Private sector must pull its weight in the township economy

19th February 2016 By: Sydney Majoko

The news that Gauteng Economic Development, Environment, Agriculture and Rural Development MEC Lebogang Maile has extended the Qondis’ IShishini Lakho campaign deadline from March to June just goes to show how seriously government is taking the registration of small businesses on a single database.

This will not only help these businesses to be ‘visible’ online or to government agencies, but also grant them access to government programmes aimed at making them sustainable. One question remains, though: What role can the private sector play in ensuring that the township economy is lifted to the level where entry into the formal economy becomes possible?

Frans, a liquor retailer, recently told me that, even though township retailers are viewed as the cornerstone of one international beer giant, the service they receive is quite poor. “Take this example – I buy 25 crates of beer from a wholesaler in the township weekly. If, in my stock, I find a beer bottle that is half-filled, cracked or not in a condition to sell to a customer, I have no recourse. The wholesalers refuse to take back defective products and I have no choice but to absorb the loss. If this happened only once in a couple of months, it would be no problem, but it happens quite frequently. So, I’m taking a knock I shouldn’t . The wholesalers do not take defective stock back because they struggle to return it themselves.”

Viewed in isolation, this may seem to be a simple matter of one international giant having overlooked a small system in its operations, but if one looks at the service offerings of other local giants, one will realise that the private sector is not pulling its weight in terms of matching government’s enthusiasm for the formalisation of businesses in the township economy. A customer of the beer brewing giant based elsewhere knows that a sales representative will call on them once a week to not only take sales orders but also prepare an inventory of products returned to the retailer for replacement. This is a vital part of the business. Surely, the same system can be put in place and made to work to ensure that the township small-business owner does not absorb losses he can hardly afford.

When retail malls started mushrooming in South African townships, many business owners breathed a sigh of relief. Finally, here were world-class malls with world-class banking facilities similar to those one finds in town. Businesspeople in the township would no longer have to travel to banks in town, or so it seemed. There was one problem, though – all the local banking giants have underestimated the demand for their services in the townships and have continued to build banking facilities that cannot handle the numbers. The result? Overcrowded banks every single day, and any businesspeople will tell you that, for him or her, any time spent in a queue is time spent away from his or her business. So, many businesspeople still take the long trip to the nearest town to ensure they find quicker service. Also, for a businessperson carrying large amounts of cash, overcrowded banks pose a serious security risk.

Fast-moving consumer goods wholesaling is another level where the private sector must work to ensure that the people who stock their goods at these places are not left to the whims of business owners whose only concern is profit, without caring for the sustainability of those that sell their goods. The manufacturers of these goods need to ensure that their goods sold through informal channels meet the health and safety standards that they set for large players like Makro and Cambridge.

While it is clear that there is no deliberate action on the part of the private sector to deprive the township economy of world-class service, it is also quite clear that not a lot of knowledge is generated by the private sector about how to best service those businesses that fall outside the scope of the formal economy. For government efforts to formalise the township economy to work and make those businesses sustainable, the private sector will have to come along and tweak their operating models to accommodate the township economy.