Finweek English Edition
The winter of our discontent
What is being done to develop opportunities in townships?
in the aftermath of the widespread looting of shops and businesses that took place across many parts of Gauteng and KwaZulu-Natal in July, there has been a flurry of insightful debates about the importance of developing low-income and unemployment-afflicted townships. For over a week in July, South Africans were glued to their TV screens, watching thousands of people ransacking and pillaging shopping malls and small businesses in an orgy of violent unrest the country has not seen since the early 1990s.
After the dust had settled, more than 300 people had lost their lives while R50bn worth of damage had been unleashed on property and infrastructure in what President Cyril Ramaphosa described as a “failed insurrection”.
During the pandemonium, thousands of township-based shops and businesses took a huge financial knock, compelling the government to whip out R38.9bn to help affected businesses to reopen and rebuild their operations.
The riots will forever be etched in our memories. The riots reminded us of the re-enacted scenes on the History Channel of Barbarians pillaging Rome after defeating Roman legions on the battlefield. Who can forget the video that went viral of a looter who triumphantly ate a stolen cake inside a Shoprite store, with no care in the world of being arrested by the police for his crime?
The unrest sent shockwaves reverberating across the country, prompting several influential organisations and institutions to consider ongoing neglect of townships, home to about 60% of the South African population.
The townships, our own version of Brazilian favellas, are underdeveloped compared with middle-class and upmarket suburbs, a legacy of apartheid’s social engineering. What we are faced with is rising discontent in the townships over income inequality and high unemployment burdening these settlements. If nothing is done, townships could potentially become a breeding ground for political instability.
In the deliberations about effecting economic development in the townships, the National Treasury and Association of Black Securities and Investment Professionals (Absip) have been leading at the forefront. Absip has hosted two township imbizos and Treasury a symposium, where key speakers spoke about the need to unlock the potential that is inherent in townships, transforming them into vibrant and thriving economic hubs.
At these gatherings, attended mainly virtually due to Covid-19 restrictions, there has been resounding acknowledgement that townships have been left behind since 1994. Absip is trying to nudge large corporates, particularly JSE-listed companies, to extend their enterprise and supplier development (ESD) initiatives to townships while Treasury has called for the economic revitalisation of townships.
Perhaps the real leader in doing something about developing townships, and not just talking about it, is the Gauteng provincial government. The province has developed the Gauteng Township Economic Development Bill, which it has placed before its legislature for promulgation into an act. The proposed legislation is intended to regulate economic activity in Gauteng’s townships while at the same time facilitating economic development and attracting investment.
The legislation proposes the introduction of incentives to encourage entrepreneurship and job creation in townships across the province, from Soweto to Tembisa and from Kagiso to Mamelodi. From the day the legislation commences, township-based businesses will be required to have licences that permit them to operate. The introduction of a licensing system is a victory for local activists, who have been calling for businesses owned by foreign immigrants to be licensed and taxed.
The bill also implores the Gauteng government to leverage its procurement spend to benefit township businesses. Furthermore, the proposed legislation makes allowance for municipalities to develop taxi ranks into micro-CBDs and for leasing or the sale of state-owned vacant land and buildings for commercial use. The Gauteng government believes that the vacant land and properties could be turned into office parks or industrial parks for light manufacturing.
The legislation also aims to support the growing township backyard real estate market, whereby landlords will be supported to upgrade their homes to provide affordable accommodation to lowincome residents. However, building regulations will not be relaxed, but the legislation will make it easier for backyard landlords to access funding in a market largely shunned by the banks.
However, the Gauteng government realises that the interventions outlined in the proposed legislation will come to naught if there is no funding to support township entrepreneurs who are willing to exploit opportunities emanating from the policy.
As a result, the province has established an SMME fund that will provide wholesale and blended finance in which it fulfils the role of first-loss guarantor, helping to derisk lending to township businesses. The Gauteng government and the Industrial Development Corporation have each committed R250m to the fund, which is expected to total R1bn after more financiers inject their own portion of funding.
With regards to manufacturing, there is an opportunity for township entrepreneurs to tap into the localisation programme, whereby they can produce products earmarked in the list of 1 000 products compiled by government and major retailers.
The list covers six product categories spanning food and beverages; beauty, skin care, and cosmetics; cleaning and hygiene; hair care products; pharmaceuticals; and clothing, leather, and textiles. Companies that participate in this programme will receive financial support and will also be assisted to find markets for their products.
Most of the major retailers are already profiting from the township economy, alongside banks and telecoms companies. It makes sense that these players support efforts to develop townships. ■ email@example.com
is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service.