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South Africa’s informal business sector serves a burgeoning consumer market.
South Africa’s informal business sector serves a burgeoning consumer market.

Informal sector vital part of SA’s economy

ECONOMIC NEWS

By Lyse Comins - Feb 26th, 08:41

South Africa’s informal business sector serves a burgeoning consumer market worth more than R100billion in the country’s rural areas, townships and cities, presenting opportunities for corporates and traditional small businesses.
 

GG Alcock, a marketer, author and entrepreneur, who focuses on helping corporates understand the informal sector and on empowering informal businesses to grow and improve their strategies, believes informal traders are overlooked as an integral part of the economy.

Alcock, who grew up immersed in Zulu culture in a mud hut with his human rights activist parents in Msinga, has captured the sophistication and size of the informal sector in his latest book KasiNomic Revolution.

Alcock has years of experience in marketing and founded the successful marketing agency Minanawe, which helped Parmalat introduce the sale of cheese in townships where it has achieved R1.5bn in sales. He has sold the business.

Instead of viewing informal traders as a nuisance and chasing them off the pavements, Alcock says the informal sector should be understood as job creators and providers of many basic goods and services to local communities.

“Very few people realise or understand the size of the informal market because it is invisible to most people and because it is a multitude of small businesses, people don’t realise the size when you put it all together,” Alcock says.

“The informal ‘muti’ market is worth R3bn a year which is 6% of the national health budget and township fast food is R80bn in size. There are about 120000 informal spaza stores with sales estimated at between R100bn and R200bn,” Alcock says.

The success of these informal traders lies in their understanding of their markets - they produce food and flavours that consumers want to buy and they are selling what people need close to where they live.

“About 10% of people’s budget is spent on transport so even if they see something cheaper in a Shoprite, they have to pay R7 or R8 to get into a taxi and they have to pay the penalty of an extra seat to bring the bags home. Informal sector businesses are designed to be completely fitted to people’s needs based on lifestyle and it solves ‘pain points’,” Alcock says.

“The informal sector is increasingly disrupting the formal sector. The informal spazas are disrupting and taking business from the Pick * Pays and Shoprites of the world. Municipalities, governments and financial institutions have to adapt their regulations, laws and products to suit the market, instead of knocking the hawker off the pavement. If we didn’t have the informal sector we would have a revolution on our hands,” Alcock said.

He highlights the earning potential of informal traders, citing the case of a couple he interviewed for a chapter in his book. “The couple sells 2000 vetkoek a day for R1 each and take home R30000 a month,” Alcock said.

However, he said the couple classified themselves as “unemployed”.

Alcock estimates real unemployment is probably close to 10% to 15%, rather than the official 27%, because of the huge numbers of people who are employed and self-employed in the informal sector.

Alcock will be in Durban for the KZN launch of his book at Phansi Museum in Glenwood on Tuesday, March 5.
IOL 

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