Why businesses in townships and rural areas struggle to compete

Consumers in township and rural areas are being forced to travel farther to find the products they need because small businesses there face barriers that make it difficult for them to grow and compete.

This is according to recent research by the Competition Commission, which identified licensing requirements, compliance rules, limited market access, and competition as some of the challenges holding back businesses in township and rural economies.

The commission found that these challenges can also affect consumers by increasing product costs and limiting the range and quality of goods available in local communities.

The study found that township and rural economies face a wide range of market and regulatory barriers that prevent businesses from entering markets, growing, and expanding.

“These challenges also limit the ability of businesses in these areas to compete effectively. Most of these businesses are independent, informal, micro- or small enterprises owned or controlled by historically disadvantaged people,” the study highlighted.

An extract from the competition commission study. (supplied ) The commission noted that licensing, zoning, and compliance standards can protect consumers and the public interest, particularly in areas such as health and safety, while supporting orderly spatial planning.

However, it warned that when the administrative burden is too high, information is difficult to access, or rules are enforced unevenly or disproportionately, regulation can become a barrier to businesses entering markets and growing.

The commission said these barriers can also weaken competition, as potential new businesses and smaller competitors may grow more slowly or fail to expand, particularly in high-footfall areas and formal markets.

This reduces the competitive pressure that smaller businesses could otherwise place on larger, established companies.

The study found that consumers consider more than the price displayed on a shelf when deciding where to shop. They also weigh the money, time, and effort needed to get to a store.

This means the real cost of a product can include both its price and the cost of travelling to buy it.

Where transport costs are high, consumers may not be able to take advantage of lower prices at shops further away. This can reduce competition between businesses in different areas and contribute to price differences across locations.

The commission also highlighted poor service delivery as another challenge facing businesses in township and rural areas.

Frequent electricity and water disruptions, poorly maintained roads, and weak municipal services can make it harder for businesses to operate and reach markets.

Smaller businesses are particularly vulnerable because they often lack the financial resources and backup systems needed to absorb these disruptions.

The commission said addressing these challenges would require engagement with municipalities, provincial governments, infrastructure agencies, and departments responsible for local economic development.

In its conclusion, the commission said there is no single solution to these challenges. Instead, it recommended a combination of competition advocacy, better coordination between interested parties, targeted further research, and, where necessary, screening of specific markets or practices.