Rio de Janeiro let its hillsides be filled in with lower-cost dwellings.  The result was a significant increase in the crime rate.  On the more positive side of the ledger, upward mobility increased too.  If you live in a decent favela, you can get to a downtown job with not too much difficulty, albeit with some travel risk.  Note however that some of those jobs include “theft.”

Cape Town has not filled in its hillsides, and you see empty, valuable land all over the place.  The townships have remained remarkably segregated, both racially and spatially.  The nicer parts of Cape Town also have remained relatively safe, both for whites and for upper class blacks.

One secondary consequence of this equilibrium is very high unemployment in the townships, staggeringly high in fact.  It is expensive to get from most of the townships to a job in the nicer part of town.  For South Africa as a whole, GPT Pro reports:

OECD reports that around 70% of discouraged jobseekers cite location as the main obstacle to looking for work, and that commuting can absorb up to 37% of post-tax income for the lowest quintile, or up to 80% once time costs are included. The World Bank estimate is even harsher for the poorest households: up to 85% of daily income once the opportunity cost of time is counted. In effect, many low-wage jobs are too costly to search for, reach, or keep.

And see this link.  Young male workers in particular find it hard to get the experience that would enable them to prove themselves reliable and then keep on climbing a skills ladder.  So they stay in the townships, maybe engage in some black or gray market labor, and collect some welfare payments.  They also might commit crimes against each other.

Which in turn makes the notion of filling in the hillside with low-cost housing all the less appealing.

It is difficult to solve the problems of South Africa.

Addendum: Note also that South African agriculture is capital-intensive, as you might expect from a wealthier country.  So subsistence agriculture is less of an option here, compared to many other African nations, and that leads to all the more overcrowding in the poorly located townships.