In November 2024 the government issued a decree frantically announcing that spaza shops in Gauteng had 21 days to register or close. The deadline was eventually extended to February 2025, accompanied by the usual threats of “enforcement” and “crackdowns”.
We are now in a new year, looking at the scoreboard for strong gains to carry forward into 2026 and beyond. Can we leverage these registrations in this regard?
“The Township Informal Economy Report 2025″ by Standard Bank confirmed what pragmatic strategists already knew: almost 80% of township businesses remain unregistered. Despite the deadlines, the task forces and the political bluster, the needle has barely moved.
This failure is not due to a lack of will by the state, nor a lack of “lawfulness” from entrepreneurs. It was a failure of design; we spent 2025 trying to force a R1-trillion asset class into a regulatory box designed for Sandton, and the market simply voted with its feet.
‘Missing middle’ trap
The reality is the need to recognise the “missing middle” trap. We have a survivalist sector that cannot afford formalisation, and a formal sector that is struggling to access or adequately tap and unleash the power of the township market. Between them lies a chasm where just 1% of micro-enterprises successfully graduate to becoming larger firms.
The “21-day” mindset assumes that if you threaten micro-entrepreneurs enough, they will suddenly acquire the capacity to navigate zoning laws, tax compliance and health certificates. The evidence of the past 12 months conclusively proves otherwise. When the cost of compliance exceeds the value of the business, entrepreneurs don’t formalise; they go underground.
If we want a different result in 2026 we need a different mechanism. We must abandon the binary legal vs illegal, formal vs informal and registered vs unregistered, and build a framework and adopt “tiered compliance”.
Just as the banking sector successfully introduced tiered know your customer limits to bring millions of unbanked citizens into the financial fold, our municipalities need a “township tier” for business licensing, for example. The tier would offer basic legal recognition, prioritising food safety and verified ownership without the crushing administrative burden of full corporate formalisation.
Data over decrees
We should also stop treating the township economy as “unsophisticated”. While the government fixated on paper forms, the market was innovating. In 2025 stokvel inflows surged to more than R13bn and digital adoption in the 18-34 demographic accelerated — not due to regulation but because fintechs started to offer value.
The lesson of 2025 is clear: you cannot regulate a R1-trillion economy into submission. You can only co-create it into a safe, thriving environment.
We are seeing some gains in that regard. The opening of the National Payments System will serve the township economy in important ways and help expand the frontiers that regulation has previously imposed. The movement of money via an open payment system will assist, grow and hasten engagement between participants in the township. That will enable money to flow quicker and through more transactions, thereby increasing inclusion in ways we’ve only hoped for.
The South African Reserve Bank has also announced a review of the reference rate that commercial banks use to price trillions of loans to their clients — what we call the prime rate. It is early days to know what the review may lead to, especially in terms of how it changes how banks behave. However, there is an opportunity that banks may review how they think about products they offer, how they assess risk and, with any luck, how they see this space getting closer to the township economy in the new paradigm.
As we head into 2026, deadlines and risk perspectives may need to be reassessed as stakeholders better immerse themselves into the economic reality as presented by the township economy. The township economy is not a problem to be solved with a rubber stamp; it is an ecosystem waiting to be unlocked by smart design.
• Chadha is director at Inani Strategies.
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