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Will the township economy survive Covid?

We need to have an entrepreneurial revolution in SA, one of self-reliance, where people begin to accept they need to look after themselves: Khandani Msibi.

NOMPU SIZIBA: The township economy, which tends to be more informal in nature, tends to be a forgotten part of the wider economy. And yet it serves a market function. It’s full of entrepreneurs hustling to make a living. It got knocked temporarily at the beginning of the Covid-19-related national lockdown, when government prevented spaza shops and informal traders from continuing to operate. So how has it been faring during the lockdown, and what needs to happen for the township economy to fulfil its potential, given that it’s bang in the centre of where many people live?

To discuss this issue and more, I’m joined on the line by Khandani Msibi, the CEO of the 3Sixty Global Solutions Group. Thanks very much for joining us, Mr Msibi. We know at the beginning of the national lockdown some missteps in government policy led to spaza shops and informal traders not being able to trade initially, although that was resolved fairly quickly. So what’s your assessment of how the 10-week national lockdown has affected the township economy?

KHANDANI MSIBI: I think the initial lockdown, when it took place, was very severe and terrible on the SMMEs and township businesses, in a sense that most of them went from subsistence to zero revenue. And the implication for that is that, with a limited workflow, these SMMEs would tend to consume the capital of survival, and therefore they are unable to come back post the Covid lockdown.

NOMPU SIZIBA: Some economy observers say the future will likely change with new business models in the formal economy needing to be created to cater for a new normal, and a greater adoption of technology and so on. But from the township economy perspective, what do you think needs to happen for this sector to up its game, as it has many customers at its doorstep – not to mention the great potential?

KHANDANI MSIBI: I the sector of the business that is operating in the townships has the challenge of a transition because you are right, the economy is going through a transition. Certain sectors are going to struggle come back – certainly for some of the SMMEs, being in the sector that they are servicing. To look at the tourism industry, it’s going to struggle to come back. If you look at the restaurant industry, it’s going to struggle to come back.

And for operators in the township, in particular our people, for a long time they have allowed the foreign nationals to take over tuckshops and they have let that side of the business to be taken away from them. I think they need to reclaim that. But reclaim it in a different format, whereby they organise themselves into … and into buying clubs to ensure that they bring the cost down.

But to also move up the product and service line. There’s a man in Pretoria, Lebogang, who is working on providing township people with cheap data. So he has seized a market opportunity and he’s going to become a data provider in the townships, which is something that maybe SMMEs have not looked into. He started off by supplying, importing cellphones. He designed his own cellphone. And now he’s getting into data.

There are areas for township people with skills unclaimed by anybody. I think our entrepreneurs have to, other then capturing what is their birth right in terms of tuckshops, they need to move up, in terms of manufacturing goods. Manufacturing can start off as a simple process of making school uniforms, and get to make shirts. And while making shirts is a repetitive process that enables you to get sufficient practice in order to improve your quality over a period of time. We need to think that entrepreneurs need to start leveraging on, because it’s a market they own. They can go and talk to principals, they can go and address the school governing bodies and become the suppliers of school uniforms, instead of our people going to suburbs and to formal trading in order to buy these services.

So there are a whole lot of things that we that we can [do to] change the townships. People can actually hire space the townships and plant vegetables, and sell vegetables, as opposed to people going to the market to buy vegetables.

Many people think that we’ve come to the end of the world. Maybe we’ve come to the end of the old world, but we’re definitely at the beginning of a new world. And that new world requires that we should think differently, we should be much bolder, and take advantage of what we have and liberate it into new opportunities.

We also need a move up the technology ladder. We have stokvels in townships that have capital for investments. Why do stokvels think that they must invest in the JSE and in banks? Why don’t the stokvels come back to their members to start with this. Why can’t we be the importers of goods and services that are needed in townships, those that need to be manufactured? Why don’t we import machinery and make the goods ourselves in the townships, and then supply the suburbs?

By the way, I’m a firm believer that townships are potential low-cost operators. We have to pay exorbitant rents to operate in the suburbs. I could see, easily, a township business becoming more cost-competitive in relation to events in towns, so that the flow of goods starts from the township into suburbs.

NOMPU SIZIBA: Let me interject there, Mr Msibi. You are brimming with ideas, but I do want to punctuate you a little bit. Even though there’s great potential, what’s your feeling or what’s the evidence around entrepreneurs within the township economy being able to get the necessary financial or funding support?

KHANDANI MSIBI: It’s not there. There’s no funding for township entrepreneurs from the formal sector. Where do our trustees live, who are deciding over retirement funds? Why is it they had to come up with policies that actually exclude investment in their own area, where they live? I would safely say … trustees areas in the areas like ……, and I say to them, with tears in my eyes, tell me why you think it is wise for all your retirement fund contributions to be invested in Sandton, in companies and also in bonds overseas, and not in …… . I think that there’s a need for conversation among black people that, yes, we don’t get as much funding from …… as we should, but we have access to funding. But have locked ourselves away from our money, from the money that is in retirement funds, the money that is in stokvels; we have locked ourselves from that.

The other areas that are sitting with a lot of social wealth are the churches, and the trade unions.


KHANDANI MSIBI: If we can begin to accept that we are on our own, that we don’t have outsiders that have our interests at heart who are going to come and invest with us. But we have our own money. Why can’t we rearrange our money? Why can’t we have stokvels that are meant to get certain people to produce goods and benefit from them, produce those goods at a profit?

NOMPU SIZIBA: Mm. Lots of questions there. So what is it, at a government and municipality, even at a network industry level, that needs to be happening to better create a conducive business environment in the townships?

KHANDANI MSIBI: If you go back to the past, there is one man that we’re working with … He’s taken over an old factory in Babelegi, where he has revived a ceramic manufacturing plant. And, fortunately, the provincial government has come on board with some assistance, the national government has come on board with some assistance. They are seeking entrepreneurs that have taken the initiative. And we need our young people to take the initiative with all of these factories that are empty. They should look at ways and means to occupy these factories and begin to make goods.

If your income is zero, and everybody wakes up to eat, because people are eating, it means you cannot work for free for yourselves until your business can generate and profit and reward you handsomely.


KHANDANI MSIBI: So the difficulty with the state and the municipalities is that we don’t have enough initiative that is coming from communities. I think we are not without blame in that a lot of SMMEs are not getting access to cash. But one can sympathise as well, and say that often for the state it’s easier for them to support a business that is actually operating.

You don’t only get support from the state when it is operating. You also get support from the private sector. I remember the guy that started the Soweto beer … being sold to Heineken It’s things like that. Having mentioned the Soweto beer, it’s interesting that the South African beer market is manipulated by South African Breweries and has significant revenue out of townships.

Why can’t we have more township beers produced by young people in South Africa, and export it into other areas? Why doesn’t Soweto have its own bakery? Why doesn’t Alex have its own bakery? And these micro organisations, when they start off, they start off small but they are significant enough to take care of families and multiples of families.

In fact, the country that has a lot of economic activity from so many businesses is India. You find the manufacturing happens in yards, it happens with family businesses where a man and his children are actually producing. And they start off small, and making good that we all need. “Made in China” meant poor quality, but practice enabled China to get to a point where the Chinese goods are seen to be of equal quality to the likes of Germany. Sometimes they are better value.

So we need to accept that no one is going to save us. We are going to save ourselves. Everybody is trying to save their own country, they are trying to save themselves, and we have to get down and save ourselves by being economically active.

NOMPU SIZIBA:  Mr Msibi, you’ve asked so many so many very crucial questions, but when you ask those questions and you try and answer those questions yourself, what are the reasons? Why aren’t people stepping up and setting up their own bakeries, why aren’t people who have talents in the areas of textiles starting to make uniforms and hoping to upscale by accessing maybe some money, and seeing if they can have some sort of relationship with a school or whatever? Why is this not happening? Is it is it a lack of confidence, what is it?

KHANDANI MSIBI: There is a historical aspect to this thing. If you can, for 60 years, get into people’s houses and find them brewing beer to sell for themselves, and you send the police, and they decant the beer and beat the people up, if you find them baking bread for themselves, you make it illegal for them to bake the bread, and if you find them trying to save money, you make it illegal for them to find the money, you create a culture of dependence. We have a culture of dependence that was inculcated in us through the colonisation slavery and apartheid. That’s why black people cannot farm – how could we have succeeded if we couldn’t farm, because producing goods is a primary enterprise.

But we’ve lost the skills, and we’ve lost the skills, and we’ve lost the confidence to want to do things for ourselves. And our state as well has emphasised employment, right? Over the past 25 years, every election, every political party, is complaining over employment. None has complained and said “I’m going to create 10 000 entrepreneurs”. It’s always “We are gong to create five million jobs”.

So the sight of black people has been damaged, and we need to fix it. Being employed means that you are depending on someone to look after you. All you have to do is to show up. You don’t have to think, you don’t have to get clients, you don’t have to control costs, you don’t have to control cash flow. You are actually a dependant.

So that dependency syndrome needs to be broken and I think we are seeing a lot of that happening. There are a lot of young people in farming , I seen them showing off their produce, I’ve spoken to you about them in ceramics, in fact do things … is the only one of its kind in South Africa and in the continent that makes ceramic tableware.

We need to have a revolution, an entrepreneurial revolution, in South Africa, a revolution of self-reliance where people begin to accept that they are going to look after themselves. And we need to deal with the mindset of conspicuous consumption, where people want to consume easily. That’s what put us in a position where we are want to get around these things the easy way. The easy way is to find a job. And also go back to the school. You and I were told that we must go to school, get good grades so we can get a job. No one ever said to us: “Go start a business”. It’s never been there. It’s never been any of the things that have been encouraged among us. Success is a great job that you get. One goes for education in order to work for someone. Nobody is standing in the queue in order to start a business and be independent.

NOMPU SIZIBA: Mr Msibi, you know what, we’ve run out of time but we could have gone on. Thank you so much for you thoughts.

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