What is a ‘township’?

In South Africa, a ‘township’ is a dense urban settlement usually built at a distance from centres of commercial and industrial activity. In the apartheid era, this was by design: with townships established as dormitory towns for black workers, with no internal economic logic and limited social services. In the post-apartheid period, this pattern has often been reproduced, because large-scale housing projects have been built on cheap land, which is typically far from economic opportunities in the core economy. The social, infrastructural and economic costs of this ineffective urban planning are under-estimated and become set in concrete. Yet what are commonly referred to as ‘townships’ in South Africa can have highly divergent features.The level of income differentiation

• The nature of the available skills set

• Size and history

• The extent and character of existing economic activity.

• The nature of tenure arrangements and the scale of informal housing. 

The main aims of township economic development strategy

 economic activity taking place in townships. This includes better returns to entrepreneurs, better wages for workers and better choices for consumers, that allow their incomes to go further to strengthen asset accumula-Title deeds or other forms of;secure tenure enable investment &in upgrading business facilities and in home improvements, too. Investments in vehicles or equipment can enhance productivity but such investment requires a sense of security. A stronger asset base limits vulnerability for entrepreneurs and households.

All enterprises, no matter where they are located, operate within the context of the wider society and economy. The overall structure of the South African economy has implications for the competitive context in which all enterprises – including township enterprises – operate. 

South Africa’s unequal economic structure is characterised by high levels of concentration, 

including in sectors that produce the fast-moving consumer goods typically found in the shopping baskets of township residents. Here are some of the items – and the all too familiar brand names;Maize meal (Iwisa, Ace, White Star), bread (Albany, SASKO, Blue Ribbon), sugar (Illovo, Tongaat-Hulett), milk and dairy products (Clover, Dairy Belle), sunflower oil (Nola, Epic), flour (SASKO, Premier Milling), tea (Joko, Glen, Five Roses), coffee (Ricoffy, Frisco), peanut butter (Yum-Yum, Black Cat), margarine (Flora, Rama), canned goods (Koo, Gold Crest, All Gold). And Cremora. If small enterprises produce the same products, it can be hard to compete with the economies of scale the giants enjoy – and the brand recognition, too. This does not mean there are no opportunities. Finding them does however require an understanding of the competitive context.

 So for example, to succeed, entrepreneurs may need to differentiate their products or to find niche markets not already taken – rather than competing head to head with the large, established firms in relation to the most popular branded goods. These impacts of concentration apply most directly to manufacturing and agro-processing activity. By contrast, there are certainly opportunities in retail, as the high rates of participation in this sector reflect. While some are survivalist, others make good incomes. Ironically, spatial inequality can also provide a degree of protection for enterprises in the services sector, with spatial distance from the CBD’s potentially creating a competitive advantage for the local provision of services. So for example, even if it costs more to make a photostat copy in the township or to use an internet café, it’s still probably cheaper than traveling to the CBD to do so The township economy – part of the wider Internet connectivity also changes the game. In the past, buyers expected to visit the premises of an enterprise. Today, on-line purchasing options can mean that as long as your website looks professional, the rubbish in the street on the way to your premises is no longer visible to clients, Nor do high levels of concentration always make large firms more competitive. In the fresh produce sector concentration in the retail sector has given supermarkets huge power over farmers, squeezing down their prices. This has led to a growing gap between farm gate prices and food prices in the supermarkets. This provides an opportunity for new linkages between farmers and consumers. 

The nature of local markets is not static either, with changes in levels of disposable income in townships opening new market opportunities. The point is that township enterprises do not function in isolation from the wider economy and need to be aware of this wider competitive context. For more on this, see #1 in this series on Township economies.