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Township economies: job creation and competitiveness

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Title: Township economies: job creation and competitiveness


1
Township economies job creation and
competitiveness Dr Thami Mazwai
2
  • Access to finance

3
Structure of presentation
  • Problem statement Africas 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?

4
Problem statement
  • The World Bank and its experts have written
    extensively on Africas 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?

5
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.

6
Poor performance on SMME development
  • South Africas 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 Africas
    development should be at 15 total
    entrepreneurial activity
  • (GEM) South African Report, 2010

7
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)

8
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

9
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).

10
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.

11
The anomaly of the South Africas 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.

12
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

13
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

14
Thank You
  • Do not miss International Congress for Small
    Business (ICSB) conference to be hosted by South
    Africa next year
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