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=SA's poverty plan incoherent, says DBSA=

Business Report, Johannesburg, June 30, 2005

 * By Andile Ntingi**

Johannesburg - South Africa has no coherent strategy to tackle unemployment and poverty, a Development Bank of Southern Africa (DBSA) report charges.

In its 2005 development report, headlined Overcoming Underdevelopment in South Africa's Second Economy, the DBSA says some of the interventions aimed at addressing the challenges of the second economy are reaching a small group of people who are usually entrepreneurial, bankable and experienced instead of the wider poor population.

The second economy is made up of people in the informal sector, the unemployed and the poor. Government interventions include the integrated sustainable rural development strategy, the urban renewal programme, the expanded public works programme (EPWP), the comprehensive agricultural support programme and the small enterprise development strategy.

The report concludes that the lack of an organised development approach for the second economy is probably the reason behind the ineffectiveness of the current tools. "Apart from the apparent absence of a coherent, scale-appropriate strategy for the second economy, a fundamental shortcoming of current efforts is a tendency to design assistance in a way that does not suit the ordinary, poor person," the report says.

"The fact that 70% of the budget of the comprehensive agricultural support programme is earmarked to benefit land reform beneficiaries who themselves represent not more than 2% of all blacks involved in agriculture, excluding farm workers, is a case in point."

The report points to a shortage of entrepreneurial skills and low disposable income as some of the constraints responsible for slow development in the second economy.

The authors suggest that the major barrier is the inability of small enterprises to link their activities to those of the mainstream economy. "Arguably the most important constraint to transforming the second economy is that the vast majority of those who inhabit this economy are manifestly unprepared to make the transition to the first economy or to link to it somehow," the report says.

"This, after all, is why a number of government's second economy interventions have not had more impact." The DBSA says the major thrust of the government's poverty alleviation policy involves pouring more funds into social grants rather than second economy interventions such as the EPWP or small business support.

The government has set aside nearly R20 billion for the EPWP in an attempt to create about 1 million jobs and to accelerate skills development over the next five years.

Although the unemployment problem is structural, the 1 million jobs that the EPWP aims to generate are short term, lasting about six months.

The report advises: "In response to chronic unemployment, the policy objective would be to create demand through the implementation of large-scale public sector employment programmes offering employment guarantees and sustained employment."

Last year the government launched the Small Enterprise Development Agency to accelerate the creation of small and medium-sized enterprises by providing non-financial support.

Its activities are mostly targeted at stimulating the second economy.


 * From: http://www.busrep.co.za/index.php?fArticleId=2605794