The Gauteng Provincial Government’s submission to the Competition Commission’s public hearing on the Retail Sector Market Inquiry was dedicated to the living memory of the ’76 generation that left an indelible mark on the history of mankind and their unflinching dedication to changing the course of history in demand of social justice and prosperous South Africa.
Our participation in these hearings was crucial for a number of reasons; not least, to contribute to a transformation discourse of the township economy because the discussion on proliferation of big retail stores into the townships has remained unresolved, including its adverse impact to township retail enterprises. Of significant importance, our participation was to achieve the following objectives:
- Create a platform for structured discussions regarding the impact of big retail stores on the township economy;
- To pave a way for future structured policy and programme interventions, and
- Collectively develop programmes (public and private) geared at restoring local ownership of the retail space and regulation of uncompetitive geographic practices by big national and international retail stores.
During his maiden State of the Province Address, Premier David Makhura made the following clarion call: “We are determined to revitalise and mainstream the township economy by supporting the development of township enterprises, co-operatives and SMMEs that will produce goods and services that meet the needs of township residents.”
Since the 1994 democratic dispensation, the retail landscape has witnessed some significant structural changes of the grocery retail in townships, leading to a massive presence of big retail chain stores. Big retail chain stores such as Shoprite, Pick n Pay, Spar and Cambridge Food have invested massive capital in the townships. As a consequence, they displaced local retail which kept the local communities economies vibrant. At the same time, there has been the takever of township grocery stores by foreign nationals.
According to research undertaken by the Centre for Competition and Regulation based at the premiere University of Johannesburg, only a handful of large chains hold over 70% of the national market share. This limits the alternative options that suppliers and consumers have, and confers substantial market power to the major supermarket chains. The high levels of concentration in the retail sector are indicative of the barriers to entry and expansion faced by new entrants. This diminishes the propensity for effective competition which has far-reaching implications for consumers, suppliers as well as emerging small township entrepreneurs. The high level of concentration is also indicative of barriers to entry affecting mostly historically disadvantaged individuals.
This is happening on the backdrop of increased wage income in township households boosting the high consumption rate and spending power of the working class through social grants transfers. In addition, the income of old township households has been boosted by the rise of rental markets in the townships (especially the massive increase in backyard dwellings), which supplements the income of the township households and contributes in denting extreme poverty in the province.
The Gauteng Economic Development (DED) road shows for the Gauteng Township Economy Revitalisation (in 65 townships) has helped the government and its partners to craft a concrete policy response beyond the generalisation of typical township businesses and their challenges. The road shows revealed critical and common challenges facing township entrepreneurs, which include among other things;
- Proliferation of foreign-owned business, particularly within the retail sector. These foreign entrepreneurs are said to be non-compliant with the laws of the country and drive locals out of business through cartels, vertical ownership, collusion with wholesales and bazaars;
- There is lack of market access and information to sell their products. There is a call on government to deal with the monopoly pricing that makes it a barrier to entering certain markets through lobbying the Competition Commission, among other regulatory bodies.
Our province has approximately 152 townships which account for between 70-80% of the population, the majority being black Africans. Townships have long been characterised by spatial inequalities and underdevelopment, as a result of our apartheid past and legacy. In his seminal research work, Prof Patrick Bond noted that cities have for a while developed at the expense of townships, and there is no mutual reciprocal beneficial symbiotic relationship between cities and townships. Furthermore, he points out the unequal relationship between the economic core and the peri-urban periphery, where townships are consumption centres with limited production capacity.
The ability of township grocery retail stores to compete effectively in the retail space alongside big retail chain stores is fast becoming a serious concern. It has led to what others call “irresponsible competition” dominating a specific local geographic market. Township grocery stores are severely under pressure from big retail chain stores that are encroaching on low-income markets which township-owned grocery retail stores have been serving for many decades. It is within this context that the need to regulate this encroachment in the township consumer market by big retail chains stores is a prerequisite and necessary act.
For instance, the retail sector, unlike other industries, does not have a Transformation Charter which sets out targets to be achieved, consistent with most sectors that have initiated charters in accordance with the Broad-Based Black Economic Empowerment (BBBEE) regulation and targets.
The technical recession presents an opportunity for a different model of development and investment for working class townships and communities. It is not acceptable that black townships have become consumption centres for white monopoly capital goods without tangible developmental outcomes. Communities where malls are located have become the epitome of unemployment, poverty and social inequality. The scourge of social inequality demands collective action and retails cannot be announcing increased profits while their citizens from their trading sites are trapped in economic exclusion and income inequality.
Perpetually building the township economy on the back of consumption or a debt-driven economy amounts to economic racism.
Our inability to transform the face of our townships – previously used as a reservoir of cheap labour for big conglomerates – into centres of economic boom and prosperity will only serve as an indictment to the ANC’s historic Morogoro National Consultative Conference’s assertion “to allow the existing economic forces to retain their interests intact is to feed the root of racial supremacy and does not even represent the shadow of liberation”. DM
Lebogang Maile is MEC for Economic Development, Agriculture, Environment and Rural Development AND ANC Gauteng Provincial Executive Committee (PEC) member.