During the first quarter of 2018, South Africa’s gross domestic product (GDP) decreased by 2,2% according to Stats SA.
This low growth trap followed a period of cautious optimism and highlights the need for creative thinking from all role players in the economy.
For the South African business community, it highlights the need to begin looking for growth opportunities in areas that traditionally were not contributing actively in the formal economy, such as township economies and former homelands.
South Africa boasts 2,500 modern trade outlets that include supermarkets and 140,000 traditional trade outlets, which includes spaza shops. Together, these outlets generated annual retail sales of R316.5 billion to March 2017. According to a Nielsen study of this total, traditional trade within urban as well as rural areas amounted to R70.5 billion (22.3%).
It is very clear that South Africa must tap into the dynamism of township and rural economies and employ these as strategic springboards that are able to propel the country’s economy forward.
An important interview with Abigail Makhubele, Sector Solutions Specialist: Franchise, Absa Business Banking and Dr Ivor Blumenthal, CEO ArkKonsult, discussing how the establishment of informal businesses has been driven by necessity for economic survival, as well as entrepreneurial drive, with half of small businesses in the township economy being started to generate basic income.
A deeper look into township economy
Across many parts of South Africa, the township economy is growing at a faster rate than the formal economy. According to the Gauteng Enterprise Propeller (GEP) document from GDED, employment within the township economy in the province has grown by over twice as much (11%), compared to employment within the formal economy (5%).
The growth is attributable to various factors including high unemployment and job losses within key sectors such as mining and manufacturing.
The increase in the establishment of informal businesses has been driven by necessity for economic survival, as well as entrepreneurial drive, with half of small businesses surveyed in the township economy baseline survey conducted by Gauteng Department of Economic Development (GDED) in 2017, being started to generate basic income.
The baseline survey also revealed the main hindrances to business across these prevailing sectors are crime, lack of funding, the skills gap, expensive electricity tariffs, and competition amongst others.
Partnering with businesses active within the township economy
Some of these problems can be overcome through partnerships and businesses of the formal economy getting involved and assisting township companies.
This can be achieved through mentorship, skills transfer or even providing …
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Read this article by Abigail Makhubele, Sector Solutions Specialist: Franchise, Absa Business Banking, as well as a host of other topical management articles written by professionals, consultants and academics in the October/November 2018 edition of BusinessBrief.
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