Institute for Development Studies, University of Nairobi

This paper focuses on the small rural towns as intermediaries between the rural economies.,on the one hand, and the formal, mainly urban based, national industry on the other. Theoretically, the paper rests on a network concept of the enterprise which is related both to the Scandinavian network approach and to the Anglo-saxon theory of flexible specialisation. In the network approach, the small enterprise is seen neither as completely dependent nor as independent, but as a node in a network of enterprises where it is linked to other enterprises both public and private, both large and small. The networking is seen as leading to a process of specialisation and market segmentation which is beginning to be visible in the small towns of Zimbabwe that have been the focus of research. The paper argues that in economies like that of Zimbabwe where a large part of the population remains in semi-subsistence production while formal trade and industry is highly concentrated both organisationally and geographically, rural industrialisation combines consolidation and concentration of rural small-scale activities with decentralisation of formal sector activities. The paper then discusses policy initiatives usually associated with structural adjustment programmes in the light of the theory and the observed small-town economic structure.