It is an irrefutable fact that, by and large, present-day South African townships and informal settlements have not changed significantly from their pre-1994 configurations. Admittedly, successive post-apartheid administrations have contributed much to deliver, for the majority, basic socioeconomic rights such as housing, water, electricity, education and healthcare.

What has not been achieved sizeably, inarguably, is the structural transformation of the townships and informal settlements from their apartheid function, primarily as dormitories for labour and catchment spaces for consumption of commercial goods and services.

The tabling and passing by a majority of political party support of the Township Economic Development Bill last week at the Gauteng legislature is a game changer to progressively change the economic geography of townships and informal settlements. Since these geographic spaces comprise settlements for the majority population, it is sensible that public legislation and policies should be focused on their material development.

In fact, for the very survival of building sustainable nation-formation and social cohesion projects, it is logical that the focus should be on townships and informal settlements to address spatial and wealth inequalities mainly inherited from apartheid social engineering.

The bill should be welcomed and supported across ideological interests since it is meant to bring townships closer to mainstream economic opportunities, close the disconnected urban and peri-urban class divides, and promote convergence between the formal and informal economies.

It is an unprecedented and far-reaching legislative instrument to affirm township citizens and communities who have been deprived across human generations of strategic benefits to affirm their fundamental human rights. These socioeconomic rights are enshrined in the 1955 Freedom Charter premised on the principles of promoting “equal rights and shared opportunities” and “redress, redistribution, social, economic and spatial justice”.

Equally, this bill’s game-changing importance is informed by the 1996 Constitution that enjoins the democratic government to “improve the quality of life of all citizens and free the potential of each person”. It will soon be signed into an act (Township Economic Development Act) by the Gauteng premier.

It is not an exaggeration to say that these rights entrusted upon the government at both national and local level are non-negotiable to affirm the dignity of township and informal settlement residents who are excluded from meaningful participation in the formal and informal economies. As a result, their structural disadvantage disconnects them from engaging in economic prospects in high-growth sectors and investment facilitation in value chains.

Unfortunately, it is not surprising that the Global Entrepreneurial Monitor (GEM), in its 2021-22 report, ranked South Africa’s “entrepreneurial ecosystem” as the sixth-worst on a global scale comparable (respectfully so) to Sudan. The GEM rating ranks factors such as small and medium enterprise (SME) access to finance, regulatory support, business training, taxes, research and development plus bureaucratic red tape.    

Therefore, the Township Economic Development Act is a mechanism for SME empowerment through active enterprise and supplier development. Specifically, it is a platform to enable or link SMEs to clusters of township suppliers who operate in some cases from revitalised township industrial estates. Bringing opportunities and addressing decisively spatial inequalities, as envisaged from the implementation in this act, will attain the following benefits: 

• It will change how townships and informal settlements are regulated and governed into job-creating activities from their current configuration as merely reserves of unemployment for working-age people;
• It provides for setting up better procurement rules and support for the government and its contractors to buy from large groups of township-based firms;
• There is to be a dedicated financing mechanism to establish an SME Fund to provide wholesale, blended finance to intermediaries that can de-risk lending to township-based firms;
• It is an innovative act for the vast taxi economy to commercialise and transform these transport nodes into mini central business districts; and
• It provides for commercial rapid land release and establishing township commercial precincts and upgrading backyard real estate.

These policy and legislative interventions have the measurable potential to change townships from labour dormitories into active economic geographies that are vibrant centres of and for inclusive self-employment creation. As the World Bank economist Sandeep Mahajan said in a 2014 report focusing on the positively unexploited potential of Diepsloot, this is an area that has “a viable middle ground: a dynamic middle-income economic structure on a large scale that hosts a range of robust businesses, both labour intensive and small enterprises”.  

In large measure, the passing of the Township Economic Development Bill is not a legislation and policy that belongs to the government. To be viable and gain traction that contributes, ultimately, to the Gauteng City-Region, South Africa and our African continent, the role and responsibility is an existential necessity. Fortunately, in the numerous engagements that the Gauteng department of economic development has embarked upon with industry and private sector stakeholders, there is an appetite to work with the government at all levels.

The urgency of implementing this act and resourcing it continuously, through public-private partnerships, is an avenue to transcend historical wrongs that deprived the black majority of gainful economic activity and participation. It is a game changer to empower, without discrimination, citizens and communities to partake in the economy, formal and informal, so that the ideal of economic liberation envisioned in the Freedom Charter and Constitution becomes real and tangible.

With this bill, the Gauteng government led by Premier David Makhura has transitioned from statements of intent as captured in the Charter and Constitution, to statements of action and fact to affirm a better life for all South Africans, especially in the Gauteng City-Region, which is the country and continent’s irreplaceable economic engine. DM

Parks Tau is the Gauteng MEC for economic development.