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Township economy still vulnerable

22nd July 2016

By: Sydney Majoko

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The #TshwaneBurning riots were a case of déjà vu for traders based in the townships surrounding the capital city. The most vulnerable group of traders were, once again, foreign nationals, who felt the first brunt of the riots that followed the nomination of Thoko Didiza as the ruling African National Congress’s mayoral candidate for the Tshwane metro. The scenes that unfolded were reminiscent of the xenophobic violence that gripped the country not so long ago.

This time around, though, the riots did not target businesses owned by foreign nationals only; traditional malls and other shops owned by locals were also looted, highlighting the vulnerability of traditional businesses in the township economy space. While one can view this as a reason not to get involved in township businesses, true entrepreneurs will see the riots as an opportunity to do things differently. An example that I encountered recently is recycling.

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Recycling glass bottles and plastic has become big business in South Africa over the past few years. This came on the back of scrap-metal recycling, which ignited a boom of its own, even in the township economy. The business carries very little overheads and just about anyone can get into it. Space constraints in the townships have always been a limiting factor for any type of business. Innovative glass and plastic recyclers have invented a time-based system to get around the space problem.

A recycler partners with a transport provider who carries a weighing scale on his bakkie or truck and, at an appointed time, the transporter gets to a recycler’s yard daily to collect the day’s recycling. This might seem pretty simple and obvious but it reduces the burden of space for the recycler in his or her own yard. Vandals and thieves are deterred because no full recycling bags are kept on the yard overnight. What’s more, the absence of hoarding means that, should any instability engulf the townships, there will not be a week’s worth of recycling or more at risk.

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Although this is all on a small scale, it shows the kind of innovative thinking that needs to be built into the process of establishing a viable and profitable venture in the township economy. Taking local conditions into account when doing business in the township economy must never be optional. While bricks-and-mortar businesses have their value in the township economy, more and more innovation is required to survive in that space.

In the past, meat-selling places always required massive infrastructure in the form of refrigeration for meat storage and coldrooms for bulk meat storage. The proliferation of informal settlements and the housing backlog have forced entrepreneurs to come up with solutions that are not too dissimilar to the recycling example. An entrepreneur works on an order system, in terms of which he or she collects the orders at a predetermined point on a daily basis, and also collects the cash. This then allows the business owner to go and buy meat in bulk from an established meat wholesaler, thus earning a bulk discount, which is passed on to his or her customers. The beauty of the system lies in its simplicity: the business owner is not exposed to the risk of his business being looted and burnt in the event of riots, but gets to also provide a much-needed service for dwellers of informal settlements.

Street-side hairdressers, whose only assets are a chair, an advertising board and a mirror, have long been a hit in the townships. The business model resembles that of a pop-up store rather than one built into a particular locale or building. The versatility of the business allows the trader to follow the public to wherever the new attraction is. We have, on many occasions, seen that a township business based at a certain point can suffer if a mall is built in the direction opposite to where it is located. Suddenly, the footfall of the business drops, making the business less viable. Businesses that are not building-based but rather skills-based are able to relocate to where the people are, keeping the entrepreneur in business.

The first prize in the township economy will always be providing stability through sustained service delivery, but it has been shown repeatedly that small businesses (based on innovation) are the best way to go in solving the rampant unemployment problem in the townships.

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