The informal economy, sometimes known as the "township economy," accounts for about 17% of total employment in South Africa. In a country where the unemployment rate is on a high, the informal sector provides sustenance for many families who are unable to find regular work. It's also been impacted particularly hard by Covid lockdowns and recent fatal disruptions of the looting. So, what can be done to help this industry thrive? Is there a way to regulate it?
According to Stats SA, informal businesses provide livelihoods, employment, and income for around 2.5 million workers (excluding agriculture) while not contributing directly to the fiscus through taxes. The township economy can be defined as economic activity within townships which includes both formal and informal businesses, with some having a symbiotic relationship (WCEDP, 2019). Many township businesses have become a way of life, particularly for individuals who are unable to find regular work since they help families put food on the table. The township economy can also be defined as an economic system that meets the social and economic demands of a community within a defined geographical space.
Some of the challenges that township entrepreneurs experience:
Financial exclusion:
We know that township entrepreneurs and township-based entrepreneurs — those who operate solely in townships and those who do business both inside and outside of these areas — struggle to obtain funding from traditional sources such as banks and government programs, and we're starting to realize that they're also cut off from information that could help them grow their businesses.
Social capital
Initiatives such as the Township Business Investment Summit & Expo provide a venue for township-based entrepreneurs to access knowledge, resources, funding, and procurement possibilities, as well as create their own networks. However, eKasi initiative has a restricted capacity and can only deal with a limited number of entrepreneurs. Many more people are overflowing with ideas that have the potential to transform townships — and ultimately the country. Entrepreneurs could do so much more if they were given a helping hand.
General business knowledge and skills
The absence of business skills, as well as business literacy and education, poses a challenge to many township-owned and lead businesses. Many entrepreneurs lack the basic abilities and skill sets needed to run a business. Observing and becoming involved in the value chain of established larger organizations, as well as learning through interaction, can help with this.
Infrastructure
A lack of infrastructure is one of the most significant issues that entrepreneurs encounter. By infrastructure, we mean everything from office and industrial space to the necessary registration and regulatory foundations for starting a business. These are reminders that townships were never intended to be business incubators; they were merely destinations for commuters.
The government has implemented a number of interventions to support township SMMEs and entrepreneurs and help them thrive in order to address some of the issues that they face in South Africa's townships. The goal is for these township businesses to provide jobs and push the township economy into the mainstream.
