Risky business and refugee capitalism – the Somali township economy in South Africa

This article is a brief overview of the findings of the article “Risky business and geographies of refugee capitalism in the Somali migrant economy of Gauteng, South Africa” in the Journal of Ethnic and Migration Studies. This piece builds on two previous pieces written with Richard Grant, which appeared in Urban Geography and Urban Forum; a summary of them can be found here.

The article is available for download here: 

“Risky business and refugee capitalism” are the terms used to describe the primary aspects of Somali migrant life in South Africa. “Risky business,” because the majority of young Somali male migrants who are able to find employment in South Africa work in retail shops in South Africa’s townships where livelihoods are earned at high risk of robbery, injury, or even death during daily violent crime or flare-ups of anti-immigrant violence (such as those in 2008 and 2015, dates which frame the 2010-2012 study period). “Refugee capitalism,” because many of these retail stores are owned by groups of investors who do not work on the premises, contrary to previous discussions of immigrant “bootstrap entrepreneurship” and immigrant self-employment. In fact, one of the main findings of the research that went into this article is that the Somali migrant economy involves a lot of investment from Somalis living in North America or Europe who use family networks and Somali money transfer operators (commonly called hawala/hawilaad [plural]) to invest in South African businesses, where, by all accounts, there is money to be made.

What is interesting is the way in which the local economic geography of Somali business—by which I mean the way that business dynamics map specifically onto the urban geography of the Gauteng City-Region (Johannesburg and Pretoria and their surrounds)—are connected with international circulations of people and money. This is what the article explores, showing how the Somali ethnic enclave in Mayfair, Johannesburg links the international circuits of the Somali diaspora economy with the specific South African township retail niche where most Somalis in South Africa find profitable investment opportunities.

Now a word about background for those readers who are perhaps less familiar with the South African context. For most of the 20th Century, South Africa was ruled under the apartheid system, which enforced a strict racial segregation by creating areas of the city in which certain racial groups could live. Even after the apartheid system was replaced by democratic governance in 1994 (with Nelson Mandela becoming the first democratically elected president of the Republic of South Africa), racial groups remained heavily divided both socially and geographically. The term “township” refers to settlements on the outskirts of South Africa’s cities to which Blacks were relegated during apartheid. Particularly in Gauteng Province, most townships remain predominantly Black, whereas Whites, Indians, and others are more likely to live in more central areas (actually, the inner city of Johannesburg was largely abandoned in the 1990s as Whites moved out to the northern suburbs, but that is a topic for another time). Townships are also commonly called “locations” (a reference to enforced segregation under apartheid), and I use the terms interchangeably.

As South Africa’s economy grew from the 1990s onwards, Black South Africans in the townships gained purchasing power, but the dynamics of the job and real estate markets left many still unable to find formal employment or move closer to the cities. Thus, huge segments of South Africa’s population live in the townships surrounding the cities, and since South Africa implemented a pension system, many people scrape by with marginal employment or informal entrepreneurship. Nevertheless, people need basic goods. This provides the context for an exploration of Somali township businesses: “Historically, most townships were residential zones where Blacks were barred from conducting formal business. The collapse of apartheid opened opportunities for entrepreneurs to bridge spatial divisions by purchasing goods from urban (usually White or Indian) wholesalers and re-selling them in marginalized and sometimes dangerous areas where many business people were reluctant to take the risk” (p. 5).

When I say “Somali”…

It does not necessarily mean just Somalis, in this context—and certainly not just Somalis from Somalia. Individuals identifying as ethnic Somali and speaking Somali as a first language also come from Kenya, Ethiopia, and Djibouti (and Somaliland, which is functionally independent from Somalia though not recognized as an independent country by the powers-that-be). And tied closely to the Somali community in South Africa and elsewhere are closely related groups such as Oromo and Gabbra, as well as Muslims from coastal Kenya and Tanzania.

“Two contexts of violence—war at home and xenophobia in South Africa—frame Somali identity and experience in South Africa, frequently described along the lines of ‘out of the fire, into the frying pan’ … After arriving in South Africa, many Somalis look for opportunities to move on to other countries. A number of men working in the townships send money to wives and children left behind in Kenyan refugee camps to await resettlement. Husbands then seek to re-join their families if the wives and children are selected for refugee relocation to Europe or North America” (p. 6). This observation pertains to a number of the informants for this study, who sent money to their families until their wives and kids were relocated overseas, and then embarked on the lengthy process of proving marriage and paternity in order to become a refugee in North America, where life is considered better than it is in South Africa.

The township retail economy

This article is certainly not the first to point out the danger that immigrants face in South Africa’s townships; the study cites several others that provide statistics on anti-foreigner violence, which “is most likely to occur in poor (but not the poorest) townships with a high population of young males (Polzer 2010)” (p. 7). A later section of the article observes that it is not just South African nationals who engage in anti-foreigner violence; foreigners themselves frequently fight each other, and the Somali economy is rife with rumors about Somalis paying South Africans to target other businesses. The study quotes one informant who states that Somalis shoot each other over business competition in South Africa’s townships.

In this context, the distribution of risk is rather striking. Employees bear the brunt of physical risk, willingly placing their lives on the line on a daily basis in order to provide for their families. Investors, as is customary in Somali culture, tend to spread risk by holding shares in multiple businesses. Often it is family and clan networks that provide workers with employment and create connections across the worker/investor distinction. One of the most interesting stories for me is the story of Q in the article, who worked for his uncle. He provided the following story, described on p. 8 of “Risky Business”:

“[Thieves] killed in my uncle’s shop in the locations … They killed two guys; they shot them… My uncle called me. I left my job here [in Mayfair] and went to my uncle’s shop…. My uncle gave me a gun. He said I must stay there. I was working—me and my uncle’s brother’s son were there—only the two of us…. Early in the morning they came to us—the same guys who killed those [other Somali workers]. They just tied us up. That day I survived. I could have died. I told [my coworker], ‘Give whatever money you have. Let them take it’. Because life is more important than money” (p. 8).

The motivation for continuing to undertake such risky work is the obligation of sending remittances to family members at home in the Horn of Africa. Remitting money is expected; it is “compulsory”; it is the main reason why many informants arrived in South Africa in the first place. The township shop economy offers the possibility of remitting the expected amount (usually about $150 per month), and sometimes workers can make enough in a month to save up money and eventually become a shareholder in a shop, or even purchase their own shop. Although the sample size was not sufficient to get a significant T-test result, the difference in income between shareholders and employees is telling: Shareholders reportedly earning from $650 to about $900 per month, with an average of $780. Employees’ incomes ranged from $150 to $300, with an average of around $260. Employees surveyed reported remitting about 54% of their incomes, whereas shareholders reported remitting about 40% on average. In the townships, Somali workers live inside the shop and usually eat from the stock which is purchased wholesale, so living expenses are minimal. ‘The small amount of start-up capital required and the high turnover make the locations a potential stepping-stone for entrepreneurs. ‘In town, actually, the sales are so small. In the locations it’s better’, reported one informant who in 2011 became a shareholder in a large shop in Pretoria West after working in other locations for over seven years. ‘That’s our foundation we started from’” (p. 9).

The Eighth Avenue ethnic enclave

Richard Grant and I had written about some of the dynamics of the Eighth Avenue Somali enclave in earlier articles, and the JEMS piece shows more fully how the geographies of Somali migration are linked through this space. The several blocks along Eighth Avenue that some informants called Johannesburg’s “little Mogadishu,” serve as the hub of Somali migrant social and economic infrastructure. Social infrastructure, in that it is the place to go if you want to find a job, and also the place to go if you want to hang out with other Somalis, eat Somali or Oromo food, chew qat, or generally relax and take a break from the dangers of township work. The economic system is grounded largely in the Somali money transfer system (hawilaad), through which investors send money to South Africa and migrants in South Africa send money to family members in the Horn or elsewhere.

Business in the Somali ethnic enclave is based largely on circulation, rather than on production. Most of the businesses involve food, money transfer, lodging, and technology (Internet cafés are popular). The second part of the JEMS article explores these dynamics more deeply and shows how they create forms of investment and urban upgrading in Mayfair. One of the main points in this section was to explore how “cosmopolitan” disembeddedness—a topic of conversation in the work of migration specialists—may produce forms of visible investment and become “grounded” in the infrastructure of a neighborhood or city. I don’t really buy distinctions such as “locals” versus “cosmopolitans,” and I show why by indicating how an individual’s practices can change over time from more locally-grounded interests to broader horizons such as international refugee resettlement. Only time will reveal the long-term dynamics of investment and circulation that will change Mayfair, probably in unpredictable ways.

Just the beginning

One problem with academic writing is that by the time it is published, it might be out of date. Things change rapidly. I have since shifted my work back northwards to the Horn of Africa, but I will continue to explore the intersection of mobility, finance, and political-economic geographies in my other work. I hope that “Risky business” will provide a useful jumping-off point for others who wish to engage with the ways in which Somali life in South Africa is changing, and how various scales and types of international linkages are created and navigated in the shifting South African setting.

What are your thoughts?