Spazas have buying power

Matthew Govender’s highlighting of the need to tackle the skills deficit in township economies coincides with the publication of recent research showing that township economies are mostly disconnected from supply chains in the formal sector (Township economy plan needs to tackle skills deficit, March 2).

Results of a survey by the Gauteng City-Region Observatory (GCRO) reveal that 8% of respondents own a business, of which 35% are in the formal sector and 65% are in the informal sector. A map unsurprisingly shows informal businesses to be primarily township based, while formal businesses are in established industrial and commercial hubs such as those north of Johannesburg’s central business district.

Relevant to Govender’s point is that informal, township businesses tend to buy locally, whereas formal township businesses buy from outside suppliers. This illustrates that most township businesses are not taking advantage of opportunities to expand by buying from suppliers who themselves are connected to formal and often shorter supply chains, leading to better-quality products, improved logistics and lower prices.

Both Govender and the GCRO have missed a key dynamic in township economies, which is that foreign-owned spazas have been able to cut their prices and so out-compete locally owned informal spazas by amassing greater purchasing power through bulk-buying networks that source from formal sector suppliers.

Much could come from the form of training Govender calls for, focusing on the township retail sector, which in combination has enormous buying power. Moves are afoot to address this key factor in revitalising the biggest sector in the township economy. Expect to see real transformation sooner rather than later.

Toby Chance, MP DA shadow minister for small business development