By Lucky Biyase and Thekisa Anthony Lefifi
CARWASH owner Nathi Mbatha says it is a “sad thing” that both government and fellow South Africans are “quick to refer to us as cry babies and incompetent business people” outclassed by foreigners who are simply working harder.
Mr Mbatha, who works in Merebank, a low-income area in KwaZulu-Natal, was speaking to Business Times in the grim aftermath of the looting spree that rippled through Soweto and other townships, devastating a number of foreign-run shops and leaving five people dead — including a baby.
The authorities have focused on this key question: was this the first wave of a new round of xenophobic attacks, or simply criminal opportunism?
As the dust clears, it seems evident that there were elements of both, as the cauldron of youth unemployment, municipal incompetence and frustration bubbled over.
While politicians debate the semantics of xenophobia, afrophobia or plain criminality, sentiment on the ground shows that the youth’s disregard for the law is rooted in anger at the remarkable success of the foreign traders, along with frustration at the perceived unwillingness of the government to assist them.
Mr Mbatha attested to this frustration when he described how foreign shop owners were only doing better than their South African counterparts because they had “institutional support from various sources”.
It was a “sad lie” that foreigners did better simply because they offered cheaper prices, he said.
“If you lower your prices in order to wrestle customers from your competitor, you do that because you know you have somewhere to get your stock at a competitive price. The situation here is that foreign business has access to bulk buying due to the support that locals don’t have,” Mr Mbatha said.
Just what this so-called “institutional support” is that has upset so many South African shop owners in the townships is unclear.
These South Africans believe that foreigners are being given hand-outs of “subsidies”, which allow them to build their businesses at the expense of locals.
Mzwandile Mavula, a street trader who sells fruit in Durban, said immigrant traders received “financial support” from various chambers and this has allowed them to “subsidise” their goods, undercutting South African traders.
“In principle we accept them. We also have organisations for informal traders that foreign traders belong to and are protected through these organisations. It is just that these challenges are there,” Mr Mavula said.
But this notion that the foreigners get some sort of “support” seems to be more myth than reality. If anything, they appear more desperate to succeed partly because there is no help, or expectation of it.
The Economist described last year how “an influx of traders from the Horn of Africa and Asia has been a headache for spazas run by South Africans”.
“Informal retailing has swiftly become a foreign speciality,” it said, recounting how most of the buyers at the giant Kit Kat cash-and-carry wholesaler were foreigners who restocked two or three times a week.
“They flit between Kit Kat and other cash-and-carries for the best deals,” it said.
The magazine also cited a study by the African Centre for Migration and Society, which said Somalis were able to gain the upper hand over their South African counterparts by selling goods at lower prices, paying more attention to customer service, offering credit and staying open for longer hours.
That study seems to answer the question raised by Lindiwe Zulu, the Minister of Small Business Development, who fuelled tensions this week by saying that foreign business owners must reveal their “trade secrets” to local business owners.
But the past week’s implosion also illustrated the fact that townships and settlements like Soweto, which were formed during the apartheid-era when black people were forced to live far from white suburbs, have not achieved the sort of economic success many expected.
It’s hard to get a holistic picture as a place like Soweto is now as middle-class in some areas as it is poor in others.
The average monthly income in the Soweto suburb of Protea, for instance, is now R11,400. But what is a problem in most areas is youth unemployment.
A report by the World Bank said the ANC-led government had installed houses in townships, but had given residents scant access to social services. An explosion of informal settlements, such as Diepsloot, also added a heavy burden on services. It is not surprising, then, that service delivery protests have spiked in these areas.
A recent study by the University of the Western Cape has said that there were as many as 28 protests a month in 2012 -a sharp increase from 2007.
John Loos, a property strategist at FNB, said more “turbulence” lay ahead for the country in service protests — especially if economic growth did not expand fast enough.
What also makes it tricky to get a grasp on how township economies operate is the fact that they differ markedly from the economies of more affluent suburbs.
For example, rising electricity and food costs in townships mean that families often buy food on the streets -including spykos (a mixture of tinned spaghetti, sugar beans and fish), fried potato chips, dishes like pap and meat or amanqina (cow heel). Smart and flexible small businesses are cashing in on the low-cost “eating-out” option.
Still, the perception that foreigners are only here to cash in on a distinct local economy hasn’t helped ease tensions.
Mr Mavula, the street trader, said: “As I speak to you, there is an immigrant selling his stock in his car just 3 metres from me, selling the same things. Police can’t do anything to him. But, if I were to go to the toilet now, police would have taken my stock by the time I return.”
The perception is that police target informal local traders — but foreigners are ignored.
“We are supposed to pay for permits — if we don’t have these, we get our stock taken away and have to pay fines. By the time you pay the fine to get your stock back, it will be damaged. Foreigners. normally go from street to street with their products,” said Mr Mavula.
Tashmia Ismail, a faculty head at the Gordon Institute of Business Science, said that evident “bullying” of foreign shop owners was not doing the economy any good.
Ms Ismail runs a business training programme with pharmaceutical giant GlaxoSmithKline, which teaches spaza shop owners marketing and other tricks to boost sales. She said the recent violent events will hit investment in townships.
Mr Loos said the low opening rate of shopping malls in townships was one of the factors holding back the economic development of these areas.
New shopping centres would plough more money into the area, and reduce the cost for residents, who would otherwise have to travel to find big supermarkets such as Shoprite, Checkers and Pick n Pay.
Futuregrowth Property Fund, which has invested in 24 shopping centres in townships, is helping to change things.
But this is a double-edged sword. Plonking giant retailers in townships inevitably puts pressure on local spaza shops, many of the traders believe — compounding the perception that they are already struggling to fight off “foreign competition”.
Smital Rambhai, product manager for Futuregrowth’s community property fund, said this view was wrong.
Most local business owners have adapted and thrived, he said — even as big businesses were entering townships.
And starting a small business is never an easy task anyway. In 2013, Trade and Industry Minister Rob Davies painted a grim picture, saying five out of every seven new small businesses in South Africa closed their doors within one year.
Thami Mazwai, the executive chairman at Mtiya Dynamics and former head of the Centre of Small Business at the University of Johannesburg, said the legacy of apartheid, which barred black people from being entrepreneurs, didn’t help build business skills.
Mr Mazwai said that after 1994, there was an influx of Asians and Somalis who brought decades of experience in the formal economy and quickly captured the market.
“These outsiders also have strong networks as they do not expect assistance from the local government, so they are very competitive. They have their own banks [money that they keep under the mattress] and they help each other,” he said.
Although business chambers such as the National African Federated Chamber of Commerce and Industry had been set up to assist black entrepreneurs, Mr Mazwai said they were “simply not up to it”.
He noted that locals often had an “entitlement syndrome”, which meant they looked to others for assistance, rather than helping themselves -in the way that foreigners would.
Mr Mazwai said: “Yes, the foreigners must integrate themselves into networks with locals for their own survival.
“[But] it is absurd for them to think that they can survive in a network of Somalis in the middle of Khayelitsha. It is downright dumb.’’
This article was first published in Sunday Times: Business Times