Developing South African enterprise is a complex task, but an absolute, positive necessity. South Africa suffers from a shortage of decent jobs, the pace of transformation lags expectations and disadvantaged groups remain economically underrepresented. This is most apparent in townships, where the distortions entrenched by apartheid persist 20 years after democracy.
Township entrepreneurs face many challenges in capturing even the most immediate business opportunities. Limited buying power and asset bases compound with skills shortfalls, restricting growth and formal sector value chain linkages. While small businesses are drivers of innovation and competitiveness, they play a proportionally minor role in the economy. This reduces competition and stifles innovation, leading to a competent rather than globally competitive economy.
Thoughtful enterprise development in townships seeks to tackle these challenges.
Creating engines for growth and transformation means South Africa focusing on creating a ‘virtuous economic cycle’ based on increasing competitiveness, capital accumulation and sustainable local economic development.
Enterprise development plays a key role in achieving this end. It is a positive necessity, which we discuss in further detail below.
As businesses grow, so does job creation and skills diffusion
Once a Small, Medium and Micro Enterprise (SMME) has become established in a community, as it continues to grow, the number of people it needs to employ increases, fueling job creation and by doing so, reducing poverty. As more people enter the business and acquire the skills within, those skills will be diffused and can be later used as tools by those employees in their own lives and careers.
Further, through increased job opportunities in local communities, those new workers can enjoy improved quality of life benefits through decreased travel time to work, there will be more capital circulating within the community as a result of wage earners working and living in the local proximity – benefiting surrounding businesses – and they can rely on a stable wage versus infrequent work opportunities.
Unlocking dead capital, spatial regeneration and community value realisation
Township communities are often located near ‘dead capital’, being dilapidated industrial facilities or vacant fringe land separating communities from previously ‘white’ areas. Philanthropic efforts to support township SMME development typically lack the means to scale because they are not based on commercial principals.
Enterprise development can utilise available dead capital, which will have the knock on effect of regenerating economic activity in the near vicinity, closing the spatial gaps created by apartheid and better integrating the nearby community to surrounding areas.
As already hinted at above, if a township enterprise is capable of establishing itself and remaining sustainable in its surrounding locale, the surrounding community will realise the economic and societal benefits such businesses bring.
Going beyond headcount and increasing competitiveness
Meaningful change requires a focus on depth and the prioritisation of scare resources to areas of greatest impact and financial sustainability. Township enterprise development aims to ensure township residents can integrate into the broader economy from which they were once excluded.
To achieve this, integrated programmes must go beyond headcount to focus on the material skills and resource constraints that currently act to limit such integration.
This is why it is important that when enterprise development plans and initiatives are conceptualised, they must be done so where the achievement of objectives can make the broadest impact possible balanced with depth of impact.
If supported correctly, there is little doubt that enterprise development and the small businesses they seek to assist can act as important catalysts for the economy by generating greater employment opportunities and contributing to poverty alleviation.
If you want to find out more about how your organisation can leverage enterprise development and assist entrepreneurs with potential, contact Letsema’s Economic Development practice here.