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The Potential of the Township Economy

Published on April 25, 2019

Over the years we have seen tremendous growth in how business is conducted in townships and the vast opportunities available to customise services which cater directly to the needs of these communities.

In this session of Entrepreneurship To The Point we looked at the potential found in the township economy and factors that threaten the growth of township business. We invited eight entrepreneurs and township business experts to share their insights about the best way to explore the myriad opportunities that are available from Mamelodi in Pretoria to Mdantsane in East London.

The panel consisted of:

  1. Oliver Phaahla – Owner, Pick n Pay Alex Junction – Alexandra, Johannesburg
  2. Charlene Heyburgh – Editor of Spotong Magazine – South Africa’s no.1 township trade magazine;
  3. Kgosi Rampa – Founder & Owner, Makhelwane Festival and LoCrate Market – a community lifestyle festival that aims to reconnect and re-ignite the community/ neighbour culture “Bo Makhe” and promote local brands;
  4. Colin Leshou – Provincial Manager, Small Enterprise Development Agency (SEDA);
  5. Richard Chauke – Managing Director, Value Waste – a product of the Property Point programme, Value Waste is a company with expertise in waste management (Recycling and Waste Removal);
  6. Elvis Sekhaolelo – founder & director, Ekasi Entrepreneurs – is an entrepreneurship movement (NPO) focused on the developing township entrepreneurs through mentorship, training and development and access to resources, information and market access; and
  7. Mpho Motsumi, The President of the Greater Alexandra Chamber of Commerce (Galcoc)

From our discussions, we identified some areas that could need further exploration to harness the economic growth potential of townships.

Lack of research and reliable data

It is said that you can only manage what you measure, and this is true of the township economy. Our panellists agreed there exists little reliable and coherent data about the township economy. What is the rand value of spending in South Africa’s townships? Where do township residents spend most of their money and on what products and services? Which businesses and industries do well in townships and what are the needs of these communities? Several panellists noted that better data was required to determine the point of need, spending patterns and areas of growth that could be exploited by new businesses.

Phaahla said that based on his observations, communities still measured the value of a business based on its location and would rather shop outside of the township in more affluent areas due to the perception that townships offered lesser quality.

“The township was initially distanced from the economic hubs and has been overlooked as a lucrative location for sustainable business. This is a perception that needs to change,” he said.

He said it would be good to know how much money communities spend within the townships and how much outside, so that local businesses could be more competitive.

This data will also be of assistance to funding institutions who are reluctant to support township-based entrepreneurs, citing risk and uncertainty.

Leshou of SEDA said township entrepreneurs are the least supported group of business owners when it comes to funding and other forms of support, because opportunity holders do not understand township businesses. “We need more people on the ground who understand and are able to speak to the needs of township entrepreneurs,” said Leshou.

Policy Uncertainty – A threat to innovation

Governments’ core mandate is to create an enabling environment for businesses; however, entrepreneurs have discovered first-hand, that policy uncertainty stifles innovation which is geared towards tackling township specific challenges. Sekhaolelo of Ekasi Entrepreneurs noted the example of Cape Town by-laws that restricted a business in Khayelitsha from collecting and delivering medication on behalf of elderly patients.

“This innovation had the potential to grow and be scaled up across many areas. However, the lack of understanding from the market stopped the business in its tracks,” said Sekhaolelo. “Government and financial institutions find it difficult to envision services in the township as lucrative and sustainable in the long run.”

Motsumi, of the Galcoc said township specific policies needed to be developed that consider the needs of business in these informal areas. “Little had been done to develop the township economies and we are frustrated at the lack of growth and development that takes place,” said Motsumi.

Quick Fix Solutions

Our panellists also called on big business to rethink how they engage with entrepreneurs in townships as their programmes are sometimes superficial.

“While big companies are well-intentioned, their once-off interventions often do not follow up on progress or invest in ongoing training, said Heyburgh of Spotong Magazine. “For example, one company donated laptops to entrepreneurs which was fabulous but some of the recipients did not even know how to turn on the machine. I believe that interventions should be more holistic.”

Motsumi said big business and government should work with the local business forums in partnerships to unearth opportunities but in his experience in Alex, little had been done to engage with local business owners.

Opportunities for new business

The panel strongly believes that there are many unique ideas to explore in the township community. Sekhaolelo said that opportunities existed in the green economy – the production of goods from recycled content; Agro-processing – the production of food from the produce of their backyard gardens; township construction and development like Hustlenomics, which helps reconstruct shacks into communal houses that are safer for human inhabitancy; and technology such as the township owned ticketing company called ‘AmaGig’; and many more unique ideas to the challenges of the different townships.

Sekhaolelo said: “Entrepreneurs who will do well are those who identify the needs of resident in the township and create products and services that speak to those needs of the locals.”

Our engaging discussion show us that while the challenges are significant on one hand, townships also possess incredible opportunities on the other. A concerted formal effort to develop townships will offer significant benefits for the South African economy.

Growth lies in the likes of Tembisa, Soweto, Mitchells Plain, and Phoenix; and not only in the high-end development of Sandton and Umhlanga.

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