The South African system: a hindrance or an enabler to township economies?
Londiwe Khuzwayo
Dabbling on township economies without acknowledging the historic impact of Apartheid on South African townships would be unjust. South African townships were formed from forced segregation by the Apartheid regime; these townships were designated for Blacks, Coloureds and Indians.
Forced into exclusion from urban towns where there were key economic centres and activities; wherein other races except White were regarded as mere labour to drive these industries. Only a select few were able to own and run township Businesses; out of adversity, they waded through the Apartheid red tape and established viable businesses: James Sofasonke Mpanza, Richard Maponya, Sam Motsoenyane, to name but a few. Townships were densely populated, with limited land to no infrastructure investment.
It is evident that since the dawn of democracy, some form of progress has been made, even though the ‘needle’ hasn't moved much in terms of inequality and the impact is minuscule as the Apartheid legacy still persists.
The concept of a “township economy” was formed to address the economic imbalance resulting from Apartheid spillover with the aim of rectifying the economic marginalisation of the previously disadvantaged.
The practicality and somewhat limitations in building thriving and sustainable economies in townships; require high understanding of the history of townships and the current socio-economic challenges facing the entrepreneurs, their local consumers and business operation environment.
Amongst these could be setbacks of children-headed households, access to healthcare, low to none/no education quality, overpopulation, limited or no savings and investments, substance abuse, high crime rates, mental health issues and Gender-Based Violence.
Overall, there is limited to no stable income, where the dominant social class is typically the working class, lower-income groups (often categorised as the low-income or lower-middle class) and the underemployed (minimal working with limited income and low skill usage).
Furthermore, exposure to entrepreneurial culture, empowering regulations and opportunities remains the key challenge. Statistics reveal that there are roughly 30-40 businesses per 1 000 people in townships. FNB estimates that this translates to about 800 000 to one million businesses, however only 300 000 of are formalised and create jobs.
It is evident that not everyone will be able to penetrate the job market, judging from the high unemployment rate, further, communities in South Africa need to be self-sustainable should they seek for geographic livelihood.
It goes without saying that many efforts towards addressing township economies have taken place and still ongoing. Firstly, the BBBEE government policy serves as reparation for previously disadvantaged South African groups, aiming to rectify the imbalances of the economy by promoting Black participation in the mainstream economy and addressing inequality.
Political analysts, scholars and economists are in continued debates and discussions whether its implementation has served its cause in the economic discourse of the country. It can be argued that through many initiatives - i.e. Enterprise and Supplier Development (ESD), Affirmative Action, Skills development, Corporate Social Investment, and lately Environment, Social and Governance (ESG) policies - there is a shift. Whether black communities have and are considerably benefiting, creating sustainable township economies is a discussion for another day.
Efforts from the government, private sector, non-profit organisations and international partners, regarding job creation, entrepreneurship and infrastructure improvement go without notice.
However, according to the World Bank only 25% of the money generated in townships is spent there. It is suggested that the government ought to develop new, or revisit existing, policies seeking to address legacy dysfunctions of Apartheid in the townships and their economies.
The government’s strategic plan and theme for the years 2024-2027 is “Leave no one behind”, if the government seeks to accomplish this, the following should be considered to ensure townships are included in progression and economic sustainability:
The government needs to invest further in research and development (R&D) to avoid providing solutions that may not be suitable for implementation in township economies. Thorough studies need to further provide guidance to key gaps in communities and global trends to assist in identifying suitable skills required in townships, preparing them for current and arising thriving industries.
Policies with stringent requirements need to be implemented for the protection of township businesses and their communities. Further, policies need to be finalized (whether through preferential procurement or partnerships) that challenge private entities, public entities, non-profits and other SMMEs’ contribution specifically towards township businesses.
There needs to be policies and regulations that limit non-local entities, brands and ownership within the township, from spaza shops to big retail stores. This needs to be supported by land redistribution and strong infrastructure.
Continuous assessment and adjustment of red tape restricting financial assistance and access to market to township businesses need to be a priority.
Despite the hurdles that township businesses experience, the direction and progress is exciting, the entrepreneurial spirit cannot be ignored.
Indeed, there is no one way of solving the township economy approach, however, there is progress, the flame that burns in these business owners need not be extinguished. The support to foster their growth needs to be strategically derived through the formulation of policies and practical implementation plans with key decision makers, programme implementers, investors and township business leaders.
As of July 23, 2024, President Cyril Ramaphosa has signed the Public Procurement Act 28, seeking to transform public procurement into a tool for economic inclusion and sustainable development. In partnership with TESCA, Deputy Minister for Small Business Development; Ms Jane Sithole declared October 7 as Township Economy Day.
There is hope for local spazas as new by- laws have been announced by the government to protect local trading and communities. These, among others resemble the country’s direction towards building thriving township economies.
As the 2025 G20 Summit, scheduled to be hosted in South Africa, approaches, it is important for township businesses to stay ready, ensure their products and services are in the market, seeking to address key problems in their communities and in the country at large. Besides politicians, residents of South Africa and professionals, SMMEs moreover from townships need to take centre stage. It is now or never.
Londiwe Khuzwayo is a programme manager at 22 On Sloane
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