Procurement Opportunities Are Key

Kganki Matabane, CEO of the Black Business Council (BBC), a lobby group for the transformation of the South African economy, has called on the government to procure goods and services from township economies to help them grow.  

Matabane says local and provincial governments must set aside a percentage of their procurement spend exclusively for township businesses if township economies are to grow. “What stops the government from giving all their RDP houses material supply, such as bricks, sand and window frames, exclusively to the township enterprises?” asks Matabane. He says these contracts should be 20 years to enable these enterprises to use the contracts as leverage to obtain discounts when buying their materials and also to raise funds from funding institutions. 

“It is very difficult to raise relatively cheap funding or even employ skilled and experienced labour with a three-year contract as it creates instability. Once that is done, the government should pay these enterprises on time, or even better, pay them upfront,” he says.  

Matabane adds that these measures will enable these enterprises to grow into sustainable medium to big businesses that can start doing business with other companies in the private sector and broader continent. 

“If the government adopts these interventions, the private sector will follow suit, but if the private sector sees that the government is indecisive (as is currently happening), they will do nothing,” he says. 

Political will and commitment needed  

Matabane further offers that South Africa needs a strong and decisive political will to help develop and support township entrepreneurs.  

Hairdressers, spaza shops, street trading and taverns are among the main businesses in township economies that can create more jobs with government intervention.  

Bulelani Balabala, founder of the Township Entrepreneurs Alliance, which focuses on empowering township businesses, says extending procurement opportunities to township entrepreneurs is key for creating an inclusive economy. 

“These opportunities are not handouts but procurement opportunities. Give them a fair opportunity to bid for services at a large scale and watch them flourish,” says Balabala. 

Balabala adds that procurement opportunities need to be linked to mentorship or guidance programmes to ensure township entrepreneurs deliver to the specifications of their customers. “This will create more risk appetite for the likes of the Small Enterprise Finance Agency, Department of Trade and Industry and different financial development institutions. The bigger their risk appetite, the more they can fund the business and help them create the required employment,” he says. 

Gauteng premier Panyaza Lesufi said in February the province has committed to using 60 per cent of the R34-billion goods and services budget to support township initiatives. Lesufi said Gauteng is establishing a township business register of all businesses in the township. 

“We are told that the reason our spaza shops are struggling is because they don’t have a collective buying power. We have now finalised a financing model to allow township businesses to have their own bulk buying mechanism through the establishment of township-based warehouses and distribution centres,” Lesufi said. 

Lesufi’s spokesperson, Vuyo Mhaga, said the province has identified 20 000 spaza shops in Gauteng to benefit from procurement initiatives. “We have set aside R100-million to help township spaza shops with bulk buying opportunities,” he said. 

Buy local

National African Federated Chamber of Commerce and Industry (Nafcoc) president Gilbert Mosena says the influx of counterfeit products was a threat to township economies. “The biggest major constraints to township business are the consumer’s appetite for foreign or imported goods and lack or little support for locally made products. Big capital also takes advantage of townships and puts up mini convenient retail chain stores almost like the spaza shops that black townships are famous for,” he says. 

The City of Cape Town’s mayoral committee member for economic growth, Alderman James Vos, says the City implements numerous economic development interventions to support local businesses, including a supply chain management policy that supports local production through specified levels of local content for designated sectors and subsectors. Vos says the city was also supporting incubation programmes for wood-based products in Delft, Belhar and Nyanga. 

“Through participation in a National Treasury programme, the city has developed a township economic development strategy and is partnering with local organisations to implement eight projects aimed at supporting township economies,” says Vos.