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Lockdowns in SA freed township entrepreneurs to thrive

‘Covid has been tough but it’s benefited the economy of the townships and it was nice to see that.’
Image: Waldo Swiegers/Bloomberg

Eighteen months ago, Kopano Mofokeng began supplying cooking oil to street food vendors in South Africa’s biggest township, Soweto, guaranteeing delivery within the hour and offering stock on credit before gradually expanding to products ranging from liver to chicken feet.

Then the coronavirus outbreak hit and the country was shut down by the end of March. As the national economy tanked, Mofokeng feared the worst — that is, until he realized that government orders to stay indoors and stop traveling were triggering a surge in demand for local food.

Today, his Kasi Convenience company is thriving: He’s switched to chicken, charcoal and polystyrene fast-food boxes — he uses his grandparents’ home for storage — and works seven days a week with a team of friends and neighbours that’s grown to eight.

“Covid has been tough but it’s benefited the economy of the townships and it was nice to see that,” Mofokeng, a 28-year-old former website product developer, said as he helped unload a truck with boxes of frozen chicken from Poland. “Vendors who were brave enough to stand on street corners particularly reaped the rewards. People saw it’s cheaper to buy fast food than to cook at home –- for 20 rand ($1.30), you can feed your kids a meal.”

Seven months of lockdown regulations have slammed South Africa’s economy and prolonged a recession the government was struggling to reverse before the pandemic hit.  Thousands of boutique hotels and high-end restaurants folded, retail stores fled brand-new air-conditioned malls catering to the middle class and unemployment is at a 17-year high. The government expects the economy to contract by more than 7% this year.

The toll is evident in the proliferation of for-rent signs on gleaming office towers and the swelling number of haggard men begging for change at traffic lights in Johannesburg’s business district of Sandton and nearby suburban streets. Several state-owned companies plan to cut jobs; the national airline is bankrupt.

Empty retail units in the Melville district of Johannesburg on November 12. Image: Waldo Swiegers/Bloomberg

Yet the densely populated townships on the outskirts of Johannesburg where Black people were confined by decades of segregation policies quickly sprung back to life after a hard lockdown in April — especially Soweto, home to an estimated 1.6 million people.

While movement restrictions meant that most workers stopped commuting to the city and its suburbs, few people stayed indoors. Rather than standing in long lines outside supermarkets, many turned to corner shops instead.

In a country rife with racial, class and spatial divisions, Soweto residents, distant from the more heavily policed wealthy suburbs, were able to ignore government warnings and rely on neighbourhood businesses to cut their hair, buy second-hand clothes or find beer, which was officially banned.

“Prior to lockdown, small and informal retailers were already growing because of proximity and the cost and inconvenience of transport,” said GG Alcock, a marketer and author who specialises in township economies. “The lockdown has simply fast-tracked the economic revolution of local and small-scale businesses. There’s been a great deal of shopping locally.”

Alcock estimates the size of South Africa’s informal food sector at $5.5 billion, saying there’s a strong economy “out there that’s completely invisible.”

More than half of business owners in the province of Gauteng, where Johannesburg is located, operate in the informal sector, according to the Gauteng City-Region Observatory, a development policy group.

The outbreak crippled tens of thousands of informal traders, many of them foreigners, who weren’t considered essential workers and were barred from operating for several weeks, according to Mamokete Matjomane, a researcher at the observatory.

It was only after advocacy groups lobbied the government that regulations were amended to help food traders, including fruit and vegetable sellers, she said.

“Informal businesses have been most affected by the pandemic due to a number of factors such as longstanding infrastructure issues,” Matjomane said. “Resilient businesses have been those that are able to access government relief, and these are mainly small businesses that have attained a certain level of formality.”

Even so, other small businesses like Mofokeng’s expanded without government support.

Refiloe Rantakoe outside his Borotho Bakery in Soweto. Image: Waldo Swiegers/Bloomberg

Soweto bakery owner Refiloe Rantakoe began sending young men out with metal pushcarts to sell loaves of bread door to door. The experiment was so successful that he was able to open a second bakery in June, almost doubling his output to 1,200 loaves a day.

“The lockdown has helped me to think differently about business,” Rantakoe said in an interview in the Soweto district known as White City. “Innovation was the scary thing. I liked it because it helped me to think out of the box.”

Today he employs more than 20 people, and both his bakeries operate night shifts to keep up with demand.

“Huge business can be done in the townships: We eat and drink every day,” he said. “We can’t rely on the government. We need to do our own thing.”

© 2020 Bloomberg

COMMENTS   8

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Delivering illegal cigarettes and alcohol to everyone at a 400% margin.

Great article we need more like it?

COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 5:48 PM
The bias toward the minority view is most certainly the preference of this website..

COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 7:55 AM
Moneyweb is evidently employing the new advanced style of censorship? Comments that are too difficult for the admin bot to categorize are simply held indefinitely?
COMMENT HELD FOR MODERATION
28 NOVEMBER 2020 @ 5:36 PM
Agree about the biggest issue being further pandemic reactions. Dems want lockdowns until vaccinations completed = success for economic suicide and vaccine merchants. But now there is a truth leak that must surely sprag the vaccine merchants and scuttle the prospective bargain business acquisition targets. A high level analysis of the US Covid-19 deaths reveals errors that reduce these numbers into non-existence. https://www.aier.org/article/new-study-highlights-serious-accounting-error-regarding-covid-deaths/
All hands on deck to fix the leak and PR it into river? You bet.
The acceptance of this analysis will have global repercussions.
Comment on story: How Biden might stimulate the sputtering US economy

Comment on story: How Biden might stimulate the sputtering US economy

To understand the mechanism by which government interference in the economy distorts economic activity, we have to get a bit technical.

This exercise is worth the effort because we will then understand why the formal economy is shrinking, the informal economy is growing, the investment drive is unsuccessful, unemployment is rising, the SOEs are bankrupt and service delivery is imploding. All these components are interconnected and result from the way rational humans react to the given incentives.

Ludwig von Mises describes the nature of human action: that it is purposeful behaviour, i.e., actors aim to achieve something they consider both attainable and valuable using the means they recognize as appropriate and effective. Using this framework, it is clear that socialist central planning and intervention remove the incentives for entrepreneurs to create value in the formal economy, and incentivises entrepreneurs to hide under the radar, in the informal economy.

Rational humans do not find any “attainable and valuable” opportunities under the regime of BEE, labour laws, the Mining Charter and high taxation. No investment drive, special envoy, investment congress or national budget process will convince investors otherwise. These socialist policies render all entrepreneurial activity “inappropriate and ineffective”, and force entrepreneurs to migrate to those pockets of the economy where the socialist requirements are not enforced.

This is how socialism reverses economic growth, retards innovation, changes a formal economy into an informal one, degrades the capacity of the state, destroys jobs, demolish tax-generation and sets the Malthusian Trap. In short – Ludwig von Mises describes why Africa is a failure, a basket case.

An economy is driven by human action, not by the stupid, myopic and opportunistic socialist laws that were made by incompetent and ignorant men.

Presume they are now all SARS Registered !!!

why?????

they look after themselves, they dont ask for money, they actually work for it.

in my book, should should never pay tax.

Well done to the entrepreneurs and locals for bouncing back; their resilience is its own reward.

Fell off my chair when I read about the ‘more heavily policed wealthy suburbs’.

The toll is evident in the proliferation of for-rent signs on gleaming office towers and the swelling number of haggard men begging for change at traffic lights in Johannesburg’s business district of Sandton and nearby suburban streets. Several state-owned companies plan to cut jobs; the national airline is bankrupt.

Pauline Bax, carefully wording inline with censorious gov, blaming a teeny-weeny virus for the country’s economic ills

10/10 for the entrepreneurs who survived
0/10 for journalist propaganda

End of comments.

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