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There are signs of a movement gaining momentum to address global poverty. Celebrities, successful leaders in business and, significantly, political leadership of the G8 countries are coming to the party. Africa is making progress with its own Nepad-plan. Sometimes the war against poverty becomes destructive, as when activists prefer to demonstrate with the use of sticks and stones, while the leaders try to debate and come to decisions in a constructive way. Gradually, however, we see a plan unfolding, comparable to the Marshall Plan for the resurrection of Europe after World War 2.

In South Africa we are proud of our leaders who have taken the lead in international discussions. We experience the effects of significant programmes unfolding in our own country over the last ten years. There is a will to make poverty history.

Aspects of the different manifestations of poverty and its reparation are manifold and complex. There is however one key issue that remains pivotal in the application of programmes: the participation of the poor themselves in the closing of the gap between Rich and Poor. It is as if we have constantly been hovering between giving / receiving on the one hand, and processes of development and job-creation on the other. In most cases the donors are dominant and employer interests come first. Lesser significance is attributed to the contribution of the Poor. It is as if the role of the Poor has certainly been observed, studied and recognised, but not taken seriously when it comes to implemen­ta­tion, making a true partnership almost impossible.

There is an old philosophy in Africa that says: I am because I participate. It is only when ingredients are properly mixed and baked that there is a cake to be shared. A programme needs to be developed that will give significance to all the ingredients, and will therefore give meaning to the lives of all those who participate – Rich and Poor. It has become an issue of praxis. The way in which the Poor (or, better stated, the people from the Second Economy) are incorporated in this process is as important as the goal of poverty eradication itself. The transfer of money doesn't mean the end of poverty. Transformation of both giver and receiver is necessary.

Let us endeavour to discover and uncover this process.

Two Economies

In the international world of economics, prosperity is based on property (or capital), protected and controlled by internationally accepted systems of law. Property is wealth. This system has enabled economies to thrive and expand. It's aim is the creation of more wealth. This is what is called Capitalism.

In traditional Africa (largely continued at the grass roots of the Black communities of South Africa), economic activity is inter­wo­ven with social interaction. This is what can be called the informal economy. Social relations and people’s wisdom – not the laws of the global economy – govern this economy. It can be called an Economy of Affection. Africa’s wealth is its people, and human co-existence is its security.

The colonial era has brought the world economy into Africa. A duality developed: a powerful government of expatriates on the one hand, and an overpowered local population on the other hand. Two economic systems (also called the First and the Second Economies) came into being. There was a clear Gap between the two parallel economies, a Gap which vividly indicated the wide chasm between the two worlds and two value systems that co-exist in Africa.

It is within the informal economy that millions of poor Africans find their refuge. It is this sense of togetherness – primarily within the context of extended families – that made it possible for them to survive.

The Gap

The Gap is the problem. The colonial era, and the present-day dichotomy between the two economies, can only finally come to rest when the economic equilibrium has been found, that is when the two economies come together and a normal spread between Rich and Poor comes into place – without the present Gap.

The South African Government is doing its best to overcome this dichotomy and to restore economic equilibrium. Their efforts vary from Black Economic Empowerment and Land Reform to social grants and subsidised community projects. There are clear indications of the emergence of a new middle class. This significant group of newcomers to the First Economy is celebrating the new life after apartheid, and share in its prosperity.

However, the informal economy has continued as the refuge of the majority. Their understanding of economics is a strategy for survival. To the ordinary peasant the formal economy is risky. They find their security in the structures of the informal economy they know. They have learned how to survive. They will not easily leave the security of this group and cross over to "the other side". This has become part of their cultural identity.

The danger is that we may find ourselves in a situation of relative prosperity for the country, but without significant better­ment in the position of the majority. The tragic fact is that the economy has succeeded in shifting the dividing line between Rich and Poor, and making it colourless, but it has not succeeded in bridging the Gap between Rich and Poor.

Politically all people are better off. They enjoy freedom of choice and are protected by a Charter of Human Rights, but for millions of people the economic options still remain very limited.

The Challenge

Most interventions from outside (Public or Private) got stuck in programmes of poverty alleviation – charity – and therefore leave no other option to the poor as to continue with mere strategies for survival. Even projects aimed at job-creation and self-reliance help people with one temporary job after the other, and one subsidy to the next. Recipients remain dependent and miserable. They are constantly reminded of their sad state of dependency. Even small enterprises remain too small to make an impact, and one spaza (informal) shop after the other becomes a casualty in the cutthroat world of competition and jealousy. The overall picture in peasant communities of the former homelands and its adjacent small towns, as well as new communities in towns and cities, remains one of dissatisfaction. Programmes are not translated into fruitful projects.

This situation is not helping the people at the grass roots. Ten years of democracy have been a long time to wait and watch how some benefit and others not. Millions of able-bodied and intelligent people with creative minds are still waiting on the platform (Freedom Park) with valid boarding tickets (Human Rights) for their development train to arrive. Train after train arrives to pick up some, but leave the majority waiting on the platform. Neither the power of the State, nor the trickle down of a thriving economy, nor even the magic of education and technology have been able to bring the two economies within touch of each other. It is always The Gap that matters most. The challenge is to bridge this Gap.

In short: I hope for a marriage between the two economies. The question is: How?

Solution?

If the real problem is The Gap, and the foundation for sound economic development is Capital (so it seems), we will have to begin looking for Capital among the Poor... the Poor Man’s Capital.

"The poor is in actual fact not so poor", says Hernando de Soto, tipped by the magazine Time as one of the 100 most influential people in the world for 2004. Hernando is referring to property that actually belongs to the poor, but, because of different reasons, has not been utilised by them to generate wealth. He maintains that there is hidden, unexploited capital in the hands of the poor. "The Poor" needn’t come empty-handed to negotiations regarding their own economic development. As the late President Nyerere of Tanzania once said: The poor cannot be herded into development like cattle. They can walk tall.

Almost a century ago a community development project in the Philippines accepted a couple of basic principles for their work. The one principle that remains ringing in my memory is: "Start with what the Poor have, and build upon what the Poor possess". The solution to the problem of The Gap has to be found where the people are, what they are, and what they have to offer.

My submission is that we need this paradigm shift. For as long as we categorise people as the objects of poverty alleviation, and not as the subjects of poverty eradication, they will remain dependent, struggling and frustrated. Categorising people under headings such as "have-nots", "the Poor" or, even worse, "poorest of the Poor" are negative, derogative and detrimental, and not helpful. People become what you call them.

There has to be a way to bring the responsibility (opportunity?) for their own destiny back to the people – irrespective of financial status. People must be enabled to take control over their own lives and become the masters of their own future in a pro-active, responsible and organised way. Without this paradigm shift the actions taken by Government will remain void of real meaning.

The challenge therefore is to design an inclusive and participative programme that aims at poverty eradication and not poverty alleviation.

The Bridge

The Gap must be bridged. We need a programme that will link the informal with the formal economy. Every bridge needs sound pillars at both sides of the river. In the case of the two economies we are not dealing with nothing on the one hand, and everything at the opposite end of the economic equation. Everybody has something to offer. The contribution of the poor will have to be anchored on what they have, and not on what they don’t have control over. And, if capital is the basis of the formal economy, the secret will be to transform what the poor possess into capital, and so provide the valid entrance ticket into the formal economy. There they will be able to buy their own shares, participate in decision-making, and share profits.

We are compelled by the situation to move beyond mere activism (entitlement), beyond research (ending up in papers), beyond misdirected "do-gooding", and – this is something I have only recently discovered – small projects. There is a need for a constructive mobilisation of the informal sector of the economy through an intermediate system that will form the bridge to the formal first economy. Participation of a sizable percentage of the disadvantaged community is necessary. People should be com­mitted to participate, to share a common programme, and willing to work together. The blessing and financial support from the side of Government will be important, but the initiative for this movement will have to come from the participants. Also in the First Economy there should be private initiative.

This bridge should be built from both ends. Three elements will be necessary: the two pillars at each end, and the link, the roadway between them. In other words:

• capital from within the informal economy of the poor necessary for the pillar on their side, and
• the capital on the pillar on the "other side", and
• the intermediate link, the partnership of know-how.

The ultimate aim should be: A participatory model of development to empower Second Economy Co-operatives to become equal partners (50/50) with reliable First Economy Enterprises in sustainable competitive income generating trade and industry.

The Poor Man’s Capital

The challenge is to translate and unpack the known factors of wealth creation of the First Economy in such a way that it becomes achievable in the world of the Second Economy. Three sources for building a Development Fund are suggested:

Source 1: From Stokvel to Community Bank

The culture of pooling resources (tsima in Tsonga, a "work party") – to assist one another in certain agricultural, building etc tasks, and afterwards celebrate together – is one of the oldest ways in Africa to get things done. It is a good example of the African "Economy of Affection", with its intrinsic format: first supporting each other, and then celebrating it!

The well-known African concept of Stokvels and Burial Societies (Umgalelo, Makgotla, Mogodisano and Gooi-Gooi or Oor­gooi) has its origin in the late 19^th century Eastern Cape where African farmers pooled their funds from one stock-fair (stokvel) to the next to make it possible for one of them at a time to buy good cattle in order to improve their own stock and eventually challenge the competitive market. The system has expanded to other sectors. By 1990 it was reported that some R200m a month circulated in this way, and that maybe 30% of the adult black population participated in this monthly exercise of pooling resources. (In the meantime this amount could have escalated to many milliards of Rand per annum.) The system is reliable. Because of its social structure of togetherness the repayment rate is calculated as very high – 98%, any financier’s dream.

The informal economy is flexible. The smallest form of Stokvel is the "Gooi-gooi" (Oorgooi) where workers regularly pay a certain amount into a common fund, and each in turn gets the opportunity to be at the receiving end of a larger pooled amount. Even amongst very poor people food-buying stokvel-style clubs exist that enable them to buy in bulk at a cheaper price. Its success lies in the value of human relation­ships within small face-to-face structures.

More sophisticated Stokvels are closely related to saving clubs or co­operatives, where decisions are made by Committees or Boards. [For further information on Stokvels see Prof JNJ Kritzinger in Mission Studies 13 (1&2) 1996: “African Cultural Resources in the Struggle against Mammon”.]

Isn’t it possible to elevate this known and popular pheno­menon into a next level of operation, and to apply it to generate new business opportunities? Looking at the spectrum in which the stokvel system is already being applied it can be regarded as the most natural bridge from the informal economy into the formal economy.

Enoch Munano, the founder of what he calls a Mutual Aid Society, SACOTSO, has already transformed the stokvel system into a viable vehicle for economic transformation, based on self-reliance. He linked small groups, formed around common activities (like pre-schools), in a sophisticated way into a community of communities, and succeeded in pulling the organisation up by its own shoestrings. The regular savings are linked to a SMARTCARD system. This brings the programme into the modern economy, and opens many further new possibilities (trade, savings, safe money, etc). At ground level people are good money keepers, but as projects get larger there is a need for bookkeepers to ensure accountability. Munano also laid the foundation for the next level of development: a certain percentage of the savings of the small groups is channelled into a community based Trust for development. This has the potential to grow towards a financial institution of its own – a Community (Village) Bank. SACOTSO provides ample proof that pooled financial resources is possible at grass roots level, and that simple peasants can take control over their own development.

It seems possible to establish a community based organisa­tion, built on the concept of a Community of Communities, that will be able to mobilise capital from "small people", in a communal effort towards self - determination.

The following aspects are important:

• The importance of numbers.

In contrast to the "Small-is-Beautiful-culture" it should be empha­sised that "large is powerful". A large number of participants and an intense mobilisation is needed. It has become an issue of size and intensity. Many small projects suffocate and simply die because it is too insignificant to survive in a competitive world. What is needed is the momentum of a movement. Stokvel-like groups organised as a Community of Communities has the potential for this breakthrough. It is both small and large... small face-to-face groups, linked to a large organisation. This will require mass mobilisation for the sake of the generation of income. Government approval and support is essential, but the strength of the movement is community participation. Power-play can kill the movement. The identity of the organisation should be communal and not individual. All activities should be driven by consensus. A group can only be as strong as the centripetal force of people coming together through free choice.

• Affordable joining fees and monthly contributions.

No one will be regarded as a member without contributing to the organisation. The small groups will determine each individual's contribution – and therefore their own level of participation – according to what they can afford. The vote of the different small groups within the broader organisation will carry equal weight, but rewards will be based on the total amount of the contributions.

• Connection to a Commercial Bank through the use of a Bank Card.

The modern technology of the Smartcard provides a helpful tool to facilitate a programme with a diversity of features. It has the following advantages:

• It provides one common instrument to be used by individual participants at the different levels, and at the same time symbolises a common bond of people belonging to one organisation and contributing to a common cause.
• It replaces cash for day-to-day expenditure on basic needs.
• It makes possible negotiated discounts at designated dealers.
• It can facilitate the growth of a Stokvel Fund for the use of the small groups, and gives access to a fund of their own making.
• It can organise savings in such a way that a community based Capital Fund becomes possible. This could form the foundation for Co-operative enterprises of its members.
• It can facilitate the payment of Grants through direct pay­ments into the accounts of members².
• A strong central administration.

There is a need for a Central Administration with the following features:

• Establishment of a Sec 21 Company with a Board of Directors.
• The administration of membership records, and proper admin­istration of the central funds.
• The research into opportunities for enterprise in Trade and Industry on behalf of the members.
• Negotiation on behalf of members for Government assistance.
• The organisation of relevant Action Training.
• The establishment of a Co-operative of Co-operatives³.

• A holistic Training Programme (Action Training)

Training will form an ongoing and integral part of the mobilisation of the people. They must understand the organisation and its role in their own development programmes. Such a training Programme cannot succeed without full support of the government's Depart­ment of Labour.

Source 2: Sweat Capital… the Re-Valuation of Labour

In the aftermath of slavery, during the colonial era, African peasants became the disadvantaged working class in the land of their birth. They needed cash to pay taxes, or to buy guns for their defence, or to buy cattle for lobola. So they went to work in the mines and industries, or on White owned farms. The obvious aim of all colonists was to create wealth for themselves and their countries of origin. They were not there for the benefit of the indigenous workers. They were only interested in workers, they were not looking for partners in development! The indigenous population remained strangers to the economy of the colonial masters, which was quite different from the indigenous African culture of work, where the family has been the productive economic unit.

Indicative of the resulting Rich/Poor divide in society is the relative under-valuation of raw materials and manual labour (the Poor Man’s share) on the one hand, and the escalating appreciation of the value of property, shares, dividends, profits on manufactured products, and the general income through capital investment (the Rich Man’s share) on the other hand. In this scheme of things it was clear that the Poor Man’s contribution was of inferior value, and he therefore could be remunerated at a lower scale.

In the present restructuring of South Africa in order to benefit the Poor the focus is – rightly so – on job creation. However, for instance in the ghetto communities of the small rural towns, the competition for jobs is severe:

• The privileged ones who secure permanent jobs, especially in the expanded new Municipalities, become targets of jealousy and prejudice.
• Job opportunities in projects are per definition temporary. The fortunate ones who get temporary jobs are constantly subject to a situation of insecurity, knowing that unemployment with all its implications are waiting at completion of the project. There is a total lack of continuity.
• It is the professionals, entrepreneurs and contractors who are cashing in during the implementation of macro construction projects. The temptation of instant wealth has become a problematic phenomenon and a temptation to enter into this group in a fraudulent way.

It has become necessary to reconsider the value of manual labour (work). It should be put on par with intellectual (professional) work. Labour should be recognised as an essential basic element for the construction of any project, and the labourer should be regarded just as valuable as the entrepreneur or professional planner of the project. It should become normal for the (organised) labour of the project to tender on the same level as the developers, and to share in eventual profits attached to the project. The contractor for a project usually has to go out and look for labour. Why can’t the workers – structured and organised in a professional and legal way – not also be given their opportunity to tender, while finding partners in development to bring on board the necessary expertise? Such a situation will certainly put pressure on the manual workers to become professional in their own right like the guilds in Europe some centuries ago. But that will be a positive development.

To give legal, financial and administrative clout to local communities it will be necessary to become organised as Commu­nity Based Co-operatives. There are those who are very sceptic about the successes of the co-operative movement. They mention the examples of the USSR and the policy of the late Nyerere in Tanzania, but they don’t mention successful examples like the kibbutzim, the Mondragon success in Spain amongst the Basques, or the Grameen Bank in Bangladesh. I can see no other option. Workers must be united in structured co-operatives, working together for their own future. It must succeed. Fortunately there is legislation in place for such a process. The Department of Trade and Industry is committed to assist in many ways – including subsidies.

The real challenge will be to allow structures to develop according to the local context. In other words: it should be avoided that a new ideology will be forced on to the people. Africans have an inborn cultural tendency to work together, and this has to be exploited and allowed to develop. It is clearly necessary that the concept will have to be internalised by the participants.

The Poor need a bridge to cross The Gap, and there is simply no other way than holding hands and club together in an organised way. This is part of the healing process of growth out of a culture of dependency towards self-reliance.

However, in order to become successful these community-based movements will need to be assisted "from the other side" and met halfway. Partnerships for development should be formed. A link with the global economy is needed, and this means expertise, knowledge and contacts which these start-up collectives don't have. These come from the "other side". However, a well organised labour co-operative can become a valuable partner for an entrepreneur in a labour intensive business.

A well-structured co-operative system will enable workers at community level to:

• Establish a Community Based Co-operative as the workers arm of the Community Based Trust.
• Organise and introduce a well-structured continuous Action Training process to build an ethos of unity, participation, hard work, skills development and entrepreneurship among the potential workforce for the relevant situation.
• Contribute regularly through all members and mini-structures to the Community Based Trust.
• Initiate mini or macro economic enterprises, and tender as a collective for the labour side of sustainable industries like construction, farming, the hospitality industry etc.
• Contribute (some of the) profits to the collective Community Based Trust for Development, and finance new ongoing initiatives for sustainable development.
• Make use of SMARTCARD technology, the Community Based Trust Fund, as well as the Central Office to simplify adminis­tra­tion and strengthen collective business opportunities.
• Look for partnerships within the private sector to strengthen projects and double potential through a 50/50 sharing concept of entrepreneurship (to be elaborated later).

The intrinsic power of an organised community with its own motivated and reliable work force becoming entrepreneurs in their own right, exploiting and developing their own resources to the maximum, and moving in unison, will be an entity not to be ignored, and an asset to take cognisance of.

Source 3: Property as Collateral

"…the property system is much more than ownership: it is in actual fact the hidden architecture that organizes the market economy of the West. Without legal systems that clear property title assets to be used to guarantee credit of contracts such property has little value in the global economy", says Hernando de Soto from South America.

(This "hidden asset" of the poor in Mexico, according to de Soto, is estimated at 7 times the value of the national oil monopoly.) The poor is in actual fact not so poor. What they lack is easy access to the property mechanisms that could legally fix the economic potential of their assets. They will then be able to secure further capital. (See the Internet article of Hernando de Soto: Listening to the barking dogs: property law against poverty in the non-West.)

The invasion of farms in Zimbabwe made a caricature of the importance of property/land in the process of poverty eradication, but it re-emphasised the intrinsic value of property in economic development. Many of the farmers got rich on those farms. They worked hard, yes, but another of the reasons why farmers could create wealth on those farms is because of the fact that they could get it cheap in the beginning. The link between property and prosperity is obvious.

In the understanding of the poor South African peasant, his/her RDP government subsidised house has become the clearest (perhaps only) share in the victory in the war against apartheid. It is a shelter that cannot be taken away.

It goes without saying that a house – or a farm for that matter – by itself can be as empty as a bucket without water, or useless as a car without driver and gas. Yet, if property can be used to produce, or to secure more capital, this asset can become the door to a better life. It can be the case for all who have been privileged by the gift of a free house, or the return to the place of their birth.

To implement property as an economic asset, however, needs skills for which the poor haven’t been prepared. My suggestion is not that individuals use their RDP houses as guarantees for collateral loans. What I do suggest is collective bargaining. When property is used as collateral within the context of a well-structured Community Based Organisation (with all the safeguards that go with it), it becomes quite another matter!

What we need to change is the culture of poverty. This can only be done within the context of a community. When poverty has become a characteristic of a community, when all perceive them­selves as being disadvantaged and therefore entitled to be regarded as everlasting beneficiaries, it becomes serious. Such a culture of poverty can only be eradicated when the community itself – the Poor themselves – become involved in their own process of poverty eradication.

To give help to people in need has merits of its own and should never be discouraged, but such laudable acts of human kindness are not addressing the social problem of a culture of poverty. It is also an illusion that poverty could be eradicated in the same way as political liberation. Protests and boycotts will not bring about the changes... it will only bring frustration.

It is a well-known African tradition to have pooled property in the form of a herd of cattle of an extended family. This principle could be valuable to re-introduce. A subsidised house (or a piece of land) is after all a public gift, a gift from the people of our country to our people in need. Individuals could be requested to avail their properties to a pool, and be used as collateral security in order to secure a loan or generate capital for labour intensive development. In return such owners will become shareholders and workers in the ongoing process of sustainable local development programmes of the Community Based Trust.

The effect can be significant. A pool of 100 RDP houses may represent a capital value of beyond R2m to be used as security for a loan that can be added to the savings in the Community Trust⁴.

Pooled assets could further be doubled with investor money coming from a trusted 50/50 partner, who will in return be assured of a reliable anchor partner with vested interests.

Land or homes given to rural communities is a once-off opportunity and should become the start of real rural wealth creation. The poor themselves have an opportunity to provide a sound foundation for their own development, using sound co-operative methods.

The Need for Partnerships

A bridge needs to be anchored on both sides of the river.

Pivotal to the whole process of successful grass roots develop­ment is the need for competent, reliable and benevolent partners in business. Internal processes and structures ensure stability. External partners secure growth. Neither the “top-down” approach (meaning from Rich to Poor, where the Rich envisage, manage and eventually hand over), nor the “bottom-up” process (where all initiative is expected from the side of the Poor) is the answer. A new approach is needed. Partnership between players from both sides of The Gap is necessary. An appropriate image is that of the process of the inoculation of new growth on an old plant. The new plant becomes both old and new. Partnership should not become a test of strength between the partners, but a process of sharing.

It is not advisable for the Government, whether National, Provincial or Local, to become an operational partner in the grass roots development. Its intrinsic role is that of the authority in the business of ultimate control. Government’s task is that of enabling development to take place through implementing good policies, and taking care of efficient infrastructure. Good governance acts like a nest in which "economic breading" happens.

Partnerships needed are the following:

• Partnership in Training.

In all budgets provision should be made for the different aspects of training. It is essential. However, all training should take place within a common ethos for development. This ethos has to become the ABC for training, known and embraced by every participant. The best method for training that I know of is the concept of Action Training, where the community, the project and new information become essential participants in the step-by-step process of transformation. Any chain is as strong as its weakest link. Training is needed at all levels and has to involve the whole community.

In a 50/50 partnership the interaction in itself becomes an un-intentional mutual learning process. Listening to one another and doing together is equal to learning together.

• Partnership in Business.

Working in partnership means sharing the financial responsibility. The ideal would be that all capital funding should be handled on a 50/50 base between the Partner and the Community Based Workers Co-operative in co-operation with the Community Based Trust. The Poor Man’s Capital as explained above has the possibility to take the proverbial beggar to the level of choice.

In a business nothing has to be taken for granted. Co-operative business needs co-operative business decisions in order to ensure success at both short term and long-term activities. It is a combined enterprise and this has to be reflected in the operations. On the other hand, good partnership will have to develop like a successful marriage, where the partners retain their individuality, but also act as one.

• Partnership in Administration.

To ensure a stable partnership a policy for Administration will have to be put in place with sound job-descriptions and short and long-term aims.

The basic overall aim should however be to establish a stable, sustainable and profitable enterprise. Since the share-hold is 50/50 all operational decisions of principle should be taken with consensus – the partnership should bear with one another in order to allow for tolerance and growth towards mutual understanding and knowledge of the enterprise.

The Need for a Catalyst

The deliberate objective of this exercise is to bring extremes together:

• A formalised First Economy is married to an informal Second Economy.
• The First Economy thrives on personal gain; the Second Eco­no­my is dealing with grass roots realities of large numbers of people.
• The First Economy relies on good financial systems and control, the Second Economy relies on people and survival mechanisms.
• In the co-operative scenario a group of workers will form a partnership with an experienced business management.
• All parties will have to be persuaded that their savings are well cared for and their Capital in good hands. Transparency is of utmost importance, but it may take different forms within different environments. The potential for conflict will be one of the challenges of the enterprise. The same applies for general information. Communi­ca­tion will be a challenge.
• On the one hand a massive drive to reach the masses will be needed. On the other hand a careful process of selection of partners and suitable enterprises is necessary.

It should be clear that the proposal is heavily dependent on this axle around which the wheel has to turn. A Central Office or Institute connected to an existing Institution, with reserves in terms of know how on legal and financial matters, will be needed to facilitate the whole process. Good solid administration will form an important basis for the smooth participation of the envisaged com­munity of communities. In this instance the hen (the Central Office) will have to be there before the eggs (widespread participation) can be lain. The bottom line is the establishment of a credible and sound administration built on the value systems of the participants. Staff should be hand picked and representative of the communities they serve.

The Institute will however have to be involved in more. Transformation is needed at both sides of the equation – in the First and the Second Economy. The central organisational hub will have to operate like a catalyst to bring the two components together through interaction. A catalyst functions through lowering the activation energy when extremes meet, and in that way enables the process to concentrate on selectivity, activity and stability.

To enable this process the Institution (Office), will have to be registered as an Art 21 Company Without Gain, and be run by an independent Board of (credible) Directors representing the two groupings. On the one hand such a catalyst will have to secure the growth processes within the Second Economy, and on the other hand focus and temper the tendency for manipulation from the side of the First Economy. So, not only mass mobilisation of the grass roots, with an accompanying process of action training within the Second Economy is necessary, but also co-operative ventures and partnerships with the sophisticated First Economy should be facilitated.

For this process an initial period of 5 years of growth is foreseen. The process we are talking about is not a pre-planned fixture but represents a living organism of growth and development through workshops and training. The Institution has to represent in itself the ideals of transformation.

To free this process from the potential poison of money, financial security to cover these initial 5 years should be guaranteed before the process starts. Although we are talking of business – indeed a pioneering kind, but definitely business – and not charity, it will have to be with the faith of a farmer that seed will have to be sown⁵.

Conclusion

The context for the development of these thoughts has been the situation in the former so-called homelands and the rural towns in the "platteland" of the RSA. Here the serious problem developed that the initial hope after 1994 has been replaced with mounting frustration and negative feelings of jealousy and suspicion. The unemployment rate is high. Apartheid is gone, but in rural townships it has been replaced by a ghetto culture that no Government will be able to solve on its own.

Efforts aimed at poverty alleviation from the private sector usually have loads of goodwill, but simply lack the capacity even to try to eradicate the growing poverty in these areas. Poverty alle­via­tion efforts remain symbols of a legacy of ongoing dependency and struggle.

A drastic effort, supported by both the public and private sectors, but spearheaded by the affected local populations them­selves, will be needed to change the paradigm of "Poverty Relief" towards "Poverty Eradication". A Bridge needs to be built over the Gap between Rich and Poor. The challenge is to think big. Small may be beautiful, but big is powerful.

The proposal is a package aimed at:

• mobilising grass roots communities for the eradication of poverty;

• exploiting what the poor have and transform it into a mean­ingful contribution to generate wealth;
• looking for partners at "the other side" of the economy to build prosperity via sound business activity that will cross The Gap between Rich and Poor; and
• the establishment of Central Office that will act as a catalyst as it facilitates the process.

The proposal obviously is not addressing poverty in its multi­tude of complex aspects. The Poor should become part of a healing process that will bring back human dignity. They deserve to be made part of this joy of sharing with the Rich and the Powerful.

ILLUSTRATION: THE GENERATION OF CAPITAL FOR COMMUNITY BASED CO-OPERATIVE PROJECTS

JOINING FEE SMARTCARD Membership R 50.00 [Once off] 10% Founders 10% Agents 80% Capital Fund Community Based Development Fund (CBDF) receives R40,00 per member

STOKVEL CONTRIBUTIONS R 10 - R100 per month Say: average Contribution R 30.00 90% Stokvel 10% CBDF Stokvel R27,00 CBDF R3,00 per member/month

SMARTCARD TRANSACTIONS Monthly Average Shopping R 500.00 10% discount: R50,00 Distribution of discount: Personal (50%) R25,00 Stokvel (15%) R7,50 CBDF (35%) R17,50 Total discount R50,00 Stokvel R7,50 per member per month CBDF R17,50 per member per month

TARGETED MEMBERSHIP [Accumulated] First Year 6 000 Second year 6 000 + 18 000 Third year 24 000 + 30 000 Fourth year 54 000 + 46 000 = 100 000

Community Based Development Fund [CBDF] Ideal position in Fifth Year with 100 000 members [Accumulated Funds + Interest + Transactions excluded] Capital Available for Macro Co-operative Projects + Central Admin Joining Fees @ R 40.00 R 4 000 000.00 Monthly income: R3,00 from stokvel + R17,50 from discount = R20,50 R20,50 for 12 months, and 100 000 members R 24 600 000 Total: R 28 600 000 + 50/50 Partner + BEE Government = R 85 800 000 Loans Available for projects where Property for Co-operative Enterprise is involved. [R 5 000 becomes a share in the enterprise] Soft loan from Stokvel Fund or Security for loan on Property e.g. RDP house worth R5 000 per share involving 25% of total membership. Total R 125 000 000 + 50/50 partner + BEE Government = R 375 000 000 Total available for Macro Development = R 460 800 000

Stokvel Fund. Ideal position in Fifth Year with 100 000 members [Accumulated Funds + Interest + Transactions excluded] Monthly Income R27,00 membership + R7,50 discount = R34,50 per member For 12 months and 100 000 members = R 41 400 000 a year available for soft loans via Stokvel Groups or eventual shares in Co-ops Available for soft loans via StokveL Groups or eventual shares in Co-ops

AN AGENDA FOR DISCUSSION

1 NEEDED:

A PARADIGM SHIFT from poverty alleviation to poverty eradication

2 THE PROBLEM:

THE GAP between rich and poor

• The rich prosper in the formal economy (first economy)
• The poor survive in the informal economy (second economy)
• The gap widens

3 THE RESPONSE:

3.1 THE TASK: to bridge this gap

3.2 HOW to build such a bridge from the informal to formal economy?

• Foundations at both ends
• Capitalising on the strength of both sides
• Common rules: capital

3.3 TWO ASPECTS:

• Capital at the informal side
• Partners at the formal side

3.4 THE POOR MAN’S CAPITAL

• Co-operative savings
• Sweat capital
• Pooled property as collateral

3.5 WILLING AND DEPENDABLE PARTNERS

3.6 THE NEED FOR A CATALYST

4 QUESTIONS:

4.1 Do we – in general – buy this reasoning?

4.2 To what extent is this concept (a) relevant, and (b) practicable in our context?

4.3 What do we do next?