After spending months on end with mining communities one is bound to take note of a few observations. The most glaringly obvious of these observations is financial illiteracy among community members.
You might think that this is not surprising at all, that in fact, it is to be expected.
In my experience, it is not the presence of financial illiteracy that has in the past caught me off guard but rather the sheer scale of it.
While illiteracy is far-flung in rural communities it is not uncommon to find a community of vendors within that community.
As a young consultant, armed entirely with my infinite ignorance, this used to fill me with admiration.
Entrepreneurs everywhere. Finding a way, no matter how small, to make money.
Walking by vendors purchasing homemade biscuits, jewellery and fresh produce from their home gardens or agricultural fields filled me with joy in my early career days.
Years later I was shaken from my blissful state as I was conducting a skills audit with a mining community in West Africa.
The majority of the community was educated to secondary level, some of the youth to tertiary level – returning home purely for the promise of employment at the mine. It was while I was sitting under a makeshift roadside stall with the 40-something female owner that I realised the profit margins for her baking business were almost non-existent.
Between her ingredients, labour and what she was charging for her loaves and deep fried breads she was making very little profit. A single mom of two toddlers, how was she getting by?
As the survey progressed the realisation set in that this was not an isolated incident. This was the case with the majority of the vendors. They were under the illusion that they were making a fair bit of money when in actual fact they were not making much at all – all rooted in the simple fact that they had little to no knowledge of the absolute basics of finances.
Now I am by no means referring to the world of debtors, creditors and balancing your books. Rather the basic understanding of inputs and outputs and most importantly placing a value on labour.
I did not come across one vendor who had even considered that his/her hours of labour had a potential monetary value.
Consider for a moment that basic financial knowledge has a greater impact than calculating and managing your profits. That financial literacy influences long-term and future life planning.
Optimising profit margins, being educated in reinvestment into your business and managing profit spent leaves individuals with a surplus to plan for the future in a way they might never have considered available to them.
This might include being able to pay for further education, expanding their business and most importantly planning for old age. Furthermore, financial competence plays an important role specifically in the form of one’s attitude towards spending and risk analysis.
Attitude towards spending tends to be a basic one of in and out. To change this attitude, the advantages of conservative spending must far outweigh the habit of instant gratification.
In terms of risk analysis, again, this would be basic risk analysis, i.e. product risk, relationships with other vendors or suppliers, etc.
Financial responsibility too has a strong positive correlation to financial literacy. Making responsible personal decisions regarding one’s business and personal growth. Acknowledging the responsibility, you have to your customers.
Finally, seeking support when needed to avoid the business being derailed. With South Africa’s unemployment rate being among the top ranking countries in the world it is an age-old notion that the mining sector is looked upon to alleviate this pressure. If you can’t employ members of the mining community, you need to develop them.
In addition, tremendous pressure is placed on the sector to do so sustainably. Not surprisingly, developing small and medium sized enterprises then seem like a brilliant project.
To develop an entrepreneur or a group of entrepreneurs is, indeed, sustainable if executed with a clear exit strategy. Developing people to be self-sufficient epitomises the definition of sustainability.
Unfortunately, without a strong emphasis on financial literacy these entrepreneurs will once again become vendors or small business owners barely making a profit. That should never be acceptable.
The investment alone that goes into these projects makes it worthwhile to see them not only survive but thrive. Creating an entrepreneur without a strong financial knowledge of their enterprise is creating the idea of an entrepreneur.
It is not only that financially literate community members have an impact on the greater community, the advantages of being financially literate in a personal capacity also makes a strong case for providing financial literacy programmes to all members of a community.