The spaza shops, bakers and other retail outlets running their small business in townships have a heap of challenges. They close often to go and source products, carry cash and have no access to credit. Intrigued by these township markets, Jessica Boonstra, originally from the Netherlands, started her business, Yebo Fresh from her garage, delivering products to a local township. When Covid hit, she became “really entrepreneurial” and with “a bit of bluff” secured funding from the Scheinberg Fund to build infrastructure to distribute food parcels. Since then, Boonstra, with the help of her team, including sales and marketing director, Lerato Ramollo, has grown Yebo Fresh from a “playful young company” into a proper scale-up with R41.5 million in annual sales in the last financial year. Boonstra told BizNews, “People keep looking at a township as a place for charity, but maybe not so much for business, whereas it is actually the next frontier.” – Linda van Tilburg
It was started in a garage in Hout Bay – Boonstra
This was about four years ago. So, for starters, I’m Dutch by background. I have a background in engineering, logistics, retail before coming to South Africa seven years ago and I was instantly fascinated by this township market, which we don’t have in the Netherlands. These two parts of one country lead to challenges, but also to energy, a dynamic, and opportunity. I couldn’t stop talking about it and one day I had a conversation with a British entrepreneur, and he said, ‘Start a business and I’ll fund you.’ So, this was four years ago, and we literally started in my garage with the family picking and packing and delivering personally into the local township, Imizamo Yethu, which is around the corner here in Hout Bay. So, from humble beginnings four years ago, we are now a team of over 70 people and active in 25 townships nationwide.
The challenges of retails outlets in townships – Ramollo
For the longest time, spaza shops or retail outlets in the townships have had to suffer through having to leave the township and go to town where traditionally your wholesalers are based, or your modern retail outlets are based. So, take a taxi from your home, in fact, even before that, you have to close your outlet for half a day or even a day. You then pay bus fare, you’re carrying cash mostly, and you go to these outlets, and you go from outlet to outlet searching for the best price. Definitely there was a need and there was a problem that we needed to resolve. We needed to ensure that our customers remained within the business and carried on with the business of running their outlets but also save them funds in terms of commuting to towns or to the suburbs to search for the best prices or search for these product items. And we pride ourselves on delivering convenience, but also empowering our customers to ensure that they do better in their businesses and the businesses thrive and flourish. Another part of this is offering them insights, information. A lot of our customers work in silos, especially the South African customers, so they don’t really get the chance to share the insights with each other, understand what’s in and what’s not, how to run their businesses better. We share that insight or those insights because we’ve got a broader view of the market as the whole, and with all our other partners as well. We’re able to share insights with them that allow them to run their businesses and flourish into bigger businesses than they currently are.
Building a business from food parcels during Covid …with a bit of bluff: Boonstra
We were still a small, small team that just operated for about a year when Covid hit. This is when we really became entrepreneurial because it was a matter of do-or-die. A lot of businesses struggled in that period, but we were an essential service provider and we had found out somewhat what it was like operating in the township environment. So, we approached a range of NGOs, and we knew that they were in need of getting food out into that economy that had suddenly collapsed from one day to the next. There was a massive demand for food parcels and for soup kitchens to help people to eat. So, we said we can do that, and we actually couldn’t. We were bluffing because we didn’t have the infrastructure. This is the point where we met the Scheinburg Fund, who gave us the funds to build the infrastructure, to rent a warehouse, build the technology, and the team to be able to scale up rapidly within the course of a couple of weeks, from 6 to 60 people to grow from a tiny warehouse, which was my garage size to a proper warehouse. That was an amazing support, and this is really the origin of our rapid growth for when we went on to start servicing township businesses and a much broader part of the township community.
Building from a ‘playful young company’ to proper scale-up with bigger dreams
We have taken on a range of investors, initially many of them entrepreneurs themselves. So, our angel investors understood the market. They understood e-commerce, for example and we were lucky to get this wide range of entrepreneurs that didn’t bring just funds. They also brought experience; they brought a network. That was equity funding that came in in a couple of rounds of the past period. We are now in the position where we are fundraising again. Of course, we’re looking at much bigger ticket sizes. We have grown from this kind of playful young company to be a proper scale-up. Now we’re talking to VCs and other bigger players for proper investment. … At the moment we’re fundraising for 2 to $3 million, and we hope to be closing that around November this year. We’re in the midst of those conversations and any investor or partner who is interested, we’d love to talk to them.
What we are finding is that luckily Africa is more and more seen as an interesting opportunity to invest in as there is rapid growth happening and as there’s a big digitisation movement. We’re not only talking to local investors, but there are luckily a lot of international investors who see that this is the place where the next wave of growth will happen. Hence, both South African as well as international investors are very welcome to talk to us.
How Yebo Fresh helped township entrepreneurs to thrive – Ramollo
As you can imagine, we are able to save an outlet owner or a spaza shop owner the time to be in the outlet and not have to go out and source stock and instead spend more time in the businesses; we’ve seen businesses growing from this. The ability to know that there will be sales rep coming through or I can order via the app. It also means more money in their pocket as well. The safety as well of the business owners, they don’t have to travel with cash. We have also facilitated the process introducing payment options, things like Shop2Shop or A2Pay. So, versus handling cash, they can pay virtually, but also be open to payment insurance or credit insurance, which usually they would not have because they are informal businesses. Now we offer payment terms where they can pay us after seven days of taking stock. So, really great impact. As I have said, we’ve seen businesses growing. We’ve seen our order sizes growing and our minimum order now is R1,000, and we’ve seen the number of our customers who started with us growing to be way bigger than where they started out.
Buy now, pay later solution with JP Morgan Bank – Boonstra
If you are township entrepreneurs, regardless of your success, let’s take some of our customers. For example, a lady who employs 12 people. Officially, her business does not exist, right? She and her 12 employees would show up in the records as unemployed and they’re not formal businesses and they’re not recognised as such, meaning also that she can’t get access to any type of loan even though she’s doing tremendously and building this amazing business. So together with JP Morgan, who’s been looking to solve these types of problems, we’ve got this partnership with another company called BFA Global, where we have introduced a buy-now-pay later solution, which is underwritten by JP Morgan Bank. This allows us to do is to deliver goods to a customer and they pay up to seven days later, which not only takes some of the risk of carrying the cash out of the system, but also allows them to make their money back before they pay us, which allows them to invest in the growth of their business, as well as building a formal credit profile. Because now we’re actually finding that the default rate with these customers is less than 1%. It’s incredibly low, and these customers are actually incredibly reliable in paying back their loans. So, building this profile now allows them to go on to become more formal players, to other players and say, ‘Hey, I’ve got this credit profile. I’m actually good for it. Can you give me a proper loan to start building my business or build my business even better than I am today?’
Townships are places of opportunity, not charity
This challenge, but also the opportunity of supporting township entrepreneurs, is often underestimated. People keep looking at this township as a place for charity, but maybe not so much for business, whereas it is actually the next frontier. If you look at the sheer numbers, if you look at entrepreneurs that are established, not just the street vendors, but entrepreneurs that have a business like a spaza shops, a caterer, a baker, township restaurant, we’re talking half a million of these entrepreneurs that bring in an annual value of R260 billion. This is a massive economy and it’s growing faster than formal retail – it’s also creating a massive amount of jobs and bringing a lot of cash into the South African economy in terms of rental, for example. It’s not to be underestimated how important these entrepreneurs are, and how important it is that we help them to grow and thrive.
Read also:
- SA’s new generation entrepreneurs: Meet township baking mogul Refiloe Rantekoa – with GG Alcock
- The modern milkman is back in the form of Lekke Fresh founder Henk van der Merwe
- GG Alcock – On ‘Kasipolitans’; a landgrab in booming township economy; and why Stalinist ANC on wrong page with its ‘500 black industrialists’
