SA Affordable Housing May - June 2020 // ISSUE: 82 | Page 11

EVENTS
The ‘unseen’ economy
FAMOUS PUBLISHING
The informal economy presents a huge opportunity for
any affordable housing development that can develop
a model which works in this untamed market. The
eighth FNB Franchising Leadership Summit was held on 4
March at The Ballroom, Montecasino in Johannesburg.
Author and entrepreneur ‘GG’ Alcock has written
extensively on the informal, unseen economy. He terms it
‘Kasinomics’ (the economy of the townships), and says it is
growing faster than the formal sector at “an urgent, organic
pace”. Recent Nielsen research shows that 20% of all money
spent in South Africa is spent in informal stores, but most
importantly is increasing at 7% a year compared to 4%/year
in formal stores.
The economy may be unseen, he says, but in fact is all
around us – right in view outside on the pavement. “There are
50 000 informal food takeaway outlets selling everything
from the township burger called a koto to vetkoek, shisa
nyama’s and amaplate food trucks where the top outlets can
turn over up to R50 000/day seven days a week – giving a
total turnover in excess of R90-billion a year.”
He says the muti market alone is worth R18-billion in
turnover employing almost 150 000 people and serving
27-million customers. There are more than 100 000 informal
spaza shops turning over more than R200-billion/year. There
are 500 000 hawkers or tabletop vendors earning on average
between R1 500 and R3 000 each month in profit. The market
has 150 000 hair salons ranging from home back rooms to
colourful corrugated iron dunusa selling hair pieces and
stylings worth millions every weekend.
There are a multitude of other businesses including:
• Building and home services: including plumbing,
electricians
• Automotive: mechanics and other vehicle services,
panelbeating, car wash, tyres and sound systems
• Cultural: muti, livestock, sangoma, nyanga, unveilings and
funerals
• Rental property: backroom and spaza rentals
• Financial: stokvels
“Like the Matrix, much
of this trade and its
scale is invisible to us,
yet in many ways our
economy is being
sustained and driven by
this sector. Not only are
these outlets and
traders paying VAT on
their substantial
purchases, but they are
employing people and
bringing in household
incomes on a massive
scale (in aggregate) in
GG Alcock.
most cases. The
average rand circulates more often in a township informal
economy than a formal one,” says Alcock.
“The scale, profitability and potential of the informal sector
is totally unquantified: there is a large percentage of
profitable, successful and sustainable businesses among them
which no one sees. The informal sector is already and will
increasingly disrupt traditional formal business models.” He
says if you look at the financial results of Shoprite and Pick ‘n
Pay, they are already being “heavily disrupted”.
One of the common misconceptions of the informal
market, says Alcock, is that it is ‘subsistence’ and if they could
get a formal job they would do so. Yet many of the people
Alcock has interviewed earn more than any formal job would
pay them (and almost all above the minimum wage),
especially with all the extra costs of the formal economy:
commuting and paying for after-care for the children.
“So, we have to change our perceptions about this sector.”
He lists some characteristics of the sector, pointing out
how similar they are to the ‘gig economy’ of Uber (which is
the largest taxi service in the world without owning a single
vehicle) and Airbnb: “it is unseen; massively fragmented; its
hugely personalised (“hyper personalised”) to the demands
and tastes of customers; but unlike the gig economy it’s
generally low tech and not typically networked through apps,
“and it is this which represents the massive opportunity”.
Another misconception, he says, is that products sold are
based only on affordability or low cost – it is actually about
preferences, as research has shown this market to be highly
aspirational with a preference for African food – “the styles
and tastes of the township”.
“To participate in this sector, business management teams
need to open their eyes to this different economic world, to
adapt trading terms and business relationships to a more
fragmented customer base, to offer products and solutions
relevant and suited to shopper patterns and consumer
lifestyles.”
Affordable housing developers could access this market if
they were to think about it differently. Instead of pushing
their own brands they should consider what this informal
market trader needs. Similarly, automotive groups and
building and hardware retailers could access this massive
market on the same basis. Instead of reinventing the wheel
and creating their own branded solutions, they can tap into a
market that is already there. Add some basic retail and finance
training and you have a market that is not only well supplied
but also well supported and equipped with skills. “This will
take agile thinking and going against the conventional
route-to-market most retailers follow – but the results could
be astonishing,” says Alcock.
Some of these informal businesses have expanded to such
a degree – he mentioned one food producer which had eight
different stands and fleet of electric bikes – that they are
beginning to think of franchising the concept. He says: “If
you’re not in this sector, you’re missing a trick.”
www.saaffordablehousing.co.za MAY - JUNE 2020 9