7 August 2006
By Neil Fraser
AFTER looking at the history of retailing in both the CBD and Soweto last week, I ended up with the dichotomy against which the current retail rollout in Soweto must be viewed:
- A CBD retail core that was aimed at a white population for nearly all of its first hundred years.
- A CBD retail core that was weakened by decentralisation and unable to compete with the massive mall explosion to its north.
- A CBD retail core that changed dramatically in order to survive by catering to a different clientele than it had historically.
- A Soweto that was not only not provided with retail but which had laws imposed restricting type and amount of retail resulting in only a quarter of spending by Soweto residents in Soweto itself.
- "Despite being one of the largest conurbations in South Africa, Soweto contributes a negligible proportion of Johannesburg's GDP and has little meaningful economic activity. Historically, Soweto has been isolated economically from broader Johannesburg and has largely played the role of dormitory reservoir for the rest of the region. What little economic activity that does exist in Soweto is largely unplanned and fragmented, resulting in few areas of critical mass or economic concentration. Linkages both within Soweto and to broader opportunities outside the area have been weak and have served to further isolate the area economically. This relative isolation, fragmentation and lack of planning has created confusion among potential investors and developers." (Soweto Investment Framework)
Soweto Retail Strategy
In 2004 the City's Economic Development Unit (EDU) developed a
Soweto Retail Strategy in support of the fact that "the City of Johannesburg recognises that Soweto is currently underprovided with retail facilities and has, as part of its plan for the development of Soweto identified the need to support expansion of the retail sector".
The strategy, prepared by the Palmer Development Group with the retail supply analysis by Viruly Consulting, makes interesting reading and provided some critical information for the planning of future development:
- Total demand for retail goods R4.2-billion per annum.
- R1.05-billion is spent in Soweto per annum.
- The balance is spent predominantly in the CBD and at Southgate, which was then the primary regional shopping centre used by Sowetans.
- The R1.05-billion spent within Soweto was spent in shopping centres (62 percent); street front shops (26 percent) and through the informal sector (12 percent).
- Demand is predominantly from middle-income groups with household incomes in the range of R1 000 to R5 000 per month.
- The dominant category of goods purchased is groceries (50 percent) followed by clothing, footwear and textiles (21 percent).
- The amount of money to be spent by Sowetans would not increase substantially over the period 2004 to 2009.
- That it would be reasonable to increase retail spending within Soweto from R1,05-billion to R2.10-billion per annum.
- A shift greater than this "is not considered to be reasonable".
The report therefore concluded that in order to provide for an increase in spending of R1.05-billion, an additional amount of 70 000mē of retail space was required.
The retail development strategy that was developed from the research behind the Report concluded:
- That the City of Johannesburg supports the development of an additional 70 000mē of retail space in Soweto over the five years 2004 to 2009.
- Of the 70 000, some 30 000m² were then under construction - the Baralink Mall and Protea Gardens.
- Of the further 40 000mē, the City wishes to see 5 000mē taking place in the form of street front shop development aimed at providing convenience shopping and niche shopping associated with tourism and entertainment centers.
- The remaining 35 000m² should be associated with shopping centres coming on line between 2006 and 2009.
- A single location for this scale of retail is not supported.
Current Situation
However, the current situation regarding retail in Soweto is as follows:
Existing
| Street front shops (2004 figure) |
28 000 |
| Dobsonville Centre |
17 500 |
| Meadow Point |
4 600 |
| Pimville Square |
3 600 |
| Dobson Point |
3 100 |
| Protea Point |
2 800 |
| Black Chain |
5 800 |
| Mapomya Centre |
2 700 |
| Bara Mall |
15 000 |
| Kliptown (new, area of old retail not known) |
2 000 |
| |
68 100 |
Under construction, being upgraded or planned
| Protea Gardens |
25 000 |
| Asanbhe Neighbourhood Centre |
10 000 |
| Orlando eKhaya |
30 000 |
| Maponya Mall |
65 000 |
| Jabulani Mall |
43 500 |
| Diepkloof Plaza |
15 000 |
| |
188 500 |
| |
256 600 |
Whilst the objective arrived at in the report was to increase retail spending within Soweto from R1.05-billion to R2.10-billion per annum by providing an extra
70 000m² we now are providing nearly three times that much new space (188 500m²)!
Does that mean that instead of half of Soweto's retail spend being in Soweto (R2.1-billion), we can anticipate its full spend being Soweto-related?
I doubt it, even if that's what the sums say. When I started off this article last week, I wanted to explore what effect the current spate of retail development will have on the CBD, but the above figures raise another issue - is Soweto able to support the amount of retail that is being developed?
I am dealing with the latter issue first.
In an article in the May issue of Shopping South Africa, Dr Dirk Prinsloo, of Urban Studies, when asked "what kind of questions should investors be asking when considering township developments?" stressed the importance of two factors: sufficient people and disposable income.
On the issue of sufficient people, on face value Soweto with its population of approximately one million (and little existing retail) should qualify. However, the Soweto Economic Activity Area Study estimated that only 44 percent of the total population of Soweto can be considered as economically active. What this means is that there is a high dependency rate. The unemployment figures for 2001 reflected unemployment at 53 percent, which increases the dependency factor.
Prinsloo also points out that "population growth is a key driver of retail development", yet the World Bank predicts that in 2015 the total South African population will be 44,3 million, indicating negative growth. This appears to be borne out by a recent study by Cubes (the Centre for Urban and Built Environment Studies) at the University of the Witwatersrand on the effects of HIV/Aids on municipal management and the delivery of housing and services. The Business Day article covering the study's findings states that "probably the most striking of the projections is that the populations of Gauteng and Johannesburg are expected to stop growing and, by 2015, to be declining."
This seems to buck all other current projections of massive increases which, currently anyway, appear to be borne out by the huge physical growth we are experiencing.
Secondly, in regard to disposable income: as previously stated, the total demand for retail goods is R4.2-billion per annum of which only R1.05-billion is spent in Soweto.
The Soweto Economic Activity Analysis of July 2003 states: "The general spending profile in Soweto is reflective of a poor community, as by far the largest portion of disposable income is spent on necessities such as consumables, and a much smaller portion is available for non-necessities such as household appliances. The current leakage profile shows that Sowetans buy most of their bulk groceries and luxury commodities (including household appliances, furniture etc) outside Soweto. The only category of commodity largely purchased inside Soweto is daily consumables. The largest points of leakage seem to be the Johannesburg CBD and Southgate. The reasons for these particular locations include the wider variety offered, general lower prices (than in Soweto) and a 'nicer shopping environment'. As such, it would seem as if a particular shopping psyche has developed and entrenched itself, with people preferring to shop outside of Soweto for the experience (i.e. they make it an outing) and secondly because they may perceive the local commodities to be of a lower quality, too expensive or the choice being too limited."
In a survey that Urban Inc recently concluded, developers and retailers interviewed, without exception, agreed that Soweto will be in retail-oversupply, which is clearly borne out by the figures I have quoted.
In addition, local shoppers interviewed felt strongly that shopping was about the people: "people are buying people and not brands"; "shopping is about personal relationships"; and "you can bargain with people". So is this huge spate of 'mall building' what Sowetan residents really want? From our research it would appear that many Soweto shoppers would rather have personalised convenience shopping.
What does this mean? Firstly, that it is likely that some of the planned mall retail will possibly fail. Secondly, that the new malls will have a negative impact on existing and traditional small retail.
And the CBD? There can be no doubt that there will be a negative impact on the CBD's retail. Whether it will be R1.05-billion per annum lost to the city, twice or three times that (which I doubt) nobody knows. But what is of concern is adopting policies and then disregarding them and allowing a free-for-all.
Aren't we repeating exactly what took place in relation to the city's retail decline?
But last time around the city retail was able to re-invent itself because there was another market to be served. I fear that the end result of the current phase may not be good for either the CBD or Soweto!
Regards, Neil
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