Flexibility required to sustain township economy

2nd October 2015 By: Sydney Majoko

Several years ago, I sat through a meeting of businesspeople who had come together to iron out a few issues that were holding back the development of a mini mall in the township of Tembisa, in Gauteng. All the items on the agenda were discussed with relative ease – until we got to an item concerning an outstanding amount due to the Ekurhuleni metropolitan municipality. The amount was for electricity.

The developer had identified a double stand that was quite close to a busy road for the construction of the mall. There was previously a single house on the stand, but it now stood dilapidated. The outstanding amount was over R100 000, and the council would not agree to the sale of the double stand to the developer without a concrete plan to settle the bill. After a few hours of difficult deliberations, it was agreed the amount would be added to the account of the yet-to-be-established mini mall. In effect, each occupant of the business premises had inherited an electricity bill before starting operations. This was, obviously, unfair. That was about 15 years ago. The mall was built and completed, but it was not surprising to see the revolving-door syndrome when it came to occupancy of the business premises. Although the mall was located in a busy area, the rates were simply too high for tenants who were still trying to find their feet owing to the inherited electricity bill.

It is common knowledge that most townships have suffered greatly from nonpayment for municipality services, particularly electricity. This nonpayment, although seen as a 'culture' now, has its roots in the 1980s strategy of civil disobedience, which also included the refusal by township residents to pay municipal rates and services as a way of fighting apartheid. Of course, this should have ended more than 20 years ago, when democracy was ushered in, but it did not. The problem is now haunting both business and municipalities.

"During our township economy revitalisation roadshows, municipal rates and service charges were identified as contentious issues by township entrepreneurs. This was raised in almost all the roadshows that we convened, which clearly means it is a pervasive issue that affects businesses across different townships," Gauteng MEC for Economic Development, Environment, Agriculture and Rural Development Lebogang Maile said last month. Maile hinted that special consideration for township businesses may have to be made by municipalities to ensure that they remain operational.

This might, on the surface, seem unfair to other residents in the townships, but a special dispensation for businesses might actually be beneficial to all involved in the township economy. Take electricity, for instance. The rates at which residents are charged for electricity have proved to be prohibitive to most small businesses that rely heavily on its use. It has been suggested, although not proved, that municipalities that are involved in the reselling electricity from Eskom to residents add a levy on the electricity as a way of recovering previously unpaid amounts. For a business just starting out, this can be crippling. The MEC is, thus, correct to suggest that municipalities consider a special dispensation for business.

It has been argued previously in this column that the most sustainable way to ensure that jobs continue to be created, even in the most unfavourable of economic environments, small businesses, particularly those in the township economy, must continue to be given all the support needed to ensure their survival.

There are other challenges to operating a successful business in the township economy, but municipal rates and services and electricity must not be among those challenges. These ought to be structured in a way that encourages, rather than hinder, new and established businesses.

Another recent trend that will prove an impediment to successful businesses in the township economy is that of property companies taking over the management of business complexes and unfairly increasing rentals using price scales that are used for normally zoned business properties in the 'formal' economy. Although the township economy must not receive special treatment because it is, after all, part of the economy, care needs to be taken to ensure that promising businesses are not suffocated or saddled with impossible rental rates in the name of competition. Fighting unemployment requires flexibility on all sides.