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How migrant entrepreneurs are a force for good in South Africa

Migrant entrepreneurs in South Africa face constant security threats and enjoy minimal protection from the police. Thom Pierce

Since the advent of democracy in South Africa in 1994, migrant entrepreneurs have been portrayed as driving small local businesses to the wall, taking jobs and engaging in illegal and other nefarious business practices.

A survey in 2010 found that 60% of South Africans believed that migrants take jobs. Only 27% believed they created them. Nearly 60% felt that one of the reasons for the xenophobic violence that broke out in 2008 was that migrants were taking jobs from South Africans. This sentiment was echoed in the 2015 xenophobic attacks.

But research indicates that migrant entrepreneurs create jobs for other migrants and South Africans.

A study of migrant entrepreneurs from Somalia, Nigeria and Senegal living in Cape Town found that 96% employed South Africans. These findings about job creation were confirmed in the 2014 Southern African Migration Programme survey conducted in Johannesburg and Cape Town. These findings have not yet been published.

Other economic contributions

Several chapters in our recently published book indicate that migrant entrepreneurs also make other contributions to South Africa’s economy.

Tanya Zack describes micro-retailers in Jeppe in inner city Johannesburg as comprising a “booming agglomeration economy.” She argues that this intense trade is a manifestation of low-end globalisation, where the transnational flows of people and goods are oiled not by high finance but by small amounts of capital and through informal transactions.

Andrew Charman and Leif Petersen outline how migrants have transformed the relatively new township settlement of Ivory Park in Johannesburg. They show that migrants have introduced a diverse range of products, business activities and opportunities, and brought scarce manufacturing skills into the township economy.

Vusilizwe Thebe’s study of the informal transnational movement of remittances and people on the route between Gauteng and the rural hinterlands of Zimbabwe draws attention to gaps in the market that migrants often fill.

Key beneficiaries are poorer consumers who can access cheap goods, often in appropriate quantities, at places and times of day that are convenient. Or they have their niche demands met, such as having money delivered to areas not serviced by the formal economy.

Other beneficiaries are South African land lords, who receive cumulatively substantial rentals, and formal business owners. For example, all evidence points to the fact that migrant businesses are sourcing their goods in the formal economy and contribute to the tax base by paying VAT.

Migrant business strategies

These are a core curiosity. This is particularly the case in the spaza market. Spaza shops are small unofficial stores in South African townships.

The evidence suggests that migrants’ competitive edge stems from careful attention to sourcing products and servicing customer needs. The business model suggested by all the studies is one of low mark-ups and high turnover.

Migrants also tend to stock a greater variety of goods and package them in flexible quantities. For example, a single egg rather than a box of eggs, or a small plastic pouch of sugar as opposed to a whole kilogram.

Migrant entrepreneurs also offer credit. This helps build customer loyalty and in the process plays a key role in food security strategies for poorer households.

A final component of the business model appears to be long hours and a culture of thrift.

This shows that rather than adopting “underhand and secretive” strategies, the spaza shop model is no different to large South African retailers.

Policy environment

The 13 chapters of the book demonstrate that some of the most dedicated and resourceful entrepreneurs in South Africa’s informal economy are immigrants.

Under any other circumstances they would probably be lauded by government as exemplars of micro entrepreneurship. But the state, and many citizens, view their activities as undesirable simply because of their national origins.

Harassment, extortion and bribery of officialdom are some of the daily costs of doing business for migrants in South Africa. Many entrepreneurs, especially in informal settlements and townships, face constant security threats and enjoy minimal protection from the police. This is in addition to all the constraints they face simply because they operate informally.

The book traces how the informal economy has at best been ignored and, at worst, actively discouraged. It shows how the anti-migrant sentiment is driving a process of draconian regulation that will be bad both for South African and migrant entrepreneurs.

There needs to be an acceptance by the South African state and the public at large that neither the informal economy nor migrants will go away.

* This articles is based on an extract from Mean Streets: Migration, Xenophobia and Informality in SA edited by Jonathan Crush, Abel Chikanda and Caroline Skinner. It is published by the Southern African Migration Programme, African Centre for Cities and International Development Research Centre.*

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