Tim Jenkin has developed a new way to facilitate the exchange of goods and services at the township level without reliance on a formal money and banking system. Taking this Community Exchange System (CES) to marginalized communities, Tim helps stimulate local economies and empowers citizens to participate in the marketplace without getting burdened by huge debts through predatory lending.
The New Idea
Tim believes that existing economic inequalities and social injustices in South Africa are products of the legacy of Apartheid and an unequal financial system. In spite of the new dispensation and government programs to alleviate poverty, the disenfranchised are still wholly marginalized and excluded from the formal economic system. Tim strives to reverse the trend of the “rich getting richer and the poor getting poorer” through the establishment of an alternative banking system which provides a moneyless economic value to the goods and services that are exchanged within communities.
Tim has created an alternative banking system by reinventing the concept of “money” and established a computerized tracking system of financial transactions within impoverished communities. He is initially targeting South Africa’s townships to provide formal value to the informal exchange of goods and services within these areas. Such a moneyless exchange of goods and services allows people to offer their services and earn points in the system that they use to pay others. Each local community operates as a separate “economy” that gives everyone an equal opportunity to share in the wealth of the community. Tim relies on his computer programming skills to create a self-managed electronic-based Local Exchange Trading System (LETS) and establishes it in centralized sites for community use. While LETS is not new, Tim’s CES applies its principles in a more effective, targeted, and sustainable way to those populations who can benefit from it most.
While the Community Exchange System’s primary focus is small communities and townships, it also operates and links at the national and global levels through various digital platforms enabled by LETS. The rapid growth of CES—with the amount of goods and services exchanged doubling each year for the first three years—is a testament to its effectiveness. Starting in South Africa, Tim has helped expand CES to nine countries, and is in negotiations to bring the model to Japan and South Korea.
After the first democratic elections in 1994 there were great expectations by the majority of South Africans that dramatic improvements in the lives of those disadvantaged by Apartheid would unfold. However this has not been forthcoming to the extent that it was expected. Though there has been great progress in providing basic services and housing to millions of South Africans and significant economic progress, a majority of people are still marginalized from the mainstream economy and are not benefiting from recent economic growth, which has particularly failed to produce jobs. High unemployment, lack of access to education, and a proliferation of petty entrepreneurism has led to the development of an informal economy, also known as the “second economy.” This economy is growing and serves millions, however there is no link between the formal and informal economies.
While many disadvantaged people have acquired skills, they have trouble earning money using their talents. The situation is worse in the townships (areas set up under Apartheid for different race groups) where the unemployment rate is higher, there is less money in circulation, and the demand for skills is lower and/or cannot be paid for with cash. Many people find themselves in the debt trap, accessing credit through private money lenders who meet cash needs at very high interest rates. Debt is increasing in South Africa, both in the formal financial and the informal systems, and when people cannot repay loans, this frequently leads to the confiscation of assets.
In the past, communities supported each other as it was expected of them to pool and share resources. The concept of ubuntu thrived in traditional communities before the onslaught of crime, violence, complex social legacy issues from the Apartheid system, mass migration, and urbanization. The concept of ubuntu is that of supporting and assisting each under a collective and communal value system. “I am because you are!” However that tradition has been all but lost, or is not practiced at a level to make a difference. As a result, millions of people still live on less than US$2 a day and are barely surviving. Many feel desperate, hopeless, and undervalued, which affects their self-esteem, dignity, and can lead to a host of other problems.
The Local Exchange Trading System is a non-monetary system set up to address the demand and supply of goods and services of small groups of people in a single geographic area. While such systems have worked for small groups, they were usually developed in middle-class communities where people paid a membership fee and the system was administratively cumbersome and demanding. Therefore, these systems had short life spans and had not been established in the impoverished areas that need them most. Tim has taken to best of the LETS system model and expanded and modified it to offer a sustainable system for dealing with poverty and the lack of money in townships.
Tim is implementing a uniquely South African approach to improve the economic and social conditions in communities that are left out of the conventional economy. By assigning values to goods and services that are not based on conventional national currencies, he empowers communities to participate in a more inclusive marketplace that does not require traditional upfront capital or traditional high-interest bank loans.
The LETS system is an electronic mutual credit system whereby transactions are recorded in a central database and accessible to all members. Tim adapted the LETS system to the economic and social realities of the South African context and founded CES. Unlike LETS, CES users enter their own trading information and do not rely on outside administrators. The CES is an alternative and complementary online money and banking system as well as a “marketplace” where people sell goods and services.
The system is presently run in many parts of South Africa and around the world. Members register free of charge with their local exchanges but become part of a global system. Registered users receive self generated “bank” accounts, much the same as in the conventional banking system. The CES system is self-managed, computer-based, fully scalable and can operate within a small community and on a global level. Tim created a unit called a “Talon” that is equivalent to one South African Rand and captures the value of a good and/or service, and is traded within the CES system as a unit of currency. The transactions are recorded through a credits and debits scheme via computers. Users enter their transactions, credit for the one supplying and debit for the one receiving. This method ensures a system check to confirm all transactions are fair and allows for self-regulation. Each transaction has an administration fee of 2.5 percent paid by the buyer and 2.5 percent by the seller. This cost is what Tim earns in the form of “Talons.” A self-generated account balance statement is sent to all users on a monthly basis.
To ensure that communities without computers benefit from his system, Tim has set up CES “branches” similar to conventional banks so members can execute their financial transactions. The branches employ local coordinators (paid in Talons) to facilitate the computer-based recording of transactions, generate monthly statements, as well as paper directories of local offerings of goods and services. CES also has a job skills component as Tim is training township residents how to run CES branches like branches of a bank—they learn the principles of banking, Internet usage, and functional computer skills. Additionally, because many township residents are not computer literate and/or do not have easy access to computers, Tim has created a software which enables members to bank through their cell phones.
In addition, Tim is using a percentage of the administrative charge of 5 percent as an incentive to residents to become more engaged in their communities. He offers volunteers Talons for use of their time to clean up the townships and work on other community initiatives. An added advantage is that this increases peoples’ self-worth by knowing they are adding value to their families and communities, important for the consolidation of democracy in South Africa.
Tim is reversing the dependence on traditional money systems, including the burden of financial debt that is associated with the purchase of goods and services. Since users do not pay membership fees in Rands, but “pay” to use the system through the administrative charge in Talons. In addition to commoditizing the wealth found in townships and other communities, this alternative currency system has the added benefit of acting as a “shock absorber” to economic turmoil, whereby communities using this system are shielded from stock market crashes or currency devaluations.
Tim’s long-term goal is for CES to have all segments of society using this alternative economy. Since its inception, CES has traded 3 million Talons (equivalent to R3 million) in goods and services. One million Talons/Rands were exchanged last year and each year the program experiences rapid growth (e.g. R1 million in year one, R2 million in year two, R4 million in year three). To date, Tim has 2,200 people enrolled in CES in the Western Cape and three branch offices in Cape Town. CES is also expanding quite rapidly at an international level, with the potential for large-scale social impact. There are fifty-seven groups using the CES system in nine countries, and he negotiating expansion to South Korea and Japan.
Tim is a long-time advocate for social justice. During the late 1970s and 1980s, he worked for the then-banned African National Congress (ANC) and the International Defense and Aid Fund—an organization that provided for political prisoners and other victims of Apartheid—while in exile in the U.K. As an operative of the ANC, he was responsible for setting up a communications network that allowed activists to communicate securely in South Africa and with ANC leadership in Lusaka, Zambia, via London. Tim was jailed in the late 1970s and his escape with two other prisoners from a maximum-security prison has become a famous story. He literally walked out of the country and into exile. He has been cleared of all crimes for which he was charged.
Through this experience, he learned computer programming and discovered the power of computers and digital communications. Returning to South Africa in 1991, he decided to put his computer background to good use and help to bring change to the “new” South Africa. Intrigued by the LETS system and understanding its value and relevance for South Africa, Tim founded CES to address the economic and social inequalities (the legacy of Apartheid) that continue to plague South Africa.