The townships bursting with potential

South Africa’s townships are renowned for their sprawling sizes, poverty and crime rates. But they are also home to plenty of vibrant entrepreneurial activity. 

According to a recent World Bank Group study, over half of South Africa’s population lives in townships and informal settlements, which account for 38% of the country’s working age population. Yet despite this abundance of people able to contribute to the country’s development, this has not translated into widespread interest in these communities as areas of potentially high business activity.

However, in recent years, a few plucky business hubs have been popping up in townships across the country, supporting South Africa’s little-known entrepreneurs.

“Through understanding the base of the pyramid and how it works, township entrepreneurs understand anything can be sold, it’s just a matter of how you sell it,” says Melilizwe Gqobo, the founder of Hubspace. Hubspace supports young businesses in the township of Khayelitsha and has expanded to Woodstock and Philippi, providing office space and facilities as well as running business and soft skills training.

Gqobo believes that township entrepreneurs are some of the country’s most dedicated businesspeople and present the future of South Africa’s economy. “More than anything, what makes township entrepreneurs stand out is the understanding that there is no other option but to make a success. There is no plan B. That’s such a drive that it’s impossible to put it into words,” he says.

Gqobo also points to townships as key consumer spaces thanks to their booming populations. However, he laments that despite their huge potential, township businesses have long struggled to attract attention and investors.

“There isn’t a big appetite from private investors to put money behind township entrepreneurs, which is caused by a lack of knowing what’s going on, and the stereotypes that townships are not conducive to markets,” says Gqobo. “It takes a few people to look at townships in a different manner. It needs a few people not to be brainwashed, to look and see an untapped market.”

Furthermore, he adds, poor infrastructure such as roads and internet connectivity as well as more specific shortcomings such as a lack of higher education institutes and technical skills training severely hinder township economies.

Reconstructed Living Lab (RLabs), originally launched in 2008 in Athlone, Cape Town, is another business hub supporting township businesses. RLabs runs skills training, mentoring and community
development programmes. The initiative has seen such success that it has since expanded worldwide, with projects now running across Africa, as well as in Europe, Asia and South America.

Founder Marlon Parker echoes Gqobo’s belief that township entrepreneurs are uniquely resourceful, whether in running a small corner shop or launching an innovative tech company.

“The uniqueness is how they are able to still succeed with even worse odds against them. Township entrepreneurs are very resourceful. That is an invaluable characteristic for any entrepreneur,” he says.

According to Parker, the market opportunity in townships has still not been understood, but could pose a wealth of opportunities for businesses willing to tap into the high-volume consumer base at a relevant price point. Sensitivity to pricing will be a challenge, he says, while access to finance also remains a big obstacle.

Parker says that the government has tried to roll out a number of initiatives to help townships entrepreneurs – such as the Bandwidth Barn project, which provides office space, mentorship and support to its members – but that not enough is being done.

“There have been a number of networks and initiatives that have been started but definitely more is needed,” he says. “Government can provide support through creating conducive trading environments for township entrepreneurs as well as incentives that will assist with cash flow.”

Leading the way

Khayelitsha-based businessman Raymond Vicani believes that stereotypes about townships run deep. Vicani’s landscaping business Raymond Landscaping & Gardening Services not only serves local households and organisations, but has also secured contracts from the Departments of Health, Agriculture, and Public Works. But he has faced many negative perceptions.

“We have been experiencing a lot of non-support for entrepreneurs through our own families at home – peers and friends not believing you will make it one day – no sort of government support, or grants,” he says. Nonetheless, Vicani believes township entrepreneurs are the ones with the drive and power to end poverty cycles within their own communities by creating jobs, fostering work ethics and integrity, and building South Africa’s economy.

“First of all we have the passion, determination, drive, focus and the will to succeed and drive change in the cycle of poverty amongst us black people no matter what the odds,” he says.

In particular, Vicani says township entrepreneurs have a vital role to play in leading South Africa’s youth and showcasing the opportunities available to those who pursue a career in business.

“Our youth of today need role models, successful entrepreneurs, people that, when they grow up in the township, they can look up to as role models of what they could live to become in their future.”

But to make this feasible, investment is needed. “If you invest in us we can create more employment, more jobs and more skills so we can put food on many people’s tables on a daily basis,” he says. “We need capital investment to expand and buy more machines, equipment, provide more training to our staff, and improve our company for our clients and shareholders.”

Mali Tyafa, another Khayelitsha entrepreneur and founder of the multimedia studio Ezibukwayo Interactive, helps 200-plus small and medium businesses operating in the township.

According to Tyafa, township entrepreneurs have the power to boost the country’s economy, create a local talent pool, provide job opportunities, and help create best practices based in equality. But to do this, Tyafa too urges more support.

“Ezibukwayo Interactive needs your support to be able to grow a big thing from within Khayelitsha, achieve sustainability, and, further, to have enough resources in order to give back to our mother township and its surroundings,” he says.

The new metropoles

According to Western Cape’s Minister of Economic Opportunities, Alan Winde, the challenges faced by township businesses largely come down to infrastructure-based shortcomings and excessive bureaucracy.

“Unnecessary red tape poses a serious challenge to the growth of small businesses,” he says. “Businesses based in the townships need to be able to connect with markets across the world and they need fast, reliable and affordable internet to do so.”

According to the minister, the Western Cape has been working on a range of initiatives aimed at removing obstacles hindering businesses. “In this financial year [2014–2015], the Western Cape government has invested R45m ($3.8m) through our entrepreneurship and enterprise development programmes to assist new business development with procurement support and access to finance,” says Winde. “Over 1,000 emerging businesses in areas including Langa, Khayelitsha, Gugulethu, Philippi, Athlone, Mitchell’s Plain, Kraaifontein, Bellville and Woodstock were assisted.”

One key project of the Western Cape government aims to cut out unnecessary administration through the Red Tape Reduction Unit.  According to the minister, the unit is working to create an enabling environment for small businesses, and has resolved over 2,000 cases since launching in 2011. A Partner Network has been set up, comprising 20 economic development centres, offering businesses services including company registrations, access to finance, website development and assistance with compliance.

Township businesses are getting noticed, and all involved in the buzzing activity are aware of the potential of these high-population areas. All that remains is for unified action to unlock the potential. Challenges seem as plentiful as opportunities, but few doubt that the townships will prevail. As Gqobo asserts, “the Khayelitshas and Sowetos will become the new metropoles.”