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Radical changes target production and supply

| Economic factors

Like all townships, Alexandra is home to consumers of goods and services. Very little, if anything, is produced in townships and supplied to the mainstream economy.

Now, the MEC for economic development and agriculture, Maile says the government is not "only talking radical, but also acting radical" to change the situation.

The plan is to get township entrepreneurs to become producers of goods and services.

If this were to succeed, it would be a game changer.

Townships were constructed by the apartheid system to house cheap labour for white-owned companies, particularly mines. But they were linked to the homelands where some of the cheap black labour came from.

The growth of the labour force meant the growth of the black consumer market in the townships.

Entrepreneurial flair was destroyed through a number of discriminatory laws that sought to confine blacks to only two things: consumer and labourer.

As part of changing this economic system - which remains largely intact with some negligible changes - Maile and his team have met about 50000 township entrepreneurs.

The businessmen and women spoke about the obstacles they faced in growing their businesses.

They wanted help from the government to access funding, office space, land and Internet.

Lack of finance is a big hindrance for budding township retailers because they are unable to buy bulk, a fact that has made them relatively uncompetitive, compared with foreigners who club together to negotiate discounts with suppliers.

Watch: Maile speaks about illegal shebeens and township economy


"Following the road show, we put together a strategy which the government has adopted. We want to convert townships from being places of consumption to becoming centres of production," says Maile.

To solve the shortage of land, the government is considering making available suitable land owned by different spheres of government, including municipalities in the townships.

But Maile admits that some government projects tend to raise hopes, only to fail. The R1.3-billion Alexandra renewal project is one example. Maile says there is no room to fail this time.

"We have stopped talking radical but we are acting radical. We will change laws if they are an obstacle," he says.

He has held meetings with 11 big businesses, ranging from IT companies to the major four banks, to support his township economy strategy.

He has signed a memorandum of agreement with the South African Banking Association to establish a grey fund that will be accessed by small businesses.

The government is also considering changing procurement patterns.

"In our health department we have already started to do analysis on what are we buying, what are we spending our money on."

Most of the equipment used in the health sector - including surgical gloves, bandages, musks and some theatre clothes - is imported.

"Some of these things we can manufacture locally and create jobs. This is the space we want to create for the township economy," he says.

"We are giving direct tenders to black-owned companies but also focusing on manufacturing.

"We are interested in ensuring that black people produce flour that they use to make the fat cakes they sell."

The spaza shops have to graduate to the next level. Maile has pioneered a deal with Massmart - owner of Game and Makro - to provide spaza shops with at least 60% of the stock needs as part of the company's enterprise development programme.

"They [spaza shops] will buy in bulk from from Massmart. We are looking at spending our school feeding budget of about 2000 schools at spaza shops. The school will buy groceries or whatever it needs from spaza shops closer to the school.

"We linked them with Massmart so that they have capacity to buy in bulk but they will buy with their own money."

But whether the products supplied to schools via spaza shops will be procured from black producers is something Maile's department should do well to monitor.

A pilot project has started in six townships where spaza owners are buying supplies from Massmart.

He is not so naive as to think that there won't be people who will try to manipulate the system, including fronting for the foreigners that are running most spaza shops in the townships.

"Operation Fiela has started to get rid of illegal people and is doing a good job," he says.

The provincial government with the SA Revenue Service and the department of trade and industry is to help small businesses get registered and be tax compliant.

"This process will help us identify unregistered business and those run illegally. We need a reliable data base that cannot be manipulated."

The government has to be able to account on how many township business people were empowered at the end of each year.

"Otherwise we will have failed if we cannot account."

He's right. The biggest challenge in South Africa's governance system today is what appears to be a swearword to certain politicians: accountability.

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