The Vumelana Advisory Fund was established by the Business Trust to support the development of community private partnerships in rural areas on a sustainable basis...
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Introduction
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Credits
The Business Trust Community Investment Programme was established to pilot a market-based approach to development in poor communities.
 
The programme was launched in a context where ten million people live below the poverty line in areas defined as poverty nodes. Although a number of government programmes coordinated the provision of public services to these areas, there was a need to attract investment, develop enterprises and open markets to support sustained improvements in the lives of the poor.
A strategy was designed to:
develop economic profiles of South Africa’s 21 poverty nodes
pilot a market-based approach to local economic development in a rural poverty node
identify business models that incorporate the poor as owners, consumers or producers
test institutional mechanisms that link commercial return and development impact
develop institutional arrangements to sustain support for market-based development.
The programme was built around:
five-year pilot project run in one of South Africa’s poorest areas incorporating Maruleng and Bushbuckridge in the Limpopo and Mpumalanga provinces respectively, (the area is home to some 500 000 people; over half the population did not have access to piped water and 85% earned less than R20 000 per year)
a Shared Growth Challenge Fund that tested the potential to increase the pro-poor impact of commercial enterprises
a series of studies to profile poverty areas, define business models and develop mechanisms that link commercial return and development impact.
By the end of the programme a company had been established to support the development of community private partnerships, the Challenge Fund idea had been taken up by the Jobs Fund established by the National Treasury, and a number of business models had been identified that benefit the poor.
 

 
Results
Develop economic profiles of poverty nodes
Profiles developed and published for all poverty nodes
These provide an insight into the conditions of deep poverty and some economic potential in 13 rural and 8 urban nodes.
Pilot a market-based approach to development
Community private partnership and farmer support models tested
Eleven partnerships were developed and investment contracts worth R1,5 billion were signed.
The Community Private Partnership model was established as a viable mechanism for helping rural communities raise capital and acquire the skills needed to develop their property acquired through the land reform process.
  176 farmers were supported to improve productivity and get produce to market.
An outgrower model for farmer support was launched.
There is more potential for market-based development than has been realised.
The Vumelana Advisory Fund was established by the Business Trust to support the development of community private partnerships in rural areas on a sustainable basis.
Test institutional mechanisms that link commercial return and development impact
Challenge Fund piloted as a mechanism to increase the pro-poor impact of commercial enterprises
The Challenge Fund idea was taken up by the National Treasury in the Jobs Fund established in 2011. The potential for establishing a social impact exchange through which commercial enterprises with a social purpose can be funded, was tested with the Johannesburg Stock Exchange.
Identify business models that incorporate the poor
Models identified and small business sector analysed
Projects were supported to identify business models that work at the bottom of the socio-economic pyramid and to analyse South Africa’s small, medium and micro enterprise (SMME) sector.
 

 
Lessons
The poor need access to markets
While the poor often need government assistance to alleviate their plight, they cannot find a sustainable path out of poverty until they have a route into a market in which they can sell their labour, provide goods and services, or participate as consumers.
The potential of market-based development
There is more potential for market-based development than has been realised. The level of investment in community private partnerships in Maruleng and Bushbuckridge exceeded expectation. The business models study and the Shared Growth Challenge Fund found commercial models that benefit the poor as consumers, employees and/or suppliers.
The public sector seeks private sector collaboration for poverty eradication
The Business Trust’s engagement with the Department of Provincial and Local Government (subsequently Cooperative Governance) was triggered by the realisation that finding pathways out of poverty requires finding routes into markets – and that public/private cooperation is required to make that possible.
The Community Private Partnership model was established as a viable mechanism for helping rural communities raise capital and acquire skills needed to develop their property acquired through the land reform process.
Structural constraints are severe
The impact of the apartheid space economy, tightly integrated markets and low skills constrain market development for the poor. Innovative responses are required to address these constraints.
Promising mechanisms
Mechanisms like challenge funds, the social impact exchange and a transaction advisory fund promise to accelerate the development of market-based approaches to poverty reduction as do the growing number of social enterprises and commercial firms, which are expanding their reach into the lives of the poor.
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