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The Gauteng Department of Economic Development notes with great concern the allegations made by Build One South Africa (BOSA) Member of the Provincial Legislature, Ayanda Allie, claiming that the department and its implementing partner, Family Tree Holdings (FTH), are misleading the public about the R3 million set aside for distribution centres. 

These allegations are unfounded and serve to undermine the department’s efforts to support and revitalise the township economy in Gauteng. The appointment of Family Tree Holdings as an implementing agent for the programme followed all relevant government guidelines and processes and was conducted transparently. 

The department would also like to clarify that three mini-distribution centres (DCs) have been established in Gauteng to date. Though smaller in size, these DCs are strategically designed to assist walk-ins and provide bulk supplies to spaza shop operators within their communities.

Currently, two of the three DCs (in Mamelodi and Kagiso) are operational, while the Kathorus DC was recently damaged in an explosion. Assessments are ongoing to determine the extent of the damage. A police case has been opened by the operator, and an investigation is underway to establish the cause.

The size of DCs in the townships depends on the available space. In many cases, there is limited space for large warehousing facilities. However, even smaller DCs can fulfil bulk supply functions when paired effectively with technology, transport, and logistics. South Africa has seen a rise in virtual warehousing, which can perform similar functions. The Department has also partnered with big technology platforms and has to date onboarded more than 200 township products which open bigger markets for them. 

The DCs are positioned to source and distribute certified local products, promoting local manufacturing. However, there is a shortage of market-ready, certified products in the townships, as many do not meet basic food safety standards. In response, the department has identified and is incubating 44 (1 participants has since dropped off) local manufacturers to ensure their products are tested and certified. The incubated products are scheduled to completed the process by March 2025. This process is critical given recent concerns over food contamination in local communities. Current local products offered at the centres include moghurt, mageu, spices and mealie meal, with dedicated shelf space for these items. The quantity is still low due to the challenges outlined above. The incubation of manufacturers is meant to ensure that more tested, safe and certified products are available for the local stores.

Since the launch of the DCs, 15 local spaza shops have consistently bought stock from the Thokoza mini-distribution centres. The strategy is to onboard additional local shops as ownership of these stores returns to local operators. At full operation, Thokoza mini-DC has about 18 employees under normal conditions, with staffing levels adjusted to meet seasonal demand.

The department is currently conducting an impact evaluation of the township retail programme, including the DCs and their effect on the local community. This evaluation, once completed, will highlight areas for improvement and determine whether the programme should continue.

The cost of establishing a DC varies depending on factors such as whether an existing structure is refurbished or a new one is built, and the size. Significant upgrades were required before reopening the Thokoza (Kathorus DC) as a superstore/mini-distribution centre.

Below is the cost breakdown for the Thokoza (Kathorus DC):

                •              Building upgrade: R1,013,285.00

                •              Furniture and fittings: R187,589.00

                •              Systems: R347,368.00

                •              Stock: R1,042,954.00

                •              Marketing: R212,345.00

                •              Overheads: R181,389.00

Total: R2,984,930.00

The department will act accordingly should any evidence of wastage or misuse of funds emerge, not only in its retail programmes but within the Township Economic Partnership Fund (TEPF) as a whole.

Issued by the Gauteng Department of Economic Development.