What’s next for the township economy?

13th March 2015 By: Sydney Majoko

There is a growing realisation by government that townships have to play a bigger role in the mainstream economy than simply being ‘reservoirs for cheap labour’, as was intended when they were first established. That can only happen when the nature of the townships changes from merely being consumers to playing an active role in the manufacturing of goods and provision of services. But there are challenges.

The recent looting riots in Soweto have had people asking the question: Whereto for the township economy? The riots, directed at foreign-owned shops, revealed an ugly side of relations between locals and foreign businesspeople and the vulnerability of township businesses to factors like rampant youth unemployment.

A myriad of reasons have been advanced for the causes of the widespread looting that threatened to spread to other Gauteng townships. The underlying reason for the riots remains the lack of economic opportunities for local unemployed youth. A casual glance at the photographs of the mobs involved in the looting reveals an already known truth: unemployed youths are a ticking time bomb.

The proliferation of shops at virtually every corner of the townships has unofficially rezoned all townships in Gauteng. In the past, one could point the way to the ‘shops’; now, every second house is a shop. Traditional policing methods have not kept pace with this rezoning.
Having done business in the township over the past two decades, I have seen the near extinction of the local businessperson first-hand. The local businessperson has had to compete with the ‘big boys’, who have suddenly woken up to the fact that one can build and operate a Spar, Pick n Pay or Shoprite outlet in the townships in much the same way as they do in town. The influx of foreign entrepreneurs knocked the stuffing out of local businesspeople, who were still reeling from the shock of having to compete on prices with multinationals in the form of Cambridge Foods (Walmart), besides others.

“They must learn to compete” is the common refrain. The proponents of this adapt-or-die attitude have no appreciation that, in the world of fast-moving consumer goods, cash is king. In a depressed economy like ours, the ability to get goods at the lowest possible prices and in large quantities becomes paramount. The Big Boys and foreign businesspeople hit the floor running on this one, resulting in the flooring of the traditional township business owners.

Gauteng Premier David Makhura acknowledged during his State of the Province address that measures such as the Township Renewal Project had to be given a bigger slice of the pie to ensure that the township economy becomes a relevant part of the mainstream economy. Deindustrialisation of parts of Isando, on the East Rand, and other areas bordering townships has had a major adverse effect on the development of the township economy.

It is, thus, a welcome initiative that the Gauteng provincial government is partnering with industry to counter the effects of industries that have closed down. The Modderfontein, Waterfall and Masingita projects will reinject life into areas that were becoming ghost towns on the outskirts of major townships like Tembisa and Soweto.

Initiatives that have sought to revive the participation of township entrepreneurs in the projects, such as the bus rapid transit system, will go a long way towards ensuring that the township economy is not marginalised. The challenge that remains is ensuring that unemployed youths become the cornerstone of any business venture that aims to grow the township economy.

Local business associations led by local businesspeople need to be revitalised and equipped to build local business. It is not xenophobia to offer protection to local business – this is done in farming to prop up our local farmers. Government missed a beat by allowing just the highest bidders to come and do business in the townships.

A new paradigm is required to ensure sustainable participation of township people in their own economies, ensuring what Makhura has referred to as “every rand generated in the township circulating in the township economy”. This paradigm must ensure full partnerships between government, locals and foreign businesspeople seeking to do business in the townships.