Jeffrey Malaudzi, 22, started Alexandra Bicycle Tours in 2010 to show tourists his township’s lifestyle, culture and history. The young entrepreneur has a number of small businesses, but the cycling tour of one of Johannesburg’s most historic townships is his most successful. He now has 27 bikes and plans to expand.

It hasn’t been easy. Malaudzi says it is difficult to get a loan when you come from the township, don’t own any property and have little start-up capital. Entrepreneurs struggle with the day-to-day basics to begin: airtime to call customers, internet access, the reams of red tape. “I think lots of people in the townships would like to own their own businesses but the problem is resources,” said Malaudzi on Tuesday. They need support like incubation hubs, where small businesses owners can access office space, computers, internet and phones, he added.

Over 80% of Gauteng’s population live in the province’s more than 65 townships, established on the periphery of urban centres to service the white-controlled economy with cheap labour. Speaking on Tuesday at a summit to boost the economy of townships, Premier David Makhura said that in the next five years R1 billion would be spent on building and improving the infrastructure of township economies, with R160 million already pledged. Makhura wants to double the province’s GDP in five years, with 30% of that growth coming from township economies.

A World Bank study released in August, ‘Economies of South African Townships: Special Focus on Diepsloot’, noted how the country’s townships create a more complex situation than the usual urban-rural divide. Townships are disconnected from the rural economy, but aren’t fully part of the urban. The study notes how Apartheid policies limited economic activity.

“This, then, shaped the uniquely South African concept of a ‘township’: a dormitory town built at a distance from economic activity as well as from white residential areas; with rows of uniform houses; and historically lacking services and infrastructure such as tarred roads, sanitation, water, or electricity. Even more so, it lacked economic infrastructure in a context in which – far from promoting local economic development – Apartheid laws curtailed it,” wrote the authors.

On Tuesday, the International Monetary Fund (IMF) once again cut its expectations for South Africa’s GDP growth this year down to 1.4%, rising to 2.3% in 2015, far below what’s needed for significant job growth. One key way of boosting growth will require an increase in township economic activity.

The National Development Plan (NDP) suggests shifting jobs to and increasing jobs in townships and building their links with the urban core to bridge the gaps of Apartheid spatial patters. The World Bank says to boost growth, links between the economies of township and urban areas need to be increased, human capital and infrastructure bases elevated, and the investment climate improved. The development can’t happen in isolation – it needs to work with and capitalise on the current pillars of the economy and established business. But, crucially, townships need to start keeping money within their boundaries, with under 20% of the money made in Soweto staying there.

“We celebrate the collective courage and resilience of township entrepreneurs in the midst of severe poverty and unemployment, to build the township economy – from minibus taxi associations, spaza shops, shebeens, hair-salons, mechanics, to burial societies, stokvels, savings groups, plumbers, furniture producers, and young people in ICT,” said Makhura at Orlando Stadium, where stakeholders gathered for the event.

Boosting the economy in townships was a focus of the premier’s state of the province address and since then he says government has interacted with over 50,000 entrepreneurs across the province. Deputy President Cyril Ramaphosa and Small Business Development Minister Lindiwe Zulu also attended Tuesday’s summit.

Those who interacted with the province complained that big business is dominating local economies and choking small enterprises; regulation is currently too costly for local companies; there’s a lack of state support for cooperatives; and government procurement practices don’t support township businesses.

The World Bank report noted, “The policy challenge is to find ways to exploit the ‘arbitrage’ between the two economies to ensure that capital flows into, not out of, the less developed township economy – and that labour becomes more mobile toward the advanced economy while township entrepreneurs have greater access to its markets.” It recommended a cycle is created – set the conditions for informal businesses that are slightly more capital intensive and can employ others, then let the sector grow.

Tuesday’s summit was about creating a plan rather than delivering one, but Makhura suggested his government will improve conditions for township business growth. He committed the province to exploring different funding models and said “regulation should be simple, cost effective and not criminalise or make it impossible to run residential-based businesses”. The province is planning to change procurement practices on bread, government vehicles, and school uniforms and furniture to support township businesses, he added.

Already, business incubation hubs have been established in Diepsloot, Winterveld and Mohlakeng. Makhura said government would soon announce how many hubs it plans to launch in the next five years. It also wants to focus on building industrial parks, street-level enterprise development zones, push green projects and assist established industries like the taxi sector and hair salons to grow.

Last week, ANC Provincial Chairman Paul Mashatile said the party would push for a new state bank to promote its agenda of “radical economic change” to add to the work of institutions like the Industrial Development Corporation, National Empowerment Fund and others. It’s been suggested the bank could be located in Soweto. “Such a state bank will work alongside a network of cooperative banks located in each municipality which will promote financial inclusion and provide needed capital for township economy enterprises,” said Makhura.

The challenges facing township economies are many, but the premier assured delegates on Tuesday action would be taken. “We will come out of this summit with a plan. This is not a talk shop. We mean business.” DM

Photo: Gauteng premier David Makhura speaks at a Gauteng township economy revitalisation summit in Soweto, Tuesday, 7 October 2014. The Gauteng provincial government will invest at least R160 million in revitalising and building business hubs in townships. Picture: Werner Beukes/SAPA