Township economies: job creation and competitiveness – Dr Thami Mazwai.

Township economies: job creation and

competitiveness – Dr Thami Mazwai

Access to finance

Structure of presentation

• Problem statement – Africa’s missing middle• Poor performances of small business• Profile of township small business• SEDP report on Soweto• Outcomes of research done in 2009• What must be done?

Problem statement

The World Bank and its experts have written extensively on Africa’s missing middle arguing that at and since

independence Africa concentrated on large organisations as these were considered the hallmarks of development. It ignored the small and medium sector, leaving millions

to fend for themselves. This still applies.(2001 – World Bank report on sustainable development)

In the light of the above, what exactly, do township businesses need?

Problem statement

Secondly, the conceptualisation of townships was that they were dormitories for temporary

sojourners and various restrictions limited entrepreneurship. Solutions offered by all have not factored this in, if we are to compare formal

and informal institutions.

Poor performance on SMME development

South Africa’s 2010 total entrepreneurial activity rate of 8.9% is an improvement on the past but still lower than the 11.7 % average for efficiency driven economies and the 15.6% average for all

low-to-middle income economies; A country at the level of South Africa’s

development should be at 15% total entrepreneurial activity

(GEM) South African Report, 2010

Prevalence of small business

• Latest research by dti (Finscope) shows that there are 5, 9 million small businesses in country.

• Previous research shows: - 90% of formal small business is white owned - 90% of informal business is black owned• Less than 10% of township businesses have turnover of more

than R1 million (CSBD)• Less than 10% of township businesses have more than five

employees (CSBD)• 83% of black small businesses have turnovers of less than

R200000 per annum (Finscope 2006)

Analysis of township businesses

• Most business owners are aged between 20 and 40, suggesting that unemployed young adults made the bulk of township micro and informal businesses.

• At least 60% had a matric certificate; 50% had a post matric qualification;

• 59% had worked for at least 6years, 41% between 5 and 6 years, 51% had worked between 3 to 4 years and 37% had worked for one or two years;

• The split between men and women was 50%

Profile of Soweto businesses

• Over 200000, mainly survivalist• Over 85% have turnovers of more than R200000• According to Soweto Economic Development Project

(SEDP)Soweto contributes about 4 % towards the economy of Johannesburg. Government services like clinics, hospitals and schools, for example, account for about 20 % of economic activity in the Soweto economy. This is followed by negligible contributions of about 4 % from construction, 3.5 % from transport and 3 % from the trade sector (SEDP, 2008).

Outcomes of research done in 2009

Research conducted in 2008/09 revealed the following:

• The is a disjuncture between supply and demand. Interventions are

aimed at formal small businesses while the black small business

community is 95% micro and informal;

• Most of the time providers of BDS are located in urban centres and not

in areas with predominantly black communities, where they are

needed. Mother tongue is also not used.

• Service providers were not accredited and most did not have the

capacity to service clients or out of touch with black reality.

The anomaly of the South Africa’s strategies on economic development

Our strategies are likely to sustain socio economic apartheid than improve lives:

• Established business, mostly white, make it impossible for small businesses to grow;

• Black economic empowerment militates against the growth of small black businesses;

• The provision of business development services is spread on the base and growing small businesses is not a readily identifiable

strategy in terms of scale; and• Government strategies to grow small business, whether it is farmers

or contractors, are very limited in scope.

What must be done?• Provision of finance must be skewed towards the

future to deal with past mind-sets;• It is time to develop strategies that focus on

value-add industries in the townships, even if it means up-scaling of home industries, with the provision of finance skewed in this direction;

• There needs to be a closer working together between business, labour, government, universities and the SMME sector;

What must be done?

• Provincial or regional small business summits, as in Tshwane, are needed to integrate services in which flows and monitoring will be clearly defined; and,

• A new winner-focused element must be superimposed over and above the new small business game plan developed by the EDD for the NGP.

• The winner must then be fed steroids so that a winner focused element is introduced

Thank You

Do not miss International Congress for Small

Business (ICSB) conference to be hosted by South Africa

next year