Date: 10 December 2020

Research on the limited success of entrepreneurial activity by locals in townships and rural areas was undertaken as part of the National Planning Commission’s economy work-stream’s task of prioritising township and rural economies as vehicles for achieving nationwide objectives of transforming and growing the economy, as well as addressing youth unemployment. The purpose of the research was to enable the NPC and its stakeholders to:

  • Gain deeper insights into the context of and challenges faced by township and rural economies
  • Inform the processes for reviewing and assessing existing strategies for developing and supporting these economies, and
  • Formulate new and/or refine existing strategies aimed at addressing these challenges as envisioned in the NDP.

A multi-method approach was undertaken to collect a range of qualitative and quantitative data. Emphasis was placed on the qualitative data emanating from six of the seven dialogue sessions conducted. Evidence was obtained from various sources including a literature review, and a mini-survey conducted at six of the dialogue sessions in Khayelitsha, Diepsloot, Mamelodi, Uitenhage, Hluhluwe and Thohoyandou.

The data gathered and triangulated are categorised into four dimensions:

  • Business Development Services: Lack of access to finance and entrepreneurial skills accounts for the most cited limitations.
  • Local Economic Development: Challenges included ineffective local business development institutions, which was validated through findings emanating from the mini-survey and literature review. This suggests that government interventions are not effective. The other limiting factors include forced entrepreneurship by government that does not necessarily leads to small business growth and forced cooperatives that found it difficult to survive without government support. Captured in a number of studies, including this one, are the limitations related to dominance of large and foreign-owned enterprises which outperform and force local townships and rural enterprises to close. Other critical challenges which negatively diminish entrepreneurial activities in the business environment are allegations of political and public sector corruption.
  • Social Capital: The inability of local enterprise to survive over multiple generations limits the success of entrepreneurial activities. Family businesses that have traded for generations and are seen as a pillar of success in other economies are limited or nonexistent in rural areas of South Africa, especially in non-farming enterprise activities.
  • Infrastructure: The spatial inequalities which are a legacy of apartheid persist in the townships and rural areas. These inequalities are shown as township and rural enterprises are adversely affected by the lack of accessible (i.e. inexpensive), suitable and convenient business infrastructure including premises and land ownership. Within government control is bulk infrastructure such as roads, ITC infrastructure, water and energy. However, this is unreliable or lacking, and this limits the chances of township and rural areas enterprises succeeding.

The report is dated October 2017