In addition, 50% are below the lower-bound poverty line. Sekhampu from North-West University in South Africa found that 77% of households in townships were below the upper-bound poverty line. Using poverty lines developed by Statistics South Africa, a 2012 report by T.J. The high unemployment and poverty rates in townships could be improved through the growth of township economies and informal institutions. These issues regard lack of credit, crime and poverty. The recent movement to connect South Africa’s formal and informal economic sectors is closely linked with several issues townships face. However, the recent recognition of untapped business opportunities in townships and the benefits of collaboration between “informal” and “formal” businesses is marking a turning point in the relationship between these economic sectors in South Africa. These businesses operated untaxed and unregulated. For example, Ram Thapa’s is a South African beauty store and fast-food vendor that has an annual turnover of about 19 million rand ($1.36 million).ĭespite a large amount of cash in circulation, the businesses in South Africa’s townships have been historically ignored by the country’s formal economic institutions, such as banks and corporations. This is particularly true for those that operate in retail. The majority of these enterprises are cash businesses that can make up to millions of rand in revenue. These township businesses, according to a 2018 report by the First National Bank, operate in the six primary sectors of grocery stores and stores stocking fast-selling consumer goods, taverns, hair salons, educational centers, micro-manufacturing and motor and cellular repair services. This socioeconomic isolation resulted in the development of what is considered an “informal” economic sector containing nearly 6 million businesses across the country. These locations were chosen to separate them from the economic bustle of city centers. The communities were intentionally developed on the periphery of larger cities. Today, more than 76 larger townships, each containing township businesses, border several South African cities.Īccording to the World Bank, townships today contain about half of South Africa’s urban population and 38% of its working-age citizens but as much as 60% of its unemployed. South Africa’s Population Registration Act in 1950 and Group Areas Act defined “non-white” racial groups as black South Africans, Coloreds and Indian South Africans, and forced their eviction from areas designated “white only” to three formally established townships. Townships, settlements created by the government to segregate black South Africans from whites, are one of the most visible and lasting scars of the apartheid system. Although South Africa’s apartheid system ended in 1994, the effects of its segregationist policies against non-white citizens can still be seen today.
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