Mdantsane City and the rise of township malls

JUNE 13, 2016

Township malls have changed the retail landscape in South Africa

The rise of township-based malls has changed the retail landscape in South Africa.

Previously a forgotten market – and especially in one of South Africa’s poorest provinces, the Eastern Cape – townships were formerly dominated by informal traders and spaza shops. For a larger variety and bigger purchases, residents were forced to spend their hard-earned savings on public transport to retail centres in town or in neighbouring centres.

“Since retailers began entering the township space in the late 1990s, and more so in recent years, township residents have benefited enormously,” said Mdantsane City general manager Dean Deary, whose centre has become a mainstay in one of South Africa’s largest townships, Mdantsane, outside East London. Mdantsane City recently celebrated its eighth anniversary.

Aside from assisting in job creation, township-based shopping centres have also alleviated residents’ need to commute long distances to enjoy a shopping experience that many South Africans take for granted, Deary said.

“Township shopping centres have also become a bricks-and-mortar manifestation of the increased spending power associated with a rising black middle class.”  

The establishment of Mdantsane City in what was once the country’s second largest township after Soweto is one such success story. Built on the vision of Eastern Cape-born business magnate Sisa Ngebulana, the mall is one of a growing number of township centres now dotted throughout the province.

As head of the Billion Group, it was Ngebulana’s personal quest to give back to rural and peri-urban communities similar to those he grew up in and make life more convenient for residents.

Having celebrated its eight birthday in April, Mdantsane City is a township retail success story which now sprawls across a 9.8-hectare site close to the national road connecting East London and King William’s Town. It houses over a hundred stores and draws foot traffic of more than 835 000 each month, making it the third largest mall in the province.

“More than a retail offering, centres such as Mdantsane City are increasingly becoming community-centric,” said Deary. “At Mdantsane City, emphasis has been placed on creating a community hub, and bringing strategic services such as Buffalo City municipality and the SA Social Security Agency (SASSA) services to residents. A National Renal Care centre and SAPS satellite office are also located at the mall to service community needs.”

While a large percentage of Mdantsane’s more than 200 000 residents are unemployed and dependent on social grants, the success of a mall such as Mdantsane City relies on achieving the right tenant mix to meet shoppers’ needs. At the same time, brands such Woolworths, Foschini and Markhams also trade well and are testament to the increased retail clout of residents in these areas.

“Although spend per capita is lower than that for suburban counterparts, the sheer number of shoppers brings performance on par in terms of store turnover. With an average trading density of around R32 724 per square metre per year, a township mall like Mdantsane City has become an attractive proposition for investors.

“The reality is that the majority of Mdantsane City’s shoppers occupy the LSM (living standard measure) 4-7 lower-to-middle income bracket. But those on the lower end of the scale can take advantage of the bulk buying power of anchor tenants like Pick n Pay and Shoprite, as opposed to the unavoidably inflated prices and limited offering of the corner shop.”

A rising black middle class, on the other hand, now also have access to high-end brands that previously did not enter the township market to meet their aspirational lifestyle values, according to Deary.

“As key contributors to local economic development, township malls have a major role to play in creating jobs, stimulating spend and acting as a catalyst for investment growth. While obvious socioeconomic challenges such as a lack of infrastructure, poverty and unemployment are still very much everyday realities, these decentralised shopping centres are nevertheless making their mark in previously underdeveloped areas.”

 Image: MDANTSANE CITY: Township malls like Mdantsane City outside East London are changing the retail landscape in South Africa. (Image: Supplied)