Township businesses set to aid SA's growth

An economist says the spark of development will come from the informal sector.

FILE: The Alexandra township in Johannesburg. Picture: EWN.

JOHANNESBURG - The spark of development for South African economy will come from someone young, black, and running a micro business in the informal shadow economy in a township, says emerging market Economist, Peter Attard Montalto.

He explains that their gender is insignificant to their succses, as is their level post matric education, and this can in part be attributed to some interaction with non-state education, probably in the charity sector.

Such interactions will have given them confidence and equipped them with basic skills to run a business, beyond what the state provides.

Their business may be in anything that fills a gap in the market and will be embedded in the local community.

They will be a small operator, pay no tax and have no formal accounts, be unregistered and they will grow beyond their locale.

Speaking on 702's Redi Tlhabi show on Monday, Montalto says looking back to 1994, government has tried to get growth to come from particular sectors, including the car and textile sectors.

"But wealth creation is only going to come from where you have a very large pool of people who want better lives, to make more money, to provide goods and services."

He says the townships hold an under-tapped potential where there are around 2.4 million people currently unemployed or outside formal employment.

"The most interesting comparison to South Africa is Turkey where you have a lot of SMEs that have popped up in poorer areas, especially in Anatolia.

"In South Africa, you need to replicate an ease of doing business and registering a business, to be able to get credit. That really isn't there at the moment. There also needs to be more freedom in labour laws for small businesses."

"There needs to be a new and urgent focus on the townships being the new source of growth. The private sector needs to stand up and offer a different paradigm for how South Africa can be run."

He also said the ANC really needs to move on job creation and be more open to creating jobs in order to win the 2019 election.

"There is an opening for that to happen. We need to utilitise idea generation by free-market think tanks to create the alternate dialogue.

"There also needs to be a culture change where South Africans can provide for themselves without relying on their government. That's a realisation we saw crystalised through service delivery protests."

"It's about taking those small businesses to the next level. There's been a huge boom in finance going into townships. There are more finance initiatives but a lot of that is being held back by regulation as the government is trying to prevent repeats of Abil.

"It's a challenge and ultimately the smaller more locally placed, micro-credit providers are going to be much better placed than the bigger banks in the next few years."