PHUMZILE CHIFUNYISE: The voice behind kasi’s R178bn economy is worth listening to

You would think the township market, worth an estimated R178bn a year, would be at the centre of our efforts to encourage inclusive growth and job creation.

And that strong voices, embodying the gutsy spirit of this slice of the economy, would have emerged to lead the hundreds of thousands of enterprises operating in the sector to higher levels of growth. 

More than 10 years ago the National Development Plan (NDP) highlighted the potential of the kasi economy to contribute up to 90% of the new jobs that so desperately need to be created in the country, yet they are nowhere in sight. Thirty years into our democracy the township economy, what many call the “informal market”, is still struggling to go beyond the survivalist stage.

The government is at least now paying more attention to the kasi economy, and it is also belatedly getting the attention it deserves from researchers as they continue to unravel the complexities and unique features of this market. Through renewed mass go-to-market strategies that are township-focused, parts of the formal private business sector are competing for portions of the action. Yet amid all this activity many are wondering when we shall see a step-change that shifts the trajectory for township businesses from survival to sustainable growth.

The place to start is to identify who the key players in the township economy are, what they are seeking to achieve, and how they intend doing so. Where are the voices of township small and medium-sized enterprises (SME) owners in all of this, if we believe in the credo, “Nothing about us without us”?

While these may be obvious questions to some, part of answering them requires us to reflect on another question posed by township business mentors: “Are you busy with business, or are you busy with busyness?” Given the numerous public and private sector initiatives out there, we need to keep revisiting that question to ensure we keep those committed to developing the township economy accountable and on course to grow the economy.

Who are these key role players? Although they tend to move slowly, we must give credit where it is due to parts of the state, such as the Gauteng provincial government. Through its Township Economic Development Act it has put in place legislation that seeks to support and fund township businesses, including channelling at least 30% of provincial procurement spend their way.

One of the key wins of this policy instrument is its segmentation of businesses into sector-based township economic zones, such as the commercialisation of the taxi economy into business districts, measures to enable residents to generate incomes from their properties in the backyard real estate sector, and — one of the most recent measures — unlocking job opportunities in the digital sector. The latter will see up to 2,000 young people delivering food to hundreds of restaurant merchants ko kasi through Uber Eats.   

Such a sectoral focus is important to determine the baseline for the 90% of jobs the NDP rightfully envisioned would emerge from small businesses. It is also essential as a diagnostic tool to determine the areas where more localisation can take place. We look forward to similar legislation being enacted at the national level so that other provinces and municipalities can benefit. Local economic development units need to be equipped with the right tools to be able to serve township businesses and create a better trading environment for them. 

Increased penetration of the private sector in townships is a double-edged sword. On the one hand big businesses bring convenience to the community, reducing the need to travel to the city centre both to buy necessities and to work. According to the 2023 Township CX Report, 23% of township residents would choose to spend up to 50% of their income closer to where they live if this were possible.

However, the scale and pricing advantages enjoyed by national retail chains, in addition to long-term lease agreements in township shopping malls, result in an unbalanced competitive landscape. The Competition Commission’s grocery retail market inquiry highlighted exclusive lease agreements of up to 45 years between property developers and some national supermarket chains, which impede the market entry and sustainability of emerging retailers. This is worsened by little to no state support for spaza shops to help them adapt to the changing competitive landscape.      

As we hear more about how lucrative the township market can be for big business one can’t help but notice how muted the voices of native township businesses are. Yet according to the Aspen network of development entrepreneurs there are at least 151 organisations providing financial and nonfinancial business development support programmes to township businesses in Gauteng, Eastern Cape and Western Cape alone.

These programmes continue to grapple with the challenges faced by township SMEs, including onerous national regulatory requirements, municipal by-laws, acquiring the required business skills and accessing adequate financing. They do assist SMEs with daily operational and value chain related challenges, including limited support from trading partners such as wholesalers, product manufacturers and local distributors.

But we need to ask: if so much entrepreneurship development support activity is taking place in this space, what is limiting these and other programmes from massifying and replicating their best practices to produce more township-based success stories?    

This is not to say that there are no such good news stories. There are many, including the family home turned modern nail bar with branches in Soshanguve and Atteridgeville, the corner car repair shop started by a once jobless electrical engineer in Evander, and the new crop of app developers like those in Hammanskraal, who are using innovation and technology to disrupt and revolutionise sectors with their own kasi flavour while contributing to the current 17% informal sector employment base.

Could the lack of credible business data contribute to the limited visibility of standout kasi businesses? Business chambers, associations, corporates and supplier development programmes, incubators, accelerators and the rest of the entrepreneurship development ecosystem have spent a great deal of time and money to nurture and grow township businesses. The success stories should be trumpeted loudly and celebrated to inspire the scaling up of best practice.

Such storytelling plays a vital role, not merely to make us feel better but to propel us to increase the value and credibility of emerging businesses and attract more clients and funders, and build legacy brands. As US academics Michael Lounsbury and Mary Ann Glynn have pointed out, “stories play a critical role in the processes that enable new businesses to emerge ... they define a new venture in ways that can lead to favourable interpretations of the wealth-creating possibilities of the venture; this enables resource flows to the new enterprise”.

Celebrating success stories and putting names and faces to problems that need to be solved can help ensure the powers that be take notice and act. 

• Chifunyise, a member of the National Planning Commission, writes in her personal capacity.