Businessweek Archives

Brisk Business In The Townships


Special Report: SOWETO, SOUTH AFRICA

Brisk Business in the Townships

It was highly symbolic: When the map of Johannesburg was redrawn, the black former township of Soweto was sketched in as part of the business center. Most whites have never ventured into the township--known for crime, squalor, and antiapartheid protests. Yet these days, white accountants, bankers, and retailers are swallowing their fears and heading in that direction.

The reason is simple: Soweto and other such townships are where the economic action will be in the new South Africa. Demographers predict a rapid shift in spending power to the black majority, bolstered by better earnings now that apartheid has been lifted. The government is pushing new roads, water lines, and sewers and is offering housing subsidies in the townships. Says Brian Meyers, marketing director at Shoprite Checkers Ltd. supermarkets: "The central business districts and white suburban areas are not going to give us the kind of growth we need. We will have to move into the black areas."

Soweto is the first township to attract pioneering investors. With a population estimated at up to 4 million--there has never been a census--Soweto nevertheless suffers from a shortage of retail outlets. It's a magnet for new businesses because it's larger than any other township and the home of successful black politicians and entrepreneurs.

The most visible project so far is the township's first mall. Built for $12.1 million by Sanlam Properties, one of South Africa's largest commercial developers, the Dobsonville Shopping Center mixes national retailers with nascent black enterprises: a hair salon and a bookstore, along with movie theaters, restaurants, and banks. Opened in September, 1994, Dobsonville is the test that "everyone is watching with four eyes," says Sanlam's regional property manager, Swani Swanipole. "Will it make money?"

The jury is still out. The center's white managers admit that their lack of understanding of black consumers' demands has caused glitches. Another problem is transportation: Few township dwellers have cars. People get around on private minibus taxis, but more routes go downtown than around Soweto's winding streets. So now, the retailers may set up a free bus service.

Despite these difficulties, the main store in the mall, a 23-checkout Shoprite, is doing brisk business. Soweto's first big supermarket, it consistently beats sales targets by maintaining the same standards as in white neighborhoods. Up till now, most Sowetans bought groceries in downtown Johannesburg, where quality is better than in small local shops. The Shoprite "is what we've been waiting for," says welder Gilbert Nkosi, a weekly customer.

Now, city planners are drafting a long-term plan to integrate Soweto with central Johannesburg. They want to create a commercial, industrial, and residential corridor around Soweto's massive Baragwanath Hospital. The National Business Initiative, a private-sector link with the government, is also working to ease investors' fears about building township infrastructure projects.

PARTNERS. For white businesses moving into Soweto, community leaders recommend hiring black managers and staff and making a visible contribution to the neighborhood. "You must develop a partnership with the community--and in that, you have protection for your investment," says Max Legodi, executive director of the Soweto Chamber of Commerce.

One example is Buildware Market, a construction-supply warehouse that opened recently in a new business center. Buildware is a joint venture between Murray & Roberts, a major construction company, and two black entrepreneurs, Ndaba Ntsele and Solly Sithole. Instead of maintaining its own fleet of trucks, Buildware hires Sowetans with pickups to deliver its goods. A snack bar is run by local women, and pay telephones were installed to serve the mostly phoneless deighborhood.

Although jackhammers aren't yet sounding across Soweto, plans are circulating for casinos, more shopping centers, an industrial park, and a hotel. Sanlam may also put up an office building. Other developers "are jealous," says Sanlam's Swanipole, "because we have learned what they still have to learn." Soweto and other townships are markets they can't afford to ignore.By Drusilla Menaker in Johannesburg


Soul Searcher
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus