The lethargic death of the South Africa’s rural economy
|Published
By Nokwanda Mathenjwa
The rural economy has been neglected and left to its own demise, once an exciting and soulful place to visit during the holiday season. Local stores and halls have become dilapidated structures that only pleasure us through nostalgia.
Growing up most South Africans would purchase their basic household needs at a local general store. The owners of these general stores were mainly locals and those families were considered more well-off than most families in the community. Despite that, the community has a sense of comradery that garnered unreserved supported by consumers in around their jurisdiction.
The rise of shopping centers in rural areas promising access, convenience, variety and job creation came at the detriment of rural entrepreneurial activity and self-sufficiency of locals. Previously, the wages locals would earn or working family members would send home would be first spent within the community. A portion would be spent purchasing necessities KwaSibiya General Store, another allocation kwaJabulani Butchery, another at MamNkosi’s for a homegrown chicken and eggs, KwaZikalala for homemade pies namagwinya, a local tailor for garments and a community hair salon.
Travelling to town was a monthly excursion to purchase larger items and volumes of goods. Nowadays locals receive their wages and monies from families, catch a taxi to town, spend at a chain store and that revenue flows into the JSE. Instead of circulating within the local rural economy at least 4 times for local sustenance, within hours these large cashflows return to the pockets of investors and shareholders and is seldom reinvested towards local infrastructure or social development needs.
According to a 2012 Property24 report, 160 retail shopping centres were developed in townships and rural areas between 1962 and 2009, generating R34 billion in sales and creating 54 300 permanent jobs since the 1980s. A 2015 report by Futuregrowth Asset Management which owns 30 shopping centres states that centres helped created 7 600 jobs.
When compared to a rural population of 19.2 million, township population of 11.6 million as per 2020 Macrotrends statistics and rural unemployment recorded at 3.9 million by Trading economics in 2016, this success is dismal for the country’s economic development. The job creation figures are unjustifiable and prove the premise of shopping centers to be excessive and conspicuous consumerism over productive and sustainable development of underserved communities. The community members employed at these malls or shopping centres spend their money there, thus perpetuating this vicious non-developmental cycle.
It is evidently not enough to only employ locals, as noted above, the spillover effect on poverty alleviation is meagre. The unemployed continue to outweigh the employed and those living in abject poverty remain neglected. If locals were given shares in shopping centers, communities would have reasonable ownership through community trusts that dictate the use of funds through consultative processes. These can include improving local infrastructure, higher education reservations for their immediate children, stipulated dividends per household and/or local business development, etc for as long as the centres operate on traditional, community or municipal land.
What do numbers look like for local small businesses?
A 2008 study by the Bureau of Market Research found that township business owners recorded a decline in business activity within six months of a mall opening. While 75% of business owners within 1km radius to the mall reported a drop in profits and 36% of businesses within a 4-5km radius reported the same. Do the jobs created by shopping centres measure up against the loss in local business activity? Similar statistics for rural areas are currently unknown, these township figures will therefore serve as proxy.
Rural areas are endowed with land and agricultural finesse, if retailers sourced products like fruits and vegetables from local farmers, we would not be the most unequal country in the world. When making these purchases community members would spend within their local communities, the circulation of money would occur on a broader scale and consumers would indirectly support small and large-scale local farmers. The community co-operatives formed for poultry farming should have had direct links to chain stores. Thus, empowering communities to produce what they consume. In the same breath uniform manufacturing co-operatives can be formed to supply uniforms to schools in their district.
With adequate government support the rural economy can still be empowered to achieve its full economic potential through self-sustainable means. Food security is a challenge the rural economy can address, with about 2.1 million (11.6%) of South African households reported experiencing hunger in 2021, according to StatsSA. Two-thirds of these households are situated in Cape Town (240 970) and Johannesburg (238 610), with unemployment being the main contributor. The rural economy can be a feeder to these cities and metros.
Because the profits accrued by malls do not cascade down to rural communities and local small businesses, they are counter intuitive to South Africa’s agenda of inclusive growth and socio-economic development. Mall and shopping centre owners together with retailers need to grab a seat at the inclusive and sustainable development table. They need to adopt forward and backward linkages approaches that support local small business growth and development to meaningful combat unemployment, alleviate poverty and reduce inequality.
Nokwanda Mathenjwa holds an MPhil Economics in Industrial Policy, from the University of Johannesburg. She is the President of the Young Global Economists Society and a Mandela Washington Fellow.
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