Globalisation’s ugly stepsister : estimating some economic impacts of localisation in South Africa

Abstract

There is growing concern that globalisation is unable to address unemployment and alleviate poverty sufficiently to achieve the targets of the Millennium Development Goals. Increasing numbers of development economists and practitioners advocate some or other policy favouring the localisation of economic activity in local communities. The authors’ research and policy impact analysis are rooted in the sincere belief that localisation, as defined in this paper, is required alongside globalisation, if the Millennium Development Goals are to be met. The authors explain to the reader that localisation encompasses the institutionalisation of policy execution within specific localities (local township communities). Localisation is thus not a new policy per se, but a policy of institutionalising the localisation of existing government policy and programmes. This paper reflects the authors’ estimate of the regional economic impact of a localisation policy, using a case study from South Africa. Alternative strategies are required for the unemployed poor to participate in economic activity. This is usually done by encouraging the unemployed to engage in informal sector entrepreneurial and self-employment activities, which do not contribute much towards building working local economies, as they often take place in the services sector and in a geographic location within the formal economy. The authors investigate the postulate that working local economies can be achieved if the unemployed poor engage in production of the commodities most needed within their own local community. This can be achieved by applying the factors of production present within said community. The authors marry the consumer needs of the local economies with their stock of production factors (available skills) and estimate the number of people that could be gainfully employed, together with the impact of localisation on poverty levels. Input-Output Policy Impact Assessment models show that an additional gross output of R953.28 million could be created annually within the (local) township economy if current consumption expenditure and production activity is localised. Similar results may be obtained by localising government transfers such as social welfare contributions and public works programmes.