BNC London: GG Alcock – The hidden wealth of SA’s informal economy

At the BizNews Conference in London, GG Alcock captivated the audience with his remarkable life story, transitioning from a mud hut in rural KwaZulu-Natal to becoming a successful entrepreneur. Raised by activist parents in conditions without electricity or running water, Alcock learned resilience and adaptability early on. Despite never attending university, he launched South Africa’s pioneering marketing firm targeting the informal economy. Alcock emphasised the untapped potential of this “invisible” sector, illustrating how savvy entrepreneurs can thrive in seemingly chaotic markets. His narrative challenges perceptions, urging businesses to recognise and invest in the vibrant, informal economies driving growth in South Africa.

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Summary of GG Alcock’s keynote address at the BizNews Conference in London

GG Alcock grew up in rural KwaZulu-Natal, living a modest, culturally rich life. His parents, political activists, inspired his entrepreneurial journey. Despite not attending university, Alcock became a political activist and later a successful businessman. He founded a marketing company targeting South Africa’s informal economy, highlighting its significant and often overlooked economic contributions.

Edited transcript of GG Alcock’s keynote address at the BizNews Conference in London

00:01 Hi everyone, my name’s GG Alcock, and I grew up in a mud hut in Msinga, KwaZulu-Natal. My parents, political activists and community workers, believed in living just like those they aimed to help, so they built this mud hut.

00:35 We had no running water or electricity. My mother taught us under an acacia tree, and our kitchen was another acacia tree with a gas stove. We washed in the Tugela River. Despite being poor, we were rich in culture and upbringing.

01:04 I once asked my father, who had given up successful farming for activism, if he’d send me to university. He said he couldn’t afford it but would prepare me for life in Africa. I never went to university and instead became a political activist, later starting a business in the townships.

02:00 I moved to Johannesburg, known as Msiingagwandonga Zyaduma, or “the place where the walls thunder.” It was loud and intimidating, much like Msinga. I started as a bricklayer and eventually ran a marketing business called Minna Ngawe Marketing, targeting the informal township and rural economies.

02:28 We, my comrades Diablani and Sandile, and I, grew it into South Africa’s largest marketing business of its kind. I’m not a researcher or academic but a businessperson sharing insights from my business experience.

03:23 People often misunderstand the informal economy, seeing it as chaotic and invisible. However, it holds immense business potential. We are data-rich but insights-poor. I’ll illustrate this with a story from Baragwanath Taxi Rank.

04:16 Picture Baragwanath Taxi Rank, one of the largest in Africa. A well-dressed lady there sells small rolls of toilet paper for two rand each. Thirteen and a half million people pass through this rank monthly, providing significant business for her.

05:16 She buys a full roll for five Rand and sells 30 to 40 small rolls, making up to 100 Rand per full roll. This story reflects the untapped business opportunities in informal settings.

06:20 The media often shows South Africa’s inequality with images of informal shacks next to suburban houses. Yet, only eight percent of households live in informal dwellings; over 90 percent live in formal homes, often financed informally.

07:45 South Africa’s household dynamics have shifted, with a significant rise in smaller households. This mirrors Sweden 30 years ago when IKEA thrived by targeting one- or two-person households.

08:40 Smaller households spend less on essentials and more on personal care and appliances. This trend is evident globally and in South Africa.

09:38 There’s a growing demand for housing, with township entrepreneurs meeting the need for micro units. For example, Spoo in KZN has built 28 rental units from his Shisanama business profits.

10:38 The government estimates a need for two million micro units but lacks the funds, leading to reliance on private township entrepreneurs. Calgro M3 reports high demand for affordable housing, selling every unit they build.

12:03 The township economy is booming, with informal businesses generating significant income. For instance, Dabi Seng in Soweto earns about 148,000 rand a month from her rental units but struggles to secure bank loans despite her successful business.

13:57 Our perception of the informal economy is often skewed by stereotypes of poverty and unemployment. Yet, businesses in these areas, like spasas and informal markets, thrive and contribute significantly to the economy.

14:52 For example, a vendor in Baragwanath Taxi Rank sells 1,200 vetkoek and 200 deep-fried fish daily, making substantial profits.

17:07 The out-of-home fast food sector is worth 90 billion rand a year, with 50,000 outlets. It’s a major growth sector, comparable to formal fast food chains like Nando’s.

18:06 Informal bakeries and food vendors create demand for large manufacturers like Parmalat, which built a 3 billion rand business in cheese slices primarily for the informal sector.

19:28 Retail in the informal sector, especially spasas, is booming. Nielsen reports 187 billion rand in annual spend across 100,000 outlets, growing faster than the formal retail sector.

20:54 Many of these businesses are run by highly efficient Ethiopian and Somali entrepreneurs, contributing significantly to household incomes through rental payments.

21:20 The beauty sector, with businesses like Belisa’s hair salon, is another thriving area. The demand for personal care and beauty products is growing rapidly.

22:17 Hair extensions are now the most stolen product in South African ports, highlighting the booming beauty sector. Imports of hair extensions have grown 64% year on year.

23:16 The salon sector generates 10 billion rand annually, with businesses like Belisa’s employing multiple staff and driving significant economic activity.

24:11 Despite economic challenges, South African consumers remain resilient. Retail-focused property funds report higher trading densities in township and rural shopping centers compared to urban ones.

25:10 Listed companies like DeBula Property Fund acknowledge the strength of the informal economy, which often goes unmeasured but is vital to the overall economy.

26:08 Capitec’s Khedie Fourie highlights the untapped potential in the informal economy, which he compares to the early days of retail banking. This sector offers immense opportunities for growth and economic development.

*The above transcript has been condensed and paraphrased for brevity and clarity, and may not capture the full context or nuances of the original speech delivered by GG Alcock at the BizNews London Conference

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