By: Anna Majavu
Township tourism small and micro enterprises are part of a diverse growth sector but need a lot more government support if they are to avoid bankruptcy within their first few years of operation. This is the finding of new research by Snenhlanhla Mokoena and Tatenda Liambo of the Durban University of Technology, who investigated the sustainability of 61 art and craft centres, carwashes, shisanyamas, restaurants, and shebeens in Umlazi, eThekwini.
Township tourism is “full of energy, culture, and hope for the future… a hive of entrepreneurial activity”, says Mokoena and Liambo, but the Umlazi businesses are in a very precarious situation. All 61 are small and micro-enterprises with none qualifying as a medium-sized enterprise. Over 70% had been in business for three years or less and the majority (67%) were in bed and breakfasts and restaurants. While these establishments had “reported success given the township consumption-oriented spending in food and drinks”, this was becoming a problem because bed and breakfasts and restaurants had saturated the market, leading to low sales and low-profit margins.
Adding to this problem was the fact that 25% of the Umlazi businesses did not have any strategies to sustain their businesses, only 16% were using social media to market their businesses, and only eight percent saved on costs by purchasing in bulk from wholesalers at lower prices, the research found. “SMMEs are still struggling in finding their main core competitiveness strategies in the wake of a knowledge-based economy as well as the creative economy,” said Mokoena and Liambo.
To avoid collapse, most township entrepreneurs would need to become multi-talented and set up several different SMMEs, the research found. But this hinged on the anticipation that government organisations with a focus on SMMEs would “be at the forefront of SMME development across the entire township economy in order to help businesses by offering support and services and by fostering an environment that will foster their expansion and sustainability”, they said.
The government was well aware of all the difficulties faced by SMMEs, and needed to step in to assist the “30% of SMMEs who are influenced negatively by lack of funding, followed by 14% who are negatively influenced by strong competition”, said Mokoena and Liambo. “Access to capital and the cost of funding are significant barriers to SMME start-ups and expansion, which has a negative impact on SMME development in general, hurting the local economy severely”, they added.
Mokoena and Liambo concluded that even though township consumers were more eager than ever to dine at a variety of local restaurants, without extra government support, it would be difficult for township tourism businesses in Umlazi to reach and maintain sustainability. While the research focuses on Umlazi, the concerns, and experiences of these enterprises are being felt by similar businesses across the country.