By Faith Kiarie
In May 2008, xenophobic attacks against foreign African nationals living in South Africa left tens of thousands displaced and numerous businesses and homes destroyed. A new wave of similar attacks erupted again earlier this year in the township of Soweto and quickly spread to other parts of the country. Such attacks have been ongoing since they first began seven years ago, albeit in smaller scales. In a country where the economic circumstances of many victims of the apartheid regime remain unchanged, it is understandable that the relative success of foreign African entrepreneurs irks local residents.
According to the United Nations Regional Information Centre’s 2013 Global Trends report, nearly one fifth of the world's 1.2 million asylum seekers are hosted in South Africa. In addition to this, according to the United Nations Refugee Agency, South Africa is home to some 65,000 recognized refugees and a large number of illegal immigrants, as well as immigrants holding other types of permits. Since very few African foreign nationals are absorbed into the formal sector of what is the continent’s second largest economy, their survival and success in a land where they have limited resources is notable.
The Somali community is a prime example of the success of hardworking foreign African entrepreneurs in South Africa. Researchers from the Sustainable Livelihood Foundation found that Somali entrepreneurs have engineered the changing landscape of the spaza business in the Delft Area in Cape Town. These unofficial stores, usually at private residences in townships, sell every-day household goods, such as bread and cigarettes. And Somali-owned spazas can now be found all over the country.
However, such foreign African entrepreneurs have long been accused of engaging in questionable practices to gain an upper hand over local competitors. And with increasing interest in their businesses from the media, there have been calls for them to share their ''trade secrets'' with local business owners.
Depsite these claims, recent research suggests that there's nothing peculiar about their recipe for success, it is simply the result of hard work and the application of business practices similar to those of formal retailers. Somali entrepreneurs have been found to provide mutual support in helping to get businesses off the ground, joining together to help one another create and capitalize on new enterprises.
With most of the products that they supply having low mark ups and thus requiring high volume, a low-cost strategy needs to be implemented if profits are to be realized. As a result, Somali entrepreneurs often invest in groups, purchase inventory together to take advantage of bulk rates, and run their shops themselves to curb labor costs. Their shops are also typically open for longer hours and are known to build customer loyalty through their willingness to extend credit.
Many South African families, who have survived off spaza businesses for decades, have resisted the entry of foreigners into this industry as they believe that they are being starved of business. Other community members feel that many spaza shops are exclusively run by foreigners and do not employ enough South Africans. Even members of government, such as Small Business Minister Lindiwe Zulu, have suggested that Somali entrepreneurs divulge their business techniques to local business owners.
With relative youth unemployment rates and poverty across the continent, immigration will not likely slow down. As a result, as foreign entrepreneurs are beating the odds each day, their efforts ought to be encouraged and celebrated. And despite the recent romanticization of the rise of Africa, higher consumption rates are not going to make African individuals more prosperous.
The consumer mentality has to give way to producer mentality. For that to happen, a number of things ought to take place. Specifically, the attitudes towards entrepreneurs have to change. Entrepreneurship is often seen as a last resort to earn income after efforts to be formally employed by large firms or by the government fail. Moreover, according to a First National Bank report, there is an overemphasis on access to capital and an under emphasis on skills and aptitude.
Somalis are just one of many foreign African immigrant groups in South Africa who are succeeding in business. There is also a visible dominance of Ghanaian and Congolese hairdressers. Well-educated Zimbabweans are also making their presence known in various industries, notably the hospitality business. Many of these African nationals are neither educated nor wealthy. They simply have good networks beyond family and close friends, as well as a determination to solve everyday problems in simpler and cheaper ways.
All in all, these entrepreneur businesses contribute positively to the South African economy. The suppliers, landlords, and even some employees of these businesses are all locals. The anger and hatred towards them has little do with their success. Rather, such anger is caused by the fact that, after two decades of a democratic South African government, the socioeconomic issues that existed in the apartheid era have yet to be fully addressed.
Local frustration will only be relieved by a serious commitment from both the public and private sectors to work with communities to revitalize township economies. In doing so, such efforts will likely result in increased production and employment rates in townships. Since immigrants are thought to be more entrepreneurial than locals, the sensible action for government and other supportive bodies is to protect and encourage entrepreneurial business. Creating an environment that makes self-employment a more attractive option for hopeful entrepreneurs will not only lead to a stronger economy but will also alleviate resentment toward foreign Africans.
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Faith Kiarie recently completed an honors degree in finance at the University of the Western Cape. She is interested in economic development in Africa.
[Photo courtesy of Roy Blumenthal]