Township retailers need to be bolstered as entrepreneurs

Sithembile Ngobese, CEO of ZOOI Consulting

In South Africa, there is a growing contingent of SMMES – especially in the township and village retail sector – but the government needs to do more to support this growing sector in order to meet their job creation targets.

“Progress is slow, and on a micro-economic level, and this challenge is still not being properly articulated or addressed,” says Sithembile Ngobese, CEO of ZOOI Consulting a social enterprise solutions company focusing on the development of the Township & Village Retail Economy.

“Our research shows that social development of this retail sector has a huge impact on the township economies and communities.”

As a consultancy focusing on revitalising the economies of SA’s peri-urban townships and villages, ZOOI consulting has been commissioned by the North West Development Corporation (NWDC) to provide a spectrum of services in communities in four targeted provinces.

To date, we have assisted 180 beneficiaries and 155 operational businesses and established two hypermarkets in Potchefstroom and Mafikeng

Macro-economic challenges

While there’s no doubt SA faces massive macro-economic challenges, with unemployment climbing to a shocking 29% in the second quarter of this year to about 6.7 million people, and a 0.87 Gini coefficient which is the highest in the world. Tackling these issues is a focus of the 2012 National Development Plan, which President Cyril Ramaphosa is in the process of resurrecting.

“What we see in the North West is that the owners of small businesses – tuck shops, hair salons, Shisa Nyamas and car washes for example – play a prominent role in this cycle. We also see that awareness of their economic value is growing to other provinces – these businesses are becoming an essential early step in creating black industrialists and rural industries,” Ngobese adds.

At the same time, local spaza owners struggle to compete with bigger retailers for reasons including inadequacies in their business models, procurement of stock, client service and networking. Often this frustration manifests as xenophobia – laying the blame squarely on foreigners, not on the other factors that put them at a disadvantage.

“There is a very powerful argument for supporting township and village businesses, which can be done through provincial government initiatives, such as ensuring hospitals and school nutrition programmes procure from local bakeries and tuckshops,” says Ngobese.

In earning a living and supplying their communities, local spaza owners ensure that capital continues to circulate locally. While the roll-out of township franchises by SA’s biggest shopping corporates (which in some municipalities is the preferred policy), results in a large portion of profits reverting to JSE-listed entities for distribution to shareholders.

President Cyril Ramaphosa acknowledged the importance of the township and village economies in his State of the Nation Address in June.

“Through spatial interventions like special economic zones, reviving local industrial parks, business centres, digital hubs and township and village enterprises, we will bring economic development to local areas,” he said. “We will also focus on small-medium enterprises in our cities, townships and rural areas and create marketplaces where they trade their products.”

Recent research conducted by ZOOI Consulting surveyed the views of those living in townships in the North West province towards. The consultancy sampled 1,534 residents in five districts (Tswaing, Mafikeng, Ratlou, Ramotshere and Ditsobotla) to provide a baseline study for our interventions.

Asked what locals could do to improve their businesses, the respondents’ suggestions ranged from lowering their prices, working together on a common goal, improving their attitudes towards customer service and extending their opening hours.

Respondents in the Ratlou community emphasised the importance of partnerships and co-operation among local businesses. It is a very important point. SA’s local entrepreneurs rely only on themselves, whereas Somali businesses – for example – operate as a cartel which is led by a group of elders and thus derive their strength from their social network.

“We believe that black-owned businesses need a full value-chain approach to develop their full capability, from primary production to logistics, processing, packaging and market access. Government intervention is vital, as our experience in North West province shows,” Ngobese concludes.