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Guide to township economy for the youth

The Youth Day public holiday is a reminder of the sacrifices young people made for South Africa. It is also an eye-opener into the struggles the youth of South Africa face today, especially those in townships. South Africa has over 500 townships with the biggest being Khayelitsha in the Western Cape, and Soweto in Gauteng being the most populated township. Because townships have a huge population, there is a bustling township economy that youth entrepreneurs can tap into.

What is the township economy?

The township economy is made up of enterprises and markets based in townships. This includes restaurants, bars, taverns, taxis, backroom rentals, mechanics, panel beaters, metal fabricators, childcare services, barbers and hair salons.

These businesses, although quite popular, have limited access to financial products and services. They are mostly run by individuals who are established business owners, leaving little space for young entrepreneurs.

Challenges for the youth in the township economy

The youth in South Africa are in a tough situation with the growing unemployment rate. Many have turned to being entrepreneurs and are contributing greatly to the informal township economy. Yet, only 8% of young people are entrepreneurs, according to the country’s early-stage activity index.

The township economy in South Africa is worth around R900 billion. An estimated 17% of South Africa’s total employment is through the township economy. And although this is a great contribution, many young people are still unemployed.

1. Lack of skills

The youth of South Africa are at a disadvantage because of a lack of business skills. These are skills such as problem-solving, leadership, and business skills (accounting, stock taking etc.). Without enough funding for education, many people start businesses without proper knowledge, resulting in their businesses lacking long-term value.

2. Technology challenges

Another challenge facing the youth is the ever-changing digital space. Although township internet penetration has reached over 70% and there is access to over 400 hotspots, most have not taken full advantage of these resources. One reason for this is that most inhabitants don’t have devices such as smartphones and laptops. Another is that they are not aware of the benefits of these resources.

3. Geographical challenges

Spatial planning also presents a challenge for township youth entrepreneurs. The design of townships plays a role in the economic isolation of the youth living in the township and leaves them on the outside of the broader economy.

4. Inadequate financial resources

Lack of access also presents a challenge for youth township entrepreneurs. These entrepreneurs do not have assets and their businesses have not been operating for long. Difficult regulatory processes also stop young entrepreneurs from formalising their businesses.

Additionally, limited market opportunities and competition with bigger businesses can be a hindering factor to the establishment of youth-owned businesses.

5. Barriers

The isolation of young girls in society plays a role in the lack of movement for entrepreneurs. Most young girls in South Africa start businesses to sustain themselves but don’t have access to opportunities.

How the youth can overcome challenges in the township economy

The opportunities for township youth are many but accessibility is an issue. From being too far away to attend training sessions, and lack of access to digital resources like laptops and the internet, to the lack of proper implementation of government Acts, accessing resources is a big concern.

Proper implementation of bills such as the Gauteng Township Economic Development Act (TEDA), the Youth Enterprise Development Strategy, and the National Development Plan can be a good way for facilitators who want to help the youth.

Providing access to proper funding, mentorship and business skills training. Simplifying processes such as company registration and establishment of business centres can also help the youth overcome their entrepreneurial challenges.

Including young female entrepreneurs helps boost the township economy and reduce overall unemployment rates. Women are at a disadvantage when it comes to the labour market. This is evident in their high unemployment rate.

As we can see, there are many ways to overcome the challenges faced by youth entrepreneurs in townships. As we look past the challenges, it is important to look at the programmes and opportunities available to the youth.

Youth programmes and opportunities in the township economy

Although the townships sit at the fringes of modern society, the economy is ever-changing and growing. From private sector investment to government initiatives, there is a determined focus on improving the township economy.

For the youth, the opportunities are many. South Africa has a young population, averaging at 27 years old. This means that for the future of this country, there is a focus on helping the youth to succeed as entrepreneurs.

One of the ways to help youth entrepreneurs is by helping them upskill. This means driving initiatives like the National Youth Service Programme, the YES4Youth initiatives and hubs.

The public sector also needs to improve their intervention efforts. Most companies have a corporate social investment (CSI) strategy designed to ensure companies in South Africa contribute to the social development of the country. Examples of this are the Momentum Motheo Financial Dialogues, the Takealot Township Economy Initiative, and the Microsoft AI training for South Africa youth programme amongst many others. These programmes continue to run but need to be more accessible to youth in the township.

Youth Challenge Fund

Funding is a major challenge for youth business owners. The Department of Small Business Development has a Youth Challenge Fund. The programme aimed at driving and growing youth-owned businesses, promoting digital skills, and growing the economy.

To qualify for the programme you must be a youth-owned start-up with a commercially viable, sustainable business idea. Additionally, the requirements are:

  • Registered with the CIPC.
  • 100% South African owned.
  • Involved in the day-to-day operation and management of the business with at least one or more members being full-time employees.
  • Prepared to participate in business development support and mentorship.

The NYDA Grant Programme

The NYDA grant programme is one of the most well-known youth business funding opportunities provided by the government. The programme offers financial and non-financial support to entrepreneurs in the development phase or already existing businesses.

To qualify for an NYDA grant you must meet the following criteria:

  • You must apply before the age of 35.
  • Submit all required documents.
  • Proof that you have attended a business management course.
  • A 10-minutes business pitch can be conducted telephonically or in person.
  • A due diligence report will be conducted by an NYDA official.
  • The business is in good standing as the NYDA will conduct credit checks for all grant applications for funding.

If you succeed with your application, you can use your grant for various things. These include buying assets, filling financial gaps, renovating your shop, covering day-to-day expenses, and partnering with other businesses. Individuals or businesses can receive up to R200 000 in grants. For agriculture and technology projects, the maximum amount is R250 000.

Youth Pipeline Development Programme

The Youth Pipeline Development Programme by IDC offers grants to help young entrepreneurs improve their businesses and proposals. This is done to prepare them for potential investments. The grant funding covers interventions such as environmental impact assessments, marketing studies, mentoring and technical assessments. The programme supports businesses in the following sectors:

  • Agro-processing and agriculture
  • Automotive and transport equipment
  • Basic metal and mining
  • Basic and specialty chemicals
  • Chemical products and pharmaceuticals
  • Clothing and textiles
  • Heavy manufacturing
  • Industrial infrastructure
  • Light manufacturing and tourism
  • Machinery and capital equipment
  • Media and motion pictures
  • New industries

The fund size of this programme is R50 million.

The Higher Education Innovation Fund helps students at TVET colleges and universities who want to become innovators and tech entrepreneurs. Additionally, the fund aims to train and up-skill student tech entrepreneurs.

The Technology Innovation Agency (TIA) also has various open calls for funding applications on its website. Amongst those is a funding opportunity for Urban/Township Agriculture Technologies.

These are just some of the many programmes and funding opportunities available for youth in South Africa. These programmes can help you learn business, technical and digital skills, and may also offer funding for your business.

Entrepreneurship opportunities for youth in the township economy

Now that you have the challenges, solutions and opportunities to start your township business. Let’s look at some of the most popular township businesses. These are enterprises that are run within townships and mostly serve those in the townships.

1. Food Enterprises

If you love food and socialising this is the business for you. They are a good cost-saving business because you can sell food from your home. You can also save on equipment costs by using your own stove and fridge.

The best part of this business is that it can become more than a food business. With good investment, funding and the proper permits, you can turn it into a social market. Your customers will come to you for an authentic experience with food, culture and music.

You can get help with your food business from the WAKANDA food accelerator. The organisation has various programmes. Such as Foodpreneur, Chefpreneur, Kasipreneur, Farmpreneur, Retailpreneur, and Agripreneur.

2. Hairdresser/ Barbershop

This is another example of a business that can start with little funding and equipment. For a salon, the most you will need is braiding skills, combs, shampoo, hair moisturiser and access to running water for washing hair. For a barber, you will need hair clippers, shampoo and hair moisturiser, and a cape to keep customers clean.

Hairdressers and barbers can partner up and open up one shop. This saves on costs like rent (if you rent out a space).

3. Photography

Photography is a big part of the creative industry. If you have an eye for photography this is the business for you. If you don’t have a professional camera, there are other solutions. You can use your phone and edit pictures using free editing platforms. And send them to your customers via WhatsApp or email (to keep picture quality).

4. Pet care services

People in townships are fond of having pets, especially dogs. This has created a new business opportunity for young people. Walking around Soweto, you see them walking dogs, washing them and feeding them. This allows young entrepreneurs to establish a business and bring in extra income.

5. Moving and delivery service

There is always some movement in the ‘kasi’. Residents are either moving within the township or moving back. You can start a business to help the movers, move from one space to another.

Starting a delivery service is a very good business idea in the township. Many shops are either too far away or don’t deliver to certain areas. You can capitalise on this by providing delivery services. The distances would be short so you save on petrol. You could also provide delivery from the townships to the city and charge ‘big city’ prices.

If you believe any of these business opportunities are for you, get started today! There are so many other businesses to start in the township and some are yet to be invented.

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