EMBRACING THE HEART OF THE TOWNSHIP ECONOMY:

Why Municipalities Should Be Championing Local Businesses

By Mongezi Mtati, Brand Strategist at Rogerwilco

South Africa’s township economy is the lifeblood of many communities and an unsung contributor to the country’s GDP. A quarter of the population lives in townships, almost 12 million people, who account for billions of rands in spending power. As the country grapples with socioeconomic challenges such as high unemployment, load shedding and rising food prices, understanding the nuances and better serving this market is not just beneficial, but essential.

Municipalities and local governments are well-placed to help harness this potential. Supporting, promoting, and investing in township businesses will not only drive local economic growth but also ensure that the communities' needs are met authentically and effectively.

Rogerwilco has been working with Survey54 over the past three years to better understand township residents' spending and saving habits, and get a deeper understanding of local economic dynamics.

One of the key findings of this year’s Township CX (Customer Experience) Report, which polled more than 1,000 individuals living in townships nationwide, is that consumers are spending more within the townships. 25% of respondents reported spending over 50% of their income within the township. More than 22% said they have bought clothes and furniture, as well as paid for services that were offered in the township, while just under 50% say they have bought food that was prepared and manufactured in their respective townships.

But we are seeing a shift in how they are spending their money with a growing preference for value over brand affinity as consumers adapt to the tough economic conditions. When asked about their motivation for choosing a particular brand, the survey found that 59.3% of respondents considered price as the decisive factor. Additionally, 24.9% of participants emphasised the importance of a brand's understanding of their needs, while only 10.4% mentioned advertising as a motivating factor. consumers tend to show loyalty to locally produced products more than those from outside their communities. This trust isn't just about 'local is lekker'; it's built on a profound understanding of the unique challenges and cultural nuances that township residents face daily. Brands born and bred within these communities inherently 'get it' in a way that outsiders struggle to.

For many, a significant portion of their salaries is spent on transportation, leaving little for essential food, clothing and personal care. Brands that understand this and offer genuine value earn more than just trust; they earn loyalty.

Another enlightening trend in the Township CX Report is that township

Local township businesses, particularly spaza shops, are not just surviving but thriving in this environment. We’ve seen a rise in patronage of local spaza shops, with 51% of respondents claiming to shop at spazas daily—an increase from 44% in 2022. In comparison, supermarkets only garner 28% of daily shoppers, with 48% of respondents saying they shop once a week at supermarkets and 18% saying they do so once a month.

Recognising the unique tastes, preferences, and economic realities of their clientele, these businesses are providing residents with affordable, flexible, and > locally-tailored solutions including repackaging items into smaller quantities, offering weigh-and-pay options and even buy-now-pay-later solutions for regular customers. entrepreneurs in running their businesses by providing business development training, facilitating local partnerships, or even offering incentives for sustainable business practices.

But these spaza shops and small stores need more support from the brands they sell and the government to ensure the quality of their products remains high.

One of their biggest challenges is that unlike big supermarket chains, they don’t have direct relationships with suppliers, and they don’t have the storage space for goods. So if an item has been on the shelf for longer than it should be, the quality can deteriorate.

To avoid this from happening, brands need to collaborate closely with the people who are selling their products to understand how it’s going to be sold and who sells them. That involves trust, not just between the store owner and customer but the big brand on the other end as well. Close partnerships with these local businesses will allow brands to increase their basket sizes as customers top up their supplies throughout the month.

Municipalities and local governments also need to intervene to ensure that those businesses selling legitimate quality products are not undermined by fake products and brands— which stretch way beyond highfashion labels to everyday products, including bread, soft drinks and cigarettes— through streamlining regulation and using existing structures to beef up oversight on the ground. They also need to have resources available to assist township

Another means of better understanding the township economy is through communication with consumers. In the advent of digital, it’s much easier to build that relationship and target the consumer directly. The availability of affordable and high-speed internet has significantly impacted internet penetration in South Africa, which now stands at 72.3%.

Contributions made by initiatives like Isizwe.com's Kayamandi Fibre Project and others led by Vumatel have helped in achieving this milestone.

Improved internet access benefits individuals and presents numerous opportunities for small businesses to thrive. One sector that has experienced notable growth is food delivery services, driven by the surge in e-commerce and the unique circumstances arising from the COVID-19 pandemic. While established platforms like Uber Eats and Checkers Sixty60 enjoy strong brand recognition, local services such as Zulzi and YeboFresh have successfully addressed specific needs within the township ecosystem. For example, Zulzi offers a wide range of products, including food and pharmaceuticals, and even facilitates instant loans. On the other hand, YeboFresh focuses on bulk orders via WhatsApp for local businesses, leveraging economies of scale.

The loyalty towards local businesses extends to the fashion industry as well. The popularity of homegrown brands is on the rise among township consumers.

In 2022, 75% of respondents expressed a higher likelihood to purchase local fashion brands if they were easily accessible through store cards at frequented shops.

This year, the survey delved into the actual expenditure on local fashion. Nearly 17% of respondents reported spending between R1,000 and R2,000 in the past year, with almost 6% investing over R3,000 in local fashion over that time. Footwear brand Bathu leads this demand, with 7% of respondents stating they purchased the brand within the last twelve months, followed by Drip (4.4%) and Amakipkip (purchased by just over 1% of respondents). In comparison, 6.3% of respondents bought international fashion brands.

Nurturing these local brands and understanding the significance of townships and their residents, is key to driving growth. By allocating funds to infrastructure, enhancing the quality of services, and backing local enterprises, we can harness the full potential of these areas. Policymakers, investors and entrepreneurs need to collaborate in establishing a conducive environment that encourages economic expansion and employment opportunities within South African townships.

The township economy isn't just about businesses. It's about communities, relationships, trust, and value. By championing these local businesses, municipalities can play a pivotal role in fostering an economy that is resilient, vibrant, and reflective of the community's true needs.

CONTACT DETAILS

Cape Town

Tel: 021 975 8181

Email: info@rogerwilco.co.za

Johannesburg

Tel: 010 045 0316

Email: jhb@rogerwilco.co.za

Download the 2023 Township Report @: www.rogerwilco.co.za/south-africascx-township-report-2023-here

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