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Big business and communities: South Africa must go local to overcome economic challenges

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Shawn Theunissen is an executive at Growthpoint Properties responsible for corporate social responsibility, transformation. He also founded Property Point in 2008, an entrepreneurship support and development social enterprise. In 2012 he founded Entrepreneurship To The Point, a content creation and advisory service with the objective of building the entrepreneurial ecosystem. 

When a development or investment is made in a community, it is only natural that the locals will want to participate in the value chain.

As South Africa replaces its windows, cleans its streets and mourns its dead after July’s chaos and looting, we face a few critical questions. The violence was an orchestrated attempt to destabilise the country and was further spurred on by an underlying desperation caused by a 42% unemployment rate and a declining economy, as well as being, according to the World Bank, the most unequal country in the world. 

What was particularly disheartening is that retailers and businesses were not only robbed and looted, but some were burnt down. This is even though many looters were dependent on some of these very businesses for groceries and other essentials. Blinded by their deprivation, they chose alienation from the mainstream of the economy. But this is not the entire story. 

Many communities refused to join in the mayhem. Residents of Nongoma in Zululand, KwaZulu-Natal, bravely stood against the looters when they realised that there was only one retailer left in the town for basic provisions. They were not alone. Nhlanhla Lux, a young Sowetan who happens to be a pilot by profession, stood guard at Soweto’s Maponya Mall for five days warding off looters. The same happened in Tembisa, where taxi operators and residents prevented looting from taking place at Birch Acres Mall. 

How we move forward now is fundamental to what South Africa will look like in a decade. 

What we saw during the looting is not new. It was just a wilder version of what so many businesses are experiencing daily, whether it be the construction mafia at building sites, the hijacking of trucks or the forced closure of mines and factories by angry host communities. These are all symptoms of communities that do not feel they are part of the businesses located in their areas, never mind the economy at large. 

The residents who said no to the looting and openly put themselves in harm’s way felt ownership over the infrastructure in their community. They saw their local retailers, not just as a business extracting earnings, but invested in their lives and wellbeing. This is one of the benefits of local economic development (LED) – when economic development takes place in conjunction with the community. 

This buy-in by local communities acts as a social and moral barrier against any potential unrest. Many shopping malls were defended by taxi associations, due to the fact that they had a direct economic interest in the sustainability of the malls. Consumers and workers need to be transported to and from the malls. No mall means no income for the drivers. The taxi industry is LED at its most basic level. 

The “protests”, even if they were partially stage-managed by those with nefarious motives, were a loud message that communities must start benefiting directly from any new developments in their area. This is the message sent to big industry every day when a workplace is shut down by local communities. Business needs to lead with LED when engaging with local communities. 

Despite the critical importance of LED in the developmental mandate of local government and the substantial funds that have been committed to the implementation of LED initiatives, South Africa has barely made a dent in its enormous poverty and developmental challenges. More than half (55.5%) of the population live below $75 per month in South Africa’s dual economy, which continues to struggle to reduce one of the highest inequality rates in the world. On top of the inequality we still face the triple challenge of low growth, high unemployment and high levels of poverty. The youth (15-35 years) are most vulnerable, with an unemployment rate of 63.3%.

For more than 10 years, we have worked with small businesses in the construction sector to promote economic growth and improve the quality of lives of people in local communities – where the evidence of South Africa’s dual economy remains most stark. Consequently, when a development or investment is made in a community it is only natural that the locals will want to participate in the value chain. In this macroeconomic context, LED has the potential to offset the hardship that afflicts the majority. It can work directly to build up the economic strength of a localised area to improve its prospects and quality of life. 

But what the events of the past few weeks have shown us is that we are failing as a country to effectively include local communities. Local community stakeholders are key to a thriving community. LED is a multistakeholder partnership that includes local business forums, local small and growing businesses seeking market access, jobseekers, community leaders, taxi associations and elected government officials. All these groups have a role to play. 

The model of sustainable community development is changing from one of shareholders, generally driven by monetary capital, to one of stakeholders engaging the full spectrum of community sustainability. It makes good business sense if all parties feel they can benefit from a project, as it limits potential conflict in the future. 

The first step of engagement is identifying the people, public institutions, businesses, community organisations and other groups with interests in the local economy. The importance of stakeholder engagements must include understanding the pain points from the communities’ perspective and how the corporate players can immerse themselves and be a partner in addressing it. 

We need solutions that will build South Africa. LED is one such tool that can bring big business and communities together to drive economic growth and prosperity for all South Africans. DM/BM

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  • This is an important contribution to the process of changing South Africa from an exclusive to an inclusive society. If we are moving away from a shareholder society towards a stakeholder society, why not allow customers to acquire shares as part of loyalty programmes? Together with employee share ownership schemes, this could bring about major transformation and start to impact on our extreme inequality by spreading ownership much more widely.

  • Ownership is not the issue, the dignity and purpose of having a job is. LED is complex and is the job of governments. Simply being able to develop profitably is the job of the private sector and such wealth creation means more public resources to tackle the dire social needs.

    • Having a job is meaningless if you do not possess the necessary skills to perform that job, so skills training is first and foremost.

    • Sure employment is a critical issue. Ownership is also a major issue. It is a key element of inequality which if not addressed by generating more stakeholders will continue to destroy the country just as it is doing now.
      Wider ownership of companies will have no impact on funds flowing to the fiscus. LED is not the job of governments. We are seeing more and more communities starting to act at local level because government simply does not know how to do it. The private sector working with local communities is a must especially as government is increasingly collapsing.

  • Please peer review 3 community comments before your comment can be posted