Woolled sheep and meso-level economic institutions

One of the books that I am currently dipping into is one containing a series of essays on the economic history of Natal. An essay with the unpromising title of “The origin and development of the woolled sheep industry in the Natal midlands in the 1850s and 1860s” caught my attention as it illustrates something that economic development practitioners seemingly battle with.

One of the lessons that I drew from my visit to Germany last year was that one of the reasons that the German economy is still competitive despite a number of structural constraints is that the meso-level is richly populated with a wide range of institutions focused on developing and enhancing competitiveness. The meso-level is simply the level between firms and clusters, and public sector bodies. It is here that institutions such as sector bodies (such the wool/potato/egg etc. board), development agencies, development finance institutions, and chambers of business are found.

Having been involved with a number of meso-level institutions over the years I am aware that there is a constant pressure to “make it sustainable”. This usually means that the organisation is expected to become financially independent and as a result be able to continue it operations into the foreseeable future. Many of these institutions battle to do this and become so caught up in “becoming sustainable” that they often fall short when it comes to fulfilling their primary mandate.

This is why the case of the wool industry in Natal in the 1850s caught my attention. In August 1958, a group of farmers formed the “Natal Association for the Introduction of Woolled Sheep”, a not-for-profit enterprise aimed at developing this sector of the colonial economy. The Association used its capital to buy sheep from the Orange Free State and the Cape for resale, on easy terms, to farmers in Natal who had limited access to capital or who where unable to leave their farms to purchase sheep in the other colonies. Initially 1000 sheep were purchased and sold on auction and the Association made a small profit. After no response to a tender for further supplies, the Natal Association for the Introduction of Woolled Sheep shut up shop in July 1859.

The Natal Witness commented on the liquidation of the Association:

“This Company (the Sheep Association) originated to give an impetus to the introduction to woolled sheep, has ceased to exist, and has realised a handsome dividend in a few months operations. Having demonstrated the practicability of introducing and rearing sheep to any extent in the upland counties, the company leave the work of filling up the vast wastes with numerous valuable flocks to private enterprise. And this work is going on rapidly….[my emphasis]”

(quoted in Sellers, M., 1985)

The Natal Association for the Introduction of Woolled Sheep is easily recognisable as a meso-level institution but does not seem to have suffered from the same pressure to become sustainable. It played a catalytic role in the development of the woolled sheep sector in colonial Natal (a sector which barely exists today but one that experienced rapid growth in the 1860s) and then closed its doors once its objectives had been achieved.

Meso-level institutions in South Africa seem to operate under the assumption that they need to last forever if they are to have an impact. The irony is that these organisations that exist to enhance competitiveness are not themselves not competitive, in the sense that they are not responsive to the demands of the local economy. The choice for them is to either review and refocus the organization, or close their door and allow other more relevant (i.e. competitive) institutions to take their place. While meso-level institutions play a key role in enhancing the competitiveness of a local economy and South Africa undoubtedly needs more of them, their sustainability is not necessarily desirable or necessary.

Reference:
Guest, B., and Sellers, J.M., 1985: Enterprise and Exploitation in a Victorian Colony: Aspects of the Economic and Social History of Colonial Natal; University of Natal Press, Pietermaritzburg.