Township Economy Revitalisation Initiative - challenges encountered & employment opportunities created: Department of Economic Development and Tourism briefing

Meeting report

Presentation the Department of Economic Development and Tourism on the Pick n Pay Market Store Project

Mr Joshua Wolmarans, Director: Enterprise Development, Department of Economic Development and Tourism (DEDAT), presented on the successes and challenges faced with the Pick n Pay (PnP) Market store project which was aimed at revitalising township economies. He mentioned that the first PnP market store had been opened in 2017 to which seven more had been opened in and around townships of the Western Cape, and the eight stores accounted for 177 employees to date.

He said that PnP was playing an important role in terms of ‘capacitating’ the various stores but there had been needs for aid with grant and loan funding in order to make the project more viable. The Department had been engaging with various financial institutions for acquiring funding at reduced interest rates. One of the major challenges faced when setting up the store was the upgrade of the electricity supply system from single phase supply to three phase supply, as the various equipment in the stores made use of three phase electricity. However, the City of Cape Town had been able to help with the process of providing the upgrades.

PnP required that each market store have at least 10 parking bays, and that brought about an issue of re-zoning of some potential sites for the stores. There had also been challenges with the transfer of ownership of sites from the previous owners to the market store owners. The identification of entrepreneurs and store owners had been a critical issue for the Department since these were the people who would be tasked with running the store.

He shared the financial statistics for the various stores indicating that the stores had been doing relatively well but their overall cash flow had been impacted by the COVID-19 pandemic. Taxi violence within the province had also affected the ordering of stock, as some suppliers had become sceptical to come into the townships to deliver.

Further details on the employment and sales performance of the individual stores can be found in the attached presentation

The Chairperson thanked Mr Wolmarans and opened the floor for a round of questions from the Members.  

Discussion

Ms N Nkondlo (ANC) asked if there would be any officials from PnP joining the Committee in its oversight visit especially those that were responsible for project management or project support to the store owners. She added that some questions which were asked when the project started indication that there was no ‘township revitalisation strategy’ in place, as some of the documents from the Department stipulated. She inquired on when the documents that govern similar interventions were going to be completed and asked on the cause of delay in developing the strategy.

She said that there needed to be a link between the interventions and the reasons as to why the said models were chosen and asked on the relationship between the Department and the Local Economic Development (LEDs) in as far as the said interventions were concerned.

In terms of the PnP Model, she inquired if there was an ‘after care’ support system in place to supplement the intense training that got rendered when the stores were being opened.

Mr A Van der Westhuizen (DA) asked if the PnP market store project was a national initiative, or it was only available in the Western Cape. He inquired on how the Department mapped entrepreneurs to PnP if it was via advertisement or the entrepreneurs had to approach PnP directly via head office.

He asked the extent to which the Department’s officials were able to learn from the initiatives so that when they engaged with entrepreneurs, and when they would be able to make suggestions that could lead up to new sites being explored for setting up businesses.

He asked on how further the knowledge base could be expanded to officials in the small business unit of the National Assembly (NA), Department Small Business Development (DSDB), Department of Trade Industry and Competition (DTI) and others.

Responses

Mr Wolmarans said that PnP representatives would be present at the site visit in Langa and Members would be able to ask their questions there. He added that the Department was working on the development of a ‘township revitalisation strategy’ and it was done in the context of the broader Western Cape revitalisation strategy, although it was difficult to say when the said strategy would be made available. Before the project was embarked upon, there was significant research done by the Department around township economies because there needed to exist an understanding of the context of the landscape in which the project would operate.

The Department did engage regularly with LED officials in terms of identifying potential sites and in discussions around identifying potential beneficiaries of the project. With regards to the ‘after care’ support, PnP had a team of individuals dedicated to providing ‘after care’ support to the market store owners, and that was an ongoing process. The PnP market store project was a national initiative that had started out in Gauteng and then extended to the Western Cape.

He said that there was a lot of value added to the Department’s officials in terms of expanding on their knowledge base within the retail sector. There was a lot to learn from the PnP market store project and the knowledge obtained would benefit entrepreneurs in communities in future engagements.

He handed over to colleague to handle the question on how potential entrepreneurs were being identified by PnP.

Mr Sharif Davids, DEDAT, said PnP had worked with various business forums which were responsible for enquiring with members of the communities on whether entrepreneurs were interested in the market stores. PnP would then arrange meetings and visit the sites for assessment. If a site was found to be suitable and its ownership status was in order, the process would then continue.

The Chairperson opened for the next round of questions.

Ms N Makamba-Botya (EFF) asked if the Department had done thorough research on the initiative prior to getting the partnership with PnP. She inquired if PnP was not creating a monopoly in terms of market shares, or the black economy would receive shares in the said market stores.

She asked on the reasons the government was not enriching the township market by supporting spaza shops as opposed to enriching a big retail market like PnP. She added that it could not be that spaza shops had to compete with PnP. She highlighted that the initiative was going to create employment but only a few individuals were going to benefit heavily from the initiative and asked on what would become of small business owners like the ‘mamas at the corners’ selling vegetables She added tha the initiative seemed to be designed to eradicate competition.

Ms Nkondlo asked the percentage contribution of funds by the Department to the eight stores that had been established, and to the specific aspects of the stores these contributions were channelled. She inquired on the number of new jobs created as opposed to ‘new jobs’ that were actually transfers from other PnPs where there was surplus staff, as was found to be the case with some of the ‘new jobs’ in Nozinga PnP market store.

She asked on the recommendations the Department could make to ensure that the market stores and PnP benefit more fairly from the initiatives.

Mr Wolmarans said that the Department did consider the impact the market stores would have on the local township economies and that was factored into the design of the model. The Department ensured that it did not open a PnP store that would result in the closure of other operating businesses within the community, but the model had scope for local supply chains to be brought into the particular process around PnP.

The Department provided grant funding to each of the stores to the value of R500 000 and had contributed about R5 million to the project over the last three to four years. The funding was used for upgrading infrastructure or the purchase of equipment.

With regards to new jobs versus transfers, he asked that the question be postponed so that the Department could refer it to PnP to answer.

In terms of recommendations for improving the project, he highlighted that there needed to be better methods for acquiring infrastructure and that the Department was also looking into acquiring low-cost funding.

He mentioned that there was a review discussion in terms of the market store concept and the review was about making the model more efficient and there were on-going discussions with PnP on the matter. The Department was looking at extending the model to smaller business, as the minister had alluded to in his opening remarks.
 
The Chairperson asked if the model was locked only to PnP or whether the Department was able to extend it to other retailers as well.

Mr Wolmarans responded that the Department had an agreement with PnP for the time being but was going to extend calls for proposals soon to open the opportunity to the market again. The Department was also looking into opening the model to other sectors.

Mr Davids added that the partnership with PnP came after the Department made a call for information with retail giants such as Woolworths, Shoprite, Checkers and Spar, in trying to find out their interest and appetites for building their stores in the township. He added that the call would be extended as indicated.

Ms Nkondlo inquired on how the Department arrived at the PnP model from all the others that were available. She added that there were other models available such as the U-Save model, the Boxer model and various others that were flooding the market.

She asked on the method used by the Department to engage township entrepreneurs to get feedback from them instead of just engaging with the big retailers.

She mentioned that the PnP model had a 30% reservation for products that could be realised through local supply chains in any of the eight stores and asked if the 30% flexibility had been utilised in terms of ensuring that some of the products in the PnP market stores were sourced through local supply chains.

Mr Van der Westhuizen said he had assumed that the model worked on a franchise basis and that the stores were wholly owned by the entrepreneurs. He asked the Department to confirm whether this was indeed the case and if any studies had been done on whether the PnP market stores allowed for more money to be spent in neighbourhoods and not in the CBDs.

He inquired if the initiatives lowered the general prices of goods because sometimes in spaza shops people had to pay exorbitant prices because they are likely closer to customers who do not have to pay taxi fees to reach them. He asked whether some of the spaza shops had to lower their prices to be able to compete with the market stores.

The Chairperson commented that it was interesting that Ms Nkondlo spoke about Boxer because she had recently discovered that the franchise was owned by PnP.

Mr Wolmarans answered that there had been a call to other retailers in terms of gauging their appetites for the market stores within township areas and PnP was the only retailer that put in an application and that was why it was chosen. In terms of the 30% flexibility issue, he said the Department had to engage with PnP to maximise the benefits around the issue of bringing in local suppliers and that was one area that PnP has agreed that it needs to strengthen.

He highlighted that the PnP market Stores were not exactly a franchise model, but they were owned by the local entrepreneurs. The stores were located directly in the communities and one of the attractions was that consumers did not have to travel to far away stores and in that sense the stores did help the local community. The intent of the Department has never been to displace the already operating local shops but to improving the local economies. The stores purchase products at the same price as the normal PnPs and sell at a similar, sometimes lower, price compared to normal PnP stores. The idea was to make products available to the community at affordable pricing.

The Chairperson opened for a round of more questions from the Committee.

With regards to the processes leading to the implementation of the initiative, Ms Makamba-Botya asked whether small businesses had engaged with a public participation kind of setting prior to building the stores and what the response was if such occurred.

The Chairperson asked if the City looked into including spaces for the building of such stores in its developmental framework or had that issue been left over to the private sector.

Mr Wolmarans said that there had been extensive discussions with local organisations and businesses on building of PnP market stores in the townships. The engagements were particularly based on finding entrepreneurs who were keen to make use of the opportunity and the initiative that had been made available. There also had been engagements with the neighbourhood watchers and funding was provided for bicycles and other resources.

With regards to re-zoning, the Department was engaging with the City of Cape Town to look into what could be done to relax some of the existing regulations in terms of the Spatial Distribution Framework.

Ms Nkondlo commented that if there was no dedicated township revitalisation strategy, there was going to be an increase of isolated projects which do not enable the township economic environment. A policy needed to be set in place for dealing with some of the challenges related to township economic development. The Department needed to develop a dedicated and structured, formal, relationship with the LEDs and work toward improving township infrastructure so that when big investors like PnP come in to invest, they find that the township is already enabled as an economic environment.

The Chairperson gave the Department an opportunity to render closing remarks.

Mr Wolmerans thanked the Committee for the engagement and said that there were some challenges that the Department had and was trying to deal with. They were also looking forward to further engagements to be held at the oversight visit.

The meeting was adjourned.