Despite being worth almost R1-trillion and creating significant employment opportunities, South Africa’s township informal economy largely remains underserved by traditional financial institutions.

With this in mind, Standard Bank released its inaugural ‘Township Informal Economy Report’ on October 14, providing insights into the sector and highlighting both the resilience of township entrepreneurs and the systemic barriers that continue to hold them back.

“This report . . . was commissioned to listen more closely, understand more deeply and act more meaningfully as we aim to serve our clients. At Standard Bank Business and Commercial Banking, we understand that our success lies in ensuring that we contribute positively in enabling an inclusive, entrepreneurial ecosystem,” said Standard Bank Group head of enterprise and supplier development at Business & Commercial Banking South Africa Naledzani Mosomane during the launch.

In a media release, Standard Bank noted that the findings reveal that nearly 80% of surveyed township businesses are unregistered.

According to Statistics South Africa (Stats SA), unregistered businesses are those that operate outside formal regulatory frameworks including value-added tax registration, labour regulations and tax compliance.

Standard Bank explained in a release that these businesses are often not incorporated to make them legal entities, a reality that excludes them from access to finance, formal markets and digital tools that could enable them to grow.

“Currently, we find that township entrepreneurs are often unable to reach their potential because they lack marketing support, they lack operational funding which foreign traders sometimes have, they lack the skills training and often word of mouth is what they rely on in order for them to understand what information is out there,” said market research company Foshizi research director Kani Rajuili during the launch.

Despite these constraints, Standard Bank noted in the release that the township informal economy is a critical component of South Africa’s labour market, accounting for nearly 19.5% of total employment in the last quarter of 2024, according to Stats SA.

Additionally, the report noted that recent estimates suggest that the township economy is valued at over R900-billion a year.

The survey, conducted across Gauteng, KwaZulu-Natal, Western Cape, Limpopo and North West, covered enterprises with yearly turnovers ranging from R100 000 to R50-million.

Standard Bank, in the media release, noted that it confirms the township economy’s scale, while also identifying critical constraints that limit growth and inclusion.

Other key findings from the report indicated that entrepreneurs often face up to 20 similar businesses per community, squeezing margins. Additionally, fewer than 9% have access to bank loans, with most relying on personal savings or family support.

The findings also reveal that while cash remains dominant, more than 56% prefer electronic fund transfers or bank transfers, indicating readiness for safer digital payments.

During a panel discussion at the launch, Standard Bank executive head of merchant solutions sales and service Muzzafar Nagvadari discussed the opportunities and challenges for digital payment solutions in township economies, highlighting customer preferences for cash.

He explained that while there was appetite, it was necessary to enable and find ways to create simple, easily accessible channels to allow for these businesses to leverage existing solutions.

Nagvadari highlighted issues such as infrastructure costs and a lack of access to credit as barriers to the adoption of digital payment platforms.

He thus advocated for greater market education in this regard, emphasising the championing of affordable digital solutions in the sector to help unlock more opportunities for the sector.

Further, the report also noted that 49% of businesses operate from homes or garages, with only 11% in commercial premises.

The report thus argued that township businesses play a vital role in local supply chains, with many contributing through sponsorships and youth initiatives.

Standard Bank said in the release that it commissioned this report to ensure its small and medium-sized enterprise offerings continue to respond directly to the realities of township entrepreneurs.

Insights will also inform the bank’s collaborations with partners in government, corporates and development agencies – strengthening collective efforts to unlock growth in the township economy.

Additionally, Standard Bank said in the release that the report underscores the need for affordable digital and merchant solutions, alongside step-by-step support to help township businesses formalise and expand.

“Township economies are not just about survival – they're about creativity, they're about community, they're about encouragement, they're about possibility, they are creating employment.

“It's not just about numbers, it's not just about traders. We have to think of them as mentors, as builders, as local anchors who simply need financial inclusion to drive policy so that they can be part of the greatest engineers that are actually going to drive growth and propel it forward,” said Rajuili.