OPINION | The myth of township economy entrenches separate development for black business

Two years ago, the Gauteng government passed the Gauteng Township Economic Development Act with great fanfare.

It was hailed as a transformative step towards empowering historically marginalised communities with funding to boost their local businesses and transform townships to job-creating commercial activity.

But I remain deeply sceptical – not only of the act itself, but of the entire concept of the “township economy”.

This stratification economy, which separates township economy from mainstream economy, will not resolve the question of economic transformation with acknowledgment of the apartheid spatial design of the economy.

Despite redistributive policies, inequality persists in SA, fuelled by historical racial exclusion and low intergenerational social mobility.

The idea that townships can flourish through a parallel economic system ignores a painful truth: townships were never designed to be centres of economic activity. They were the spatial legacy of apartheid, deliberately disconnected from the engines of formal economic growth.

Rather than integrating these communities into the broader economy, the township economy concept entrenches their separation.

For example, spaza shops – those ubiquitous informal convenience stores scattered across SA’s townships. These shops, often hailed as the cornerstones of township entrepreneurship, have long operated without regulation. But their lack of oversight came into sharp and tragic focus last year, when food sold at some of these shops caused the deaths of at least 23 children and sickened more than 400 others across the country.

In response, President Cyril Ramaphosa announced that all spaza shops and food-handling businesses would need to register by February 28. It was a necessary move – but one riddled with logistical and political challenges.

Estimates suggest there are between 150,000 and 200,000 spaza shops nationwide. As of the registration deadline, fewer than 90,000 had applied. Even more concerning: about 37% of these applicants are foreign nationals, many of whom face additional legal and administrative hurdles.

The government simply cannot inspect and enforce compliance across such a vast and informal network. Without enforcement, the new regulations are toothless. And without addressing the deeper structural issues such as access to capital, supply chain inequalities and spatial planning failures, they are ultimately symbolic.

The department of small business development has made some strides, launching a R500m support fund in partnership with the Development Bank of Southern Africa. The fund targets business refurbishment, skills development and wholesale access. But while this initiative is commendable, it’s not nearly enough to fix a broken system.

Let’s be clear: the spaza shop sector matters. It forms part of an informal economy that employs 3.1-million people and provides critical support in a country with 34% unemployment. Trade Intelligence estimates the spaza and mobile trader market at R184bn. These shops serve more than 11-million South Africans, often offering the only affordable and convenient food access available.

But that does not absolve us of the need for regulation – or of asking hard questions. Why is such a vital sector left to operate without standards? Why are many spaza shops run by undocumented migrants? And what does it say about our economic planning that 40% of household food purchases and 77% of daily calories are sourced from informal traders?

The tragedy of the spaza shop food poisonings was not just a failure of regulation – it was a failure of imagination. We have allowed the myth of the township economy to persist, pretending that economic marginalisation can be addressed through piecemeal funding.

The Gauteng government allocated more than R400m through the Gauteng Township Economic Development Fund, intended to provide affordable and accessible credit to township-based businesses, including spaza shops. This fund, supported by the Gauteng Township Economic Development Act, was meant to help township businesses grow and formalise. Yet, we’ve seen little to no transformative progress.

This lack of impact reveals deeper issues: the provincial government lacks the analytical tools and institutional capacity to monitor its interventions and measure their success. The very act designed to support these businesses should have required a system to register spaza shops, ensuring they were tracked, supported and regulated. After all, businesses seeking government assistance must be registered with the relevant licensing authority.

Real change will take more than paperwork and promises. It requires reimagining how we integrate townships into the formal economy – ensuring consumer protection and building an inclusive system where every entrepreneur, whether local or foreign, operates safely, legally and with dignity.

The government must address the lack of access to adequate business premises, water and sanitation and general infrastructure and also give the sector the support it needs, particularly safety, as townships are riddled with crime and violence.

The inadequate enforcement of health and safety regulations in spaza shops often results in compromised hygiene standards, putting consumers at risk and the government needs to augment these inspections to ensure there is a consistent oversight of these spaza shops.

• Mabasa is an executive manager in the office of the deputy minister of mineral and petroleum resources