Local Value Loops are Changing the Growth Potential of South Africa’s Township Economy
The township economy is the epitome of a success story despite the odds, and new ways of building revenue and loyalty have the potential to take it even further.
South Africa’s township economy is a dense, interdependent web of micro-enterprises, informal traders and township-focused wholesalers that combine to form tightly knit local value chains. Recent 2025 estimates value this economy at around R900 billion in annual spending, which is largely driven by everyday consumption in informal retail, food, transport and local services. Township entrepreneurs like spaza shops, street traders, home-based services and small transport providers are the living, thriving rhythm of the sector.
And yet, the environment remains constrained by cash dependency, competitive pressure from national retailers, and limited access to formal loyalty or reward structures, which has the potential to transform engagement and growth. The 2025 Township CX Report found that loyalty within this sector is driven by survival economics – shoppers (39%) will switch brands if prices increase and households actively shop across different shops to optimise their spend value. Rewards have to translate into immediate and tangible benefits such as discounts, cashbacks, bonus units, or free delivery. These are expensive investments and, for many informal suppliers, margins are thin which makes investing in customer-retention tools out of reach.
That said, there is growing interest in mechanisms that allow township money to stay in township markets. One of the most notable is the emergence of community-centred value loops that strengthen local suppliers and encourage traders to support businesses within their immediate neighbourhoods. These value loops – closed circles of economic activity which reinforce the local economy instead of diverting money to external players – mirror the longstanding relationships that define the township supply chain.
Traders routinely buy from suppliers who understand their cash flow rhythms, extend trust-based facilities when needed, and adjust offers to match local demand. These dynamics sit at the centre of township commerce and are one of the reasons why it remains resilient even when national retailers enter the space.
Medium-sized informal suppliers form an essential part of this ecosystem because they are deeply embedded in their communities and often operate with far slimmer margins than larger chains across all industries of trade. Their ability to personalise offers has the potential to be a competitive advantage, but their capacity to invest in loyalty infrastructure is limited. Formal rewards systems can be prohibitively expensive to design, administer and sustain, and yet these are the very systems that could anchor more predictable revenue and expand customer retention.
There are some interesting new reward models that are entering this space and closing the gap. They’re creating shared infrastructure that township suppliers can participate in without carrying the financial burden. Case in point is Shop2Shop’s rewards programme that creates shared infrastructure where informal entrepreneurs, suppliers and payment partners can participate collectively.
Instead of large, capital-heavy loyalty systems, the programme distributes value through a collective rewards pot funded by all the partners in the ecosystem because the sum of the parts are greater in this economy through collective contribution. The system has proven so effective, that at one time, the cumulative value available for distribution reached R5 million. This example shows the scale of what can be redirected back into small enterprises when partners work together and build systems that benefit a collective mutually.
These reward mechanisms reinforce the economic value of township trading. Traders, entrepreneurs and retailers frequently rely on the same suppliers for years, building relationships shaped by trust, proximity and flexibility and so rewarding these existing patterns of behaviour strengthens what is already working instead of attempting to re-engineer the market. When rewards are earned through purchases at local suppliers, the traders are encouraged to consolidate spend with businesses that support them. This in turn stabilises revenue for township suppliers who face increasing competition from well-resourced national brands.
Local value loops strengthen the flow of money within community boundaries and shared reward structures give medium-sized suppliers the means to compete in a market that’s led by national chains and brands. Digital transaction histories create new pathways to financial inclusion and traders gain safer, more reliable channels for sourcing stock. As these mechanisms mature, they offer the potential to really change the nature of economic participation and create environments where township entrepreneurs can grow without abandoning the community networks that have supported them.
