Alexandra township in Johannesburg. Picture: SUNDAY TIMES
Alexandra township in Johannesburg. Picture: SUNDAY TIMES

Townships have the potential to drive economic growth in SA, according to Thamsanqa Mazwai, special adviser to the minister of small business.

"Most people live in townships so the jobs and opportunities must go to where the people are," he said during a seminar on the Department of Trade and Industry’s rural and township industrial economic development programme, in Pretoria on Wednesday.

Twenty-two million South Africans live in townships and informal settlements, accounting for 38% of working-age citizens. But these areas also account for 60% of the unemployed.

Unemployment in SA reached historical highs of 27.7% in 2017, although the government is confident that with support, townships and informal settlements are poised to become major job creators.

The biggest challenge for economic development in rural and township economies is transforming them from markets to active economies.

"Markets entail a consumption-driven society. Townships have become a market for others, but there is little productive activity happening. We need to stimulate economic activity in rural and township areas," Mazwai said.

Eighty percent of township businesses have turnovers of R70,000 a year.

Mazwai added that small, medium-sized and microenterprises, which account for 45% of total employment and almost 33% of national income in emerging economies, are vital for economic development by generating employment and fostering growth.

He said there was a limited understanding of the capabilities of township entrepreneurs, along with a limited demonstration of the value-add of government programmes.

"Some of these issues stem from government and some stem from the general mind-set in the township, which is often a victim and dependence mentality."

Mazwai referred to poor access to finance and nonfinancial services, and the heavily regulated environment in which small businesses operated in townships and informal settlements.