Township Looting – the underlying causes

In the first few months of my appointment in the Economic Development portfolio, I trekked various townships to gain a better understanding of the challenges faced by township entrepreneurs. These engagements were more than just consultations but forums where township residents who are engaged in business and trading reflected on the state of the economy and how it continued to marginalize the poor.

From township to township, the presence of foreign nationals in the township retail market was a prominent feature in the cries of South African entrepreneurs. Local traders and merchants recited tales about the disappearance of the once powerful Thanda Abantu General Dealers or Puwane Hardware stores in various townships.

It became clear that local township-based entrepreneurs are struggling to compete with foreign nationals – who employ a variety of innovative strategies to stay competitive and keep prices low- as well as big retailers in shopping malls.
It also became clear that local entrepreneurs are squeezed out of the market by cheaper, service-oriented businesses with friendly trading hours.

But the reality is that the intra-business rivalry is only a small part of the challenges we face. Although local and foreign national trading in townships compete for the meagre incomes of township residents, both sides have no real presence in the production and value chains of the goods they sell.

Their scramble to benefit from the buying power of township residents takes place on the sidelines of an economy that is still in the clutches of white-owned multinationals. Almost all the South African economic sectors and their value-chains are dominated by a few monopolistic businesses, which create barriers to entry for new enterprises. Townships are increasingly dominated by major supermarket chains, which have crowded out small businesses in the township space.

Currently, townships are outlets for big business and consumption sites with little productive capacity. In addition, we have also witnessed a decline in the living standards of the poor in recent times. The poor’s share of the national income has been significantly reduced and inequality has widened. More than half of all workers in South Africa earn less than R3500 per month. Casualization and the prevalence of labour brokers, which are now an entrenched part of the labour market, erode what are already scarce resources for working class homes.

When one engages directly with local shop owners it becomes clear that their businesses moved from thriving establishments to survivalist enterprises with the introduction of more competition in the township space. Many narrate anecdotes about the fall of profits and loss of market share and how this has led to home repossessions and financial woes. All of this boils down to one thing – an assault to dignity meted out on poor sections of the society.

Faced with this reality, all sorts of unfounded and dangerous tales begin to shape the consciousness of people. Unsurprisingly, in narrating the chronicles of the Soweto mayhem, big business completely evades our radar. Like local township traders who seldom look at the role of big retailers in eroding their customer base, the majority of unemployed South Africans also misdirect their anger at the rapid and adverse changes taking place in the workplace on foreign nationals.
It is easier to place the blame for their economic miseries on our “porous borders” and completely overlook how big business is continuously looking for ways to increase profits, which includes pursuing cheaper sources of labour.

Foreign nationals, who, as the painful aftermath of the Soweto mayhem demonstrated – are not making millions out of the township space, become easy targets and an outlet for the economic grievances of the locals. In this flawed analysis, no questions are asked about the systematic impoverishment of the  majority of South Africans by big business, which is hoarding hundreds of billions that could be reinvested to expand the economy and create jobs on a massive scale.

Guateng’s township economic revitalization strategy – which aims to encourage and foster productive economic activities in townships by aiding business with land, industrial space, funding, mentorship, market access and overall competitiveness – is an integral part of resolving these challenges. Through this strategy, we aim to grow the township economy’s contribution to the economy of the province to 30% and have allocated R1 billion over five years towards this objective.

I can concede that the economic question is not the sole explanation for the events that took root in Soweto and other townships recently. But discounting it would also give false solutions. The acknowledgement of the economic undercurrents provides us with better prospects to address the root causes of the crisis and tackling it head on.

Comrade Lebogang Maile is a member of the ANC Guateng PEC and MEC for Economic Development, Environment, Agriculture and Rural Development

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