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Home » September 2010

Impact of retail centres in townships

by Robert McGaffin

The issue of township retail development and particularly the issues relating to township shopping malls and the positive and negative implications of their development is a source of major interest and debate at learning events coordinated by the Training for Township Renewal Initiative (TTRI). Launched in 2007, the TTRI aims to build local expertise to conceptualise, design, initiate and implement township development projects around the country. A joint venture between the National Treasury, the Department of Cooperative Governance and Traditional Affairs, the South African Cities Network, the Development Bank of Southern Africa and Urban LandMark, the initiative works towards understanding the needs and dynamics of South Africa's townships, as well as the various ways of transforming them into functional and sustainable neighbourhoods.

From discussions at TTRI events it is clear that public sector township practitioners, for the most part, do not have at their disposal the conceptual tools and empirical evidence needed to assess, decide on, pursue the potential of township retail markets, and to engage effectively with proposed township retail developments.

Key areas of enquiry have mainly been about how to assess, structure and implement retail/commercial sector interventions in ways that:

  • intercept leaking township commercial expenditure
  • minimise negative impacts on township communities and existing township-based enterprises
  • promote beneficial impacts for township-based enterprises
  • generate property investment opportunities for township investors
  • address the maintenance and operational requirements for success and sustainability aspects within the context of weak public sector regulatory maintenance and operation capacity.

As a result, a TTRI colloquium was held on 11 August 2010 where the Urban LandMark-commissioned Demacon research on the impact of township retail was used as the basis around which the necessary conceptual tools and evidence could be identified and debated. The ULM research findings were complemented by additional Cities Network case study research and expert inputs. About 60 participants representing local municipalities, private developers, banks and academics attended the colloquium.

The ULM-commissioned research showed that there has been significant growth in formal shopping centres in township areas over the past decade, with approximately a third of all new retail space in the country developed in the past 5 years being in second economy locations. Furthermore, as was pointed out at the colloquium, retail development represents one of the few avenues through which private investors are prepared to invest in second economy areas. While this investment is generally welcomed, as these centres can play a strong role in developing and expanding economic nodes in these areas, concerns have been raised about the impact of these centres on local enterprises.

The ULM research showed that prior to the development of the formal retail centres, consumers would undertake a large percentage of their shopping outside the area, resulting in significant leakage of income from the township areas. The development of the retail malls in these areas however seems to have resulted in far greater shopping taking place within the township areas and these centres generally seem to have a positive impact on consumers because they provide greater choice, reduce the price of goods and services and reduce the travel and time costs that consumers have to pay to get to formal centres.

The impact of formal retail centres on local enterprises appears to be more mixed, with some enterprises reporting that they have been negatively impacted upon in terms of lower turnover and greater competition. Other enterprises report that there has been no impact, while some enterprises state that the centre has had a beneficial impact because of the numbers of people the centre draws to the area. When unpacking the logic of the retail centre, the ULM research showed that in order for a formal retail centre to be viable, it needs to charge high rentals for the smaller, "line-shop" space (R200 - R400/m2). These rentals are usually unaffordable to most small enterprises and create a great challenge with respect to how one incorporates the small enterprises in these centres.

The discussion emanating from the colloquium suggested that the retail centres had a positive role to play but that small enterprises need to be incorporated in the broader planning around the retail centre and that a beneficial interface needed to be created between the centres and the broader trading environment. Furthermore, in order to facilitate the progress of small enterprises up the retail ladder to a point where they can viably operate out of a formal retail centre, greater attention needs to be paid to the business training and skills development of these enterprises.

Robert McGaffin is a town planner and land economist and the Property Market Theme Coordinator for Urban LandMark.