The informal business sector in South Africa, holds much potential for the growth and development of our country. A part of the informal sector is ‘the township economy’, where much of the country’s small businesses operate in townships or outside urban areas. Here are six reasons why the potential of the township economy deserves to be unlocked.
It is reported that South Africa has over 500 townships countrywide. As recently as 2019, there were over 21 million people residing in these townships. Pre-pandemic statistics from FNB show that there are 30-40 township businesses per 1000 people which means that there are around 800 000 to 1 million such businesses in total. Of these, around 300 000 of them employ three or more people.
Investec reports that the township economy provides roughly 17% of the country’s total employment. In a country experiencing record high unemployment (or should we say record low employment?) rates, the small business sector is and will continue to be crucial for the inclusion of more South Africans into the economy.
…especially in the retail industry, particularly in spazas, and other township shops. The 2021 South African Township Marketing Report by RogerWilco found that Spaza shops contribute 5.2% to the country’s GDP. Although experiencing stiff competition from more established and formal entities, the average township shop can turn over as much as R2 million a year.
What often prevents informal businesses from growing is usually their informal nature - being cash-only, operating without being registered, and other obstacles such as living hand to mouth, etc). By sharing the resources, expertise, and technology of the formal business segment, we would better help bridge the gap and create even better performing small businesses nationwide.
Companies such as MTN and Standard Bank have realized and acted on the importance of the Township Economy. A notable story is that of Spinach King, which started off as a small township fresh produce business in the Western Cape. Then, after partnering up with Standard Bank, Spinach King grew to become an award-winning supplier, supplying over 150 retailers including top retailers like Spar & Pick n Pay. There are plenty opportunities for other major investors to partner up with small businesses and take them to the next level.
Simone Cooper, head of Business Clients at Standard Bank says that “South Africa’s small business sector is critically important because they can unlock growth, inclusion and long-term social stability.” Improving the township economy will yield positives results such as lesser crime, increased education and skills development, technological advancement, inspiration for further entrepreneurship and innovation, more developed townships, and an overall better quality of life for now and the future in both the townships and the country at large.
It's simple, the township/small business economy is crucial to South Africa’s current and long-term development. More investment and progressive participation, in an often-forgotten sector of the economy, will lead to more economic growth and improved livelihoods for many people living under the toughest circumstances. Perhaps looking at the billions that have been invested into the ever failing Black Economic Empowerment policies, you can’t help but feel that government has missed a trick – the township economy deserves this wasted backing that BEE has received.
Cover image source available here.
