Can the 'Township Economy' be liberated?

8th September 2017

Can the 'Township Economy' be liberated?

Ntembeko Nqapela

Dormitory-style, underserviced, insecure, overcrowded and noisy. This characterises living conditions in the majority of South Africa’s townships. Townships remain as they were conceived, spatially disconnected and alienated from mainstream economic activity.

A popular joke in Alexandra Township is that, when once flying over Sandton and Alexandra, Harry Oppenheimer the former boss of Anglo-American, thought that “the township looks like an old, disused scrapyard for junk cars, set in the middle of a beautiful suburban scene dotted with swimming pools, and leafy trees and he thought that he could redevelop the scrapyard for profit. As a Star Newspaper report from 1984 notes, approaching Alexandra by air shocks the senses more than it would on the ground. One moment you are gliding over large beautiful homes set in lush gardens and tennis courts, tables and sparkling swimming pools, then the earth below you suddenly turns brown and scabrous as if it had died”.

Dusty roads, pothole prone and mud-sliding when it rains, row upon row of chemical toilets form a line outside homes, with the stench from open and unattended decomposing latrines accompanying the overflowing sewerage pipes leaking human faeces, filling the air.  Add to it the overcrowding of small matchbox style homes and the sparse distribution of recreation facilities – these all symbolise the space, road, passage, transport, and general quality and air of the township. This is the unfortunate reality of every township, even the seemingly modernised one of Soweto, which in many parts, is not immune from this condition.

It was thought that in the phase of history immediately following the political transition from Apartheid, in addition to the provision of political & socio-economic rights as well as efforts towards the construction of a welfare state, attention would be given to the spatial, infrastructural and economic reform and vitalisation of “The Township” in order to remedy the years of deliberate Apartheid marginalisation and under-development.

This was not the case. It was perhaps the signal oversight of reform efforts in the early years of the transition to democratic government. The inherited spatial, economic and infrastructural neglect of the township continued, until relatively recently. But even recent efforts at township vitalisation, have hit conceptual and practical snags.

Developing the Township Economy - Limitations
To begin with, the township was never originally conceived of, or designed as a place of potential, for possible revitalisation. The historical roots of space and location account for the primary challenge faced in township economic development, and are the primary source of every conceivable obstacle faced in the vitalisation of the township economy.

Stemming from this, the costs associated with township economic vitalisation are astronomical, simply because of extra-ordinarily high input costs. Firstly, the topography of township land is hard to excavate and develop. The distance from which townships are based away from core infrastructure and service points, such as water sources, electricity generation grids, major arterials and other infrastructure leading to and from commercial, economic and industrial hubs, compound the costs of servicing. A poor road and route network in and out of them, mean that transporting goods, services and people are costly and consequently the logistics and supply chains to and from townships, which are vital to manufacturing and industry, remain perpetually underdeveloped and under serviced. Where infrastructure, amenities and services do become available – the cost at which they do, prices them at a point that renders them unaffordable to the average township dweller and township business, due to the lower average income level and business turnover in the township.

There was an expectation, misplaced perhaps, that at the point of the transition and with the waning of old apartheid era legislation in the late 1980’s that the excluded and marginalised from the townships would move closer to the cities and urban areas. This, in the main did not happen, and was largely an option only available to the small, and at the time, embryonically developing business, professional, technical and managerial class. Where this did happen, especially in affordable middle-class suburbs close to cities – there was a mass exodus of previous (white) inhabitants, capital flight and with it a decline in property investment and property value.

This has had the dual impact of displacing investment while simultaneously hollowing out the township of a solid middle class that could have contributed to developing the township economy in the commercial and services sectors which are not as reliant on heavy infrastructure as manufacturing and other industry might be. Compounded by internal migration from non-metropolitan provinces and rural areas, has seen both an underclass moving into townships but also, spurring the proliferation of informal settlements which served to overburden the already sparse services and infrastructure available. Governments response to this was the provision of RDP housing – and some social housing for middle income earners. Both of these varietals are not imbued with an inherent store of economic value and though it addresses a social need, they have not as a government investment, yielded any economic return.

Add to this the lingering legacy of anti-apartheid rates and tax boycotts, the extent of illegal and irregular service connections (water, electricity, telephony), as well as the comparatively lower collection of service fees and rates from Townships by Local Councils – dampens the necessary revenue base that aids money multiplication and circulation. 

Addressing the Legacy Issues
Given this conundrum, efforts at economic stimuli in the townships Post 1994, have seen economic development initiatives focused on the provision of infrastructure, largely in services, and in limited aspects of the commercial services sector such as retail banking, restaurants, small scale retail, the replication of large national chains at micro level, and the establishment of malls or small scale industrial parks such as the one in Orlando West, Soweto.

All of these however, have had limited labour absorptive capacity; limited market development potential, stunted revenue generation, and consequently, they dim the prospects for rapid replication, expansion and transfer to other sites, or for scaling up.

This is in contrast to the micro economies and businesses operating in the formal, developed economy which continues to enjoy growth, expansion and success by virtue of their residual, and subsequently reinforced strategic positioning placing them at a comparative and competitive advantage – that sees them continue to benefit from new business development incentives and subsidies, technological advancements and inherited economies of scale. Of course, the caveat here is that with the onset of the global food, fuel and finance crisis, coupled with South Africa’s fragmented and fractured political landscape, poor growth and high unemployment, even businesses in the formal sector have witnessed some degree of stagnation. The point however is that small businesses in the Townships are more manifestly affected by these developments, which further inhibits its growth potential.    

Efforts at connecting the Township economy with the pre-existing city and suburban economic, commercial and industrial nodes, offered some glimmer of hope for Township (re)vitalisation, but these are inherently limited in the ways in which they are able to integrate the township into the mainstream economy. One of the frequent laments emerging from these initiatives - academic, political, and media – is the marked absence of an “entrepreneurial culture and spirit” in the township. Nothing, however, could be further from the truth. 

Those bemoaning the lack of an entrepreneurial culture in the townships, frequently make the claim based on the habit of “observing” townships, rather than being “immersed” in them. Such conclusions are hastily reached by remote and the pre-supposition that the networks, business practices, knowledge, customs and traditions in which the marginalised have been engaging, were either irrelevant or unhelpful in crafting strategies and activities that can develop the township economy. 

On the contrary, township economies, even in the informal sector demonstrate the creativity and resilience in bridging the Apartheid regime’s spatial and economic exclusionary practices. For example, as an alternative to the high transport costs to work - in mines, homes, gardens, factories and offices, economic hubs, shopping malls and retail centres – people in townships significantly altered their own living spaces by creating “a makeshift township economy” bridging the gap left by the woeful and perpetual under-servicing and neglect of the township market, by the formal economy and the provision of its goods and services.

Consequently the historical under provisioning of the formal economy for the township market because of both, apartheid government regulation and exclusion, as well as traditional businesses avoidance - because of the social fear and stigma of “the racial other” -  saw townships develop self-reliant provisioning mechanisms that witnessed the proliferation of unlicensed kiosks and/or spaza shops generating small subsistence income for the unemployed, the hitherto unregulated commuter minibus taxi industry, the development of stokvels and savings clubs as financing mechanisms, roadside eateries, taverns, and restaurants, the unregulated home or garage based back yard motor mechanics, panel beaters, spray painters, barber shops, salons and beauty stalls, shoe; sandal and bag makers and repairers, sewing and haberdashery stalls, tyre re-makers, carpenters and cabinet makers as well as upholsterers and re-furbishers.

Add to this list the survivalist - mobile traffic light and road side auto electric entrepreneurs or retailers selling low-end sunglasses, earphones, vehicle perfumes, home and auto-mobile cell-phone chargers, leather belts, watches, wallets, hair and nail clippers, shoe and variations of nail polish. Key to this cohort’s survival is mobility and its ability to scan and analyse sales prospects on a continuous and ad hoc basis. Of the cohort of non-mobile township entrepreneurs, most operate in approximately 3 square meter wooden/zinc stalls interspersed around shopping malls and retail centres.

What measures exist to formalise, accommodate and supply services such as water and electricity to this cohort? Or to assist with financing and commercial services, to scale and expand, to provide business support services such as marketing and advertising, accounting, contracting and procurement as well as developing its supply chains?

Liberating the Township Economy 
Understanding the cultures, motives, networks and practices of this informal, unlicensed and unregulated economy is vital to the development, formalisation and integration of it into the formal economy, or even for the provision of basic commercial, finance and business support services to them.

One such initiative aims to group and cluster township business for purposes of service provision, market creation and regulation into designated spaces such as incubation hubs, innovation centres or industrial parks as policy currently suggests. But any act, such as clustering or any form of organisation is counter-intuitive to the manner in which these businesses can be enhanced. For one, a group and cluster approach will have a curtailing effect on their nimbleness and mobility, and would in fact destroy this segment of entrepreneurs. 

The difficulties inherent in developing the township economy should be recognised, rather than simply be used as a critique of current initiatives.

In providing stimuli for township economies, policy makers are having to navigate seemingly irresolvable contradictions. These contradictions stem from the fact that it would make it easier for government to provide services if the business operators and vendors were to be clustered together - creating economies of scale for the Government. But the business operators might be reluctant to be grouped and clustered together given that if in the same sector and offering the same range of gods, products and services, are likely to be competitors, who would find it a disincentive to have share spaces, support services, business intelligence, market share and the like, with their competitors.  It is equally obvious that the bulk of the businesses have already established a market of suppliers and clients and will be reluctant to lose out on them, or provide a competitor with access to them.

They will wish to remain within easy accessibility to an already cultivated market, and to further capitalise on being located where people are concentrated and where traffic volumes are high. While the clustering and grouping approach might promote the development of business hubs and economies of scale for service provision, it ignores the most basic aspects of business practice.

Internationally, trends suggest that businesses are relocating to less congested areas, with easier personal and vehicle access. The international approach is thus conducive to de-concentration, proliferation and franchising – but is only replicable in developed economies with established, highly organised and efficient businesses.  Local practices with Township businesses are contrary to the international trend with township businesses are trying to position themselves more proximate to high density population concentrations and large volumes of traffic, rather than away from them. Consumer population density and high traffic volumes are prevalent at taxi ranks, bus stops and train stations, large malls and shopping centres. This then creates a further conundrum for policy makers who are caught between the clustering and grouping approach leading to concentration, while simultaneously being attracted by the international trend towards de-concentration and dispersal.

Small businesses in townships are themselves caught in this contradictory conundrum – between the desire to easily access government and business development services at a one stop central spot, while simultaneously wishing to retain its competitive and comparative advantages.    


On the face of it, while the township may never be the site for large scale industrialisation, the township economy has good prospects for advancement, enhancement and growth, in spite of the contradictions and conundrums. However, it is important to realise that the township economy will not mirror the established mainstream economy due to infrastructural, spatial and network separation. It will need to develop on its own specific, and particular terms.  

The idea that “the township” lacks entrepreneurial agency and culture, seems misplaced. The business culture that exists in Townships is different to the one that exists in the mainstream economy, to be sure, but vital as it is, it is inhibited by the legacy of apartheid history and early transition neglect. Having survived the ravages of apartheid exclusion, marginalisation and neglect, as well as transcending the infrastructural limitations, the township economy has survived and in some cases even thrived against formidable odds but has also given rise to distinct business practices and traditions that are sometimes at odds with classical business development models.

From a policy perspective, the first problem that needs to be appreciated is the limited scope of current Township revitalisation strategies. They implicitly place a focus on Gauteng’s Townships, with Soweto idealised as a benchmark for Township development to the neglect of Townships elsewhere.  

Secondly, the National Treasury grant funding allocation for Township Revitalisation is small in relation the needs and requirements of country wide economic recovery driven through Township Economies. This needs scaling up. 
Thirdly, the skewed allocation of planning resources, where 90% of funding is allocated to technical assistance compared with a paltry 10% to investments in infrastructure development, need to be reworked to greater balance.  Addressing these three policy issues would be a good start to making the Township Economy Strategy a workable one.

Written by Ntembeko Nqapela, the Township Economies Programme Coordinator and Ebrahim Fakir, Director of Programmes at ASRI.

This article is a summation of a more extensive policy brief on the township economy forthcoming (November 2017), and an empirical research report (February 2018).