ACCELERATING SHARED GROWTH: Making markets work for the poor in South Africa

ComMark Trust, 2006

Executive Summary

Poverty remains South Africa's most pressing challenge. To tackle it, we need to make markets part of our development strategy. Rather than protecting the poor from markets, we should make markets work for them. This approach of ‘making markets work for the poor' - which has become known by its acronym, MMW4P - is being adopted by leading international development agencies. We believe it could help to move millions of South Africans out of poverty.

This report explores the market-driven approach to development. It builds on numerous specially commissioned case studies illustrating how markets are working for the poor in different economic sectors in South Africa and elsewhere. And we identify ways in which markets could be made to work better for poorer people.

MMW4P is not a radical new paradigm, but rather a new approach that builds on lessons learnt in practice in the development field. It is not anti-state, nor does it advocate leaving the poor to their own devices. Instead, it aims to promote interventions that will help the poor to help themselves, make existing markets work more inclusively of poor producers and consumers, and make the benefits of well-functioning markets more widely accessible. MMW4P therefore requires governments, NGOs, companies, and educational organisations to co-operate on:

strengthening pro-market institutions;

encouraging established businesses to find new markets, customers, and salespeople in poorer communities;

transforming malfunctioning markets and addressing the causes of market failure;

strengthening effective markets; and

enhancing the capacity of the poor to participate in markets.

When this is done, it becomes possible to build on a country's existing strengths and avoid the pitfalls of many previous development approaches. The conventional development project, for example, has struggled to sustain the involvement of the poor beyond the period of the intervention. It has frequently been founded on a variety of direct and indirect subsidies, and imposed inappropriate plans formulated by ‘experts' with little local knowledge. These have rarely managed to address the long-term conditions that trap people in poverty; have made it harder for local producers to break into commercial markets and supply competitive goods and services (thereby sometimes increasing poverty); and diverted resources and energies away from the structural and systemic issues that underlie poverty.

State-led interventions across the globe have sometimes had a broader impact, but they too have, more often than not, been wasteful, destructive of local market-linked initiatives, and far too ambitious. MMW4P allows development practitioners to avoid these pitfalls because it requires that outside intervention works with, rather than on behalf of, the poor, and is rooted in the realities of the prevailing market - its opportunities and constraints. The approach has the advantage of starting off where poor people already are, and then looking for incentives, institutions, and mechanisms that will help them to start participating in markets - by strengthening the markets themselves, addressing failures and constraints, and lowering regulatory and other barriers that prevent the poor from entering those markets. It is therefore highly flexible, non-prescriptive, and draws on existing social capacities and energies.

How MMW4P works, and its potential to reduce poverty, emerge clearly from our case studies which, drawing on very different contexts and emphasising different aspects of the approach, provide concrete examples of the relative advantages provided by interventions that work with markets.

Available for download at http://www.commark.org/Downloads/ResearchAndLearning/ACCELERATING%20SHARED%20GROWTH.pdf