Success remains to be seen
SHOPPING malls are mushrooming in many of KwaZulu-Natal’s poor and remote rural towns, raising questions as to what impact these facilities have on the existing economy and long-term forecasts.
Further, are these shopping malls sustainable in areas where most of the population is dependent on social grants?
And, lastly, what is the economic sense of a shopping mall that has large retail and chain stores as tenants who drain the rural economy by sending profits to centrally situated or internationally-based headquarters?
For a small town to survive and thrive, according to some experts, the revenue, particularly social grants, salaries or income from outside the town should circulate among and support small businesses which, as a result, create wealth not only for themselves, but the townsfolk they employ.
Gavin Tagg, managing director of Retail Network Services, which owns half shares in the recently opened Tugela Ferry Mall says the positive impact on the rural economy far outweighs the negatives.
“For a pensioner getting about R1 350 a month, to travel to the closest town from Tugela Ferry – which is Greytown – can cost anything up to R150. Having a major supermarket chain close by also means they can get staples more cheaply than they could before,” he said.
The 15 000sqm shopping mall, which was officially opened earlier this month, is anchored by Shoprite and Cashbuild, with 48 stores, service outlets and eateries such as KFC and Steers. Other major brands include OK Furniture, the Post Office, Jet, Liquor City, Standard Bank, Capitec Bank, Rage, Express Stores, Lewis Stores, Pep, Pep Cell, Power Fashion Factory, Studio 88, Beaver Canoe and Shoe Zone.
The remaining 50% share is owned by Copper Zone (Pty) Ltd.
Tagg declined to disclose the cost of the development or the average rentals for tenants.
According to a statement released by the investors, 184 200 people live in the surrounds, of which 60% are dependent on social grants.
Tagg said a similar shopping mall was on the cards in Mpophomeni, near Howick, in the KZN Midlands.
Andrew Layman, a senior consultant for the South African Chamber of Commerce, said he was concerned the mall developments in these rural towns were too big for the market.
“There are different ways of promoting local business than opening a big shopping mall. The problem with developments such as these is the money doesn’t stay in the community. The head offices of all these stores are outside of the community.”
Layman said entrepreneurs or small business owners in the towns could not compete on price or afford the rentals asked by the developers.
“However, these malls are what the communities want. Particularly the fast-food outlets,” he said.
While noted economists Mike Schussler and Harold Ngalawa agreed that the livelihoods of existing entrepreneurs were under threat from the developments, they said the positives outweighed the negatives.
“This kind of development brings people into the modern economy. It gives these consumers access to markets they never had before.”
Schussler said he was unsure, however, how sustainable such a development would be considering the percentage of consumers dependent on social grants.
“There is not much money in social grants, but perhaps the developers have looked at volumes over numbers. I am not sure of the sustainability, but I can’t see it being a bad thing. We want people to enjoy the good things in life,” he said.
Ngalawa said it was inevitable that small businesses would close down as they could not compete with the establishments in the shopping malls.
“In the process, some people will lose their jobs and the shop owners will lose a source of income. However, the shopping mall will open up many more employment opportunities, which will more than offset the ones that will have been lost by the closure of the small businesses,” he said.
He said, however, it was important that the mall be seen as complimentary to established businesses.
“Consumers will benefit through improved services and new products, while the small businesses may offer them credit, which is usually not the case in shopping malls. The small businesses may also be open during hours that the mall is closed, such as very early in the morning.”