CHAPTER 1
INTRODUCTION
1.1 Background to the study
South Africa experienced an economic decline in the1980s and early 1990s which
was characterized by stagnation in output growth leading to ‘massive and growing
unemployment with no creation of new jobs in the manufacturing sector through the
1980s’ (Gelb 1991:1). This state of affairs was followed by large-scale job losses
which left many South Africans with no income or livelihood (Webster 2004: 16).
Many people turned to the informal economy, which was seen as a beacon of hope
to millions of the unemployed. In reference to this development, Beavon (1989:50)
notes that the ‘burgeoning size of the informal sector is closely related to the
inabilities of the South African economy to offer sufficient employment. It is
therefore not surprising that many see the informal sector as possible panacea to the
unemployment problem of the country’. Barker (2003:7) remarks that ‘the informal
sector in South Africa is particularly important and has shown phenomenal growth
in recent years’.
Indeed, there are several explanations as to the cause of the development and growth
of the informal economy in South Africa. Some thinkers see it as ‘a product of
exclusion and expulsion of unskilled workers from production in the capitalist mode
of production’ (Davies 2004:31). Also worth noting is the fact that with the end of
apartheid (which prevented certain groups of people from practicing their trade
through restrictive legislations), the new economic and political environment has
created conditions that are conducive for entrepreneurial and survivalist activities.
In his analysis of the issue, Ligthelm (2004:21) arrives at the conclusion that ‘the
shortage of productive employment opportunities in the formal sector, therefore,
compels people to fend for themselves’. In a study conducted by Ligthelm on the
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informal traders, the findings show that 82.2% of hawkers started their business as a
result of unemployment.
According to Corbridge (1995:260) the informal sector ‘has been lauded as a major
source of employment’. However, some thinkers see it as a ‘marginal economy’
consisting of people who are ‘trying to eke out a living’ (Lubell 1991:17).
Despite this negative view of the informal economy, what is worth noting is that,
with the decline in formal employment a series of trades have emerged in the
informal economy, of which the woodcraft trade is one.
In the early days, the woodcraft trade in the Hazyview area was a success for the few
who ventured into the trade, but as the number of traders increased, the competition
also intensified resulting in a downward spiraling in prices and profits. The
woodcraft trade is now faced with challenges that are likely to impact on its
sustainability. A threat in the livelihoods of so many people who have been working
in this trade for many years may be disastrous, especially in the context of high
unemployment rate. Knowing the state of the woodcraft trade through a value chain
analysis remains important in pointing out areas of weakness, strength and where
possible interventions could be made to enhance and protect the livelihoods of
individuals.
Worrying is the fact that, little is known as to how the trade is organized and how it
links with other sectors of the economy. As the nature of their trade, their challenges
and difficulties have not been fully documented; the woodcraft traders are often
perceived as conducting a simple and marginal trade like any other workers in the
informal economy. However, dealing with wood is a difficult and complex process,
which starts right at the sourcing of the wood to the carving of the crafts. By the time
the craft reaches the consumer, much has been done in terms of adding value and
perfecting the product, let alone the issue of the costs involved in the form of labour,
time, inputs, tools and transport.
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The opening of markets which goes with globalization and democratization in South
Africa have also exposed traders to competition as crafts from other parts of Africa
flow into the country, flooding the informal craft market with cheap crafts. Craft
workers from other parts of Africa are also bringing with them skills that local
traders are lacking, and some of the foreign traders are even more educated, have
better marketing skills and access to markets than their South African counterparts.
Most analyses in the literature have tended to be biased ‘towards looking at the
impact of globalization on formal wage work and, to lesser extent, on informal
employment’ (Carr and Chen 2001: 1). These kinds of analyses tend to downplay the
fact that globalization does not only impact on the formal economy, but as Carr and
Chen note, it can also subject small, survivalist and micro-enterprises to increasing
competition, thus threatening rents, incomes and livelihoods of people, most of
whom are already living below the poverty line. However, globalization can also
lead to new trading opportunities for those who work in the informal economy
depending on their competitive edge, their accessibility to markets and their
insertion into the value chain.
The literature on the informal economy have also tended to ignore endogenous
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issues that affect the competitiveness of informal traders, and most emphasis have
tended to be on exogenous
2
issues impacting on the informal economy. This
approach has led to the tendency to put more emphasis on the final product, while
ignoring the processes that are equally important in determining the general
competitiveness of the traders. In this study, both factors are examined for a broader
understanding of the opportunities, obstacles, and challenges facing the informal
traders. Also worth noting is that the value chain approach is mostly used in studies
focusing on the formal economy. This study seeks to address some of these gaps in
the literature by assessing informal craft activities using a value chain approach.
1
Endogenous means those factors that emanate from the internal environment. They are constructed
by the firm or organization itself e.g. technological, human resource rents etc.
2
Exogenous factors are those that originate from the external environment. They arise from external
factors such as resource, policy, financial, infrastructural rents etc.
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1.2 Aims and objectives of the study
The main aim of this study is to provide a value chain analysis of the woodcraft
trade as practised by the informal woodcraft traders in the Hazyview area. The study
maps out the value chains involved in the woodcraft trade by showing the activities,
characteristics, relationships, inequities, bottlenecks, and leverage points that exist in
the chain (McCormick and Schmitz 2002). The analysis also intends showing
activities that are subject to increasing returns and those subject to declining returns.
The intention is to represent the various stages in the informal woodcraft value chain
and to demonstrate the connections between actors in the chain by combining both
heuristic
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and analytical
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approaches. Although this study focuses on the Hazyview
area, it also acknowledges that linkages in the chain go beyond the designated area
of study due to the interconnectedness of economic activities. In order to address the
aims and objectives of this study, the following major and subsidiary research
questions are answered by this research:
ƒ What are the value chains involved in the woodcraft trade in the Hazyview
area, Mpumalanga Province?
ƒ What are the characteristics of the chains and the role players (actors)
involved in the chains?
ƒ What are the constraints or success, problems and bottlenecks in the chains,
and why do they exist?
While answering the above major research questions, the following subsidiary
research questions are also answered:
3
A heuristic approach is descriptive in nature. It only portrays the existing situation or condition
without explaining why things are the way they are.
4
An analytic approach gives in-depth analysis by showing why the situation occurs and how, for
instance, value is distributed in the chain.
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ƒ How are the benefits distributed in the chain? Who benefit most? Who
benefit less?
ƒ What are the links between the woodcraft trade and the rest of the formal
economy?
ƒ Are the constraints facing the informal traders endogenous (created by the
participants in the value chain) or exogenous (created by external factors)?
ƒ Is there a way in which the informal traders could upgrade the existing chain
(e.g. by being more innovative, varying their products, producing crafts for
household use, which will ultimately lead to them moving into a new
segment of the chain)?
1.3 Overview of the study
The chapters in this study are arranged as follows:
Chapter 1: the introductory chapter sets the background to the study by examining
the growth and development of the informal economy in South Africa. It also
provides background on the woodcraft trade in the Hazyview area, pointing some
gaps in the literature and how the trade fits into the informal economy. The chapter
states the aims and objectives of the research, and concludes by giving an overview
of the study.
Chapter 2: focuses on development in Mpumalanga and the Hazyview area, and the
role of the tourism industry in the development, growth and survival of the informal
woodcraft trade. The challenges facing the craft industry in South Africa are also
discussed.
Chapter 3: reviews the literature on the informal economy by focusing on
definitional aspects, the various schools of thought and approaches on the informal
economy, the link between the formal and informal economy, livelihoods and how
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the informal economy is a source of livelihood to the majority of poor people in
South Africa.
Chapter 4: examines the theoretical aspects of value chains by focusing on
definitional issues and the characteristics of value chains. The Value Chains
approach as a methodology of data collection and analysis is discussed in the next
chapter on methodology.
Chapter 5: outlines the methodology used for the purposes of this study. It describes
the research process, the sampling process and the research techniques. The data
analysis, strengths and limitations of the research methodologies are also covered in
this chapter.
Chapter 6: provides an analysis of the woodcraft trade by examining certain useful
characteristics of the traders such as gender distribution, educational qualification,
working hours, work experience etc. The relationship between income and some of
these characteristics or variables are examined. The influence of these characteristics
on competitiveness and success of the informal traders in the value chain is also
tackled in this chapter.
Chapter 7: reviews the whole woodcrafts value chain, the role players in the chain,
factors determining and influencing competitiveness in the chain. The chapter
concludes by focusing on the problems and challenges that the informal craft
workers are facing.
Chapter 8: concludes the study by critically summing up the findings of the study
and providing some recommendations.
Having outlined the overview of the study, it is crucial to examine the context within
which the study takes place by looking at important developments and aspects in the
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Mpumalanga Province and the Hazyview area that impact or are likely to impact on
the growth and development of the woodcraft trade.
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CHAPTER 2
THE MPUMALANGA PROVINCE AND THE HAZYVIEW AREA
Introduction
The objective of this chapter is to briefly outline the background to the area in which
the woodcraft trade takes place. This is important in that, the prevailing conditions in
the Hazyview area (Mpumalanga) and the rest of the country are likely to impact
positively or negatively on the woodcraft trade. The South Africa craft sector is also
discussed to have a broader perspective of the state of the sector, and to determine
possible opportunities for people trading in crafts.
2.1 Profile of the Mpumalanga Province
Mpumalanga has an area of 82333 square kilometers, which is 6.7% of South
Africa’s total area (Meintjies, Rousseau and Viljoen 1995). The sectors with the
highest contribution of employment are: agriculture and forestry, mining,
manufacturing and services sectors.
The province is largely rural and pockets of poverty are huge in rural areas. In an
attempt to escape rural poverty, many people are migrating to urban areas, not
necessarily with the intention of settling there on permanent bases, but to access
markets and employment opportunities, which are scarce even in the urban setting.
According to Brynard and Mataboge (2000:197) people move from rural to urban
because ‘there is overcrowding of people in the already poverty-stricken rural areas
which leaves a section of these people with no option other than leaving their area in
order for them and their families to survive’. This view is also supported by a study
done by Slater (2000), which indicates that people generally migrate from rural to
urban areas for the purpose of accessing education, employment and income.
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This trend is also supported by the findings of this study, which show that all of the
craft workers (100%) interviewed come from rural areas. Their movement to urban
areas such as Hazyview is motivated by search for better trading opportunities or
markets. As indicated, craft workers are not settling in the town permanently, but
commute on daily basis from their homes to town, which has a market for crafts due
to the strong tourist presence in the area.
2.2 Tourism and its impact on the woodcraft trade in Mpumalanga
The Mpumalanga Province is one of South Africa’s top tourist destinations. It
consists of two contrasting types of scenery: the escarpment and the bush of the very
attractive lowveld. The province is endowed with valleys, rivers, waterfalls,
mountains, and forests. Some of the province’s tourist attractions, such as the Kruger
National Park, God’s Window, the Three Roundawels, the Swadin Dam, the
Sudwala Caves and Burke’s Luck Potholes in The Blyde River Canyon, are regarded
among the greatest natural features in Southern Africa.
The Province is also rich in cultural heritage. There are cultural villages of the
Tsonga and Ndebele, which tourists could visit. The beauty of the Mpumalanga
Province, which is epitomized in its natural resources and people, makes it the safari
capital of South Africa.
Tourism plays an important role in creating opportunities for traders to sell their
products. Glasson et al (1995:33) argue that ‘tourism can be the catalyst for national
and regional development bringing employment, exchange earnings, balance of
payment advantages and important infrastructural development’.
There are also negative impact that tourism can have on sectors that are dependent
on it in that it can create dependence on ‘what can be a fickle industry susceptible to
variables such as politics, crime and rumour’ (Glasson et al 1995:33). These
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