Dualism in South Africa’s Economy

A number of recent speeches by President Thabo Mbeki have highlighted the important reality of “dualism” in the South African political economy.  Among other things, the contributions by the President have pointed to the fact that our people inhabit distinct socio-economic worlds, and that there is no logic or dynamic in terms of which growth and development of the “first” economy contributes automatically to improvements in income or livelihoods for people in the marginalised “informal” economy.


The question of “dualism” and how to overcome it will without doubt continue to be a major issue as South Africans move into the second decade of liberation and strive to reduce unemployment, poverty and inequality.


In addressing the challenges posed by “dualism” it is important, in my view, that we see socio-economic duality as two poles of a single integrated political economy, and not as separately existing economies.  Economic dualism is not new in South Africa. It was a product of the particular trajectory of capitalist development that emerged under colonialism and apartheid. This was most convincingly analysed, in my view, in terms of the theory of “articulation of modes of production” developed in a number of contributions in the 1970s by Harold Wolpe and others. These argued that there was a conceptual distinction between a “mode of production” – an abstract formal object – and a “social formation” in which several modes of production exist in a structured pattern of articulation.  Based on this, the South African social formation that emerged during the period of colonialism and segregation was seen as one in which a dominant capitalist mode of production (CMP), originally emerging in the mining sector, articulated with and subordinated “pre-capitalist modes of production” in the “reserve” areas.  More specifically, the migrant labour system, on which accumulation in the CMP was based, was predicated on a pattern of articulation that placed sufficient pressure on household production in the “reserves” to oblige men to seek unskilled low paid wage labour employment, while simultaneously allowing a measure of household production to “subsidise” intra-generational reproduction of the migrant work force.


This historic pattern of dualism or articulation has been under pressure for decades and has clearly undergone major change.  Beginning in the mining industry and in the commercial agricultural sector in the late 1960s, we have witnessed a sharp fall in demand by capital for cheap, unskilled labour power of the type generated by the migrant labour system. This was the beginning of the structural unemployment problem we are still confronting. This ongoing process also had major implications for both the economies of the “homelands” and the pattern of their articulation with the CMP. Descriptively it has been captured by notions of a shift in the function of  “homelands” from “labour reserves” to “dumping grounds” for the surplus population excluded from production – a trend which became increasingly apparent in the late apartheid period.


There is probably insufficient research on the impact of these processes on production patterns and relations of production in former reserve areas. Based on research carried out in the 1980s by the late Ruth First and others on what happened in former reserve areas in Mozambique (where the process of marginalisation began earlier) I suspect that there has been some process of restructuring of household subsistence production and probably also some attempts at petty commodity production.  Does this amount to a re-creation of a peasantry?  I suspect, too, that there has been some process of social differentiation within these areas.


As we know, globalisation has added additional pressures to the processes of marginalisation of the unskilled. More particularly globalisation placed additional competitive pressures on manufacturing and other enterprises to restructure around global norms, involving shedding non-core functions and adopting more capital and skills intensive methods of production.  This has added to the trend towards marginalisation and exclusion of lower skilled workers from production processes in the CMP.


Also, as the 10 Year Review records, since 1994 we have experienced significant in-migration and urbanisation – which, in fact, began before but was partly impeded by apartheid measures.  The net result of all of the above is that we now have an “informal economy” existing both in townships and former “homelands” as well as now to a significant extent also in city centers etc. This “informal economy” is characterised by subsistence production to be sure, but also embraces petty commodity production and trade.  It is without doubt also internally differentiated. What must be central to understanding the dynamics of this “informal economy”, in my view, is a recognition that its creation, subordination and reproduction in its current form are the product of a particular pattern of articulation/subordination by the CMP.  Its expansion since the mid-1970s was, as already suggested above, the product of exclusion/expulsion of unskilled workers from production in the CMP.  But there are also important patterns of articulation and subordination of current “informal sector” activities with the CMP. For example, 95 percent of liquor sold in South Africa today takes place through unregistered, illegal “shebeens”, a quintessential “informal sector” activity that is thus an important part of the circuit of capital in the highly monopolised “formal” liquor production industry.


What is the relevance of this for current policy?  In my view, it is important that we see the challenge as being to transform both poles of the dual economy as well as the pattern of articulation between them. The existing pattern of articulation is one of systematic marginalisation and exclusion of the unskilled from the CMP, as well as of domination/dependency of “informal” activities by the CMP.  Part of the solution to be sure will be to provide skills training so that more people who are currently excluded can find employment at the levels for which there is currently some demand. Another important part must be to promote greater labour absorption and job retention in the CMP.  But it is doubtful that this will be sufficient to absorb all the unemployed and marginalised.  Nor can we see the process required as being either one in which the “informal sector” withers away or as one in which the current trajectory of the CMP is simply accepted as an unproblematic given.


The concept of “sustainable livelihoods”, which featured prominently in the ANC’s election manifesto, is broader than wage labour employment and embraces efforts to transform “informal sector” economic activities into higher income generating and higher quality productive activity. The latter must not all be seen as “preparation” for participation in the CMP. The marginalisation of the “informal sector” means that partially delinked activities – local, partially de-commodified production and service delivery – all have real possibilities and can contribute to combating poverty.  It is precisely here that co-operatives have such potential.


As far as the CMP and its articulation is concerned, while it is clearly important to maintain output and productivity in the CMP, it is also critical that there is intervention to promote transformation. As already indicated, skills development and labour absorption are important parts of this, but so, too, will be the unlocking of resources to promote sustainable livelihoods among people in the “second economy”.  The financial sector campaign, the NEDLAC agreement and the Financial Sector charters are examples of some of the things that can be achieved in this regard. The financial sector has for some time been marginalising and excluding low income people.  As a result of pressure and intervention banks are now innovatively looking for ways to bring lifeline services to certain categories of low income people in townships and rural areas, even finding ways to adapt and develop ICT for this purpose.  This is clearly not enough, but an example that highlights the potentiality for a struggle to transform the pattern of articulation from one characterised by marginalisation, exclusion and domination/subordination into one where resources and capacities are unlocked through conscious struggle – with and for the workers and the poor.

By Rob Davies in New Agenda Issue 14 (2004)

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