Amidst slugging economic growth and a high rate of unemployment, revitalising South Africa’s township economies is potentially one of the most efficient ways to help kick-start the country’s economic revival. 

Official unemployment figures of 33.9% – and an even more alarming 44.1% according to the expanded definition, which includes discouraged job seekers – remains one of the most urgent crises facing South Africa given that our socio-economic stability is heavily reliant on employment. Not only will job creation create a more sustainable economy, but it will also broaden the tax base and lessen reliance on government’s social grants.  

Townships, established by design during the apartheid era outside of main commercial and industrial centres, have over time developed their own vibrant economies. The township economy – also referred to as the informal economy – is estimated to provide 17% of South Africa’s total employment and contributes around 6% to the country’s GDP. Estimations are that there are around 30 to 40 businesses per 1 000 people in townships which translates into approximately 800 000 township businesses. 

Largely unregulated with informal businesses not charging VAT to their customers or paying taxes, township economies play a critically important role despite not contributing directly to state coffers by providing a livelihood for millions of vulnerable households. 

Township economies, however, face numerous challenges. Amongst the most significant are regulations that essentially criminalise work in the informal sector, a lack of financial support and insufficient investment, insufficient access to skills training and exclusion of a large number of black people from meaningful participation and ownership.

To boost the impact that the informal sector makes requires the creation of a more conducive environment and better support for emerging entrepreneurs. South Africa, however, performs poorly when it comes to supporting an entrepreneurial ecosystem. The Global Entrepreneurial Monitor’s 2021-2022 report, which ranks small and medium sized enterprises access to finance, regulatory support, business training, taxes, research and development, and bureaucratic red tape, ranked South Africa’s entrepreneurial ecosystem as the sixth-worst globally. 

Encouragingly, there is a growing recognition that more needs to be done both to address the spatial inequalities that are so prevalent in townships as well as improve the investment climate in townships. Earlier this year the Gauteng Legislature passed the Township Economic Development Bill, a piece of legislation aimed at progressively changing the economic geography of the province’s townships and informal settlements by providing a platform to enable or link SMEs to clusters of township suppliers. 

Organisations such as The Township Project (TTP) have been established to act as facilitators to help township entrepreneurs while various hubs provide entrepreneurial support. 

Banks are coming to the party with financial inclusion products. Standard Bank, for example, has introduced a range of solutions it says are designed to help bridge the gap between small township enterprises and the formal economy by providing assistance with formal business registration, building payment channels and developing business capacities. 

Mobile network providers are ramping up their investments in townships. Earlier this year MTN announced that it planned to extend its reach into township areas to boost growth and participation in the digital economy. 

World Bank economist, Sandeep Mahajan, has been quoted as saying that what’s missing from many large urban townships in South Africa is 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 that are suited to absorbing the different skill levels available among the townships’ unemployed population. 

That’s precisely the vision behind Philippi Village, an integrated, mixed used development situated in the Cape Flats township of Philippi. The Village, which is breaking down the spatial divides so prevalent in many of South Africa’s townships, is the brainchild of philanthropic investors the Bertha Foundation and The Business Place Philippi to provide a community-centred safe space for both local residents and businesses. 

An R80 million investment from the Bertha Foundation and the Jobs Fund enabled the construction of a business hub which includes 54 spaces available for affordable rental as office or workshop space or even conference space for small businesses and emerging entrepreneurs while the ‘Container Walk’ provides six and 12-metre converted containers for communal workspaces, offices or storage space. 

A process of community engagement and collaboration resulted in the addition of various community facilities and amenities including a basketball court, 5-a-side football pitch, BMX cycle track, running track, library, sewing school, amphitheatre, coffee shop, health services as well as training opportunities. Today, Philippi Village is a commercially sustainable space that is integrally connected to the community. 

“Our mission is to co-create a safe and vibrant space that connects the Philippi community to services, employment, educational opportunities and activities”. explains Bushra Razack, CEO at Philippi Village. 

Key to the success of the development, she reveals, is ongoing engagement with the local community to better understand their needs, challenges and where the opportunities lie. 

A community development specialist who specialises in stakeholder engagement and is passionately committed to realising meaningful outcomes, Razack explains that for an initiative like Philippi Village to be successful requires successfully navigating a number of complex dynamics. 

“We’ve invested a great deal of time and energy into mapping out exactly what our tenants, the local community and other stakeholders require from Philippi Village and then finding a way to meet those needs. We have used the results to work with our partners to design programs and spaces that are relevant. It’s an ongoing process: every initiative and idea is tested to ensure it is fit for purpose and achieves the necessary objectives of meeting the needs of all stakeholders: tenants, the surrounding community and investors.”

This result is the creation of an exciting multi-dimensional, inclusive space which wouldn’t look out of place in any of Cape Town’s more trendy spots. Philippi Village is currently home to over 80 tenants providing products, services and training opportunities as well as job opportunities to the local community. The sports facilities and other amenities on offer ensure that there is constant activity and a buzz within the development with local community members feeling a proprietary sense of ownership of this innovative development. 

The Philippi Village model, says Razack could potentially be rolled out in other townships, particularly the formula that has been developed for how to identify stakeholders, communicate with them, mapping out stakeholder relationships and engagements as well as how to test concepts both prior to implementation and post implementation.  

“What’s particularly exciting is the potential for change that a development like Philippi Village offers; it can become the connective tissue that links community with easily accessible employment opportunities, training and development, health and wellness services, all underpinned by a strong social element. The connector that links proximity to challenges with the opportunity to reimagine solutions. A place that offers inspiration and engagement and positions the community at the centre of the change” she concludes.