R10 billion spent on entrepreneurs since 2017, but little to show for it

The City of Johannesburg invested billions in business incubators, policy changes and partnerships with the private sector to boost entrepreneurship as a solution to unemployment, but these efforts have been considered “inadequate” on a global scale.

The Roodepoort Civic Centre has a hidden entrance behind the glitz and glamour of the Roodepoort Theatre. It is here, just inside a small, gated door, where hopeful entrepreneurs can find the unassuming sign that reads, “Isiqalo Opportunity Centre.” 

A short trip to the fourth floor of the building and down a long corridor reveals a medium sized room, clean and tidy but especially quiet. The only sound the tapping of keys as two women work at administrative desks and one client, a man, uses one of the dozen available computers which neatly line the bottom left corner of the space to browse Facebook. According to the freely available brochure, this is the City of Johannesburg’s “concrete solution” to unemployment, stunted economic growth and informal trading.

Johannesburg has a rising unemployment rate of 26,5% according to the Cooperative Governance and Traditional Affairs profile on Johannesburg and a provincial youth unemployment rate of 63,9% according to a 2023 media release from the Gauteng office of the premier. The latest Global Entrepreneurial Monitoring Report (GEM), a 25 yearlong project which maps entrepreneurial ecosystems globally through direct interviews with entrepreneurs in over 50 countries, states that it is a lack of employment which drives 90% of entrepreneurs in South Africa to start their own business. 

Johannesburg is home to around a third of South Africa’s small, medium and micro enterprises (SMME’s) according to a 2022 study on Investigating SMMEs strategic planning techniques in Johannesburg central business district post-COVID-19 lockdown, and this number is growing. The City of Joburg’s definition of an SMME includes not only formal entrepreneurs but also informal traders, this is according to the Small Enterprise Development Agency’s research note on the South African SMME sector.

A market for women entrepreneurs was held in Johannesburg on May 7, 2023 at
Constitution Hill. Photo: File

The Department of Economic Development (DED) is responsible for entrepreneurship in formal and informal sectors, which they refer to “the backbone of any economy” on their website. The department’s mandate promises to, “Support the city towards achieving a 5% economic growth rate and to bringing down unemployment by 2021.” This includes promoting SMMEs, informal traders and streamlining regulation.

However, the department is yet to achieve the economic growth target in the City of Johannesburg, only seeing 0,79% growth in 2018, while the unemployment rate continues to grow, as jobs cannot be created fast enough for a growing population. In addition, the support laid out by the city for entrepreneurs and informal traders is regarded as inadequate by the GEM, who lists South Africa as the worst of over 50 participating countries in entrepreneurial framework conditions. 

This means that South Africa, and Johannesburg in particular, has no adequate framework conditions. These conditions include financing, policy, taxes and bureaucracy, city programmes, school-level entrepreneurship education and training. In addition, despite the department spending R10 billion in the last seven years towards these aims, they have consistently underspent their budget allocated by the city treasury, according to their annual and quarterly reports.

In the “Young Entrepreneurship Policy and Strategy Framework,” the vision is to make Johannesburg “the leading city in entrepreneurial development in the developing world by 2025” through removing barriers of poverty and unemployment. The policy was drawn up in 2009.

According to Leah Knott, Johannesburg Ward councillor and MMC for Economic Development between 2016- and 019, the Johannesburg policy on entrepreneurship has not been amended since. Knott said that this document is outdated, “we should be renewing policy every five years. But it takes 18 months to two years to be approved by council and this can’t happen when the Johannesburg government changes every five minutes.” Referring to the frequent changing of hands in the city’s coalition government, Knott added that, “when government changes, policies in the process go back to the beginning.”

In an effort to support entrepreneurs in Johannesburg, the DED launched ten opportunity centres throughout the city. Knott, who held the role of MMC during the rollout of the centres, said: “The majority of small businesses fail in their first three years, and so the centres give a leg up to entrepreneurs and give them the necessary tools to succeed, like how not to eat profits before seeing a return.”  The opportunity centres serve as entry points to local communities to access guidance and cut the red tape of bureaucracy when starting a business or growing an informal business into a sustainable, formal business.

This project began with the transformation and expansion of what used to be “business centres” according to Knott, who managed small advisory desks in regions E and A, Diepsloot and Alaxendra. The opportunity centres were created in collaboration with various Johannesburg-based communities, who said they did not visit the centres previously because they could not access them due to their placement. The department has since opened 10 opportunity centres in Diepsloot, Montclare, Florida Park, Soweto, the Johannesburg CBD, Alexandra, Braamfontein, the Joburg Market, Elderado Park and a mobile centre which travels to remote areas. The latest annual report from the department said that the rollout is only partly complete, with a goal to open 14 centres.

The DED’s website states that “the purpose of the opportunity centres is to create an environment where entrepreneurs and small businesses can thrive”. Knott said that the centres provide help and advice on finances as well as tax returns, accounting and registration with the CIPC. Workers at these centres are not required to have any entrepreneurial experience themselves, according to the department’s job description.

They do not provide funding to clients, but they do assist with access to funding, mostly through the Gauteng Enterprise Propeller. According to assistant key accounts manager, Nomonde Zulu, access to funding can be secured by applying on the propellers website or by visiting one of their offices.

Including training, events and workshops, the centres have supported 14,294 entrepreneurs in the last financial year. This means that less than five entrepreneurs visit a centre per day. The department acknowledged this low number in their latest report and said it would be able to make more of an impact and reach more clients if they were granted a locomotive allowance. This request has been put forward in the past two financial years and denied due to no budget being available. The department is set to resubmit the request in the next financial year. 

Contrary to the statement provided, the financial performance of the department, which is listed in the same quarterly report, states that the department was granted an advertising budget of R1,084,000 for the last financial year but spent only R257,000 of it.

The complicated issue of informal trading 

Twenty one percent of the Johannesburg workforce is in what the DED refers to as a “thriving, vibrant informal sector”. MMC of the department in 2021 Lawrence Khoza said in his speech for the opening of the Joburg Market Opportunity Centre that the centres provide informal traders with, “non-financial assistance on how to formalise their businesses.” The policy on informal trading in Johannesburg boasts that the city supports informal traders in a way that is more progressive than others, “it looks good on paper,” said Doctor Mamokete Modiba, a senior researcher at the Gauteng City Region Observatory. 

“But there is a translation issue when it comes to practice,” she continued. The city has goals such as the “sharing of public space” and “the regulation of competition” as well as “enabling access to entrepreneurial activities.” In this regard, the opportunity centres exist to take members of the informal economy into the formal economy and provide advice on business growth so they might expand to create jobs and benefit the macro-economy. “On one hand this is effective because it gives resources and training to people with a specific focus on disadvantaged groups and disadvantaged areas,” said Modiba. 

“On the other hand, informal trade is not regarded as a real business by the City of Joburg, it is regarded as something they want to make into something else.” Modiba continued to say that not all informal traders have the ambition to become successful businesses. Some are simply survivalists who want to make enough money to keep bread on the table, and they need a different kind of support from the city. 

Sakhile Pehana is an informal fruit trader, who sells his fruit to passing cars at this
Linden intersection

Modiba suggested adequate services and infrastructure as an intervention strategy for the informal sector, “some traders have no shelter and then when it rains, they lose money because they can’t do their job. Others waste time looking for ablution facilities.” Louis Botha, a Parkview based entrepreneur, said that his main problem with running a business in Johannesburg is electricity. In running his mobile coffee business, Perfect Cup, he said, “I think our main challenge is power. With the loadshedding, at markets in particular, we constantly have to keep an eye on the Eskom schedules.”

The DED had budgeted R3,9 million towards the goal of allocating appropriate areas for informal traders in Joburg, but by the end of the 2022/2023 financial year, no areas were allocated and only R212,000 was spent towards informal trading.

In addition, the city emphasizes training for informal traders to improve their skillset through opportunity centres, however, Modiba states, this training can be inappropriate, “some people in the informal sector do not have an education, others are engineers, for example, who cannot find employment elsewhere. You cannot train someone on writing skills if they already have a degree in engineering.” 

The question of why the DED did not utilize the advertising budget allocated to them and the reasons behind the underspending as well as the failure of the informal trading project were brought to the department, but Wits Vuvuzela received no reply by the time of publishing. 

Entrepreneurs in Gauteng Race, sex and education

Other Johannesburg initiatives: Public-private partnerships

The Johannesburg opportunity centres perform an advisory role, however, a 2022 study by Bantu Majaja and Jabulile Msimango-Galawe on mapping the needs and challenges of SME’s in Johannesburg found through interviews with 1,099 entrepreneurs that the main challenges facing entrepreneurs in Johannesburg is the city’s spatial divide, access to suppliers and access to equipment. These are beyond the resources and capabilities of the opportunity centres, however, national and provincial government attempt to bridge these gaps by partnering with private sector companies and NGO’s in Joburg. 

Moses Mogotlane, manager of the Transnet Matlafatšo centre told Wits Vuvuzela that this centre, based at the University of the Witwatersrand, was started with access to equipment in mind.

This centre consists of two halves, the ideation space and the innovation space. The ideation space follows the same model as the opportunity centres of non-financial support. The innovation space, on the other hand, gives entrepreneurs access to equipment such as 3D printers, computers, software and woodwork machines. “All of this equipment has been made as simple as possible,” according to Mogotlane, who said that, “if you can use a computer, you can use the technology here.” 

The centre was built in partnership with the South African government owned enterprise, Transnet, who sponsored the operations until 2020. It became a popular innovative space for local entrepreneurs, “anytime you visited the centre, there were always people in the space, creating or thinking of ideas”, Said Mogotlane. 

In 2020, however, the contract between Transnet and the University of the Witwatersrand expired and was not renewed by Transnet. Since then, the centre has become absorbed into the Wits Innovation Centre and serves only the Wits community. The number of visitors to the centre has since been on the decline and in the month of September 2023, only 72 people visited the centre at all. 

In addition to this gap in support with regards to equipment, research by the Gauteng City Region Observatory found that historical inequalities continue to persist in the world of entrepreneurship in Johannesburg. In 2021, the percentage of entrepreneurs who are white increased from 10% in 2015 to 20% while the percentage of entrepreneurs who are African increased only from 7% to 15%. This is a trend which applies to gender and education as well.

In response to this, youth employment accelerator Harambee has turned their focus specifically onto young, African women in Johannesburg with lower levels of education in the hopes of bridging this historical divide. “We refer to it as make your own money” says Xolile Sepuru, programme manager at Harambee. 

According to Seperu, this programme consists of social media interaction to stimulate entrepreneurship, looking at a platform-based approach for young entrepreneurs as well as policy, incentives and licensing, “the goal is to remove the barriers to young people starting businesses,” said Seperu. The organization is supported through the Gauteng government. “I think the City of Joburg is doing a lot. They’re doing well in trying to bridge the gap and help entrepreneurs. What we need is for more private organizations to step in” he continued. 

FEATURED IMAGE: The Khoebo Opportunity Centre, based in Braamfontein, is temporarily located at the department of economic development’s building due to disrepair at their previous location. Photo: Kimberley Kersten

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The reality of fake goods

Destiny sits snuggled between two makeshift gazebos. The plastic legs of his stool bend as he rocks back and forth.  To his left hang bundles of hair and to his right, packed neatly, is an array of the sneakers he sells.

Unperturbed by the blistering heat, piercing sounds and pungent smells that engulf Johannesburg’s city centre, he sits fixated on anyone who shows the slightest bit of interest in any of his items.

An elderly lady walks past hastily, clutching her purse under her arm. She gazes at Destiny’s stand, motioning towards a size two sneaker, its Puma stamp slightly peeled. Destiny is up in seconds.

“How much?” asks the bag clutcher.

“R250,” responds Destiny.

“My son is a size three,” says the bag clutcher, replacing the sneaker.

Destiny begins packaging the shoes in a black plastic bag. Placing it in his customer’s hand, he says: “This is a big size two madam. If you have problems, bring it back.”

Hesitantly, the bag clutcher fondles out a couple of notes from her bosom.

Destiny is quick to return her change, thanking her simultaneously.

SNEAKER SELLER: Destiny Ogah’s stand at the King George Street the linear market. Photo: Nadia Omar

Destiny Ogah is a 32-year-old foreign national living in Hillbrow. His dark skin and hardened hands indicate a life of long days and heavy labour. His ripped jeans and plain t-shirt barely hide his muscles that bulge through with every movement. Inconspicuously presented, the only thing that stands out are his orange Nike sneakers and bright smile.

He came to South Africa in 2012 from Lagos, Nigeria, in the hopes of finding employment. Having graduated from the University of Benin with a Bachelor of Science in Banking and Finance, he found himself without employment in a country with a vast population and very few job opportunities.

“If you don’t know someone in Nigeria who can give you a job, there is no hope for you. Graduates like me, without important friends, are left to be hooligans and beggars,” says Destiny.

Destiny operates in the linear market situated on King George Street in Johannesburg’s city centre. He is one of the many foreigners who came to South Africa for a better life, but who have resorted to trading counterfeit goods to make a living.

“Life is only a little bit better here than in Nigeria. I thought I would be able to come here and find a job as a banker or get a Master’s degree, but I have to sell these shoes to put food on my table,” says Destiny.

CBD: The entrance to Jay’s Outfitters.

A step behind Destiny’s stand is Jay’s Outfitters, a store that has been selling branded items for 37 years. Inside, the air is still, the only sound that can be heard is the occasional flip of a page by owner Yameen Mayat, who passes time by reading a daily paper.

A bell jingles, alerting him of someone entering. A young male customer enters and has a quick browse. He stumbles upon some sneakers that fit his fancy; he turns them over to view the price, replaces them and leaves the store once more. Yameen continues reading his paper.

“Business has been slow for about the last five years, ever since this linear market opened,” says Yameen.

“And, to be honest, I don’t even blame my customers. Who would be willing to pay the full price for a pair of original shoes if they can get the fake for a fraction of the price on my doorstep?” he adds.

According to a statement released by the City of Johannesburg, linear markets were first established in 2011 as a means of properly managing street trading, as well as ensuring that it did not disrupt pedestrian mobility or passing road traffic. It is an area designated for street trading in a pedestrian environment within the inner city.

After a street is chosen to host the market, the city erects a roof to indicate the presence of a linear market. Most serve as a place to purchase goods, such as clothing and electronics or as an informal area to eat for those working nearby. The linear market on King George Street is littered with stands of second-hand clothes, counterfeit goods and digital cameras. The aroma of cooked rice, spicy chicken and chakalaka camouflage the persistent smell of garbage and urine.

Yameen and his family opened Jay’s Outfitters in 1984 during the Apartheid era. Due to segregation laws, theirs was one of the very few black-owned shop in the city. At the time business was booming, the city centre was, after all, “the only place to shop”.

“Naturally, the area began to change once Apartheid laws were abolished. People of colour were allowed to come into the city and buy anything they wanted. It was an amazing time to be alive,” says Yameen.

“But things really changed when the City of Johannesburg built a linear market on the same street my store was on. We are no longer making a profit so we are shutting down at the end of the year,” he says.

“I am all for people making a living and I think the linear market helped solve a lot of the problems informal traders were experiencing, but the government has not been monitoring what is being sold in these markets. Most of the goods are fake,” says Yameen.

INFORMAL ECONOMY: The linear market on King George Street, is full of second-hand clothes, counterfeit goods and digital cameras. Photo: Nadia Omar

In a press statement released by the Organisation for Economic Co-operation and Development in April 2016, based on international data, it was estimated that imports of counterfeit and pirated goods are worth nearly half a trillion US dollars a year, or around 2.5% of global imports.

“It is not possible from available data to determine the exact figure fake goods are worth, but there is no denying that it is a huge problem and that it affects the market in many ways,” says Professor Imraan Valodia, a senior lecturer in economics at the University of the Witwatersrand.

According to Prof Valodia, the increase in counterfeit goods in a market represents a major threat to business and is also a key barrier to trade. The distribution of cheap and poor quality pirated goods creates an obstruction to the distribution of genuine products.

“As the global trade in counterfeit goods is growing, Africa is increasingly being targeted as a market for counterfeit merchandise. Fake goods are not being produced to any significant degree in Africa. These products are mostly imported from Asia, and particularly China,” says Prof Valodia.

As such, Africa is fast becoming a “dumping ground” for knock-off goods. A very high percentage of counterfeit shipments from China are destined for Africa, either directly or via ports such as Karachi, Dubai or Hong Kong, in an effort to disguise the country of origin.

“The problem of fake goods is increasingly serious and the continent is fast becoming fair game for counterfeiters and it is hurting, not only South Africa, but the entire continent’s population and economy,” says Prof Valodia.

UNREALThe fake sneakers Destiny sells. Photo: Nadia Omar

 

Wayne Minnaar, spokesperson for the Johannesburg Metropolitan Police Department, says the department deploys “counterfeit operations” continuously but as quickly as the goods are confiscated, the traders manage to replace their stock.

“These operations are held by the Gauteng Law Enforcement Agency Forum (GLEAF) which consists of all law enforcement agencies in Gauteng and brand managers who are working together to try and combat this problem,” says Minnaar.

According to the spokesperson, GLEAF receives tip-offs from the community, mostly shop owners, that fake goods are being sold. The agency then goes into the market and confiscates all the items, which are then transported to warehouses to be disposed of.

“Counterfeit goods are being sold all over the country at a rapid rate,” says Minnaar. “It is difficult keep it off the street but we [JMPD] are doing our best.”

One such “Counterfeit Operation” occurred in October 2013 called “Operation Clean Sweep”. The purpose of the operation was to move towards creating a safe and habitable environment within Johannesburg’s city centre.

“We managed to impound 528 counterfeit goods, one bad building and arrested 192 illegal immigrants,” says Minnaar.

The operation, which saw thousands of legal and illegal traders without an income for weeks, received major criticism from the South African National Traders Retail Association (Santra) and the South African Informal Traders Forum (SAITF). The Socio-Economic Rights Institute of South Africa (Seri), acted on behalf of SAITF, and filed an application for an interdict in the high court against the city for “illegally and violently” removing traders.

According to a press statement released by Seri, the traders were evicted even though each had a right to trade in the area, granted through permits issued by the City of Johannesburg itself. Without warning or explanation, they were removed from the streets in a mass eviction operation. Many were assaulted and had their goods trashed. All lost large quantities of valuable stock.

Seri stated in a press statement that the municipality of Johannesburg did not seek to justify its “brutal and humiliating” eviction of the informal traders, nor had it been prepared to repair the damage it caused.

“Immediately after Operation Clean Sweep was abolished, things improved drastically but as time has gone on, it has deteriorated again. Traders are at risk of having their goods confiscated without warning and are regularly taken advantage of by officials,” says Nomzamo Zondo, Seri’s director of litigation, who acted for the traders.

Yameen remembers Operation Clean Sweep vividly.

“The city centre was in shambles! It was very sad to watch the police come in and remove so many people from the city. The linear market wasn’t cleared, but a lot of goods were confiscated,” he says.

“I didn’t agree with the way it was done but I do think the police must do something about all the fake goods. I have to pay a licence fee to sell original items, plus rent, levy, tax and so on. The guys outside aren’t paying anything,” says Yameen.

THE REAL DEAL: Jay’s Outfitters has been selling original, branded items since 1984. Photo: Nadia Omar

Yameen further adds in frustration: “I am paying the same rent as the store owners in Eastgate, R60 000 per month. Can you believe it?”

According to Yameen, the problem will be rectified once “the playing field” is equalised; when every trader is subjected to the law, liable to the same taxes, the same conditions of trade and to abide by all the bylaws regarding street vending.

“All I want is to be able to trade in a safe and fair environment, where every storekeeper is a legal entity, where rentals are fair and not subjected to a false demand allowing unscrupulous traders to manipulate rentals,” he says.

Yameen, noticeably frustrated, lowers his voice that was now filling the store, when he hears the bell ring indicating a customer coming in.

Outside, Destiny has offered his chair to a young man who has shown interest in a pair of navy blue Adidas sneakers.

While his customer paces a couple of steps away, feeling and examining the fit, Destiny says: “I know selling this stuff is not good, but what else must I do? I have been living in asylum for four years. I have been applying for citizenship since early 2013.”

Destiny makes a profit of around R1 000 per month. His earnings go towards the rent he pays for his room in a Hillbrow flat, food and the rent of R800 per month that he pays a South African citizen who owns his stand.

The owner of the stand then pays the City of Johannesburg a mere R100 for rent.

“I know I am being ripped off, but I cannot own my stand because I do not have an ID, so I have to go through a South African, who makes me pay eight times the price,” says Destiny.

Like many foreign nationals living in South Africa, Destiny does not enjoy citizenship and the benefits that come with it. He says the lack of a South African identification document means he cannot own property or open a bank account.

Thus, desperate for an income, he has resorted to selling counterfeit sneakers.

“It’s basic economics, there is a demand and I am creating a supply,” he says, pocketing money from the sale while returning to his original seated position.

“Besides, this stall is all I have,” he says, steadying himself on one of the poles as he rocks back and forth on his plastic stool.

FEATURED IMAGE: A photo of fake sneakers sold in the streets of Johannesburg. Photo: Nadia Omar

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Without a home but not without hope

Teecee Boley spends a day with a homeless man on the streets of Johannesburg, in the middle of the winter, to understand the unique challenges he faces on a daily basis. 

The homeless of Johannesburg face extraordinary challenges particularly in winter. Photo: Kudzai Mazvarirwofa

DAILY GRIND: The homeless people of Johannesburg face extraordinary challenges particularly in winter. Photo: Kudzai Mazvarirwofa

“Move away, go!”, a security guard shouts at Azisa. The 35-year old former KwaZulu-Natal resident spends his days on the streets of Johannesburg, begging for money, finding shelter and rummaging through rubbish bins for any edible food. Being chased away by security guards is just a normal part of his day as a homeless man in the city of gold.

Azisa, who refused to give his surname, was released from prison a year ago where he spent the last three years for theft. His mother died while he in prison and his younger sister has been taken in by some relatives. With no money, a criminal record to his name and no identity document (ID), finding any kind of job is impossible.  But finding a job is one of his lowest priorities, staying warm in plunging temperatures is his biggest challenge.

The 8am morning sun provides a little heat but winter has been tough on him. His only set of clothes is not warm enough and he does not have a blanket.

“The cold is hurting my bones and my leg is swollen,” he says, removing his sneakers to expose a leg badly in need of medical attention. 

A smile lights up his face as he discovers a packet of fried chicken leftovers.

Azisa is happy to follow the security guard’s orders. As we speak, he moves away from under a tree at the Johannesburg theatre where he had spent the previous night. He takes his small black backpack which contains everything he owns and moves to the park across from the theatre.

The park presents two opportunities – one, to get heat from the sun and another, to beg for money. At midday, he gives up on the begging and heads to Park Station for a bath.

“I must pay R10 to clean my body. You see, I am smelling because I have not cleaned for two weeks,” he says pointing to his dirty clothes.

It’s 1:30pm as he heads to lunch. Rummaging through a rubbish bin outside the station, a smile lights up his face as he discovers a packet of fried chicken leftovers.  His lunch is followed by a short nap and about two hours later, he starts begging again, this time in desperation for a blanket.

As the day comes to an end Azisa tries to find a place to settle down for the night. Despite the near freezing temperatures ahead of him, he remains hopeful: “If I just get the ID I will find a job, rent a place, marry and have two children.”