{"id":259849,"date":"2018-07-20T13:19:52","date_gmt":"2018-07-20T11:19:52","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=259849"},"modified":"2018-07-21T09:11:33","modified_gmt":"2018-07-21T07:11:33","slug":"is-south-africas-township-economy-worth-r100-billion","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/259849\/is-south-africas-township-economy-worth-r100-billion\/","title":{"rendered":"Is South Africa’s township economy worth R100 billion?"},"content":{"rendered":"

\u201cSouth Africa\u2019s townships contribute up to R100 billion to the overall economy,\u201d the chief executive of business advisory service\u00a0EntBanc<\/a>\u00a0wrote<\/a>\u00a0in a\u00a0LinkedIn<\/a>\u00a0post in May.<\/p>\n

Vuyo Tofile was promoting the Township Investment Summit, held at the Soweto Theatre in June 2018.<\/p>\n

He said the figure came from the World Bank and told Africa Check that he specifically meant the townships\u2019 contribution to South Africa\u2019s gross domestic product.<\/p>\n

Tofile said his source was \u201ca snippet\u201d from the\u00a0Gauteng Department of Economic Development<\/a>. (Note: We asked the department for comment, which had not been received at the time of publication<\/i>.)<\/p>\n

No mention of R100 billion in World Bank study<\/strong><\/p>\n

A Google search brought up a Gauteng Department of Economic Development strategy draft called\u00a0Revitalisation of the Township Economy<\/a>. It reads: \u201cAccording to the World Bank Study on South African townships, their combined economy is estimated at R100 billion.\u201d<\/p>\n

But the World Bank report,\u00a0Economics of South African Townships<\/a>, does not mention a figure of R100 billion anywhere.<\/p>\n

The authors of the report, which was published in 2014, researched the economic conditions and types of businesses in Diepsloot, a large township in the north of Johannesburg. (Note: In South Africa, \u201ctownship\u201d\u00a0<\/i>usually refers<\/i><\/a>\u00a0to underdeveloped residential areas reserved for African, coloured and Indian people during apartheid.)<\/i><\/p>\n

The report places the equivalent of gross domestic product for Diepsloot at R671 million, using 2012 figures.<\/p>\n

How is gross domestic product measured?<\/strong><\/p>\n

A country\u2019s\u00a0gross domestic product<\/a>\u00a0(GDP) is a measure of the size of its economy. It is the value of all goods and services produced in a country in a period of time.<\/p>\n

Any economic activity, such as building a house or paying for a haircut, increases GDP. What counts is economic activity that is recorded: unpaid work or illegal trade, for example, are not included in GDP because their value is unknown. Washing your car does not add to GDP, but paying a carwash to do the job does.<\/p>\n

Statistics South Africa<\/a>\u00a0estimated the country\u2019s GDP at the end of 2017 to be\u00a0R3.1 trillion<\/a>\u00a0\u2013 at constant 2010 prices; the GDP figure at current prices, distorted by inflation, would not accurately represent growth \u2013 so R100 billion would be just over 3% of that total.<\/p>\n

GDP isn\u2019t that straightforward\u2026<\/b><\/p>\n

There are\u00a0many problems<\/a>\u00a0with the concept of GDP, and how it is measured. For example, measuring the value of\u00a0all<\/i>\u00a0goods and services produced is difficult.<\/p>\n

GDP is also an\u00a0imperfect measure<\/a>. It doesn\u2019t include the\u00a0social costs of production<\/a>. As GDP focuses on production, one of the things it doesn\u2019t measure is the damage producing goods and services does to the natural environment.<\/p>\n

It also does not adequately account for changes in the economy. GDP is adjusted for inflation, but the different price of smartphones 10 years ago and smartphones today is not only because prices have gone up, but also because today\u2019s phones are much improved and more powerful.<\/p>\n

All this means that GDP is not a particularly precise measurement and in fact GDP numbers are regularly revised. For example, the reported\u00a02.2% decrease in South Africa\u2019s GDP<\/a>\u00a0in the first three months of 2018\u00a0might\u00a0<\/a>still be changed.<\/p><\/blockquote>\n

Rob Davies, one of the authors of the World Bank report, told Africa Check that no extrapolation for the economy as a whole was made on the basis of the Diepsloot study. In other words, we can\u2019t say that what\u2019s true in Diepsloot is true in all other townships. Little of what is spent in townships is generated there.<\/p>\n

To calculate a figure for all South African townships from the one case study,\u00a0you \u201cwould be assuming that Diepsloot is the average (mean) township\u201d, he explained.<\/p>\n

\u201cSouth Africa\u2019s GDP is roughly R3 trillion. So the claim that townships generate R100 billion is, on the face of it, very modest. But I think our study showed that very little of what is spent in Diepsloot is generated there.\u201d<\/p>\n

In GDP terms, R100 billion is a small amount \u2013 only about 3% of South Africa\u2019s total GDP, as we have seen.<\/p>\n

\u201cSo I would not react strongly against such a claim \u2013 and I would take the rounded number of R100 billion \u2013 as a signal that this is intended as a rough ballpark figure,\u201d Davies said.<\/p>\n

Informal economies are difficult to measure<\/strong><\/p>\n

Alex Montgomery, a data analyst at\u00a0DataFirst<\/a>, told Africa Check it might be useful to find out how much townships contribute to South Africa\u2019s economy.<\/p>\n

But he said there would be a risk of errors because of the difference in measuring formal and informal economic activities.<\/p>\n

\u201cMeasuring informal sector output is notoriously difficult,\u201d he said.<\/p>\n

Conclusion: R100 billion is not a World Bank figure, and no data confirms that townships contribute that amount to SA\u2019s economy<\/strong><\/p>\n

In promoting the Township Investment Summit in Soweto, EntBanc chief executive Vuyo Tofile said South African townships contribute up to R100 billion to the overall economy.<\/p>\n

Tofile\u2019s source, a Gauteng Department of Economic Development document, said the figure of R100 billion came from the World Bank. The World Bank study of South African townships focused on one, Diepsloot. The study did not mention R100 billion anywhere.<\/p>\n

One of the study\u2019s authors said he wouldn\u2019t strongly reject R100 billion as a rough ballpark figure.<\/p>\n

But the informal economies found in townships are difficult to measure. So there would be a risk of errors in any attempt to set a value for the townships\u2019 contribution to the total economy.<\/p>\n

We therefore rate the claim as unproven.<\/p>\n

Edited by Anim van Wyk. You can read the original article on Africa Check<\/a><\/strong>.<\/i><\/p>\n

\n

Read:\u00a0FNB targets the \u2018unseen economy\u2019 with new products it plans to launch into that market<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cSouth Africa\u2019s townships contribute up to R100 billion to the overall economy,\u201d the chief executive of business advisory service\u00a0EntBanc\u00a0wrote\u00a0in a\u00a0LinkedIn\u00a0post in May.<\/p>\n","protected":false},"author":40,"featured_media":133876,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[9731,26],"class_list":["post-259849","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-africa-check","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/259849","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/40"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=259849"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/259849\/revisions"}],"predecessor-version":[{"id":259949,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/259849\/revisions\/259949"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/133876"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=259849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=259849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=259849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}