PARKS TAU | Social compact a key empowerment tool for township economic growth

Economic inequalities in townships pose a direct existential risk to our country’s social and political programmes. No social cohesion and nation building can take root and thrive when the majority of citizens and communities, concentrated in townships and informal settlements (T&IS), are left out of participating in gainful economic activities.

The role of government and industry, through targetted social compacting, is necessary to empower T&IS to achieve their potential to contribute to SA’s inclusive economic growth and employment facilitation.

Township economic revitalisation (TER) is about transforming inherited apartheid spatial patterns, highlighted by T&IS inequities, into areas of economic activity where small and medium enterprises (SMEs) participate in value-addition activities.

Therefore, the objective of TER is about supporting and leveraging the township or kasi economy worth billions of rand of spending power. We should not forget that SMEs operating in SA number over 2.4-million and as the National Development Plan stipulates, by 2030, it is feasible that 90% of jobs (or 11-million) can be generated by SMEs.

The 2022 Township Customer Experience (CX) Report reveals there is an appetite to buy locally produced goods and services even though the retail sector (spaza shops, shebeens, fast food outlets) dominate the landscape. This is a reason why the Gauteng Department of Economic Development (GDED) has entered into a partnership with the Family Tree Holdings representing 15,000 audited township businesses in the province.

Family Tree is identified as a strategic partner for its proven experience, inarguably, in clustering service and manufacturing enterprises to build capacity for skill and supplier development. This targetted partnership, also incorporating corporate companies such as Tiger Brands and Premium Foods, is about creating an enabling regulatory environment for business associations to reclaim back the township economic spaces through supporting self-reliance enterprises.

It is a living example of social compacting by capacitating township enterprises, responsible for 17% of the country’s total employment. It is also a testament to where, according to the 2021 South African Township Marketing Report, spaza shops employ an estimated 2.6-million people.        

The CX Report is also useful in demonstrating that T&IS show resilience to be centres of innovation, competition and providing sustainable solutions. These SMEs are not mere survivalist enterprises but are thriving enough to pose a healthy challenge to more formal businesses in their contribution, for one, of about 5.2% to our country’s GDP. This is argued even though, as StatsSA indicates, these township enterprises offer their workers a median income of about R2,000 per month as compared to R4,300 in the formal businesses.

Of course, with more financial and non-financial support from development finance institutions, there is room for this median income to grow to a level where informal operators can pay tax.

This is possible by capacitating township enterprises with requisite access to credit, capital an asset finance as it is being done by the GDED through the Township Economy Partnership Fund. This is a partnership with the IDC and it is managed by the Gauteng Enterprise Propeller to support township businesses (through grants and loans) in sectors like the taxi economy, backyard real estate upgrading, retail, manufacturing and ICT.   

T&IS should never be viewed as mere recipients of public services but with a bottom-up approach and like their Asian tiger counterparts, are proactive agents who only require enabling regulation and by-laws, to access market opportunities.

This is an example of a shared model to service delivery and promoting a solidarity economy or co-production where SMEs (cooperatives, stokvels, associations) can provide their communities with goods and services that meet their needs. It is an explicit ideological and common sense approach wherein, citizens and communities are seen as assets, are able to compete and gain an equal footing with formal enterprise and where supplier and enterprise development is not a tick-box exercise.

The revitalisation of the township economy hinges on SMEs as the lifeblood of the economy. Unquestionably, entrepreneurship is an irreplaceable enabler for, and regenerator of, economic growth, innovation, competition and mass employment. In turn, township economic revitalisation is a recipe to stem and prevent recurrence of the 2021 July civil unrest and build a SA all can be proud to live in.

• Tau is MEC for economic development in Gauteng