Small Business, Township Economies & B-BBEE: Enabling the Base

Introduction

South Africa’s economic future rests on the strength of its small businesses and township economies. While Broad-Based Black Economic Empowerment (B-BBEE) has made strides in restructuring ownership and supply chains, transformation will remain incomplete until the foundation of the economy (townships, informal enterprises, and micro-businesses) is empowered to grow and prosper.

Townships, long marginalised by apartheid-era planning, are now recognised as vibrant hubs of entrepreneurial activity. Every morning across the country, communities awaken to the hum of life in these spaces: the spaza shop owner flipping open for business, the mechanic under a car hood, young women styling hair in container-converted salons. These enterprises are not sideshows; they are the beating heart of local economies, centres of social connection, and anchors of dignity.

Unlocking the full potential of township economies is not only a matter of social justice but also a strategic imperative for inclusive growth, job creation, and national resilience. Real transformation requires uplifting the foundation of the economy, where millions of South Africans live, trade, and innovate daily, so that the promise of empowerment reaches every corner of society.

 

The Township Economy: A Vital Growth Engine

Townships are home to nearly 40% of South Africa’s urban population, yet they remain under-integrated into the mainstream economy. Despite limited infrastructure, barriers to finance, and historic exclusion, these communities pulse with resilience, energy, and entrepreneurial innovation.

Township businesses, whether spaza shops, local manufacturers, digital start-ups, or pooled investment clubs, are more than survival strategies. They are sophisticated, adaptive ecosystems that meet community needs with remarkable efficiency and responsiveness. These enterprises embody untapped potential for national growth, social stability, and inclusive development.

Why Township Economies Matter:

• Job Creation: Small and micro-enterprises in townships are central to the National Development Plan’s target of creating 90% of new jobs by 2030.
• Poverty Alleviation: Local businesses circulate money within communities, reducing dependency on social grants and directly improving household incomes.
• Entrepreneurship & Innovation: From digitally enabled spaza shops to resourceful investment clubs, township entrepreneurs demonstrate creativity, adaptability, and a readiness to scale.
• Social Stability: Economic empowerment fosters cohesion, reduces crime, and builds resilience against inequality-driven unrest.
• Community Value: These businesses not only generate livelihoods but also provide informal safety nets, extending credit, sharing stock, or pooling resources in times of need.

Township economies are more than geographic spaces; they are vibrant networks of purpose, dignity, and innovation. Their growth is not only a moral or social imperative, it is a strategic economic necessity for South Africa’s future.

 

Systemic Barriers Holding Back Township Enterprises

Despite their dynamism and resilience, township businesses remain constrained by a set of structural and systemic barriers that limit their ability to grow, formalise, and integrate into the wider economy.

Key Challenges:

• Access to Finance: Traditional lenders demand collateral and formal records that most township businesses cannot provide. The absence of collateral-free lending and flexible financing options remains a critical market failure.
• Infrastructure Deficits: Unreliable electricity, limited broadband, and poor transport infrastructure increase operating costs and limit scalability. For many entrepreneurs, each day is a struggle against fragile infrastructure.
• Market Exclusion: Even capable township enterprises often remain locked out of formal supply chains, restricting growth and customer reach.
• Regulatory Burdens: Compliance processes are often designed for corporates, not container salons or home-based mechanics. Complex red tape discourages formalisation instead of enabling it.
• Skills Gaps: Many entrepreneurs lack access to financial management, digital skills, and the broader business know-how needed to expand sustainably.

The result is a paradox: thousands of hardworking entrepreneurs who innovate daily and serve their communities with dedication, yet remain stuck on the margins, unable to scale, excluded from mainstream markets, and vulnerable to shocks. Unlocking their potential requires dismantling these barriers and building systems around their reality, not against it.

 

B-BBEE as an Enabler of Township Economies

Broad-Based Black Economic Empowerment (B-BBEE) has often been associated with ownership structures and corporate supply chains. Yet its real transformative potential lies within the Enterprise and Supplier Development (ESD) element, if implemented with intention and heart. The opportunity is to shift B-BBEE from a tick-box compliance exercise to a genuine catalyst for inclusive growth at the base of the economy.

Key Levers for Change:

• Redirected Investment: ESD contributions should flow directly to township enterprises rather than being absorbed by centralised funds, ensuring resources remain close to the ground where agility and sustainability are greatest.
• Market Access Platforms: Corporates can act as bridges, integrating township businesses into procurement pipelines, franchising models, and last-mile distribution networks. Access to markets matters as much as access to capital.
• Innovative Finance: Hybrid approaches, such as micro-investment ecosystems, community guarantee systems, and fintech solutions designed for informal economies, can unlock credit and capital tailored to township realities.
• Sectoral Diversification: Township economies should not be confined to retail and services. Opportunities exist across agriculture, renewable energy, waste recycling, manufacturing, and the digital economy.

When B-BBEE is reimagined, not just as a compliance duty but as a commitment to nurturing ecosystems, it becomes more than a regulatory framework. It becomes a lever of dignity, agency, and resilience empowering the millions of entrepreneurs who form the heartbeat of South Africa’s townships.

 

From Policy to Practice: Enabling the Base

South Africa has begun aligning national policies to recognise and support the township economy. The SMME & Co-operative Funding Policy (2023) seeks to deepen financial access by reforming credit guarantees and streamlining funding structures. The Informal SMME Support Framework (2025) introduces flexible registration identifiers, segmented support, and voluntary formalisation pathways that respect the diversity of township enterprises. The NISED Strategic Framework places township entrepreneurship at the centre of integrated small enterprise development, connecting financial and non-financial support to business development services.

Yet frameworks alone are not enough. The challenge is turning policy intent into tangible outcomes for entrepreneurs on the ground. Five priorities stand out:

1. Infrastructure Investment: Develop township industrial hubs, expand broadband, ensure reliable energy, and strengthen transport networks. These will create a foundation for competitiveness and scale.
2. Financial Innovation: Expand credit guarantee schemes, incentivise fintech lending models, and support township-focused venture capital and micro-investment ecosystems.
3. Capacity Building: Provide tailored training in financial management, digital literacy, and entrepreneurship, building on existing community knowledge while equipping businesses for growth.
4. Corporate–Community Partnerships: Use B-BBEE contributions to co-create incubators, shared facilities, and market access platforms, ensuring township enterprises are integrated into formal value chains.
5. Data & Measurement: Build a centralised township SMME database to guide interventions, track progress, and capture not only numbers but the lived realities and impact of these enterprises.

By moving from policy rhetoric to practice rooted in human-centred delivery, South Africa can transform township economies from under-supported survivalist hubs into thriving growth engines, alive with dignity, opportunity, and innovation.

 

Conclusion & Call to Action

Township economies are South Africa’s most powerful lever for inclusive growth. They embody resilience, creativity, and untapped potential, yet remain held back by systemic barriers. Aligning B-BBEE with township development can shift empowerment from narrow ownership transfers to true broad-based inclusion, where transformation touches the lives of ordinary people.

Enabling the base is not charity. It is sound economics – unlocking growth, jobs, and dignity where it matters most.

Now is the moment for collective action:

• Government: Prioritise township infrastructure, simplify compliance, and create pathways for easier formalisation.
• Business: Channel ESD spend and procurement pipelines directly into township enterprises, supporting their integration into value chains.
• Investors: Back township entrepreneurs with innovative, flexible finance models that reflect local realities.

Transformation begins at the base. By investing in township economies, South Africa can build a more inclusive, dynamic, and resilient future, turning spaza shops, salons, mechanics, and community ventures into beacons of national renewal.

 

References

1. National Treasury. Budget Review 2017: Transformation for Inclusive Growth.
2. Democratic Alliance. Submission on the Draft Transformation Fund Concept Document.May 2023.
3. Department of Small Business Development. Final Gazetted SMMEs and Co-operatives Funding Policy.
4. Department of Small Business Development. Informal SMME Support Framework.
5. Schachtebeck, C., et al. Nurturing SMMEs: An Evaluation of the SMME Support Landscape in South Africa.
6. Bhorat, H., & Asmal, Z. Small Business Research Review: A Report for the DSBD.
7. Nthoana, T.R.F. Inclusive Economic Growth – Building Sustainable Township Economies.
8. Bureau for Economic Research (BER). The Small, Medium and Micro Enterprise Sector of South Africa.Research Note 2016.
9. City of Ekurhuleni. Why the Growth of the Township Economy is Crucial for South Africa’s Future.