SA Township Economy by Mmakgantse Mmereki

SA Township Economy: What Was Born Out of a Need to Survive Has Turned into a Trillion Rand Industry

Opinion Article by Mmakgantse Mmereki

The formations of Townships – particularly in South Africa were formed from a dark history of forced evictions of Black people from previously designated “whites only” areas to far-flung Apartheid era demarcated zones that were meant to funnel cheap labour to fund this repressive system’s economic machinery. Townships in South Africa were initially designed not to be spaces where people thrived, but rather areas of discomfort, in small match-box houses with very limited sports and other recreational facilities. The Apartheid spatial planning intentionally located these labour-dwelling zones far-away from the Central Business Districts where the locals would need to spend exorbitant amounts and go through rigorous checkpoints and pass laws to get basic necessities such as groceries. Out of necessity, the Township economy was born. 

Small, informal enterprises like spaza stores, street vendors, hair salons, and home-based businesses are the main drivers of South Africa’s township economy, which is a dynamic and crucial component of the country’s economy. Township economy, or “i-Kasi” economies, represent a robust and dynamic industry that has enormous potential to propel Africa’s inclusive industrial development. With millions of people depending on them for income and employment, these companies create jobs and supply essential goods and services to township people living there, who comprise almost half of the nation’s metropolitan population.

Despite their vibrancy and resilience, township economies face persistent challenges rooted in apartheid-era marginalisation, including inadequate infrastructure, limited access to finance, limited business and financial literacy, restrictive regulatory frameworks, and constrained market opportunities. These intertwined challenges require coordinated interventions in finance, infrastructure, education, regulation, and community support to enable township entrepreneurs to thrive and contribute meaningfully to local economic development.

Most township businesses are necessity-driven, survivalist in nature, and struggle to scale beyond small operations due to these systemic barriers. The informal sector’s lack of formal recognition further exposes entrepreneurs to legal and operational vulnerabilities. The township and informal economy are estimated to be worth between R1 trillion and R1.125 trillion, making them significant contributors to the national economy. Key sectors include spaza stores (R190 billion turnover), fast food (R90 billion), taxi services (R50 billion), back-room rental (R20 billion), beauty (R10 billion), and savings stokvels (R44 billion) [Business Tech, 2025].

Community-driven initiatives, micro-investment ecosystems, and entrepreneurial innovation have shown promise in realising this potential, as seen by successful local businesses that combine access to capital as well as skill development, and local knowledge. Increasing government and private sector aid, as well as concentrated policy reforms and infrastructure development, are critical to realising the township economy’s full potential in generating inclusive and sustainable economic growth in South Africa.

In an effort to stimulate the township economy, the Sandton Convention Centre in Johannesburg will host the Township Economies Expo from July 16–17. Co-locating with the Manufacturing Indaba, the Township Economies Expo offers a special forum for fostering communication between township-based businesspeople and corporate manufacturing behemoths. The Indaba promotes meaningful collaboration by integrating i-Kasi entrepreneurs, which helps township firms grow, gain access to formal markets, and become more resilient. In addition to promoting inclusivity, this program reinforces supply networks, encourages creativity, and promotes Africa’s larger industrialisation objectives.

The Township Economies Expo event aims to foster entrepreneurship by developing growth-oriented entrepreneurs, connecting township manufacturers to mainstream corporate markets, and facilitating skills development for SMMEs. It supports informal businesses in transitioning to formal enterprises, provides platforms for showcasing products and services, and promotes long-term growth through government and corporate procurement. Additionally, it offers service providers a space to present financial and business support, facilitates trade among SMMEs, and identifies and addresses the needs of the informal market to enable its growth and sustainability.

Policy Interventions

The formalisation, expansion, and development of the township economy in South Africa depend on policy interventions and a whole-of-society approach. These tactics seek to promote diversity, remove structural obstacles, and unleash townships’ economic potential. Table 1 below lists some of the most important policy initiatives that have been put into place and some that must be implemented in order to empower entrepreneurs and create creative micro-investment ecosystems in order to unlock the untapped potential of South Africa’s township economies.

Table 1: Township Economy Policy Interventions

Table 1 illustrates that a holistic, multi-stakeholder approach is necessary for addressing the problems facing township economies and ensuring their sustainable formalisation, growth, and development.

Expert Opinion & Future Aims

The township economy is significant as it has been identified to assist with unemployment, boost economic expansion, encourage entrepreneurship, empower communities, lessen inequality, and support the general development and well-being of traditionally underprivileged areas. According to the February 2021 Quarterly Labour Force by Stats SA, approximately 2.5 million workers (excluding those in agriculture) depend on informal companies for their livelihoods, jobs, and income, even though they usually do not make direct tax contributions to the government. Looking ahead, a strategic focus should be placed on simplifying business registration, improving financial access, and investing in essential infrastructure to support township enterprises. Equally important is the expansion of entrepreneurship programmes, the creation of local supply chains, and the strengthening of partnerships among government, private sector, and community stakeholders. By addressing these priorities, South Africa can unlock the full potential of its township economies, fostering greater social stability, economic inclusion, and sustainable development across the nation.

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Footnotes:

1. Business Tech. 2025.  South Africa’s R1 trillion invisible underground economy. https://businesstech.co.za/news/business/821520/south-africas-r1-trillion-invisible-underground-economy/?utm_source=everlytic&utm_medium=newsletter&utm_campaign=businesstech
2. Nthoana, R.F. 2024. Inclusive Economic Growth – Building Sustainable Township Economies: Integrating Micro-Investment Ecosystems and Entrepreneurial Innovation while Empowering South Africa’s Informal Sector. https://download.psg.co.za/files/thinkbigsa/2024/Teboho_R.F._Nthoana.pdf
3. Phillip, K. 2018. Township Economics Series #5: A framework for the development of metro strategies. https://csp.treasury.gov.za/DocumentsToolbox/Township%20Economies%20Series%20Paper%205.pdf
4. Township Economies Expo. 2025. https://townshipeconomies.co.za/
5. South African Business. 2024. Why the growth of the township economy is crucial for South Africa’s future. https://www.southafricanbusiness.co.za/06/2024/south-africa/why-the-growth-of-the-township-economy-is-crucial-for-south-africas-future/
6. Stats SA. 2021. Quarterly Labour Force. http://www.statssa.gov.za/publications/P0211/P02114thQuarter2020.pdf