SA’s township entrepreneurship ecosystem ripe for innovation

According to the South African National Development Plan, 90% of new jobs must be created through entrepreneurship by 2030.  There are no places more in need of these jobs than in the country’s townships. This means that South African townships are possibly the places offering the most potential for the country’s most innovative and successful entrepreneurship and economic development.

Newly released research from The Gordon Institute of Business Science (GIBS) Entrepreneurship Development Academy (EDA), Township Entrepreneurial Ecosystem: The Entrepreneurs’ Lived Experiences reveals the unique characteristics of the entrepreneurs in South Africa’s townships. This study is particularly significant as there is a notable lack of research on entrepreneurial activity in informal economies, and particularly through the lens of the lived experiences of entrepreneurs in such an overlooked segment of the economy as the South African township.

Associate Professor and Researcher at GIBS Business School, Professor Anastacia Mamabolo says, “Township entrepreneurs contribute significantly to economic development through new ventures and job creation in their communities. Today there is a growing focus on how to support township entrepreneurs and unleash their potential.

However, we first need to understand how these entrepreneurs navigate the uncertainty and resource scarcity of operating in their communities. Typically, entrepreneurial ecosystem actors make assumptions about entrepreneurial challenges, but we need to incorporate the township entrepreneurs’ voices.  By centering the entrepreneurs’ lived experiences, we learnt how they engage with, identify the actors with resources, and navigate resource scarcity which has yielded rich and significant insights.”

Matshepo Koape, Senior Business Development Manager at GIBS EDA and the report’s co-author adds, “Given their extreme resource scarcity, there is a surprising robustness revealed in our research. Unlike their counterparts in the formal economy, township entrepreneurs often rely heavily on informal networks, community support, and innovative problem-solving to sustain their businesses.”

Critical Islands of Opportunity
The study identifies several contours shaping the entrepreneurial landscape in townships including a notable entrepreneurial agency and resilience. Township entrepreneurs are adept at improvising to overcome both acute and chronic resource restraints; an adaptability and ingenuity that may be less innate in formal economy entrepreneurial ecosystems. 

Prof. Mamabolo says, “In the township setting, mainstream ecosystem actors that support entrepreneurship are not integrated and entrepreneurs do not know about them. In this gap, township entrepreneurs play an active role in creating the ecosystem that provides them with suitable resources.”

As a result, township ecosystem actors are more diverse and surprising. Because early-stage township entrepreneurs have a more intense battle to connect with resources within their isolated, resource-poor networks, they seek substitutes in sometimes unlikely actors – like their Ward Councilors, community members and groups, as well as local NGOs. As a result, these entrepreneurs are uniquely embedded in their communities.

“Township entrepreneurs are in coopetition or collaboration with their peer entrepreneurs. Instead of competing, entrepreneurs support each other through resource rotation and loaning. Their embeddedness in the community is a crucial resource for entrepreneurial activities,” confirms Prof. Mamabolo.

Funding is just one essential business development resource. Geographically isolated, township entrepreneurs face extraordinary challenges for just about every resource needed to develop and grow a business, from access to workspaces, operating equipment, manufacturing facilities, supply lines, affordable transport services and the new markets essential for scaling. Never mind access to business development training. In every lack here, there is substantial potential for entrepreneurial funding, training and digital innovation tailor-made for the township entrepreneur.

Lerato Mahlasela, the Managing Executive of Corporate Education at GIBS Business School says, “This new GIBS Entrepreneurship Development Academy research report provides evidence-based insights to guide the interventions of entrepreneurship ecosystem stakeholders and help define the support they extend to township entrepreneurs. Currently, many of us operate in silos, often supporting the same group of entrepreneurs who require ongoing assistance. The report instead advocates for stronger collaboration among Enterprise and Supplier Development practitioners to design more integrated, bottom-up initiatives that enhance the capabilities of township entrepreneurs, enabling them to access local manufacturing infrastructure, compete effectively, and scale their businesses. 

Moreover, the increasing adoption of online platforms to access business development support is a promising development within the township entrepreneurial ecosystem, particularly given the rise of e-commerce. This presents a significant opportunity for small businesses that require targeted support to fully realise their potential.”

Leaning into collaboration
The research proposes that in the absence of formal structures, township entrepreneurs create their own ‘shadow entrepreneurial ecosystem’, which, while informal, is highly functional and critical for their survival and growth. A striking finding of the research conducted across diverse townships is that these indispensable South African entrepreneurs are unexpectedly collaborative. They rely on, not just business advice, but resources such as stock and operating equipment from other business owners in their community, even though they are often their direct competitors. 

What this means practically is that if you have an order for chickens from your local shop that you can’t fulfill, your competitor will help you to supply them. Or, if you are booked to shoot a wedding video and you don’t yet have a high-quality camera, your competitor will lend you theirs so that you can grab the opportunity. When it comes to borrowing operating resources from a competitor such as a delivery truck, one of the GIBS EDA study participants reported that they weren’t charged any hiring fee; they just had to put some petrol in the tank. This is a unique level of collaboration amongst entrepreneurs that you would be hard pressed to find in a formal economy that prioritises outrunning or crushing the competition.

Koape concludes, “In 1934, political economist Joseph Schumpeter suggested that entrepreneurs are responsible for combining available resources in new ways, identifying new economic opportunities, and implementing them. Our research affirms this timeless insight, revealing that despite operating in an informal and unstructured ecosystem, township entrepreneurs consistently create their own functional networks. 

This ability to innovate and thrive in the face of adversity underscores the ingenuity and resilience of these entrepreneurs, proving that the essence of entrepreneurship—identifying and seizing opportunity—is alive and well in South Africa’s townships. Now the government and the other ecosystem actors and innovators need to step up and meet them on their own terms.”