Creating capital with soul

I would like to make a contribution to President Thabo Mbeki’s views in the article “Markets can’t do it alone” (July 18).

I have had the privilege of being in South Africa for the past three years. I am an American businessman who knew Peter Biehl in the United States. He and Linda Biehl invited me to help them with an idea for a community bakery that sells Amy’s Bread to the disadvantaged.*

I have been a mentor to the people at the bakery and have some first-hand knowledge of the struggle for transformation of South Africans in need of jobs and sustainability.

Mbeki reasons that capital has no soul. It simply seeks to be maximised and does not care among which socio‒economic group, political party or race it is deployed. This can be the greatest benefit of capitalism as scarce resources can be allocated without prejudice.

However, because capital has no soul, a requirement to convert the majority of the population into the mainstream of workers and spenders must include someone or some group with a soul and the support(s) to make this transition to the new mainstream possible. In this endeavour I have first-hand experience.

Since March 2000 the Amy Biehl bakery has sold three-million loaves of Amy’s Bread in the George communities. We set the price at R1 a loaf lower than the competition, but equal to the cost of bread at the main-street supermarkets. We have, therefore, saved the people R3-million on their purchases of bread simply by our entry to the free market. In addition, the bread price of our competitors was reduced by R1 a loaf.

This is easily R20-million that the people have saved on bread in our three years. So far so good, free enterprise and free markets (with a little bit of help) are working.

Amy’s Bread programme was set up because people were hungry and they needed jobs and training. Making a profit and maximising capital took third place on our list of goals. Weaving a barrier against violence and changing human life took first and second place for the Amy Biehl Foundation.

However, any baker knows that to maximise capital in a bakery you must have a product mix that averages margins over higher value-added products such as rolls and cakes and other confectionary products.

But, at the back of Thembalethu in George or Guguletu in Cape Town, the people do not have the money for these products. So capital should turn away from these people since all they want is low-margin bread.

However, the whole idea is affordable bread as well as empowerment of the workers and the resellers of Amy’s Bread so they can get into the South African mainstream, increase the market for goods and services by about 30-million people, and attract foreign capital for growth and jobs. Capitalism was given a little soul to make things work.

Our community bakery is, nevertheless, under pressure because “it is a business and does not make a profit”. Amy’s Bread has a soul, but capital doesn’t. That’s the dilemma and it won’t be solved by micro‒lending or start‒up grants that require self-sufficiency in 18 months.

I’m with Thabo Mbeki … a longer horizon is needed. Partnerships between the government and business are needed. If that is the definition of “structural support”, then I’m all for it.

Pick ‘n Pay and Blue Ribbon are our partners in a royalty programme in the Western Cape. It is a great form of structural support and we need more business people to see this big picture.

Minister of Trade and Industry Alec Erwin wants to modify the Lottery Act so that the proceeds are tied to the turnover of social enterprises like Amy’s Bread. Again, this is a form of structural support that rewards a social enterprise for making something that people need, building people’s skills and confidence to enter the mainstream, and yet not maximising soulless capital, at least in the short to medium term.

Second, I want to say that I agree with Jo Lorentzen (“Mbeki muddles his models”, August 1) that South Africa’s poor can only benefit from economic growth if they can read and write. But this should not mean that the unskilled go to the back of the unemployment line since spending the time to train and promote them will not maximise capital.

This means that precious on-the-job training in literacy and numeracy will not reach the people who need it most because many workers are stuck in sectors where capital will not be maximised.

Enterprise is where most South African transformation should take place, and the youth that businesses are trying to educate often do not have successful role models to provide them with an incentive to stay in school. Their role models are unemployed because capital is employed where they aren’t.

Finally, I agree that developing country leaders must put in place effective pro-poor policies, cost what they may. Mbeki wants governments to supply structural support to enterprise so that it can get to a level playing field and become the sustaining force of the transformation. The European Union recognises this need in the back of Slovakia through fiscal transfers. Why can’t all the people who want to help Africa recognise this need at the back of Guguletu … cost what it may?