Inequality and Economic Inclusion

Saturday, 01 November 2008

Missing the Target: Business Development Support to the Second Economy

  • Year: 2008
  • Organisation: TIPS
  • Author(s): Lochner Marais
  • Countries and Regions: South Africa

Conceptualising the second economy

No detailed process will be followed in order to define the concept second economy’. The Second Economy Strategy Project (2008:2) probably summarises it best: “In sum, the concept of the ‘second economy’ is being used as a metaphor to focus policy attention on continued inequality, disadvantage and forms of marginalisation, and on how these limit economic opportunities and lock many people into poverty. The purpose is to understand how and why these conditions are still being reproduced, and to find ways to change that”. The above definition emphasises the aspects of inequality and marginalisation. Yet, some definitions also emphasise the link between the formal (first) and the informal (second) economies. In this regard, Rogerson (2004:770) emphasises that “… the largest numbers of new SMME births occur as a result of failures in the formal economy, and as a result of people setting up informal and micro-enterprises in the absence of formal work opportunities”. Dewar (2006) builds even further on this interrelationship when he argues that “It is misleading, from a policy perspective, to separate artificially informal, small-scale activities from larger, more formal ones. They do not operate in different economic circuits: indeed, they are inextricably interrelated, often with complex economic links” (Dewar, 2006). In considering the business support environment, which is central to this report, the following two basic assumptions are used as points of departure:

The second economy refers to the people who are in a marginalised relationship to the mainstream economy.

There is a complex but interrelated link between the second and the first economy which needs to be understood.