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. ■