Township businesses are operating in markets with demand, but many are struggling to turn that demand into sustainable growth because of high procurement costs, limited market access and regulatory barriers.
This is according to the Competition Commission’s Rural and Township Economy Project 2026, which surveyed 600 businesses and 1,000 township consumers to understand the challenges facing enterprises in these economies.
One of the report’s key findings is that smaller businesses often lack the bargaining power enjoyed by large retailers.
Nearly half of businesses surveyed, 49%, believed suppliers charged them higher prices because of their size. Among independent businesses, this rose to 61%.
Competition Commission Chief Economist James Hodge said smaller businesses are often excluded from formal procurement channels, leaving them reliant on smaller suppliers and smaller orders.
“They are often not integrated into larger, more formal corporate procurement channels and as a result face much higher prices when dealing with smaller suppliers, smaller order sizes and weak bargaining positions,” Hodge said.
The disadvantage affects more than profitability. Higher input costs can make it harder for small businesses to offer competitive prices while maintaining margins.
Getting into bigger markets remains difficult
The Commission found that township and rural businesses also have limited access to major retailers and online marketplaces.
Only 6% of township businesses and 10% of rural-town businesses sell through major retailers, while online marketplaces account for just 11% and 9%, respectively.
Instead, around 70% of township businesses and 78% of rural-town businesses rely primarily on customers from their local communities.
Hodge said many businesses want to formalise and access national retailers and online platforms, but face significant barriers.
“Many independent and even informal retailers have expressed strong interest in formalising and getting access to formal distribution channels or shelf space on national retailers, including online channels as well,” he said.
“But few are achieving this because of the barriers that they face.”
Competition Commissioner Doris Tshepe said creating a more enabling environment for these businesses is important for addressing South Africa’s wider economic challenges.
“Creating a more enabling environment for rural and township businesses is central to tackling poverty, unemployment and inequality,” Tshepe said.
Godlimpi backs collective buying
Deputy Minister of Trade, Industry and Competition Zuko Godlimpi believes businesses can also address some of these challenges by working together.
At a Methodist Church Young Women’s Manyano empowerment workshop in the Eastern Cape, he urged entrepreneurs to form partnerships and cooperatives to increase their purchasing power.
“It is these strategies of scale and usage of purchasing power that have enabled foreign nationals to dominate the Spaza Shop sector in the townships and villages,” Godlimpi said.
He encouraged township businesses to work together to procure stock from wholesalers in larger quantities.
Godlimpi also urged entrepreneurs to modernise their businesses through technology, establish an online presence and look beyond South Africa for new markets.
That is particularly relevant to the Competition Commission’s finding that only about one in 10 township businesses sells through online marketplaces.
Bulelani Balabala, founder and CEO of the Township Entrepreneurs Alliance, has similarly highlighted the importance of digital tools in helping township entrepreneurs reach new markets.
Speaking at the Kasi Tech Series earlier this year, Balabala said township entrepreneurs were increasingly building businesses despite limited access to resources.
“There is a powerful shift happening in the townships. We are seeing entrepreneurs who are not waiting for access but are building solutions with what they have,” Balabala said.
Without the purchasing power and market access needed to scale, township entrepreneurs remain trapped in small, local markets.
