HOW TO RESTART RURAL ECONOMIES.

WHAT MAKES STARTING A SMALL BUSINESS SO VERY DIFFICULT FOR POOR PEOPLE?

By Marius Lubbe
2005

I personally, do not believe in the current method of government to classify a person by race as the apartheid government did, now that we are all free and supposedly equal! Frankly I think it's demeaning to black people. I believe it makes a joke of so-called black people who are real entrepreneurs and lessens their efforts, hard work and struggle to gain success in a largely poor and third-world market place. This, together with some anti-growth labour laws, also stifles general entrepreneurship that can help to create some solutions to the lack of basic labour opportunities for all citizens of our country.

Even so, with that as a given, we have an environment in South Africa that purports to be financially accessible to the previously disadvantaged wanting to start small businesses, but then clearly does not come through when real finance, for a hand up, is needed by such people that is deserving of help.

The perception by many people we come across daily is still unfortunately, that you have to have money or substantial assets before you can borrow money to start a business, no matter how good your prospects are. And they are not ignorant of the so called empowerment schemes, but have usually been through all of them.

Now and then a nice show-case is brought forth, for show, in the media, but no fast progress is taking place where it really matters; in the rural towns and the poor townships.

Having a business in such a poor community does not make good business sense to Commercial Banks, and therefore they do not risk empowering the very people they are meant to help, or even taking their case to the government agencies for help. The banks are basically acting as screening agents for the government and reject most of the applications before they even get to government.

So Catch 22 - If you can't prove substantial income you can't have a loan.

HOW TO RESTART RURAL ECONOMIES

I believe that to start rectifying this situation, what is needed is a willingness to risk our state funds on real people, by creating meaningful (about R100 000) grants with a small payback element that should be community linked, so it gets paid back into the very same community that is supporting that enterprise. Further we should make use of traditional tribal schemes of regulation that has worked for thousands of years. This will involve for instance control by a community council of elders, clergy and such grassroots people, to support and encourage local business, and not politicians, political figures like traditional leaders or bureaucrats. They in turn can be overseen by similarly composed regional community councils that encourage the same on a small regional scale and so forth, always staying with the elders, clergy and such grassroots people and they can be advised by proven entrepreneurs to grow and manage their regions.

We advocate capitalism with community oversight. Not outsiders, but insiders doing for themselves and earning, distributing, re-distributing and generally circulating their money among themselves by supporting local business, instead of pouring it out into the dry desert of big business and giant supermarket chains in their nearest town which may not be that near.

A STOKVEL * of business and an effort in community building! Slowly creating everything from shoemakers, a small community newspaper, an auto mechanic or electrician or plumber starting a small workshop (maybe even part-time at first), new farmers, their suppliers, builders, and so the ball starts rolling... until the day when you have a real town with pride, a decent school and an interest and voice in their own well being. A vibrant small village that is attracting people to return from clawing out a miserable and lonely existence in the city, to come back and contribute to the community, instead and in place of the thousands of dusty desperate and dying communities as we now have.

STOKVEL * (an African concept of local savings and finance, where a few local neighbours, usually at about 10 people would come together and pool their savings every month and invest it. When a member then needs to borrow a sum to build a house or start a business the plans and idea is put to the group who will approve the lending of the money to the applicant. This person then pays back usually at interest free or equal to bank interest to the community pool or Stokvel. In the meantime the stokvel's capital is earning interest in the bank, investment in different ventures etc, and this pool will then also look after their other members when their need for financial assistance arises whether for a project, wedding, burial, buying cattle, a farm or providing an old age pension to lifetime members.)

Encouraging those newly successful and community supported businesses, to in their turn help new start-ups in the community, giving them access via a Creative Minds® as a central generating hub for example, to internet communications and learning and acting as agents for the government in sourcing serious and meaningful new projects that can awaken small communities and get a small heartbeat started in places that are long dead or dying.

That is what most unempowered people need, not the burden of a loan with the added burden of a Khula type penalty of 5% on top of the interest rate. It is difficult enough making a living in these very poor communities, loading the business with such financial gearing guarantees failure!

What we need is some benevolent creative financing that is controlled by people who understand real business and especially small business and not bureaucrats or professional management, who consume far more of the earmarked funds, than they can ever hope to devolve to the people.