MOSHE KOLA | Townships are full of entrepreneurs but where are the factories?

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South Africa has no shortage of entrepreneurs.

Walk through Soweto, Khayelitsha, Umlazi, Mdantsane or Seshego and you will find entrepreneurship everywhere: Spaza shops, salons, mechanics, clothing retailers, transport operators, restaurants, construction businesses and food vendors serving thousands of customers daily.

The energy is unmistakable. The hustle is relentless.

We celebrate these entrepreneurs as the backbone of the township economy.

But there is a question we rarely ask: where are the factories?

This is not a call to turn every spaza shop into a manufacturing plant or expect every township entrepreneur to become an industrialist. It is a more fundamental question about the structure of the township economy.

Why is so much economic activity concentrated at the bottom of the value chain, in retail and resale, rather than moving into production, processing, packaging, distribution and other higher-value activities?

We have become very good at creating businesses that sell products. We have been far less successful at building businesses that make them.

That distinction matters.

A township resident buys bread from a local shop. The shop earns a margin but the bakery, packaging company, logistics operator and raw-material suppliers may all be located elsewhere.

A local restaurant buys its ingredients from wholesalers outside the township. A clothing retailer sells garments manufactured elsewhere. A builder purchases cement, bricks, steel and fittings from established suppliers outside the community.

The township participates in the transaction but much of the value is created somewhere else. This is one of the central weaknesses of the township economy.

Townships represent enormous consumer markets. Millions of people live, work and spend money in these communities. Yet the size of the market has not translated into a proportionate productive economy.

The result is economic leakage.

Money enters the township through salaries, grants, business income and other forms of household income. It is then spent on food, clothing, transport, construction, entertainment and services. Much of that money quickly leaves again because the goods being purchased were manufactured, processed or distributed elsewhere.

The local business earns something from the transaction but the higher-value economic activities stay outside the township.

This is why simply creating more small businesses is not enough.

South Africa needs to help existing township businesses move up the value chain.

That could mean a restaurant developing its own food-processing operation. A clothing retailer moving into local garment production. A construction business manufacturing paving bricks. A group of local spaza shops establishing a buying co-operative.

None of these businesses needs to become a giant factory. The objective is to capture more value locally.

This is the missing middle of the township economy. This is where our approach to entrepreneurship needs to change.

For years, government and the private sector have focused heavily on getting people into business. We celebrate start-ups, provide training and distribute grants. But what happens next?

How does a business move from employing one or two people to 10, 20 or 50? How does it move from buying products wholesale to manufacturing some of them?

How does it become a supplier to a supermarket chain, construction company or government department? How does a business that started in a township become a regional or national brand?

These questions should be at the centre of township economic policy.

Instead, success is often measured by how many people have been trained or how many enterprises have received assistance.

Those are useful outputs but they do not necessarily represent economic transformation.

More meaningful measures would include the number of township businesses entering formal supply chains, increasing employment, expanding production, developing intellectual property and selling beyond their immediate communities.

Moving up the value chain requires more than entrepreneurial ambition. A business cannot manufacture competitively without reliable electricity.

It cannot distribute efficiently without functioning roads and logistics. It cannot store perishable goods without cold storage. It cannot modernise without affordable technology and equipment finance.

This is where infrastructure becomes economic policy.

If municipalities want township economies to grow, they cannot focus only on basic service delivery. They must also create the physical conditions for production.

That could include serviced light-industrial sites, shared workshops, cold storage facilities, micro-warehouses, reliable digital connectivity and affordable commercial spaces.

A small manufacturer should not have to leave the township simply because there is nowhere suitable to operate.

Large corporations have an equally important role. Major companies already spend billions of rand every year buying products and services. The question is how much of that spending can be used to develop capable township enterprises.

Procurement should not become another exercise in simply meeting transformation targets. It should be about building competitive businesses.

Imagine if major retailers and manufacturers deliberately developed township enterprises capable of supplying packaging, furniture, clothing, prepared foods, cleaning products or other goods at scale.

The corporation gains a reliable supplier. The township gains productive investment. Workers gain jobs and skills. And more of the value generated by local consumption remains within the community.

That is a far more powerful form of economic development than another one-off entrepreneurship workshop.

The real opportunity is not to create more businesses for the sake of creating businesses. It is to create pathways for existing businesses to grow.

A township economy should contain retailers but also manufacturers. Restaurants, but also food processors. Builders, but also construction-material suppliers. Farmers, but also agro-processors and distributors.

This is how economies become more productive.

Other economies have demonstrated that small and medium-sized enterprises can become important components of manufacturing and export ecosystems when infrastructure, finance, skills and markets are deliberately aligned around them.

South African townships can do the same. But it won’t happen automatically. It requires patient capital. It requires infrastructure. It requires technical skills. It requires access to markets. And it requires procurement systems that develop suppliers rather than simply ticking transformation boxes.

Most importantly, it requires a change in mindset.

We should stop asking only how many township businesses we can create. We should start asking how many existing township businesses we can help grow, produce, supply and compete.

The future of the township economy cannot be built solely on consumption. It must be built on value creation.

The question is not whether every township needs factories. It is whether South Africa is prepared to build an economy in which township entrepreneurs can move beyond selling other people’s products and capture a greater share of the value they help create.

We have entrepreneurs. We have the consumers. We have the markets. What we need now is the economic architecture that connects them to production.

The township has already demonstrated its talent, determination and appetite for enterprise. The next challenge is to give that enterprise the tools to move up the value chain.

Until we see smokestacks, assembly lines and production bays standing alongside our shopping malls and spaza shops, the township economy will remain an engine running on half its cylinders.

Kola is a marketing strategist and founder of Movelu Consulting

Sowetan