President Cyril Ramaphosa’s announcement of R500 million to support township economies is a welcome step, but it leaves many unanswered questions.
President Cyril Ramaphosa’s announcement of R500 million to support township economies is a welcome step, but it leaves many unanswered questions. Will this money reach the people who need it most, or will it benefit a few established businesses? Will it address the problems township entrepreneurs face, or will it end up as just another government promise that doesn’t deliver real change?
To understand the complexities of township economies, one must situate them within the broader framework of dependency theory. This theory, which critiques the entrenched economic dominance of core economies over peripheral regions, mirrors the relationship between South Africa’s townships and its urban centres. Townships function as reservoirs of cheap labour and limited consumption markets, systematically deprived of the resources necessary for sustainable growth. “The development of underdevelopment,” as André Gunder Frank described it, adequately captures this dynamic: townships are simultaneously exploited and neglected, ensuring they remain economically peripheral.
Township economies in South Africa are complex. They are shaped by years of neglect and inequality, leaving many businesses stuck in survival mode. Townships are more than just informal markets and spaza shops. They include sectors like tourism, construction, manufacturing and even tech start-ups. Yet, these sectors remain underdeveloped because of insufficient funding, infrastructure and proper support.
As Bheki Twala, president of the Township Economic Commission, said in an interview with SABC News, “We need to unpack what this R500 million is really for. Are we talking about spaza shops only, or are we looking at the whole township economy? We have over 16 township sectors, and this money must address all of them.” Historically, bureaucratic red tape has disproportionately excluded smaller, informal businesses from accessing financial support. This risks reproducing the same inequalities the initiative plans to address.
Another pressing issue is the state’s apparent inclination toward formalising township economies. While professionalising the informal sector is an admirable goal, it often comes with unintended consequences. The informal sector provides livelihoods to millions precisely because of its flexibility and low barriers to entry. Imposing formalised structures without addressing systemic inequalities could push many informal traders out of business, exacerbating unemployment and poverty.
Moreover, the process of formalisation raises questions about governance and agency. Who decides the criteria for funding? Who will distribute these funds? Will local government structures, often plagued by inefficiency and corruption, be entrusted with this responsibility? As township business leader Bheki Twala pointed out, “We know and understand the challenges of our communities; yet, top-down interventions often disregard the lived realities of township entrepreneurs.”
While R500 million is a good start, it’s not nearly enough to tackle the deep problems in township economies. Townships are still dealing with the legacy of apartheid, where people were forced to live far from cities and economic opportunities. Transport costs are high, infrastructure is poor, and access to markets is limited.
If this funding is to make a real difference, it needs to go beyond helping individual businesses. It should also focus on creating the right environment for businesses to thrive. This means improving roads, building local factories, and training people in skills that match the needs of the economy. Twala rightly pointed out that “we need to start producing what we consume. Townships must be places where people walk to work and create jobs for each other.”
For this initiative to succeed, transparency and inclusivity must underpin its implementation. The government should establish clear criteria for accessing funds, with input from township-based organisations and business formations. A bottom-up approach is critical: it is the people on the ground who understand their needs and priorities best.
Furthermore, systemic reforms are essential to complement financial injections. Policies addressing spatial inequality, improving education and skills training, and dismantling barriers to market entry are crucial for creating a truly inclusive township economy. As activist and scholar Trevor Ngwane reminds us, “Economic freedom is not merely about owning a spaza shop; it’s about dismantling the systems that keep the spaza shop on the margins of the economy”.
The promise of R500 million offers a glimmer of hope for township economies, but hope alone will not dismantle structural inequality. Dependency theory teaches us that peripheral economies cannot thrive without systemic changes that address their marginalisation. This initiative must go beyond rhetoric, ensuring the funds reach those who need them most while tackling the root causes of economic exclusion. Without a transparent, inclusive, and systemic approach, the R500 million risks becoming yet another missed opportunity in South Africa’s ongoing struggle for economic justice.
Much like South Africa, the township economy stands at a crossroads. Will this funding lay the groundwork for meaningful transformation, or will it reinforce the cycles of underdevelopment that have defined its history? As Twala said, “We know our challenges, and we have the solutions. The government needs to listen and partner with us.”
If done right, this funding could begin a fundamental transformation. But if the same mistakes of the past are repeated, it will only deepen the frustration of township entrepreneurs who have been left behind for too long. The answer lies not in promises but in implementation.
Thabo Motshweni is a PhD candidate at the Department of Sociology and a research intern at the Centre for Social Change and Centre for Sociological Research and Practice at the University of Johannesburg.