread delivery geographically. And in the highly fluid donor environment of the early 1990’s, there had to be a high level of sustainability from the start.

 

3.         Development Centres as the Site of Service Delivery

 

It was in this context that MDA’s programme shifted to one of service delivery to support local enterprise activity. Instead of playing a direct role in the establishment of projects, as was the case with the co-op programme, MDA instead provides services that promote and respond to the initiative of local people. The services are open to all, and in this way, the problem of ‘exclusivity’ has largely fallen away. The focus is on self-employment and small enterprise support strategies; and also on promoting sustainable livelihoods, rather than ‘jobs’ in the formal sense of the term. The services offered by the centres are summarized in the diagram below.

 

 

 

Fig. 1: Services at MDA Centres

 

The centres are located in the following areas:

 

In South Africa:

  • Kokstad, E. Cape/Kwazulu Natal;
  • Mhala, Bushbuckridge, Northern Province
  • Welkom, Free State
  • Klerksdorp, North West Province
  • Morokweng, North West Province
  • Batlharos, near Kuruman, Northern Cape.

In Lesotho:

  • Maseru, Lesotho.

 

MDA now has a network of centres that can demonstrate a growing track record of sustainability. There are two critical components to the model:

 

(1)   The integration of ‘economic services’ into the centres. These ‘economic services’ act as a trigger and catalyst for local economic development, but are themselves viable business units. Key to understanding these are that they are not just ‘cash-cows’ whose profits cross-subsidise the centres: they are economic services to entrepreneurs that enhance the viability of local economic activity, and are integral to building and maintaining MDA’s base of users.

(2)   Economies of scale. The scale of demand for MDA’s services, and the need to develop a grid of delivery institutions across a wide geographical area, has allowed us to build up a scale of operation that creates the kind of economies of scale usually so elusive within the framework of rural development, and that therefore opens a different set of opportunities for service delivery.

 

In identifying the focus of the services offered at the centres, we were responding to certain identified issues confronting rural entrepreneurs, which are explored below. These are also explored in Philip, 1999.

 

3.1. Issues in Rural Enterprise Development that have informed MDA Services

3.1.1.      Lack of Diversity in the Local Economy

 

In South Africa, most rural local economies depend on wage remittances from migrant workers, and pensions, as their main source of cash income, and it is these incomes that provide the ‘kick-start’ to other forms of local economic activity, fueling everything from taxis, to spaza shops, to the sale of sheep and goats. The dependance on these external incomes also means that many people are consumers without being producers. The rapid decline in these migrant remittances from the mines has a negative spiral effect on the local economy as a whole; with local activity grinding to a halt with the decline in external income sources.

 

The limited range of local manufacturing activities is also a reflection of the extent to which people have been disempowered in relation to even the most simple production skills, in a context in which most basic needs are mass-produced in SA’s core economy. This has contributed to the lack of a culture of local production.

 

For many, lack of access to land removes the possibility of producing agricultural surpluses. This further removes them from engaging in trading cycles as producers, and it means they have no need or opportunity to explore more ‘value-added’ processing activities with agricultural produce. The limits on access to land also mean that even agricultural skills have often been eroded, and while people may be rural, this does not translate in their having the skill or desire to engage in agricultural activity.

 

The net effect of all of this is that there is a very limited range of economic activity taking place in most rural economies.  Rural entrepreneurs are also notoriously risk-averse, and there is a tendency towards ‘copycat’ entrepreneurship, where one successful enterprise will be copied by everyone else, until they all collapse under the weight of their own competition.

 

A key initial target of MDA’s centres was therefore to try to expose people to a wider range of micro-enterprise options. The centres offer training on up to 33 micro-enterprise options, including mini-bakeries, poultry, cement products such as lintels, gutters and paving stones, leather processing and leather goods, tire repair, ice-making, ice-lolly production, solar drying, peanut butter production, welding and others. Most of the enterprise options have been supplied by Rutec, the Rural and Urban Technology Company, in which MDA recently bought a shareholding, in a joint venture with the Land Bank.

 

Research conducted for MDA by Andy Jeans, of the Intermediate Technology Group, UK, also explored international experience in technology transfer, and a key message was: ‘seeing is believing’. No one is going to risk starting an enterprise producing peanut butter, for example, if they have never seen it done. Yet one half-hour session observing the simplicity of the process at a technical level, and suddenly something unthinkable becomes possible. This is not, of course, the whole story: and can’t replace the need for a feasibility study into this enterprise option in any given local context. But the point remains that until the technical possibility is demonstrated, it is not going to emerge as an option to be explored. In a context in which there is such a limited range of success stories for people to learn from, the demonstration of technology options became a key conceptual element in the design and set-up of the centres; the sale of equipment is one of the economic services offered, and the hire of equipment on site is a mechanism that allows people to experiment with production options at a minimum of risk or capital outlay.

 

The ovens at the centres are regularly booked by different groups of local women, who may use it once a week, bake a few batches of bread, and return again the following week. The welding equipment is also extensively used; at Mhala, local entrepreneurs source contracts on the local housing programmes, and then hire the welding and cement products equipment at the centre and produce to order. In this way, the hire of equipment facilitates people into production, in a context in which the finance for the purchase of capital equipment is rarely accessible.

 

Given the continued absence of rural enterprise finance, we also need to explore the options of equipment lease, where producers can take equipment off-site where they are ready to invest in more permanent production activity.

 

3.1.2.   Procurement Services for Rural Entrepreneurs

 

The limited diversity of economic activity in rural areas is compounded by the lack of access to any but the most basic raw material inputs for production activities. In fact, the logistical problems faced by local entrepreneurs in sourcing input supplies acts as a key constraint on enterprise development, and on diversification. The lack of packaging supplies is also a key factor limiting the formalization of production activities. It is easy enough to make atchar at local level; but it is not so easy to find a supplier of basic plastic atchar containers within which to package the product. Similarly, ice-lollies made from fruit juice concentrate are a steady favorite at schools and football games: all you need is the concentrate – and the plastic tubing within which to contain the lollies. Try sourcing lolly tubing from Mohotlong in Lesotho. The same applies to egg boxes for eggs, jars for peanut butter, foil caps and containers for yogurt or fruit juice; sealed screw top containers for juice pulp concentrate – let alone printing inks for t-shirt printing, or brass buckles for leather sandals and belts.

 

In Lesotho, a co-op of women producing candles could not source wax from within Lesotho. They had to take a taxi to Sasolburg in SA to buy the wax in 50kg bags, and it took three of them to carry: the costs of transport and accommodation simply overburdened the project, and other strategies of procurement were beyond their organizing ability.

 

So, in exposing people to a wider range of production options, it becomes necessary to ensure that they can rely on a steady supply of the necessary input and packaging requirements. This in turn is an opportunity for the Centres, all of which have a Business Supply Store linked to them. The growth in turnover in the Business Supply Stores is a direct indicator of growth in local economic activity; which is a success indicator for the training services provided. If the centre is not ‘producing’ entrepreneurs, it will quickly be evident from the low turnovers in the Business Supply Store. In mining towns such as Klerksdorp and Welkom, there is far more competition and this makes the model more difficult.

 

With seven centres in operation, and more in the pipeline, another opportunity presented itself: to set up a Central Buying Agency, that could allow these widely dispersed stores to benefit from national economies of scale.

 

As a result, MDA has set up Ethaleni as a subsidiary company. Ethaleni is the central buying agency for all the centres – and for a growing network of district level stores. Ethaleni is still in its first year of full operations, but volumes are increasing consistently, and the indicators are that Ethaleni will consolidate as an effective business, able to deliver competitive prices to the rural stores and through them to the entrepreneurs, as well as being a sustainable entity in its own right.

 

Ethaleni’s outreach has been extended by the establishment of district level stores that form part of the outreach of regional centres. In Eastern Cape, for example, there are stores operating in Bizana, Idutywa, Cala and Umtata; and in Lesotho, the Quthing Store was launched recently, and had achieved a monthly turnover of R65,000 after its first three months. These local stores operate as business units; but they also provide a platform for cost-effective outreach of other MDA services. For example, at Quthing, the room above the store has been converted into a classroom. The Maseru Centre is able to run training programmes using this facility; the Agricultural advisor runs regular focus groups there; and the business counselor has a regular programme of visits to Quthing, using the facilities at the store. This reduces the costs of rural outreach.

 

3.1.3.      Other Economic Services at the Centres:

 

Poultry Supply Centres have been very successful in certain areas. The first poultry supply centre arose out of a process in Mhala, Bushbuckridge, where ex-miners from Amcoal organized village-level income generating groups, who opted to buy and sell live chickens. This proved to be a highly lucrative exercise; far from the perception of selling live chickens as being a survivalist marginal activity, we have found that in some areas, just by selling 50 birds a week, people can earn a gross income of more than the minimum wage in the mining industry. So this ‘marginal’ activity is more lucrative than a formal job in a unionized sector! These village groups were buying chickens from a white farmer in Hazyview, some 40 kms away. But within three months, their volumes justified the establishment of a local supply outlet. The Mhala Poultry Supply Centre currently supplies up to 4,000 fully grown birds a week, 4,000 3-week olds, and day-old chicks to order, as well as the input supplies to all levels of local entrepreneurs.

 

The Supply Centre only supplies entrepreneurs; but it is able to do this at rates that allow local entrepreneurs a healthy mark-up, and still be a profitable business unit within the framework of the Centre. By limiting itself to this market, it avoids competing with its own users – some of who are in production at the same scale as the centre, but still find it most cost effective to source their supplies there.

 

In Lesotho, some of the original co-ops have become poultry supply centres; and an additional two centres have been established, in Mafeteng and Maputsoe.

 

In Lesotho, the establishment of a seedling nursery is another example of an economic service. At present, there is no commercial supplier of seedlings to Lesotho’s agricultural sector: they are all sourced in South Africa. By setting up a seedling nursery, MDA is contributing to the local economy, helping trigger and support local enterprise activity, and at the same time further boosting its own sustainability.

 

3.1.4.      Training and Counseling

 

MDA set up a ‘Mobile Training Unit’ in a 20-ton truck, that delivered technical and business skills training to workers being retrenched in the 1992-1996 period. In certain instances, this training was provided on the mine, before workers left; in others, the training was delivered in the home areas. Two significant experiences in this regard were at Durban Roodepoort Deep, where about 800 workers were trained on mine, by MDA and other services providers; and Buffelsfontein Mine, where 1,400 Buffelsfontein retrenchees and other ex-miners and community members were trained in 8 districts in the Eastern Cape, in a major training ‘blitz’, by MDA, on a mobile basis. In both these cases, there were real limitations to the impact of the training. In the case of the DRD training, workers were then dispersed across Southern Africa. It was extremely hard to retain support networks for newly training entrepreneurs under these circumstances. In the case of the Buffelsfontein workers, there was at least the advantage that local support networks were possible: but at this time, MDA had no real institutional framework that could provide ongoing support to the trainees, through the critical stages of business start-up. Both these experiences highlighted the need for an institutional ‘grid’; that could provide ongoing support services: preferably not just at a regional level, but localized to district level as well.

 

The training provided by the mobile unit is now provided at the centres. Follow-up counseling has also been integrated into the training package.

 

At this stage, however, there is an increasing tendency to focus on the delivery of business skills, and to contract in outside service providers to provide the technical training input. This allows the centres a far more flexible response to changing opportunities in the local economy.

 

3.1.5.   Product Development and Marketing

 

Although product development and marketing were identified as services that were needed within the framework of the Centres, the real focus on this area is recent, and is highlighted under 5.1. below.

 

4.         Impact Assessment of MDA’s Programme

 

In the last three years, MDA has trained 6,182 people across the whole programme. In early 2,000, an impact assessment was co-ordinated by a consultant appointed by the UK Department for International Development (DFID). The impact assessment, designed by Caroline Pinder, entailed the random sampling of one in every five of MDA’s trainees, over a one-year period, with the cut-off 6 months prior to the interviews. In other words, the interviews took place between 6 and 18 months after the participants had attended MDA training.

 

The outcomes indicated that 70% of MDA’s trainees engaged in income generating or enterprise activity following the training, and 77% of these (or 54% of the total number of trainees) were still involved in business activities at the time of the survey, up to 18 months later. Half of the ‘survivors’ had been involved in income generating activity before the training, and half were starter enterprises. The results also showed that if the businesses could survive the first six months, there was a trend to rising incomes, but that in the first six months, returns were often extremely low. This is normal in starter enterprises – but in the formal sector, the impact of this is generally cushioned by external finance or equity. In the self-employed, micro-enterprise sector, this ‘financing’ generally comes out of household income or ‘sweat equity,’ and the initial growth period can be a difficult one. (Pinder, C., 2000)

 

However, even if they survived the first six months, and despite some success stories, returns were often low; yet participation remained at remarkably high levels. For us, this raised a whole set of questions.

 

  • Levels of poverty:

 

Low as it is, for many women, the income from income generating activity often represents a large part of the income over which they have direct control, and even of the total household income. We are now including in our survey methodology an attempt to establish what percentage of personal and household income the business income represents, in order to better analyse its impact in the context of levels of poverty.

 

  • Gender issues:

 

The results were dovetailed with a gender assessment that found that many women in business actively concealed the returns from the business, out of concern that the enterprise would be appropriated by male household members. A range of tactics was also used to mask returns. Most women surveyed preferred not to take cash out of the business, but to be paid in kind. For a bakery, or poultry project, this might be a direct transfer of the product of the enterprise; but even where the enterprise was producing, for example, bricks, the members opted to have the cash income converted into groceries, and to be paid in groceries, rather than be paid in cash. At least one of the women surveyed on a random sample basis had set up a spaza shop, and had it taken over by her husband once it was seen to be successful. Many motivated the practise of payment in kind on the basis of this fear.

 

Another key pattern is that the majority of enterprises or IGA’s did not operate on a full time basis, in the kind of ‘business cycle’ assumed as a norm in urban areas. For example, a juice production group of 54 people in the Northern Province divided themselves into three sub-groups of 18, each working one week in three, and sharing the equipment and premises. (Pinder, 2,000). Again, particularly for women, the business activities had to be fitted in to a range of other commitments in relation to the household, including collection of firewood and water. The potential impact of enhanced productivity for local economic activity that would flow from access to basic services has been well analysed elsewhere. In addition, though, the IGA or enterprise activity was often just one amongst a number of parallel livelihood security strategies that required maintenance. These ranged from direct food security strategies such as tending vegetable gardens, to casual labour, to social activities that ensured the maintenance of support networks. From a Household Livelihood Security perspective, a diversity of livelihood security strategies is a strength, and cushions against risk.

 

These issues make it extremely difficult to be precise about the comparitive levels of return being achieved by the enterprises. Although we tried to capture the value of in-kind payments, the returns to the enterprise were not related to time and energy in the first survey, although this has been corrected, to ensure that we are measuring equivalents.

 

  • The Project Approach:

 

We also found a direct correlation between the form of business and the rate of return. The enterprises that consistently had the lowest return to members were the group projects. The notion of ‘projects’ as a solution to poverty has taken root in various institutions in SA. As part of attempts by the Department of Welfare to break with a welfarist approach, they have been providing grants to groups of mainly women to start businesses. Unfortunately, and unintentionally, the way in which this is being done is in fact extending attitudes of dependency into new terrain.

 

These projects are high in hope, grant money, and members, but very short on feasibility information or business skills. In Welkom, for example, we found a group of women had been set up to produce juice. A quick calculation demonstrated that they would need to produce and sell 20,000 bottles of juice to each earn R100 a month – a marketing target unlikely to be achieved. Yet they had been given the grant money to set themselves up, donated a bakkie, and sent for training on juice production, without anyone ever actually doing the costings to see what they could expect to earn from the activity. The project would last as long as the grant money: after that, despair and disempowerment was the likely outcome. They were set up for failure, without the tools to see it.

 

We saw the same pattern everywhere. In Northern Province, no less than 106 women were involved in a brick-making project, earning a mere R10 each per month. Ten years ago we fell into the trap of setting our co-ops up with an over-supply of labour, in the hope that we were creating jobs, but without due consideration for the productive capacity of the enterprise or the absorption capacity of the market. We see the same mistakes repeating themselves. This applies also to ambiguities around ownership, as well as to the complexities of collectively managing productive activity. At least where the co-ops were concerned, these issues were on the table and active attempts were made to address them. But these ‘projects’ are not formally called co-ops; nor are they always conceived of as enterprises, even though their main aim is to generate income for their members. They are generally set up as institutionally ambiguous institutions, and their chances of business survival are low. Yet huge grant resources are being channeled in this direction, and we are finding that increasingly, the solution to poverty being put forward at village level is: “we need ‘projects’”.

 

At the same time, the question we had to ask ourselves was: why weren’t our centres being more pro-active in addressing these issues? Many of these projects had come to them for training, funded by government departments or corporate sponsors; and by simply doing the training without interrogating these issues, our own impact was jeopardized.

 

At the same time, we had to recognize that despite our attempts to promote diversification in the local economy, not much was happening. Many of the more innovative business options were gathering dust in the centres, while a narrow range of options continued to be in demand. Where did the failure lie? Were our own trainers occupying a ‘comfort zone’ in terms of delivery of a limited range of options? Were the options actually unviable?  Or was an uncritical ‘demand-lead’ approach simply reproducing the problem of copycat entrepreneurship already identified?

 

 

 

5. Strategies to Deepen Impact

 

It is these issues that MDA is now grappling with. We have an ‘institutional grid’ in place to deliver an integrated set of services on a sustainable basis across many of the mine-labour sending areas, and this grid continues to grow.  The impact assessment illustrates that a significant percentage of our client base gets involved in economic activity following our training input, and that participation remains high. But the critical challenge now is to deepen the impact of these activities, by finding ways to improve on enterprise survival levels, but more importantly, by enhancing the returns to entrepreneurs. In looking at how to do so, a number of focus areas have emerged.

 

5.1.Shifting Focus to Higher Value Markets

 

One of the constraints on the level of return achieved by local enterprise is that they are generally producing for local markets, and local markets are poor; they buy a limited range of products, that are mainly already mass produced in the core economy, so mark-ups are kept low in order to compete. Yet the volumes required for a low-mark-up strategy to be viable are often absent from rural areas: local markets are dispersed and fragmented, which further adds to the costs of marketing and distribution.

 

But the critical advantage of producing for local markets is that the producers know and understand local needs and opportunities, and the quality standards and expectations of that market. This puts them in control of the product and the marketing.

 

Conversely, attempts to break into higher value-added enterprise activity generally require breaking into external markets: if not geographically external, then at least socially ‘external’ – such as local communities producing for the tourist market. The two may be adjacent, but they are still worlds apart.

 

The constraints on success in these markets are significant. Rural producers have often never been exposed to these markets; they are unfamiliar with the consumers, with the type of quality, design and packaging criteria that apply; and infrastructure problems such as access to transport and communications make it difficult to comply with the rigorous expectations of these markets, in terms of timeous delivery, regularity of supply, and consistency of quality and design.

 

For MDA, a typical example of the problems encountered relates to our experience with a co-op of widows of mineworkers in Lesotho. They were producing beautiful, hand-knitted, pure wool jerseys with a distinctive ‘Lesotho hut’ motif. We got large orders for them in Johannesburg; and then we waited. Winter passed; when the orders were finally delivered, in mid-Summer, with great pride, they had all been knitted in pure acrylic. The women had gone to buy the wool for the jerseys, had seen that the acrylic was cheaper, and had opted to use it: without understanding that part of what gave their product value for the consumers they were dealing with was the pure wool content. It was a devastatingly demoralising lesson in the extent to which production for this market required facilitation (Philip, 1999).

 

In another example, a group of hand-made paper producers in Morokweng received an order from the British Embassy to produce cards for the invitations to their Christmas ball. When the order was delivered, the paper had been neatly cut into squares. But the aesthetic with hand-made paper requires a slightly rough edge. The invitations were re-done: but this time, the edges were so rough that each piece was effectively a different shape. They had to be done again!

 

When rural producers are producing for markets that are outside their experience, it is impossible for them to second-guess the apparently unfathomable shifts and changes in trends and demand. This makes them dependant on external product development input, and external marketing facilitation. It is rare that this can be ‘bought in’ as a full-time capacity by such enterprises.

 

However, in the context of how MDA is set up at present, with our network of Centres, there is an opportunity for MDA to deliver this kind of input and facilitation in a cost effective way. We have ‘dabbled’ in product development for some time now, but have identified this as a major area of focus for the coming period, with the establishment of a Marketing and Product Development Unit.

 

For rural producers, there is little possibility of competing with urban producers in relation to the production of day-to-day consumer items. However, there are two areas in which rural producers have unique opportunities; the one is in relation to agri-business, and higher-value crops and processed products. In particular, we see opportunities in relation to the use of indigenous resources, where our producers would have the competitive advantage, as compared to trying to compete with dumped, subsidised Euro-chickens or other mainstays of commercial agriculture.

 

Secondly, the craft market internationally is enormous, and there are significant niche markets for original, crafted products. As with agri-business, some of the particular opportunities relate to the use of natural and indigenous resources and materials, as well as the integration of a cultural aesthetic that meets a particular market need.

 

In relation to both of these types of production activity, there is an overlap of markets: sophisticated urban niche markets; the tourism sector, and the export market.

 

We recognize that there are significant constraints in entering these, and anticipate that production for local consumption will remain the entry point for many new entrepreneurs. However, we are now setting about building the capacity to provide the facilitation required to ‘make these markets work’ for rural producers.

 

In March 2001, MDA is hosting a conference called ‘Bridging the Gap’, which is bringing together players on the different sides of the equation: retailers, product designers, research institutions, marketing networks, government, and the producers. Already, the ‘fault-lines’ are clear. From the perspective of the retailers, the critical constraints in dealing with rural producers are: poor design, difficulties in communication, uneven quality, unreliable supply. The challenge for us is to provide the facilitation to overcome this.

 

In this regard, we have two key case studies currently in process, which each yield a different set of lessons.

 

5.1.1. Marula Beer and Marula Oil in Mhala, Northern Province:

 

Marula trees grow prolifically across a belt running from Mpumalanga to North West Province in South Africa, and extending into Mozambique, Zimbabwe, Botswana and Namibia. Marula beer is widely brewed and drunk wherever the marula grows; but as a cultural not a commercial product. At the same time, there is a great deal of surplus marula berries; many are eaten by goats. Some years ago, MDA initiated technical research with traditional brewers, and the Council for Scientific and Industrial Research (CSIR), to look at the potential to commercialise marula beer.

 

We were given a platform at the annual conference of Private Game Lodges, where we ran taste tests with the first product. The consensus was: this is a brilliant idea whose time has come, but take it away, and don’t come back until it has been sweetened and carbonated. We have done so; and at this stage, have built a partnership with local game lodges to market and promote ‘Vukanyi’ marula brew on a limited basis for the 2001 season.

 

At the same time, it has emerged that the kernel of the marula berry has a very high value oil, for use in body products, and with export potential. We are currently working with product developers to develop the oil into body products, and soap, also targeting the game lodges, as part of a basket of indigenous products.

 

The key issues at a policy level, though, relate to how jobs are created through this process, and the impact on local incomes. A key aspect of the marula project is that the raw material is abundant, and free: but it is a community resource, and its use requires community consent. We have been working with the Department of Water and Forestry around the community forestry issues raised, and have built networks of village-based ‘collectors’ from whom the berries are bought. In a unique feature of the marula, 100% of the direct cost of the raw materials is therefore in fact a cost to labour. While the collection of the berries is seasonal, the hand crushing required to extract the kernels for the oil processing provides out-of-season income as well. In the first three days of the marula season in 2001, 15 tons of marula was bought by MDA, from 27 villages, and from 300 women. Fifty four women were employed part-time, to squeeze the juice from these berries, with a local income contribution of R25,000 per month into the local economy for the duration of the season.

 

The model that we have used in the case of the marula is that MDA has taken the product development risk, and controls the production process of the beer at this stage, as well as the marketing. Our priority is to position the product correctly, and to ensure that we build systems that overcome the traditional problems of inconsistent quality and irregularity of supply, and to build up the volumes. In the mean-time, there is a significant income contribution to local communities.

 

The processing of the oil is a far less sensitive process, and is easily outsourced to local entrepreneurs, with MDA providing a secure market for as much as can be produced. In the first instance, our target is simply to buy in the raw oil, and pass it on for further product development. But in the medium term, the challenge will be to develop local capacity for the higher value-adding processes, given the proximity of a large market for these products in the game lodges.

 

So, the marula programme is an example where MDA is playing a very direct role not only in the product development but in an aspect of the production itself. We see this as providing a platform on which other local income generating and enterprise activity can grow: but we are debating ourselves whether this is the appropriate model and how best to adapt it. It may be that once the pilot phase is over, the potential exists to franchise out the beer-brewing process. We see the franchise model as having interesting potential to be adapted in the development context, where the business development service provider, such as MDA, becomes the ‘franchisor’, and develops the technical and business model to a high level, providing a range of support inputs that facilitate business success for new entrants: at the same time as being able to ensure quality control. In the case of the marula, a critical element would be continuity of approach in relation to the community organizing and facilitation that is a key success factor for the whole initiative. But through the franchise model, we could facilitate local entrepreneurs into business, rather than performing that function as MDA. The debate is in process!

 

5.1.2. Stone Cutting in Lesotho:

 

In this case, MDA has been working with stone cutting artisans in Lesotho, who are mainly ex-miners. They produce blocks for construction purposes, with a high labour input and low return. MDA conducted a product development workshop that yielded a range of stone products targeting the market for home interiors and gardens.

 

The feedback from the market is very positive; in fact, the demand is overwhelming, and we are now dealing with the classic problem of securing regular supply and quality, and are in the process of extending the process to include stone-cutting artisans in two additional villages, thus tripling the capacity. The stone cutting is a more classic scenario of product development and marketing facilitation, and we are using it to build our systems, networks and volumes around a range of products that have high acceptability. With these systems in place, the challenge will be to build associated product ranges across all of our centres, and work towards a level of volumes that will allow the Marketing Unit itself to operate on the basis of full cost recovery.

 

Already, product development processes are in place to develop lampshades with the Morokweng paper producers; and welded coffee tables with mosaic inlay with the Klerksdorp’s Katleho mosaic enterprise.

 

5.2. Building real Entrepreneurship at Local Level:

 

At the same time as we are putting the facilitation in place to target external markets, we are also deepening capacity to understand and interact with the local market. Following the Impact Assessment, it was our own assessment that our trainers needed a much more in depth understanding of how the local economies in which they are operating actually function, to enhance their ability to advise clients, as well as to be more innovative about identification of business opportunities.

 

As there is no off-the-shelf product that teaches these skills, we worked with CARE South Africa to see how the Household Livelihood Security analysis done by CARE could be adapted to focus on enterprise issues. Twenty MDA staff have just completed a month-long exercise, involving extensive fieldwork in Malungeni Village, in Nqeleni, Eastern Cape, and which has yielded a new depth of understanding about the functioning of the local economy, and the opportunities and constraints within it; including the manifest limitations of the ‘projects’ operating here as everywhere.

 

One exercise was instructive. Staff were asked to identify business opportunities. The different groups came back with no more than four, generic opportunities that have been done many times before. They were sent back, divided into groups that had to focus on agri-business, services, tourism and other manufactured products, and each group was told to come back with no less than 40 business opportunities. They did, and the lists were fascinating: and within them were some innovative, entrepreneurial ideas with real business potential: including the identification of a monthly, local horse race that involves most of the community, as a tourism opportunity. Stand by for the palio[3] of Malungeni.

 

The process currently continues, with intensive training on business planning skills, as well as intensive exposure to ways of accessing information from a wide range of sources. So that next time an entrepreneur arrives at one of our centres with a business idea for a product our trainers have never heard of, instead of being sent away, he or she will be told to return in 24 hours, during which time the trainer should be able to come back with qualitative data and pointers to assist the entrepreneur in the development of their business plan.

 

This process continues hand in hand with the community in Malungeni Village; the lessons learnt already are being integrated into how the Centres respond to their environment, all with a view to deepening the impact, viability and return to participants on their enterprise activities, whatever markets they are targeting.

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REFERENCES

 

a)         Jeans, A. (1998) “UK Desk Study and Recommendations on Technology Transfer”, Unpublished paper for MDA.

 

b)                  Philip, K. (1999) “Creating Jobs in Rural Southern Africa: The Rural Enterprise Support Strategies of the Mineworkers Development Agency as Part of a Social Plan for Communities Affected by Mine Downscaling”, in At the Crossroads: Land and Agrarian Reform in South Africa into the 21st Century (Ed. B. Cousins, PLAAS, University of the Western Cape and National Land Committee, 1999).

 

c)                  Pinder, C. (2000) “Impact Assessment of MDA’s Training and related Enterprise Development Services in South Africa”, unpublished paper for UK Department for International Development.

 

CONTACT DETAILS FOR AUTHOR: Kate Philip, CEO, Mineworkers Development Agency, PO Box 30697, Braamfontein 2017; e-mail: kphilip@mda.org.za; Telephone: 27-11-403 0277; Fax: 27-11-403 0285.

 

 

 



[1] TEBA is The Employment Bureau of Africa, the recruiting agent of the mining industry.

[2] GEAR is the SA government’s growth strategy.

[3] The palio is the famous annual, traditional horse-race in Siena, Italy, which attracts thousands of tourists every year.