Milford Bateman has raised some important issues about the consequences of micro-lending to financially stressed South Africans (‘Microcredit: a principle cause of poverty in SA’, M&G, 29 December 2015, initially published as part of The Conversation Africa). He has also sought to identify who has benefitted and who has lost in the development of this system of micro-credit extention.
Bateman argues that the microcredit movement in South Africa expanded partly as a result of ‘policy responses of the first democratically elected government’, followed a ‘debilitating trajectory’, and that the model is ‘a fundamental block on sustainable development and growth at the local level’.
Professor Batemen has written an influential and generally well-received book on this subject (Why Doesn't Microfinance Work? The Destructive Rise of Local Neoliberalism), although at least one reviewer accused the writer of ‘sloppy thinking’, ‘dramatic conspiracy claims’, being loose in reasoning and careless in use of evidence. He has also undertaken major case studies on micro-lending which range, according to the book’s publishers, from India to Cambodia, Bolivia to Uganda, Serbia to Mexico.
These credentials notwithstanding, I have some concerns about Professor Bateman’s use and mobilisation of ‘race’ as an explanatory tool in his discussion about micro-lending:
'The microcredit movement thus helped plunge large numbers of black South African’s into deeper over-indebtedness, poverty and insecurity. At the same time, not coincidentally, a tiny white elite became extremely rich by supplying large amounts of microcredit to black South Africans.
'Not surprisingly, many in South Africa say that microcredit brought about the country’s own sub-prime-style financial crisis. It had its own local flavour, generating even more disturbing race-based exploitation overtones than even in the US.'
It may be that the vast majority of micro-lenders who took advantage of the policy choices made by South Africa’s first democratically-elected government were from what Professor Bateman terms a ‘white’ elite – although I have some recollection of micro-lenders linked to trade unions in the troubled Marikana area. Equally, in the early years of the new government, when I worked as a long-term consultant to a national department, I remember the micro-lenders who were decimating the monthly salaries of many of the staff I supervised being set up and run – at least in Pretoria – by small scale black owned financial institutions which were opening and closing at a rapid rate in the centre of the city.
I also recall then Finance Minister Tevor Manuel, who was political head of the Department I consulted to, publically expressing concern about the consequences of micro-lending and the repayment systems – including garnishee orders – which left some public service staff with a take home salary at month end inadequate even for food. This suggests that government was not unaware of the consequences of its new policy choices encouraging micro-loans.
I am inclined to query the professor’s unsubstantiated comments about the relationship between micro-lending and a ‘tiny white elite’ which became ‘extremely rich’ through micro-lending to black South Africans, and the ‘race-based exploitation overtones’ which this implied.
It is difficult to understand why the new post-apartheid government, elected by a majority of South African voters (by far the largest number being black) would introduce policies intended to benefit a ‘tiny white elite’. It is more credible that many new policy initiatives were aimed at facilitating and encouraging the development of a black middle class with a loyalty to the new poltical order, and an interest in its stability. This is a far more compelling explanation of developing financial, economic and political policy following the 1994 elections than the priorisation of a ‘tiny white elite’. If existing economic interests from the older order benefitted from this, it was more likely an unforeseen consequence of ‘black economic empowerment’ than a policy choice by the new government.
If Professor Bateman wants to ague that the the system of microcredit benefitted a ‘tiny white elite’, helping to make it ‘extremely wealthy’, then he needs to establish this through reference to research and credible data – not just by assertion.
This principle is even more important when assessing Professor Bateman’s assertion that the system of microcredit developed post-apartheid generated very disturbing ‘race-based exploitation overtones’. This may be so. Alternatively, it may rather be that the exploitative nature of post-apartheid micro-lending has benefitted an emerging entrepreneurial and rent-seeking class which defines itself in racial terms (‘black’ economic empowerment) but is better denominated by the nature of its economic activity than any assumed ‘racial’ identity.
That is why an agenda for substantial socio-economic change – transformation, if you will – cannot be developed solely on the basis of assertions about race and assumed ‘racial’ interests. This cannot explain developments or change in society, nor be the basis for challenging power relations and the elite interests they advance.