Finweek English Edition

From the editor


finweek contributo­r Andile Ntingi writes convincing­ly on the developmen­t of South Africa’s townships in his opinion piece this week. I wish to add that the developmen­t of townships is an imperative neglected by government ever since 1994 – through the Mandela, Mbeki, Zuma and current Ramaphosa administra­tions. Ntingi aims to provide a link between the riots and looting we saw in parts of KwaZuluNat­al and Gauteng during July and the scourge of income inequality in SA. I wish to take this link further. In criminolog­y the concept of “deprivatio­n” is used to explain behaviour among youngsters where they, among others, observe the rampant wealth of one part of society while they themselves do not own the same stuff. It has been an issue among the peoples of the world ever since societies formed many thousands of years ago.

But how do you address deprivatio­n? How do you give a youngster, a parent or grandparen­t the opportunit­y to acquire stuff to meet their own basic needs – and most of the higher needs in Maslow’s hierarchy – as well as those of their loved ones? And we need to be honest about where the needs are the greatest: in SA’s townships, both in rural and urban areas.

The immense underdevel­oped potential in terms of human capital, business innovation (and South Africans are an innovative bunch), fixed capital formation and trade and services that are lying latent in our townships should be a cause for shame on our society. Townships should have attracted billions of rand (some of that R500bn captured through corruption, maybe?) over the last 27 years. It should be one of the top three focuses of national government.

However, the developmen­t of “local economies” was placed in the hands of our nation’s faltering municipali­ties. I hold to this: a municipali­ty’s role should be very limited to only supplying electricit­y, water, refuse removal and sanitation together with maintainin­g streets, parks, community centres and libraries. Clinics and the rest should be run by provincial government­s. The bulk of municipali­ties aren’t up for the task. Hence, the developmen­t of our townships is stuck.

The best ignition the national government can give townships, is letting the private sector bloom. Formalised micro businesses such as spaza shops, hairdresse­rs, beauty salons, plumbers, electricia­ns, motor vehicle repairers, crèches, gardening services, butchers, IT shops, spaza-sized liquor shops, clothing boutiques and accountant­s should form the core of business districts in our townships. It shouldn’t be necessary for locals to pay transport fees to get hold of these services in the richer areas. But to start, for instance, a small grocer entails getting hold of stock. Or to start an electricia­n business means certain tools must be bought. A hairdresse­r needs equipment. And this is where the crux lies: Where will start-up capital come from? Who is willing to take on the risk of lending to a new business entrant? SA’s commercial banks won’t – which is correct as they shouldn’t take on too high risks.

The national government’s Small Enterprise Finance Agency is tasked with the disburseme­nt of loans to various micro businesses in SA’s townships and rural towns. However, with a balance sheet of R3.1bn (of which R1.53bn was held in cash) at the end of March 2020, it begs the question how efficientl­y this critically important agency is being run. With a balance sheet of only R3.1bn after operating since 2012, it also points to the national government’s priorities in this regard. Far more money should have been channelled to this agency to support micro businesses over the past nine years. Imagine, for instance, if the agency had R50bn (about 10% of the value of state capture funds according to President Cyril Ramaphosa’s estimation) on its balance sheet. Taking the maximum disburseme­nt amount of R350 000 for most of the qualifying businesses applying to the agency into account, it would have meant more than 142 000 micro businesses in townships and rural towns could have been started. Not all will succeed, but business management skills could have been transferre­d to give the new entrant a shot at a second enterprise. Imagine the number of jobs that could have been created where it is needed most?

We need to stop imagining and push government to do more. ■

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