Kganki Matabane, CEO of Black Business Council (BBC), a lobby group for transforming the South African economy, is urging the government to support growth by procuring goods and services from the township economy.
Matabane says local and state governments must ensure that a percentage of procurement costs is only for township businesses if the town's economy grows. “What prevents the government from giving all RDP homes, such as bricks, sand, window frames, and more, material supplies exclusively for businesses in town?” asks Matabane. He says these contracts should be 20 years so that these companies use contracts as leverage to get discounts when purchasing materials and raise funds from fundraising agencies.
“It's very difficult to even employ a skilled and experienced workforce on a three-year contract to generate relatively inexpensive funding and create instability. Once that's done, the government should pay these companies on time, or even better, up front,” he says.
Matabane adds that these measures will allow these companies to grow from a sustainable medium to large companies that can start businesses with the private sector and other companies on the wider continent.
“If the government adopts these interventions, the private sector will follow the lawsuit, but if the private sector sees the government as indecisive (as it is happening now), they will not do anything,” he says.
Political will and commitment is required
Matabane further offers South Africa needs a strong and decisive political will to help develop and support township entrepreneurs.
Hairdressers, spaza shops, street trading and taverns are one of the main businesses in the town's economy that can create more jobs with government intervention.
Brelani Balabarabala, the founder of the Township Entrepreneurs Alliance, focusing on empowering township businesses, says expanding procurement opportunities for township entrepreneurs is key to creating an inclusive economy.
“These opportunities are not handouts, they are procurement opportunities. Give them a fair opportunity to bid on services on a large scale and see them thrive,” says Balabala.
Brombar adds that sourcing opportunities need to be linked to mentorship or guidance programs to ensure township entrepreneurs reach their customer specifications. “This creates more risk appetites, such as small enterprise finance agencies, the Department of Trade and Industry, and various financial development institutions. The greater the risk appetite, the more we can help fund our business and create the jobs we need,” he says.
Gauteng Prime Minister Panyaza Lesufi said in February that the state had pledged to support the township initiative, using 60% of its R34 billion goods and services budget. Lesufi said Gauteng is establishing a Township Business Register for all businesses in the township.
“The reason our spaza shops are struggling is because they don't have collective purchasing power. Now, through the establishment of township-based warehouses and distribution centres, we have completed our funding model so that township companies can have their own large purchasing mechanisms,” Lesufi said.
Lesufi spokesman Vuyo Mhaga said the state has identified 20 000 Spaza shops in Gauteng to benefit from the procurement initiative. “We have set aside R100 million to support stores with township spazas with bulk purchase opportunities,” he said.
Buy local
President Gilbert Mosena of the National Chamber of Commerce of Africa (NAFCOC) says the influx of counterfeit products was a threat to the town's economy. “The biggest major constraint on the township business is the consumer's appetite for foreign or imported goods, and the shortage or most support for locally made products. Big Capital also uses townships and has set up convenient retail chains in mini, like the spaza shops that are famous for Black Township,” he says.
A member of the City of Cape Town Mayors' Committee of Economic Growth Committee says the city is implementing many economic development interventions to support local businesses, including supply chain management policies that support local production through specific levels of designated sectors and subsector regional content. Vos said the city also supported the incubation programme for wood-based products in Delft, Beral and Nyanga.
“Through participation in the National Finance Program, the city is developing a township economic development strategy and partnering with local organizations to implement eight projects aimed at supporting the township economy,” says VOS.
