Market Update: Strengthening the Township Economy – Business – Full Analysis

ACCORDING TO A baseline study on informal settlements conducted by the Namibia Statistics Agency, chief executive Alex Shimuafeni reports that more than 200 000 Namibians currently reside in the country’s 419 informal settlements.

In addition to this urban residential informality, several hundred thousand individuals live in townships or other high-density residential locations across Namibia’s 14 administrative regions.

Shimuafeni recently presented these findings during a workshop held at Swakopmund, attended by regional governors, local authority mayors and councillors, traditional leaders and other stakeholders.

He noted that the study assessed 563 settlements across the country’s 57 local authorities.

It is widely recognised that, beyond the officially classified informal settlements, substantial numbers of lower-income households reside in various townships and residential locations throughout Namibia’s 14 administrative regions.

A significant proportion of household income is typically spent within these local communities, which helps explain the vibrant economic activity commonly observed in townships and informal settlements.

A diverse range of micro and small enterprises – including mini-markets and tuck shops, fresh produce vendors, butcheries, garment makers and tailors, vintage clothing traders, cobblers, shebeens and entertainment venues, as well as hairdressing salons and barber shops – operate within townships and informal settlements, typically from early morning to late into the night.

Collectively, these enterprises constitute an important segment of the local informal economy, providing employment opportunities and contributing to income generation within these economies.

Despite this economic dynamism, a critical question persists: to what extent does such activity meaningfully contribute to Namibia’s broader economy?

Empirical evidence reflects that the informal economy is a significant contributor to Namibia’s gross domestic product.
In my assessment, although it has potential to facilitate the migration of informal enterprises into formal businesses, the contribution remains

limited due to unaddressed impediments.

Here are some of the challenges that must be addressed moving forward.

Entrepreneurs operating within informal settlements and high-density townships face a challenging business environment characterised by extensive compliance requirements, constrained workspace and restricted access to essential services.

Moreover, support mechanisms for business growth are scarce, resulting in activity mostly confined to trading and basic services.

Consequently, minimal manufacturing and value addition occur in these residential areas, despite the potential presented by their high population densities.

There is another rapidly growing challenge that needs to be tackled by the authorities before it gets out of hand in the evolving and informal settlement economies: the rapid proliferation of gambling establishments and cash loan outlets.

This was so abundantly clear when we collaborated with budding entrepreneurs in the townships and informal settlements of Henties Bay,

Swakopmund, Walvis Bay and Arandis this week.

Their expansion reflects a persistent misconception that an improbable jackpot or easy credit can provide a pathway out of poverty.

This false hope on the part of lower income households is often compounded by limited financial literacy, inadequate understanding of borrowing and the long-term burden of compound interest, all of which undermine household financial stability.

Now overdue is the strengthening of financial literacy programmes, regulating high-risk lending practices, expanding access to affordable productive credit, promoting entertainment alternatives to gambling and alcohol consumption, nurturing a savings culture, strengthening consumer protection and expanded support for local enterprise development.

– Danny Meyer is reachable at danny@smecompete.com

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