Economic decline and gentrification in a small town: the business sector in Aberdeen, Eastern Cape

Abstract

Small towns are a neglected topic of study but they are gaining importance in South Africa because of rapid urbanisation. This paper discusses a case study of business development and gentrification in Aberdeen, a small town in the Eastern Cape's Karoo. Although there has been a long-term decline in Aberdeen's economy, major changes are now taking place that call for more focused development policies. The findings of a 2006 business survey in Aberdeen are presented here and integrated with findings from the international literature on small town development. The paper shows that endogenous development of a small town's economy by its business sector can lead to some local economic growth; however, it needs to be assisted by judicious government investment. Aberdeen's economy will need a stronger level of municipal guidance to exploit its strengths and overcome its limitations.

Keywords:

• Small towns
• local economic development
• business development
• Karoo
• Aberdeen

1. INTRODUCTION: WHY STUDY SMALL TOWNS?

Small towns are a neglected topic of study in South Africa, as well as internationally. Much more focus is typically placed on metropolitan issues, and ‘deep rural’, traditional communities. In South Africa, the small-town sector has not appeared on any government department's list of priorities. This is a major problem for the small towns, because many departments’ activities have affected their development, mostly negatively, in the sense of inadvertently undermining their local economies (Atkinson & Marais, 2006). Small towns represent valuable ‘sunk capital’, and there are many people who wish to live in them.

The topic of development in small and intermediate towns is becoming of major significance. By 2000, about one-quarter of the world's population was living in urban centres with less than half a million inhabitants, many of them in towns with between 5000 and 100 000 people (Satterthwaite, 2006:17). Furthermore, government services typically use small towns as service centres for local populations and for people in the rural hinterland. Small towns therefore have strategic importance.

In South Africa, small towns are becoming increasingly important because of rapid urbanisation. They are typically the ‘first port of call’ for very poor people migrating from deep rural areas or from farms. At the same time, many of the more skilled people leave small towns in search of better job prospects in the cities. This translates into poor levels of urban management, a reduced tax base, and a dwindling middle class, with a concomitant loss of economic initiative and investment. It remains to be seen whether the economies of small towns are sufficiently robust to provide a livelihood for a major influx of newcomers.

This raises the question of the main dynamic for economic growth in small towns. There are disagreements between those who believe local efforts can generate sustainable growth and those who believe outside forces determine whether or not a small town will grow. The literature shows that a transferable formula for economic success is lacking. There are numerous theories to explain growth in small towns (Daniels, 1989:417–18; Tweeten & Brinkman, 1976:58–78). For example, neoclassical models focus on their comparative advantage, ‘export base’ theory emphasises their ability to provide products or services to regional or national markets, and ‘central place’ theories emphasise the services they provide to their rural hinterlands. Some theories focus primarily on the external or exogenous determinants of growth, such as globalisation or exchange rates, or labour markets. This paper starts from the premise of what could be called ‘internal combustion’ theory (Tweeten & Brinkman, 1976:75), an approach holding that local entrepreneurs, through their own ingenuity and willingness to accept risk, can build up the local economy. The theory emphasises the importance of government's role in attracting, retaining and expanding existing firms and fostering the creation of new local businesses.

Our case study is the small town of Aberdeen in the Eastern Cape Karoo. The spluttering Aberdeen economy parallels that of many other small towns worldwide. Many small towns and regions in North America have been in a state of long-term economic decline. In recent years, however, small towns in the USA and other developed countries have begun to realise they have a stake in the vitality of their ‘downtown’ and local economies (Go et al., 1992:32). In South Africa, some small towns are also showing signs of revival. For example, small towns situated on interprovincial transport routes, and those in idyllic settings, are showing signs of growth (Donaldson, 2007).

For Aberdeen, the key question is: Can this town reverse its long period of decline? With the de-racialisation of small-town economies since 1994, is Aberdeen now on an upward growth path? Or has it entered a phase of economic stagnation, with widespread poverty and limited investment? To understand the post-apartheid economy of Aberdeen, this paper includes a historical analysis of local economic activity and a survey of current businesses. The case study involved 10 key stakeholder interviews with community leaders and municipal officials, and a focus group discussion with local businesspeople.

The paper concludes by arguing for more focused development policies to bolster small towns. Small-business investment needs to be supported by judicious government investments in local economic infrastructure. While the local municipality has adopted a strong stance on local economic development, this still has to bear fruit in practice. At provincial and national levels, there is much that could and should be done to support local entrepreneurs in small local economies like Aberdeen.

2. ABERDEEN: AN ECONOMIC OVERVIEW

Aberdeen is one of three towns making up the Camdeboo Municipality, the other two being Graaff-Reinet and Nieu-Bethesda. Aberdeen is located about 60 kilometres southwest of Graaff-Reinet, on the main highway to George. The town has shown some signs of gentrification (the renovation of a district to reflect middle-class values) and tourism promotion. Furthermore, the Camdeboo Municipality has developed a strong interest in promoting local economic development, and the study aimed to help the municipality in this regard.

The 2001 Census indicated a total population for Aberdeen, including its two townships, of 7083 (Aberdeen, 1140; Lotusville, 4427; and Thembalesizwe, 1516). The town's population and racial profile have fluctuated dramatically during the past century. In 1895 its total population was only 1225 (Brown & Brown, 1895). By 1935, it had increased to 3410, of which 1840 were whites (Union of South Africa, 1937). At this stage, whites were 53 per cent of the population – the year when whites made up the largest proportion in the history of Aberdeen. By 2001 the population had increased sevenfold, to 8662, of which only 11 per cent were whites (Statistics South Africa, 2001). The black population increased by 54 per cent between 1961 and 2001 (from 940 to 1449), and the coloured population almost tripled in the same period, from 2354 in 1961 to 6158 in 2001 (Cook, 1971:7; Statistics South Africa, 2001).

The fortunes of the white population of small towns are particularly important for an economic analysis. These are a good indicator of economic activity, since virtually no black or coloured businesses were allowed before 1990. Even today, because of high levels of income inequality and the concentration of entrepreneurial experience in the white community, the proportion of white entrepreneurs remains an important indicator. After the Second World War, white people's standard of living steadily improved – and this created an inexorable trend of moving to larger cities, where they could find better education and more professional jobs. The 1970s were the low point of Karoo towns, in a process of long-term decline (Nel & Hill, 2008). Many erstwhile flourishing trades disappeared because the needs of the local economy were changing.

The black and coloured populations of small towns increased markedly after 1960. After 1990, the increase was primarily due to the loss of agricultural jobs on the farms and the apparent influx from other areas (e.g. the erstwhile Ciskei), although this trend still needs to be fully documented. During the latter half of the twentieth century the Karoo towns experienced an economic decline, for several reasons:

• the disadvantageous geographic location of the Karoo region relative to the major national centres of production and consumption;

• the lack of exploitable mineral resources and raw materials (with the exception of wool and meat);

• frequent droughts;

• a long-term decline in demand for wool;

• the very high proportion of external earnings accounted for by subsidies and other transfer payments to individuals and institutions in the region;

• the low purchasing power of the region's population, and its low market potential;

• the general unimportance of the region in terms of national development policies; and

• poor backward and forward linkages between productive activities in the region: notably, the agricultural sector obtains its inputs from outside the region, and agricultural products are not processed within the region.

Unemployment in Aberdeen is estimated to be 33 per cent of the local workforce (Cacadu District Municipality, 2005:93). It is not surprising, therefore, that the number of people now living in poverty in Aberdeen is large, and the levels of poverty are growing for all race groups (Statistics South Africa, 2001), as Table 1 shows.

Table 1: People living in poverty in Aberdeen – 1996 and 2001

	People living in poverty, 1996	%	People living in poverty, 2001	%
Black	579	42	760	53
White	21	2	40	4
Coloured	2547	41	3047	50
Total	3148	37	3847	44

The fact that one-half of the black and coloured population is classified as living in poverty indicates that Aberdeen's economy is not meeting the needs of its people. Local households may be surviving because of remittances sent by family members working elsewhere. In a comparative study of three other Karoo towns, the extent of labour migration was estimated to affect about 20–25 per cent of households (Marais & Atkinson, 2008).

At present there are two major trends. The first is the growing dependence of the local economy on social grants. The second is the new wave of gentrification, which is leading to some capital investment in the town (mainly in terms of renovating homes and guesthouses), and therefore to some increased local demand. Both these trends affect business activity by stimulating local economic multipliers.

3. A HISTORICAL PERSPECTIVE ON BUSINESS DEVELOPMENT IN ABERDEEN

One way of understanding the changing functions of the town is to consider the kinds of trade during the last four decades. Table 2 presents the decline of some kinds of trade and the emergence of others.

Table 2: Business trends in Aberdeen – 1961, 1971 and 2006

	1961^a	1971^b	2006	Trend
Bank and bank branch	3	3	2	Decrease
Cash loans			1	New type
Garage/vehicle repair	3	3	3	Static
Building society	2	2	–	Type disappeared
Insurance office		1	–	Decrease
Medical doctor and specialist		1	2	Static
Chemist	1	1	–	Decrease
Attorney	2	1	1	Decrease
Estate agent and auctioneer	3	2	4	Static
Butchery	3	6	1	Decrease
Dairy	1		–	Decrease
Tea room/café/tuck shop	2	3	3	Static
Bakery	1	–	–	Decrease
Bottle store	1	1	4	Increase
Restaurant			2	Increase
Department store			1	Increase
Groceries/general dealer	21	6	14	Decrease, then increase
Produce buyer		2	–	Decrease
Wholesaler			–	Decrease
Hardware	1		2	Increase
Speciality/arts and crafts			3	Increase
Electrician/plumber		2	1	Decrease
Builder/carpenter		1	4	Increase
Hotel/guesthouse	1	1	5	Increase
Art gallery			1	New type of business
Nightclubs			1	New type
Transport		2	4	Increase
Clothing/tailor	4	–	2	Decrease
Funeral service	1		1	Static
Hairdresser	3	1	1	Decrease
Upholsterer/furniture		2	1	Decrease
General agent	1	2	–	Decrease/disappeared
Printing	1	1
Brickmaker	1
Bicycle shop	1
Windmills	1
Cinema	1
Hides and skins	1
^a Braby's Business Directory, 1961, p. 1-C. ^b Cape Times Directory, 1971, p. 1.

Several sectors in Aberdeen have declined during this period; for example, banks and building societies, insurance offices, chemists and attorneys. A significant factor is the decline of agriculture-related businesses, such as butcheries, produce buyers, dairies, windmill repairers, and hide and skin sellers. Several service trades have also declined (electricians, hairdressers, clothing stores, plumbers, furniture sellers, printers and brickmakers). The businesses that have increased in number recently are bottle stores, groceries (particularly because of the rise of spaza shops), and shops related to the tourist industry (restaurants, a curio shop, an art gallery). The absence of manufacturing in most Karoo towns was very evident in Cook's study in the 1970s (Cook, 1971:51). There is still very little manufacturing in Aberdeen, and this keeps employment levels down.

4. A SURVEY OF BUSINESSES IN ABERDEEN

Aberdeen's central business district consists of one main street with a few businesses located on six side streets. The imposing Dutch Reformed Church building in the main street is a historic landmark. Several gracious old buildings have been refurbished, and some are now functioning as guesthouses. The town is still largely structured according to apartheid principles. Thembalesizwe township is located to the southeast and Lotusville coloured township to the south of central Aberdeen.

The study, conducted in July 2006, used a detailed questionnaire to poll 61 business undertakings. With the significant exception of the estimated 100-plus shebeens operating in Aberdeen, it is estimated that the survey captured about 90 per cent of the Aberdeen businesses. In about one-third of the cases, the owner was unavailable and a shortened set of questions was answered by a manager or supervisor. Only 12 of the businesses were based in the two townships.

4.1 Number of businesses and business profile

To assess the degree of formality and informality of businesses, two proxy indicators were used. Firstly, four of the 61 businesses did not have a bank account, which suggests that they are extremely informal. Secondly, the types of premises indicated the degree of formality. About three-quarters of them operated from formal premises, while five were based in brick structures alongside private homes, and 11 worked from home. This suggests that informal businesses amounted to less than 20 per cent of businesses. The survey did not ask whether businesses were registered with government, as this could have contributed to the possibility of false answers.

All the respondents were either business owners or business managers in Aberdeen (including Thembalesizwe and Lotusville). About one-third was under 36 years of age and just over one-half were aged between 36 and 60 years.

The racial classification of the business owners or managers does not reflect the demographic composition of Aberdeen. The town's population is 11 per cent white, but 54 per cent of the businesses are white-owned. In contrast, the population is 71 per cent coloured, but only 20 per cent of the businesses are coloured-owned. The black population is fairly accurately reflected, however: the population is 17 per cent black and 18 per cent of the businesses are black-owned (Camdeboo Local Municipality, 2005:8).

In the July 2006 survey, about 60 per cent of the respondents were mainly Afrikaans-speaking, only 15 per cent were English-speaking, and 20 per cent were Xhosa-speaking. Almost two-thirds of the respondents were male. These respondents included owners and managers.

Table 3 presents the variety of businesses in Aberdeen at the time of the survey. One-quarter were in household groceries and foodstuffs. A significant one in six was in the construction or artisanal sector. This figure probably reflects the recent upsurge in the gentrification of Aberdeen as well as the opportunities created by various housing programmes. About one-sixth of the businesses were guesthouses and eateries. It is singular that there appeared to be only one undertaker in the town, and only two concerns providing personal services such as hairdressing. This shows that typically informal commercial activities are markedly underdeveloped in Aberdeen.

Table 3: Businesses in Aberdeen, July 2006

Type of business	n	%
Groceries, vegetables, butcheries, bakeries	15	25
Cars, mechanics, filling stations	3	5
Construction, artisans	10	16
Restaurants, eateries	3	5
Accommodation	5	8
Bottle stores, shebeens (excluding illegal shebeens)	6	10
Clothing	3	5
Arts and crafts	3	5
Funeral services	1	2
Health/medical services	1	2
Transport, taxis	3	5
Personal services – hair, beauty	2	3
Furniture	1	2
Financial services, banks	3	5
Real estate	2	3
Total	61	100

Interestingly enough, just over one-half of the interviewees had been living in Aberdeen for over 20 years and only eight of them had been living there for less than three years, as Table 4 shows. This would seem to confound perceptions that it is newcomers driving the local economy. Nevertheless, the fact that eight newcomers had indeed started businesses may suggest that there is some kind of revival and renewed confidence in the local economy, associated with a visible trend towards gentrification in the central parts of the town. Although there are 22 very new businesses, only these eight business owners were recent arrivals in Aberdeen. This suggests that some of the more long-standing residents are starting new businesses. Indeed, just under one-third fall into this category (see Table 5).

Table 4: Length of residence in Aberdeen

Resident in Aberdeen	n	%
Recent (1–2 years)	8	13
3–10 years	14	21
11–20 years	7	12
Over 20 years	31	51
Total	61	100

Table 5: Length of ownership of businesses

Ownership of businesses	n	%
Recent (1–2 years)	22	44
3–10 years	18	36
11–20 years	5	10
Over 20 years	5	10
Total	50	100

It was remarkable that 80 per cent of the businesses (49 businesses) had been owned for less than 10 years. This gives substance to the general perception that the Aberdeen economy has picked up in recent years. However, this increase in the number of new businesses is not necessarily a sign of increased economic confidence in the town; it may also indicate that local residents’ level of income has become insecure or insufficient, hence the need to undertake a new enterprise. According to one local informant, there had been no real growth in the Aberdeen economy, and many small businesses were coming fleetingly into being before failing or closing.

The more recent businesses had been set up particularly in the following sectors: groceries, vegetables, butcheries, bakeries, accommodation, restaurants, alcohol sales, clothing, and arts and crafts. In contrast, the businesses that had been in existence for over 20 years were a motor workshop, the filling station and some transport operators. Only 11 of the businesses actually manufactured their own products (mostly food). There were no hawkers or street traders in evidence.

A privately owned vehicle was by far the most common means of business travel, which suggests a level of formality and affluence. By contrast, only six of the respondents were using taxi transport.

Just over two-thirds of businesses had been financed by personal savings whereas about 20 per cent of start-ups had recourse to loans, suggesting a very limited scale of operations. Only two start-ups had been financed with social grants.

The questionnaire also asked about business turnover (which was distinguished from ‘profit’ when the questions were posed). The concept of ‘turnover’ was not always clear to interviewees, which suggests either a widespread lack of business acumen or a difficulty with terminology and language. Only about 40 per cent of respondents (24) were willing to answer this question (see Table 6).

Table 6: Monthly turnover (business revenue)

Monthly turnover	n	%
R0–R500	3	7
R1001–R5000	9	22
R5001–R10 000	6	15
R10 001–R50 000	11	28
More than R50 000	11	28
Total	40	100

Just under one-half of the businesses (27 businesses) recorded a turnover of less than R10 000 a month. This suggests a large number of very small operators. One-third of the interviewees had problems with bad debts. This could suggest that high levels of local poverty put pressure on many of the micro enterprises to provide goods on credit, sometimes with little assurance that their clients would ever pay.

4.2 Views on the economic climate in Aberdeen

Perceptions as to whether Aberdeen's economy was improving, declining or static were very mixed. Less than one-half of the owners believed there was an upswing, about one-quarter believed quite the reverse, and one-third claimed the economy was stagnating. The sectors that were particularly optimistic about Aberdeen's economy were transport and real estate. Just over one-half the owners (34 owners) said they wanted to diversify their undertakings, which suggests that local businesses believe there is untapped potential in the local economy (see Table 7).

Table 7: Diversification options

Directions for diversification	n
Groceries, vegetables, butcheries, bakeries	3
Construction, artisans	3
Restaurant, eatery	2
Bottle stores, shebeens	1
Clothing	1
Arts and crafts	5
Health	1
Personal services – hair, beauty	1
Furniture/appliances	4
Gardening/crops/agriculture	2
Selling electricity	1
Gambling	1
Events management	1

Two-thirds of the owners were looking to upgrade their premises, which also suggests a level of confidence in the future. The biggest obstacles to business expansion they cited were, not surprisingly, a lack of demand because of the high unemployment rate, and a lack of capital for expansion.

The respondents' feelings about the changes in their client base differed widely. One-half of them maintained that it had grown, while about one-quarter said it had shrunk and another one-quarter said it had remained static. The ones who had particularly noticed an increase in the number of clients were in the business of construction and artisan work, restaurants, alcohol outlets, clothing stores, transport, and funeral services.

Significantly, most businesses with a local client base believed that their client base had grown in the previous 2 years, whereas most of those whose client base was non-local thought it had shrunk. This suggests that local sources of purchasing power (such as social grants) are indeed being spent in the local community, while businesses depending on clients from other centres possibly need more active marketing.

The businesses that had experienced a declining or static client base were mechanics and filling stations, accommodation, arts and crafts, and furniture sellers.

4.3 Employment creation

Table 8 presents the level of job creation by Aberdeen businesses. It would appear that, very roughly, a total of about 220 people found permanent employment with the private-sector businesses polled. This represents just 3 per cent of the total 2001 census population, and this low figure might reflect a general reluctance to employ staff except when absolutely necessary.

Table 8: Employment creation by Aberdeen businesses

Number of employees	n	%
None	8	13
1–2	26	43
3–10	22	36
11–15	3	5
More than 15	1	2
Total	60	100

4.4 Education, training and business support

The education levels of the business owners and managers were generally high (see Table 9).

Table 9: Education levels of business owners and manager

Education level	n	%
High school – Grade 10	18	30
Matric – Grade 12	23	38
Diploma	12	20
University degree	7	12
Total	60	100

Of the business owners themselves, although three-quarters of them had not had any formal training related specifically to their undertakings, about one-half reported having undergone on-the-job training and well over one-half said they had received relevant training at a previous workplace. Just over one-half of the respondents believed they were in need of further training, mainly in management skills and finance or accounting (see Table 10). More than two-thirds of the owners said they would be interested in receiving business mentoring and nearly as many said they would value free tax advice. Just less than one-half said they would be interested in receiving business loans to grow their businesses.

Table 10: Training desired for business owners and employees

Type of training desired	For business owners	For employees
Bricklaying/building	3	5
Carpentry	1	1
Computer skills	2	3
Management	11	13
Sewing/weaving	1	1
Accounting/bookkeeping/finance	4	2
Marketing	3	–
Cooking	1	–
Hairdressing	1	–
Plumbing	–	1
Customer service	–	2
Driving	–	2
Nursing	–	1

Almost one-half of the interviewees thought their employees would benefit from training. At a focus group meeting held with the Aberdeen business community, the issue of training was of major interest to the participants, who were extremely frustrated at the lack of access to Department of Labour training programmes. This indicates that there is a real need and opportunity to improve employees' skills levels. Table 10 presents the types of training business owners would like to receive for themselves and their employees. Generally, there was a significant demand for training in Aberdeen.

The town is fortunate in having a well-resourced non-governmental organisation. The Masiphathisane Development Centre was started in September 2002, and with the aid of funds from the State Lottery it has secured fully equipped offices, with communications infrastructure, a computer training centre and facilities from which a craft project operates. Masiphathisane is a member of the Eastern Cape non-governmental organisation coalition, and could provide a valuable facility for future training programmes.

4.5 Local multipliers in Aberdeen

Local multipliers reflect the amount of goods and services purchased locally, and therefore the amount of local economic activity generated by local businesses. Although only seven of the respondents sourced their supplies solely from within Aberdeen, about 70 per cent (42 respondents) reported that their client base consisted solely of local residents. Only the five guesthouses reported that their custom came solely from outside the local community. Clearly, most businesses' existence is in response to local demand. A significant weakness in Aberdeen's economy is the considerable leakage from the local economy in favour of Graaff-Reinet, partly on account of the generally poor availability of consumer goods in Aberdeen.

4.6 The liquor trade

Many stakeholders were concerned that liquor trading was far too pervasive in Aberdeen. The Camdeboo Local Municipality's approach is to regulate shebeens, rather than prevent them (in which case they simply go underground). Several interviewees thought that the Council's licensing policy was not strict enough. Furthermore, the police are hamstrung by a general confusion as to what Camdeboo's liquor licensing policy actually is. The municipality is currently drafting a new liquor licensing policy. The Council does not itself issue liquor licences (this is done by the provincial Liquor Board); it only gives permission for ‘departure use’ (i.e. when a resident applies for a departure from a residential zone to a business zone). The municipality decides where taverns may be established, and what hours they may trade. Officially, departure use is only granted once a fairly elaborate procedure of local consultation has been followed, although it is not clear whether this process is in fact always adhered to. Departure use is granted for a period of 5 years, after which it may not be renewed if there have been a lot of complaints. Successful applicants are also advised that they will forfeit their indigent grants.

The extensive liquor trade in Aberdeen seems to be a result of several factors. Many people have applied for departures, and have been granted permission to operate taverns. Many others are trading without any licence, and many are trading with permission from the Liquor Board but without having secured Council permission. The entire licensing process seems to be bedevilled by confusion about the appropriate powers and functions of province and its agencies, as distinct from those of local government. The topic of alcohol distribution is an issue that deserves a separate study in its own right, particularly because it reflects a trend towards alcohol consumption that seems to be prominent nationwide. Policy-makers have attempted to reconcile the livelihoods of tavern owners with an awareness of the many social ills caused by alcohol abuse (Department of Trade and Industry, 1997). The growth of illegal liquor outlets confuses business data, because although these enterprises inflate business figures, they detract from the vitality of local communities.

4.7 Business organisations in Aberdeen

There is little organised support for businesses in Aberdeen. A large majority of the owners (49 respondents) reported that they had not received help from any institution in setting up their business.

About one-third reported belonging to any kind of trade or business organisation. The most prominent was the then newly established Aberdeen Business Development Forum, which aimed to uplift local business and organise informal operators, primarily in the construction sector at the time of writing. Other noteworthy support agents were the Masiphathisane Forum for Small Business, and the Umsobomvu Fund. These organisations could form the nucleus of a networking strategy if the business community was to become more organised. Significantly, more than 75 per cent of the respondents said they would join a Chamber of Commerce in Aberdeen in the event of such an organisation being established.

The resuscitated Ward Committee has organised itself into a number of subcommittees, one of which is for Business and Publicity, and another for Economic Development. Both of these are chaired by entrepreneurial newcomers to the town, who should help to infuse these portfolios with valuable new perspectives and ideas.

5. POLICY QUESTIONS ARISING FROM THE ABERDEEN CASE

The research in Aberdeen suggested several unresolved policy issues. The recommendations in this section are by no means definitive; they are provided in order to highlight the need for future policy investigation.

5.1 The decline of the agricultural role of small towns

According to many recent researchers (such as Xuza, 2005; Satterthwaite & Tacoli, 2006), one of the key strengths of small towns is their linkages with rural areas. But while this may be the case in other parts of Africa, it is not a true characterisation of the small towns in South Africa's commercial farming areas. Many farmers sell their products at markets in larger centres. Aberdeen appears to have lost its primary function of providing goods and services for the farming community, or of processing local agricultural commodities. Satterthwaite and Tacoli (2003:4) characterise situations of poor rural-urban linkages as follows:

• Farming is dominated by large export-oriented units.

• There is a demand for sophisticated non-farm goods and services, mainly by the wealthier elite.

• There are limited opportunities for local income diversification.

• There are limited opportunities for small-scale farming, manufacturing or production.

• The local urban centres have a limited role in basic service provision, and focus primarily on the distribution of cheap imported goods.

• Produce bypasses local centres in favour of larger export centres.

• Value-adding activities take place outside the region.

• These factors result in local economic stagnation.

Unfortunately these factors also present an accurate characterisation of Aberdeen's economy. Agricultural production is not stimulating off-farm non-agricultural enterprises. Commercial farmers now compete in the globalised world with very little tariff protection or marketing support, and this reduces employment levels. Minimum wage legislation has also encouraged farmers and other enterprises to make do with relatively little labour. Emergent farmers – particularly those on municipal commonage – have received no support for production or marketing.

5.2 The continuing strategic role of small towns

Despite the decline in agriculture-related businesses, small towns typically offer a site for the provision of governmental and social services. This is still an important function of Aberdeen, as evidenced by the magistrate's court, the post office, the police station, the schools, the clinic, and the hospital. Since 1993, white and coloured middle-class children have been sent to school in larger towns, and this has meant the loss of a great deal of purchasing power, as many parents shop in the larger centres when they take their children to school. Several non-state institutions in Aberdeen have made an important contribution to the local economy, such as the old-age home, the agricultural cooperative and Masipathisane Training Centre.

At the time of writing, several factors were contributing to a general air of optimism, including the plans to tar the road between Aberdeen and Baroe (in the direction of Port Elizabeth), increased governmental expenditure on highway maintenance, and the growing appreciation of Aberdeen's tourism potential, especially its architecture, heritage and rustic ambience.

This suggests a degree of economic potential that has not yet been identified and promoted officially, at least at the provincial and district levels. Aberdeen has not yet received any sustained support with regard to tourism development, business advice, or public construction works. Nationally, there is no government policy to support small towns. This is a typical phenomenon in developing countries: ‘The growth, or the stagnation and decline, of small and intermediate urban centres … is often strongly influenced by macroeconomic strategies, pricing policies or sectoral priorities that make no explicit reference to spatial dimensions’ (Satterthwaite & Tacoli, 2003:5). Similarly, in South Africa, neither the Integrated Sustainable Rural Development Strategy nor the Urban Renewal Strategy contains a coherent policy for small towns (Xuza, 2005:91). In terms of the National Spatial Development Perspective, government economic investment should be directed to ‘areas with potential’, and the Karoo has certainly not been defined as such an area. The Eastern Cape Provincial Growth and Development Plan places much greater emphasis on promoting the eastern part of the province than on the Karoo areas.

Development thinking elsewhere in the world suggests that equitable spatial and socio-economic development should be a priority. Development should be focused not only on the cities but also on the smaller towns. As Mukherji says, with reference to India: ‘Strenuous attempts have to be made for achieving a more equitable distribution, over the whole national space, of productive forces and units and of means of production, employment, consumption and investments, as well as of services such as schools, hospitals, and vocational training’ (2006:328).

Much more can be done by government to kick-start economic development in small towns. It should be a priority to attract public or private investment to these towns; for example, by using public infrastructure to attract and boost sectors such as tourism or agro-processing, or by providing major public services (such as new training colleges, prisons, orphanages, old-age homes and agricultural research stations), which draw on local advantages (such as affordable land or vacant buildings). Such a state-led approach is a necessary, but not sufficient, condition for local economic growth, and should be undertaken in conjunction with the ‘internal combustion’ dynamics referred to earlier. A new injection of sustained government capital is required to bring additional professional people and skills to Aberdeen, and for their salaries to stimulate new purchasing power. But at the same time the local government should actively encourage private-sector investment in the local economy by marketing the investment potential of the town – in particular as regards tourism, retailing, crafts and personal services. There is already a new wave of private investment – this now needs to be matched with public-sector commitment.

There is much scope for learning from the international literature on small-town revitalisation. Experiences in the United States, for example, suggest several possibilities: (1) promoting diversification (e.g. from tourism to craft manufacture); (2) downtown revitalisation and ‘main street programs’; (3) raising dedicated local taxes to invest in infrastructure, local business and job training; (4) aggressive pursuit of state and federal grants; and (5) professionally run business incubators (Daniels, 1989:420). In addition, government should promote investment by the middle-class elderly. ‘Retirement counties’ in America show strong population growth, and transfer payments (such as pensions) make up over one-half of all income in such towns.

5.3 The importance of ‘reverse migration’

Small-town functions would benefit from an emerging modern middle class of entrepreneurs, professionals and civil servants, who have the training, the knowledge and the means to exploit new opportunities and to develop more efficient hinterland relations (Hinderink & Titus, 2002:387). The recent influx of skilled and experienced investors – many of them from the cities – is an important factor in Aberdeen's economy. This is an international phenomenon. The trend towards ‘reverse migration’ or ‘population turnaround’ has been recognised as one of the most important demographic trends in the United States. It is the result of a renewed preference for rural living, which is facilitated by the modernisation of rural life, including all-weather roads, highways, telecommunications and improved water and sewerage systems (Brown & Wardwell, 1980:14).

In South Africa, city dwellers who are becoming despondent about urban living are ‘semigrating’ to small towns (Donaldson, in press), preferring a stress-free country lifestyle in a small town, where property prices are lower, and often choosing to settle in a small town that is not too distant from a major city so that they can continue their middle-class consumption patterns. Donaldson (2007) also notes that these urban–rural immigrants are chiefly responsible for the diversification of the rural economies of small towns. They have significant business skills and, most importantly, capital to invest.

In Aberdeen, this influx of modernisers has led to a degree of gentrification of the central business and residential area, particularly where buildings have an architectural heritage. Some of these ‘gentrifiers’ have brought scarce organisational and economic skills, and revived the municipal ward committee and the business forum. However, gentrification is a much-contested phenomenon, because it combines various benefits (such as improved housing stock, an increased tax base, increased local prestige and local employment) with possible social costs, in particular the exclusion of the poor because of the rise in property prices (Lang, 1982:33). Paradoxically, it is possible that gentrification could promote economic growth and employment while simultaneously increasing class inequality.

5.4 Sectoral clustering in Aberdeen

There is little evidence of ‘clustering’ of certain kinds of firms in Aberdeen. A measure of clustering could benefit Aberdeen by lowering costs for producers, ensuring a pool of specialised workers, improving access to suppliers of specialised inputs and services, and facilitating the dissemination of new knowledge and opportunities (Satterthwaite & Tacoli, 2006:168). Two sectors here have the potential to develop the ‘critical mass’ to ‘cluster’: the construction sector, based on highway maintenance and public works, and arts and crafts, based on the tourism and export markets. However, these sectors will require a great deal of facilitation, organisation and support. Already, the creation of a contractors' forum in Aberdeen suggests that the emergent black and coloured construction entrepreneurs want to organise themselves more effectively, but they have yet to engage constructively with the municipality or other role players. A small but active tourism forum supports the local guesthouse establishments and markets Aberdeen's attractions to visitors.

Aberdeen does not benefit adequately from the traffic on the N9 highway. This latent market generally carries on to Graaff-Reinet or George. Recently, some restaurants and curio shops have opened in Aberdeen to attract this market, but the lack of signage prevents them from functioning to their full potential. Again, this suggests a strategic role for the municipality, to facilitate marketing and signage to attract custom from the highway (Bell & Lyall, 2002).

5.5 Competition with regional centres

Because Aberdeen's retail sector does not provide an adequate level of specialised products and services, purchasing power is lost to nearby Graaff-Reinet. Even poor people in Aberdeen prefer to shop in Graaff-Reinet, where the prices are lower and there is more choice.

The presence of branches of large and modern companies in Aberdeen is critical – particularly the banks and PEP Stores. These make shopping in Aberdeen more attractive and help to keep customers in the town. Where feasible, more companies should be attracted to the town. Creating an economic balance between a large town and its smaller satellite town – for example, between Graaff-Reinet and Aberdeen – should be a central consideration in municipal economic policies and programmes. Without such initiatives, the economic momentum of the larger towns will continue to ravage the economies of small towns. Cooperative networking between Aberdeen and its neighbouring towns should be encouraged (Bradshaw, 1993:174). Coalitions of communities can be established, based on shared interests, such as watersheds, communal farming, ecosystems, tourist regions and highway corridors. The key is that leadership must be developed to identify and promote shared interests. This would be an obvious task for the local municipality.

5.6 Support for small businesses

The fact that the black component of the Aberdeen business sector has reached 18 per cent and the coloured component 20 per cent suggests there has been some improvement in black and coloured participation in business. However, the informal sector remains weakly developed. The municipality urgently needs to spearhead a strategy to lure potential traders away from the liquor business to more socially constructive alternatives. This will include, inter alia, helping school-leavers access new business ideas, technical training, basic equipment and sources of start-up capital. As in the rest of Africa, there is a need for apprenticeships and mentoring (McGrath, 2003:45). Networking with potential business support agencies (such as the Umsobomvu Youth Fund) needs to be improved. This is an important task for the local municipality.

Aberdeen also has a pent-up demand for training that is not being met by the Department of Labour's skills development programme. The training system the Department provides appears to be difficult to access, since potential trainees have to organise themselves into groups of at least 10 members and prove that they have already started up their business. But a lack of skills and capital inhibits them, and thus they find themselves in a catch-22 situation. The municipality needs to help entrepreneurs access the Department's services.

5.7 The developmental role of the Camdeboo Municipality

The Municipality's attempts to boost the local economy have had mixed results. In 2002, the Municipality budgeted R60 000 for job creation in Aberdeen. This appears to have involved cleaning up cemeteries and the river. The 2002 Council minutes also reveal that a chicken project had been established in 1998 but subsequently gone bankrupt. Such short-term and poorly managed projects have poor prospects of boosting the local economy. In the stakeholder interviews, a number of projects (to do with community gardens, welding, hawkers, bricklaying, plumbing, carpentry, needlework, waste recycling and painting) were envisaged for Aberdeen, but these appear either never to have got off the ground or to have miscarried, for a variety of reasons.

The developmental role of the Camdeboo Municipality will be critical in future. Time and again the international literature points to the leadership role of local government in galvanising local energies, creating common understandings, reaching common goals and negotiating with stakeholders (Daniels, 1989:417). Local municipalities are expected to engage with communities so that concerted social and economic actions can be undertaken (O'Toole & Burdess, 2005:243). Mutual communication and understanding between the Aberdeen business sector and the Camdeboo Municipality need to be structured more effectively.

Municipal and provincial procurement could offer valuable opportunities for local entrepreneurs to secure a greater market share. An obvious possibility is a solid-waste removal services. However, the small size of local companies and their lack of financial and technical capacity may hamper public procurement efforts. Aberdeen's entrepreneurs may not be able to compete with Graaff-Reinet's more sophisticated business sector. Proactive efforts will be needed if Aberdeen entrepreneurs are to access contracting opportunities.

Although Camdeboo Municipality has limited staff resources and a huge area to administer, its local economic development officer has built up good relations with local business leaders in Aberdeen, on an informal level. The presence of the Community Development Worker function provides an important mechanism for helping small entrepreneurs in Aberdeen. It is the municipality's task to ensure that this function is exploited to the full.

6. CONCLUSION

The Aberdeen business survey highlighted several aspects of the local economy – both positive and negative. In recent years, Aberdeen's economy has received a boost because of the skills and capital brought by a wave of middle-class in-migrants, but their impact has not been felt throughout the local economy. Gentrification promises to add to the local economy, but huge social inequalities may continue or even intensify. There are many promising features, not least the wide range of shops and services still available, the recent increase in community involvement via the Ward Committee, the newly launched Aberdeen Business Development Forum, the Masiphathisane non-governmental organisation, and the recent influx of talented city people to Aberdeen.

However, the town's economy will need a much stronger level of municipal guidance to exploit its strengths and overcome its limitations. It needs to work with the local business sector (possibly by means of a Chamber of Commerce, or through the Ward Committee) to market local business more actively, and to find ways of keeping local purchasing power in the town. The most promising approach will be one of incremental ‘quick wins’, whereby small but important achievements can be gained in the short term, to create confidence and build momentum.

At a more strategic level, Camdeboo Local Municipality should actively lobby provincial and national government departments to extend their services or programmes to towns such as Aberdeen. Even the achievement of one new anchor public service (such as an orphanage) could make a major difference to local economic multipliers.

Thus far there has not been a really concerted approach to promoting the Aberdeen economy. But the institutional fabric for this is already in place. The Camdeboo Municipality's resurgent local economic development focus should prove a crucial point of contact to take these issues forward.