would seem from this literature that the private sector (in its stubborn unwillingness to relinquish its apartheid capitalist mindset) and the state (in a misguided enthusiasm for housing form over location) have conspired to leave us no better off than we were in 1994.
While there are no doubt elements of truth in this perspective, it needs to be tempered with evidence which suggests that other very real, but controllable, factors may be deterring private investors from participating in township economies.
Firstly, no coherent vision for the functioning of a township economy appears to exist. Is its primary purpose, for example, to provide sustainable livelihoods for business-owners? Or should it exist to serve the needs of customers? The current Competition Commission investigation into the retail sector is a case in point.
The commission’s terms of reference include an investigation into the impact of the expansion of large grocery retailers in SA’s townships on small and informal retailing businesses. The terms of reference quote an unsurprising result from a
“A politically more salient definition of a middle class would be in terms of home ownership and the consequent stake in economic stability.”
Bureau of Market Research study that the opening of a large, formal retailer in a township impacts negatively on the revenues of local stores, with a more noticeable effect on traders in closer proximity to the new store. While there is no need to defend the uncompetitive practices that large retailers no doubt adopt to secure long- term advantage – doesn’t Porter’s Five Forces framework recommend precisely the strategies repugnant to the Competition Commission? – I have some sympathy for their predicament; if they do not invest in townships, they are anti- transformation and if they do, they are predatory. Curiously absent from the critique of large retailers is any enquiry into why township consumers prefer to shop at large retailers, not to mention the impact of retail presence on property prices.
The intolerably high level of crime is another critical factor. Perhaps the best indicator would be the homicide rate. Of all crime statistics, this one is arguably the most reliable. The data indicates that South Africa’s globally remarkable homicide rate of 33 per 100 000 (the country is ranked as the eighth most violent in the world, according to the 2017 Global Peace Index) is unevenly distributed, with a substantially higher rate in many townships. By way of example, the homicide rate is around 400 per 100 000 in the well-known Cape townships of Gugulethu and Nyanga, dropping to 100 or so in Khayelitsha and Delft. Anecdotally, many informal business-owners I meet in the townships around Cape Town have been victims of destabilising crime that threatens their lives and livelihoods. Crime is not an insurable inconvenience; it is a negative force that prevents progress, drains the creative force out of society and terrorises everyone.
Crime itself is perhaps a subset of a bigger phenomenon which deters investment, namely the complete absence of effective political leadership. To put it in Weberian terms, the state has no monopoly on violence. In its absence, there is entropy, presided over by a myriad alternative governing mechanisms, including various industry associations, civic organisations and development forums. While these organisations are there ostensibly to protect the community, they can appear to be rationing economic opportunities and protecting the economic interests of leaders.
In addition, the lack of governance means no effective enforcement of by-laws. While some of these laws are inappropriate vestiges of South Africa’s colonial past and should be scrapped, others can be quite helpful in ensuring harmonious living in dense, urban settings. Irrespective, the lack of governance creates significant risks for investors. For example, a mortgage lender would be reckless to grant a mortgage on a property built with no planning approvals and numerous departures from requirements, where the city would be within its legal rights to order a demolition. All things considered, it seems that doing township business is almost impossible.
42 An Absa Investment publication
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