- The single biggest factor behind the leakage
The biggest single cause of leakage is that townships consume far more than they produce. Almost everything on a spaza shelf, from bread and cooking oil to cleaning products and airtime, is manufactured and distributed from outside the township. So every time a resident spends a rand locally, most of it leaves almost immediately, back to suppliers, manufacturers and wholesalers in the cities. The trader keeps a thin margin, and the rest of the value is created somewhere else.
The long-term answer is to bring production, supply and services closer to where the spending happens: local manufacturers making goods for local shelves, township-based suppliers and distributors, and service providers such as repairs, logistics, bookkeeping and security that are owned and staffed within the community. Then that rand circulates several times before it leaves.
- The biggest gap between the policy and the ground
We welcome the draft Township and Rural Economy Development and Revitalisation Policy. It is right about the problems: fragmented interventions, regulatory barriers and poor coordination across government. The biggest gap, though, is between formalisation as a policy goal and formalisation as something a trader actually experiences as valuable.
The policy largely assumes that registration comes first and benefits follow. On the ground, it works the other way round. Traders formalise when doing so clearly improves their business: better stock prices, access to credit, safer ways to handle cash. Our data shows traders will adopt digital tools quickly when there’s an immediate, practical benefit, for example more sales.
So the question for implementation is how to make every step toward formality pay for itself. The policy’s emphasis on outcomes-based partnerships with the private sector is the right lever.
- Advice to a young entrepreneur in Soweto or Tembisa
Start leaving a digital transaction trail. Put as much of your business through a digital channel as you can: a card acceptance device, a business bank account, a payments app, anything that records your sales and your purchases. And keep your business money separate from your household money, even if it’s just two different accounts.
This makes you financially visible. Six to twelve months of consistent, recorded trading tells a supplier or lender more than any application form. Township entrepreneurs are already some of the most resourceful business operators in the country. The step that matters is making that performance visible.
- Shifting from survivalist consumption to retained wealth
Much of the money spent in townships leaves them almost immediately, through stock bought from outside suppliers, cash fees and the cost of travelling to town to pay bills. The private sector can help keep more of that value circulating locally in three practical ways.
See the local trader as a financial services hub. When residents can pay their municipal bills, buy electricity or send money at their local shop, that trader earns commission and foot traffic instead of the money walking out of the township. Second, lower the cost of doing business, especially stock procurement and cash handling, so traders keep more margin. Third, turn transaction data into credit and working capital, so traders can grow instead of just surviving week to week. Lastly, procure from township manufacturers / farmers etc – that is a real game changer.
- The ideal township economy in three to five years
Success would look like the township trader as an integrated part of the mainstream economy rather than a parallel one. The spaza or salon owner would have a financial identity built from their own trading history, and would access credit on terms that reflect their actual risk, not an assumed one. Formalisation would be a natural step people take because it pays, not a compliance hurdle.
You’d also see township businesses supplying one another and being plugged into larger supply chains and procurement, so more rand stays and multiplies locally. Digital infrastructure, safe payments and connectivity would be treated as basic economic infrastructure, just like roads and electricity.
Above all, the township economy being recognised as a productive sector to invest in.