GG Alcock: A massive untapped market under SA business executives’ noses

GG Alcock’s background makes him an ideal bridge between South Africa’s two economies. Author of Third World Child, an autobiography about growing up in rural KZN, he migrated to Johannesburg where his marketing company, Minanawe, offers a way for First World businesses to access the bottom end of the pyramid. In this fascinating interview GG tells us about the business opportunities in a wide range including Kota’s, funeral policies and Stokvels which he’ll be elaborating on in his upcoming book, Kasi-nomics. A book that offers a long-overdue focus on hidden sectors of SA’s thriving informal economy. – Alec Hogg

GG Alcock is with me in the studio – Minanawe?

Minanawe, correct.

Meaning?

You and I.

It’s an interesting name for a company. Where did you pick it from?

Our business really focuses on creating brand relationships and understanding people in, kind of the lower-end markets, so it was really about the concept of you and me, and closeness, and there’s a Zulu saying ‘ubuso nobuso’, which means face-to-face, which is a kind of pay-off line. It’s all been built around a kind of really close interactions with people and between people.

Well, when we chatted, a couple of days ago, you opened my eyes to a world that I didn’t know existed. This morning I had breakfast here, at the News Café, and found myself talking with a waiter, about Kota’s and what Kota’s he liked. It was an interesting point because not too many people who deal in say, the First World part of South Africa’s economy, even know Kota’s exist. Yet, there’s a huge business case that you helped to bring for Parmalat, the cheese people – it’s a lovely story.

Yes, you know Parmalat initially came to us and they wanted to get into the township market with their individually wrapped slices. The typical little slice that you’ll find on your burger, kind of story, and they were looking at the schools, potentially, and we said to them, “Hey, there’s this huge takeaway industry called the Kota’s. The Kota is, basically, a quarter loaf of bread with slap chips, with mince, with polony, with egg – you can choose, and you layer it on.

You pay per ingredient.

Yes, so you get a basic for six Rand fifty, and then you keep adding, and they can go up to R15 to R18. You even get what they call a Bazooka, which is the whole loaf of bread, with all the ingredients and like six school kids will get together and share it. Basically, we created a campaign for Parmalat around putting a cheese slice on a Kota, and it really took off. It was huge – it is huge and the cheese slice business is now worth almost one billion Rand a year, of which we estimate about two thirds of that goes into the township takeaway business.

What is interesting about this is that there was an opportunity that hadn’t been looked at before but because of your unique background, and we can talk about that in a moment, you were able to spot it.

Yes, I think there are these huge invisible markets around us that I get quite passionate about because I think there’s huge opportunity that we’re not exploring in these environments. A lot of the kind of business opportunities, entrepreneurship we look for is often ‘me too’ kind of stuff – stuff that’s been done. Yet if you look at the Kota business – one of the guys who has one of these Kota outlets does about 2.400 Kota’s a day, selling those for like R15 each, it’s good money.

Another huge industry is the Muti industry, the traditional medicine, which you kind of see hidden under bridges and on sheets of cardboard. It’s worth R2.9 billion and services 27 million consumers, so another huge market. I mentioned to you the goat industry, where we import about, I think, 360 thousand goats a year from Botswana and Namibia that come into the township and rural markets for the sacrifice industry, which is built around funerals and unveiling ceremonies, and returning of spirits.

Clearly, with the numbers that you’ve given us, you’ve done enough research into it. Hence, the book that you’re working on, KasiNomics.

Yes, well the book is, kind of really, very much about those markets, but also the secrets to unlocking those markets, and understanding. It is one thing knowing that the Kota’s are out there but unless you’re creating these relationships with the Kota outlets, or understand the sensitivity around goats as a sacrifice thing, and what’s important (in terms of the person buying them). All of these elements become quite important. How to access those, those places, those townships, those rural areas.

The book is really about some fun case studies. We created, for instance, a show called the Perfect Sishebo Show, which is the tenth most watched show on TV, it’s on SABC1, and it’s around the concept of a dish called the sishebo, which most people don’t know but, in essence, it is what a curry is to Indians – a sishebo is to Africans. This massive show, in its sixth year, it’s a cooking show. If you ask people about Master Chef, they all know what you’re talking about. Yet the Perfect Sishebo Show is probably 20 times bigger, in terms of viewership.

If you asked people in the First World market what a sishebo is, they wouldn’t have a clue.

Correct.

We met when we spoke about your first book, Third World Child. You have an interesting background.

Yes, I was, well the reason I’m in Johannesburg is, when I was a child, I had no toys, so I’m trying to make up for it, and I’m a migrant worker. Like all the people where I grew up and that place is a place called Msinga in KwaZulu-Natal, which is very rural, arid, and poor community where my parents literally built a mud hut, with no running water, no electricity, no nothing really. We were very poor and lived in this typical Zulu manner among the people. We grew up in that environment. My mother still lives like that, in a mud hut with no running water, although she says she’s got more running water than many people in the city, because she has the Tugela River going past her doorstep.

Why did they do that?

They wanted to change peoples’ lives. They were probably activists, not in a very directly political way, but they were fighting apartheid and they believed strongly – they weren’t religious in anyway but they believed strongly that it was important to change peoples’ lives. They went and found what people call the ‘ass-end’ of the world. They found the worst possible place in Africa that they could go, at the time, and try and make a difference.

Yet you came to Johannesburg, and are an entrepreneur and are helping other entrepreneurs unlock a market that appears vast and undiscovered by many in the First World.

Yes, I was a political activist and I was a community worker, and then I became a migrant worker. I believe very strongly that we are able to transform peoples’ lives by giving them jobs and creating opportunities. When I say a ‘job’ – not employing someone necessarily but helping grow their business or whatever work, and there’s a huge number of little entrepreneurs out in these environments. Who have done a lot of work around the spazas, and the hawkers and what I call the tabletop kind of business, as well as these Kota sellers, and it is how you can help grow those businesses.

How you can create jobs and employment, for me, it’s a passion and, of course, I’m a capitalist as well, so if I can grow my business and my client’s business and grow this township industry – I think it’s a very good thing to do, in terms of transforming our country.

You mention these spaza shops the retail sector at the bottom-end of the pyramid appears to be dominated by foreigners in South Africa. Why’s that?

Yes, it is dominated by foreigners. I would say 70 – 80 percent of these spazas are dominated by these, primarily, Ethiopians and Somalis. I think the key part of it – there’s all sorts of theories that go around, about bulk buying and those kinds of things, and while there are social networks within them that are very strong and they use it. The reality is that they are actually traders. They’ve grown up, (as little kids) with that culture of running a business. They understand merchandising. They understand loss leaders. They balance their pricing, so certain fast moving items are cheaper and on slow moving, they’re more expensive. They understand that the consumer will look at the cost of transport, getting them to the local Shoprite and add that to the actual cost, so they’re slightly cheaper, if you take transport into account, so they’re very sophisticated traders. It is literally in their blood. It is what they do.

Interestingly, they’re not in the food business because equally, African food, which is bought in the townships, whether that be these kinds of caravans you’ll find on the street corner outside your office in Sandton that’s selling lots of plates of food or to the Kota’s, etcetera. That is dominated by South Africans because they know that business. The taverns are the same. The entertainment industry, if you want, in the townships. There are no foreigners in there because it is not an industry they understand or they specialise in, and yet the South Africans are particular good at it.

That sounds entirely rational, but how do you interpret, given your knowledge of these things, what happened in the xenophobic attacks against, particularly Somalis and Ethiopian spaza shop owners?

I think that on the one hand you have to look at the macro situation. There’s vast numbers of people in those environments who are unemployed, who are terribly poor, who, for instance, have to live off a Social Grant of R315 per child, which is nothing, so there’s a lot of dissatisfaction out there, and it’s taken out in a number of different ways. One of them is our ‘service delivery protests’, which are often bigger issues, and I think the xenophobia is the same. It is one other issue that people point too, and say, “Look at these guys.”

So it’s not that they’re being ripped-off by the spaza shops.

Not at all. In fact, you find a lot of the time the ladies will say to you that they can get credit from these Somalis and Pakistanis and Ethiopians, which they wouldn’t have got from the South Africans. They’re getting cheaper prices. A lot of the research we’ve done shows people are incredibly well disposed to these outlets, in terms of the service that they offer.

Equally, you’ve got to ‘side-by-side’ to that, say at the same time, people are saying ‘I need a job – I want to create my own business’ so you have this kind of contradiction of, yes, these guys are bringing us cheap goods on our street corner – good quality, fresh products, and at the same time we need jobs. Maybe they’re taking our jobs and then you can’t discount the criminal element. There’s a very strong criminal element involved to take advantage of this.

So it’s complicated.

Correct.

Very complex. GG just to close off with. We haven’t touched on the financial services aspect, in the bottom-end of the pyramid. Most people understand funeral policies and many people, who operate in the parallel universe (if you like), do help housekeepers and their gardeners to have funeral policies. Then there’s the whole Stokvel situation, where the banks haven’t been able to crack that. Now those two areas, surely would offer great potential.

Yes, absolutely they do and figures are quoted at R44 billion in the Stokvel savings industry and most of it is unbanked and what I say to people is that we look at the wrong elements. When you look at a Stokvel and part of, I go into much more detail in my book is, a Stokvel makes no financial sense. All these people put their money together and then once a year, with no interest really. They go to the shops and they buy like R50,000 – R75,000 worth of stock, and if you say, well what is actually the benefit of a Stokvel? It is a social benefit.

I found a granny the other day who was showing me – I said, “How do you communicate with your Stokvel?” She said she uses ‘what-what’. I said what’s what-what? She showed me on the phone as a WhatsApp because it fits. It fulfils a need, a social networking need.

So on the one hand, very sophisticated, or using Smartphone apps. On the other hand, however, no bank account.

Well, if you look at it. What does a bank offer? A bank offers you a high interest rate and security, so they’re offering that to a Stokvel. A Stokvel needs no security. No one can run away with the Stokvel money because they’re part of this community. Where are they going to run away too? I’ve never heard of a single person running away with the Stokvel money, and then they offer an interest rate, but what are the people wanting? They don’t want the security. They’re wanting the social networking. They want to know that the community will support them, so there’s a number of other elements and, again, it is complicated but I think there’s huge opportunities by understanding what are the underlying drivers that drive people to join a Stokvel and how does a financial institution fulfil those drivers?

I’ve been frustrated because when I talk this to the marketing people they say, “Hey, we get it, but the actuaries are the people who design the financial package and we’re not going to go and tell the actuary he has to supply a goat for sacrifice, as part of the burial society.” They would rather tell them about interest and security.

So it’s almost as though business or formalised business, organised business in South Africa, is just missing an opportunity by focusing in the wrong places.

Absolutely, and not understanding the deeper things. What are the things that tick the boxes that people want to be ticked, and if you understand those then there’s a very strong course for people to be part of it. There’s no resistance to formality and to banks and that. There’s a resistance to saying, ‘you’re not giving me something that satisfies the need I have’ and often that need is an intangible need.

If we look at the burial societies – the realities around burial societies and why they’re so big, is that in African culture it is very important to put the dead spirits to rest, and if we don’t put them to rest it affects our future, so burial societies is actually an investment in the future and not in the past. When we understand that then we start looking very differently at them. We actually start applying the lends and since it’s an investment policy – because what we say is, in this culture, if you make sure that the past has been rested and it rests – then the future will take care of itself.

When is KasiNomics going to be available?

It should be in September/October this year.

GG Alcock is the author of Third World Child, and soon to be hitting the shelves, KasiNomics.