While the South African government begins a new push to develop and fund informal-sector businesses, an increasing number of entrepreneurs are developing solutions to address the many problems that township residents face.
Among these, black African entrepreneurs are using their knowledge of townships to develop apps or to adopt new business models or products, to service the growing market and solve social problems there.
One such person is Desmond Mongwe of start-up MoWallet (pictured above), who in July won Hack Jozi, a hackathon sponsored by the City of Joburg and with it R1 million in seed funding for an app that allows township residents to redeem coupons from large retailers for specific branded goods on sale.
Another is 25-year-old Nhlakanipho Shange, originally from Umlazi who has developed digital signage for mini-bus taxis (ad.it TaxiTV). Already 21 taxis – that ply the route between his former home and Durban city centre – have the screens installed. He’s aiming to get another 200 screens fitted in taxis by 2016.
Even though taxi owners get a 10% cut of advertising sales, Shange, who has been operating since August last year, admits that with no track record it’s often difficult to convince many. Yet he remains confident that his business will expand. “If they say no I just go to the next one,” he adds.
On the increase
Mongwe and Shange are among hundreds of new black Africans running tech start-ups.
A survey released in June by start-up news website Ventureburn reveals that 17% of SA tech start-ups were founded by black Africans – up from the six percent reported in its 2012 survey.
Two thirds of tech founders are white males, but the growing number of black African founders could bode well for the development of solutions to tackle some of the challenges that townships face.
A number of black Africans in the IT sector are focusing on solutions for townships, says Mixo Ngoveni, who runs Geekulcha, a Pretoria-based group that helps students and learners keen on technology to connect with industry heads and to get business help.
“Some people are now looking at building for the local market rather than the international market,” he adds.
Hubs, incubators stepping in
Many of the new ideas and apps are being nurtured by the increasing number of tech hubs, social innovation labs and incubators that have sprung up in recent years.
Last year the Pretoria’s Innovation Hub and the City of Tshwane partnered to form eKasi Labs, an initiative based at the Ga-rankuwa Arts and Craft Centre.
In March the Barn Khayelitsha, run by the Cape IT initiative (Citi), opened in the Cape Town township. At present about 20 entrepreneurs from the local community have hot desks there. While some are running things like marketing firms or a children’s soccer club, others are developing solutions using the likes of education apps.
Barn manager Chris Vermeulen believes there is “huge potential” for the new centre to use innovation to address social and economic challenges in the township. The idea he says is to use a living-lab model to get entrepreneurs to interact with the surrounding community to learn what the key problems are and then develop and test solutions to these.
In much the same way, the University of Western Cape’s Colab for social inclusion and innovation has since 2012 attempted to get youth from poor areas to work with communities to develop apps that address social problems.
These include an app to help community members find where the nearest point is to recharge their electricity account and another to offer matrics advice on what university subjects to take.
The centre’s director Leona Craffert says a key challenge is that great ideas take time to be refined. To get one good idea one often has to go through about 300, she reckons. Getting various stakeholders involved also helps to see to realise a successful idea, she adds.
By solving township problems entrepreneurs can run profitable businesses. Take Luvuyo Rani based in Khayelitsha. His internet café and computer training business, Silulo Uluthu, which he started with two partners in 2004 and now has 36 branches. Each outlet makes about R80,000 a month, with an average gross profit margin of 60%.
Rani says he has now become like a “bridge” for those wanting to get into the township market. He runs a monthly event called eKasi Network and is also trying to encourage businesses based in the wealthy suburb of Constantia to partner with those in Khayelitsha.
Despite one robbery, he says crime isn’t really a problem, because the community see the business as adding value, he says.
In addition while internet access has not been a big problem in the Western Cape, he says in some more rural areas of the Eastern Cape he’s had to turn to using 3G connections.
He’s presently in talks with internet providers, but says the company aims to become an internet service provider (ISP) in the future, to address the problem.
In much the similar way that Rani has tried address the internet challenge, the Soweto Wireless User Group aims to bring free wireless internet to the country’s biggest township.
Jabulani Vilakazi, who works in telecommunications company, founded the non-profit in 2010. The group has a license from telecoms authority Icasa to broadcast the 2.7GHZ and 5.8GHZ spectrum and currently has 28 hotspots that receive about 2 000 unique visitors a month.
An e-commerce platform has been proposed by a local spaza association, while Soweto residents already use the network to search for jobs and or for their children to do homework.
Vilakazi admits that resources to expand have been a “huge challenge”, but despite this, more than R100,000 has been invested with the project thus far from different big companies to fund branding and some infrastructure. Some big companies offer help to score BEE points.
Yet as any entrepreneur operating there knows, designing solutions for the townships doesn’t come without its challenges.
Ludwick Marishane, of Headboy Industries, designed Drybath – a soap powder that one can use as an alternative to bathing. He initially sold the product to overseas companies and to middle-income households, rather than punting it at poorer communities.
“You don’t want to position it as a poor man’s product,” says Marishane, who adds that demand for the product initially lay outside the country.
Since about the middle of 2015 he’s been testing the township market, using unemployed youths to sell sachets to homes there. His main customers seem to be those who live mostly in city centres and then return to the rural areas and townships on weekends.
Another challenge is getting licensing for ones business. Sizwe Nzima, who runs Iyeza Express, has had to put his plans to grow his logistics business which delivers medication to those in the township using bicycles, on hold while he gets both accreditation with the
SA Pharmacy Council and to run a courier business.
Once he has accreditation from the council he plans to offer delivery services to both private and government-run clinics and to help courier companies extend their services to townships.
Gap in state thinking
The hope now is that the government’s new drive to support township entrepreneurs could help transform townships. Yet much of the government’s strategy to develop the informal sector focuses on unregistered traders and those in light manufacturing – through the provision of grants, business training and by funding new work spaces.
The department’s National Informal Business Upliftment Strategy does not specify how entrepreneurs from both inside and outside townships can help develop solutions to address specific problems in townships.
But the department’s director of the informal sector Stephen Umlaw stresses that this doesn’t mean that such entrepreneurs won’t be included in the department’s move to uplift townships.
He adds for example that his unit is collecting names of smart ideas that entrepreneurs have developed to solve township problems. But he doesn’t say what these will be used for.
Ultimately more can be done very few entrepreneurs are developing solutions for townships.
A key challenge says Stuart Thomas, one of the authors of the Ventureburn survey, is that about 70% of start-up founders come from corporate backgrounds and are therefore far removed from the poor and their problems.
Connecting start-ups to townships and teaming township residents up with support centres that encourage innovation, could help entrepreneurs to solve many more township problems.
This story originally appeared in the November 2015 issue of Fast Company SA. Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
Stephen Timm is a