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Can developing the economy of towns bring prosperity to South Africans?

Gauteng government's focus on the growth and stability of black-owned township enterprises Photograph: (Others)

Delhi, India Jul 17, 2017, 11.35 AM (IST) Inga Mzileni

The towns of South Africa are relics of the country's apartheid regime. Townships and informal settlements are home to 31 per cent of employed South Africans and 60 per cent of unemployed working age people who are desperate for the economic opportunity the places provide. Although the settlements are spatially disconnected from urban centers that offer economic prospects, there have always been entrepreneurial activity.

A recent study by the First National Bank of South Africa shows that the historic township of Soweto has about 4 billion dollars consumer spending power.
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The township economy in South Africa is characterised by enterprises and markets to meet primarily the needs of township communities. These are enterprises operated by township entrepreneurs, as opposed to business operated by owners outside the townships. Revolving around local food stores, clothing outlets, and small farmers, township enterprises carry lots of potential but have remained neglected for years. A recent study by the First National Bank of South Africa shows that the historic township of Soweto has about 4 billion dollars consumer spending power. However, only 25 per cent of the money is spent in the township. Much of the residents’ purchasing potential is being poured directly into big companies in the big cities, such as the Sandton-City.

In his state of the province address, premier David Makhura of the Gauteng province highlighted the Gauteng government's focus on the growth and stability of black-owned township enterprises. This includes money that will be spent on building expertise in various fields, such as retail to waste management. In its report on the state of township economy (2016), the government aims to ensure that benefits aimed at township businesses are delivered to the right businesses so that Gauteng province can create sustainable jobs, reduce inequality and defeat poverty. 

In the financial year of 2015-16, Gauteng government, which has been the champion of this initiative, allocated more than 20 million dollars in support of township enterprises and cooperatives. Moreover, the private sector has invested 150 million dollars in small-business mentorship funds. 

As of January this year, up to 2800 Township businesses were benefiting directly from government expenditure. This focus on the township economy is not limited to Gauteng only – other provinces have benefited too. Western Cape, for example, has partnered with established businesses, such as Neotel to ensure the successful delivery of broadband service to the city of Cape Town and in other municipalities in the province. 

With the revitalisation of the townships, business unemployment dropped from 27.1 per cent to 26.5 per cent in the third quarter of 2016.
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This year the Gauteng government which has been championing the revitalisation of Township economy has invested millions of dollars to build and improve the infrastructure of these areas in the next five years, says Premier David Makhura. With the revitalisation of the townships, business unemployment dropped from 27.1 per cent to 26.5 per cent in the third quarter of 2016. This positive outcome sends out a significant signal as to what a township economy could do to turn the tables for the benefit of poor South Africans.

One striking example of the positive changes brought about the revitalisation programme is Mandisa Zwane, a business owner in Soweto Township. Since the launching of the Township revitalisation initiative, Zwane has signed up 80 small-scale entrepreneurs who make locally inspired designs for her. Opened in 2016, Zwane's fashion design business makes around 7,800 dollars in sales per month. Zwane employs four workers and sells her designs to far away places like Atlanta in the US and in London.

The Infrastructure Dialogues of South Africa, a platform which discusses the infrastructure sector of the region, found that South Africa’s township economy has been failing to prosper because of lack infrastructure, ease of access to products, and lack of skills.
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In spite of the occasional successes, however, the township revitalisation programme faces some serious challenges. The Infrastructure Dialogues of South Africa, a platform which discusses the infrastructure sector of the region, found that South Africa’s township economy has been failing to prosper because of lack infrastructure, ease of access to products, and lack of skills. Therefore, to fuel the growth of township economy at the pace the government hopes for, city services and public amenities need to be in place. Such factors are indispensable to support trading conditions of the area. While large retail companies take advantage of the buying power of residents living in townships, the supply of additional products or access to other markets is required for small businesses to grow. There is a substantial difference in skills levels within the municipal sphere and between metros which needs to be immediately addressed too.

If the provincial government of Gauging can successfully revitalise the economy of the area, it will not only mean more jobs for the township residents. More importantly, it will do away with the apartheid geography of the past years when townships, such as Gauteng existed to serve as mere dormitories and suppliers of cheap labour to the white dominated mainstream economy. 

(WION)

Inga Mzileni

Inga is a correspondent with WION and covers African stories.

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