Alec Hogg: Apologies, we're a couple of minutes late, but those are the little issues you get when you go live. We're live here on Business TV, and it's such a pleasure to be with GG Alcock, the author of Kasinomics, South Africa's leading voice when it comes to the informal economy. He's an interesting story. In fact, GG came with us to London just ahead of the election, when we had our business conference in London, talking to the mainly South Africans who wanted to know what the election was going to be like, and he gave them insights that they probably will never forget on a part of the South African economy that exists, but up until that point anyway, was very much under the radar. But more and more people are understanding GG's story. Just to give you a little bit more of his story: he grew up in a mud hut in Msinga, KwaZulu-Natal. His dad was a real activist. Well, dad and mom were both real activists. They had no running water, no electricity. He was taught by his mom under an acacia tree. He didn't go to university, became a bricklayer because there was no money in the family to send him to university. And then he went up to Johannesburg and took to entrepreneurship immediately. He speaks Zulu probably better than he speaks English. And he tells us time and again about things that exist in South Africa beyond the sight of most people in the business community. And that's why it's so good to have you here in Hermanus. Again, not for the conference, 'cause it's not conference time. But what are you doing in town?

GG Alcock: Wonderful. Thanks, Alec. So I came to, I've actually got a conference today at Arabella that I'm talking at, but I came to do a talk for the Rotary guys in Hermanus and run a little workshop for some of the municipal guys and some of the local NGOs and so on who are wanting to look at how to [engage with the township economy].

Alec Hogg: Yeah, what do you teach these municipal guys?

GG Alcock: Yeah, I wouldn't really call it teaching, but it's just exposing them to the opportunities from a business perspective. Because I think a lot of the time people underestimate the scale and opportunities in, well, the terrible word, informal economies. And so it's really about illustrating, and also which sectors, because within that economy we tend to be trapped in this kind of perception that it's just rows of spaza shops or hawkers. And the spaza sector is actually a substantial sector, but it's only probably about twenty percent of that total economy. And there are other sectors that are actually doing much better.

Alec Hogg: Just to remind you, as we are live on Business TV on YouTube, you're welcome to send through your comments, and Ruan will pick them up, send them through to me, and I'll pose questions that you have to GG. I think the big story that we've got to kick off with is the xenophobia and the deportation of so many people from townships over the last little while, the last few weeks. Has that vacuum been filled?

GG Alcock: So I think let's start with what is the scale of the immigrant or foreign trader presence within the informal township or rural economies. And the reality is that the spaza sector is about a 200 billion rand a year sector, about 100,000 outlets. It's about 70% foreign, four groups: Somalis, Ethiopians, Pakistanis, and Bangladeshis. Outside of that, we have a fast food sector, which is a massive sector, 100% South African. We have a huge sector of rental, backroom rental, that's a 30 billion rand a year sector. The beauty sector, what people call amazaloon, beauty salons, is a 10 billion rand a year sector, probably 80 to 90% South African. Taverns, you know. So I often say, take a mirror to the formal economy, every single sector is represented in this informal economy. And so seventy percent of the spaza sector is these foreign groups. All the rest of the accommodation, now we're talking a trillion rand a year sector. Only two hundred billion of it is, or seventy percent of the two hundred billion is foreign. The rest is dominated by South Africans. So the impact on the township and rural economies is very, very little in terms of any impact on the foreigners. When it comes to—

Alec Hogg: Did they go, though? Were those Bangladeshis and Somalis and Ethiopians?

GG Alcock: So the impact has been primarily on Malawians, Zimbabweans, in the inner cities where you get a lot of Nigerians, and so on and so forth. And in specific sectors, you know, a lot of the Sixty60 riders are all foreigners, people like Shoprite and Takealot, and the guys struggle to get South Africans to ride scooters. So that sector will be impacted. Things like, you know, gardeners and waiters, and those kind of sectors will be severely impacted. But that's outside of my kind of playground.

Alec Hogg: What do you make of all of this, though? Because it sounds terribly hypocritical.

GG Alcock: Yeah. Well, let's just stay with the spaza sector. So with the spaza sector, we saw a massive decline in stock-ups at wholesalers in the lead-up to the June deadline, as it were. And then, literally on the first of July, the volumes at wholesalers boomed again and everyone carried on trading. Because the average Somali or Ethiopian who dominates that sector is incredibly entrenched in the township. He's paying rent to the South African, he's providing well-priced goods to local people, he speaks really good isiZulu, isiXhosa or Sesotho. So they're incredibly entrenched into those communities. Same, same. It's crazy. You go to the middle of nowhere and there you find this Bangladeshi or Ethiopian guy speaks the local language. The common name for these foreign traders is "my friend", you know. People say, "My friend", they're my friend. So the impact on that spaza sector has actually been almost zero. We're back to normal trading in those spaces, almost none of them affected. And the same happened with the registration, what call it, two years ago now, where the government said—

Alec Hogg: Okay.

GG Alcock: —people need to register these outlets. So almost zero impact. They're very well entrenched. I think also the mistake is that while they may be foreign, they're not all illegally here. A very big portion of the Somali community have non-resident IDs. They are, in essence, permanent residents. They can't vote, but they have all the other rights. They have IDs, they've got registered businesses, and so on.

Alec Hogg: They're refugees.

GG Alcock: They would have arrived as refugees. So initially the Somalis were the only guys who could get refugee status, it came from a conflict zone. The Ethiopians were very much economic refugees. And then, of course, there was a war in Ethiopia, and so suddenly the Ethiopians could get [refugee status too]. So that's a transition. Most of them arrive as refugees.

Alec Hogg: They're highly sophisticated people. I don't want to get into classifying a whole group, but yeah, those cultures are thousands and thousands of years old.

GG Alcock: And they're incredible business people. I mean, they're very organised, very structured. Some of those Somali and Ethiopian businessmen, Alec, are running businesses. Some of those wholesalers, which we would call informal, are turning over a million to a million and a half rand a day, six and a half days a week. Six and a half, because they're closed to go to mosque on a Friday, the Somalis, the Ethiopians or Coptic Christians. They culturally connect very well with South Africans. They're more astute but very good businessmen. This sector, the so-called spaza sector, which is an anomaly because most of these stores are actually supermarkets, what I call spaza-rettes. And we see the growth: people like Trade Intelligence, who follow this, show the formal and informal sector doubling the rate of growth of the broadly spaza sector, what some people call general trade, than the formal retail sector. And if you look, Shoprite found that their USave format couldn't compete with the foreign spaza-rette, and launched Shoprite Cash and Carry, along with an e-commerce platform where they'll deliver to spaza shops and spaza-rettes. Now that's brilliant, because they've recognised that they couldn't compete with the corner supermarket that is Somali, Ethiopian.

Alec Hogg: You mentioned Shoprite, and this being BizNews, we've got a tribe who are really interested in investment opportunities. Shoprite would be an obvious one, Boxer another obvious one, but who else is tapping into this huge economy that you keep telling us about, and most people don't really understand?

GG Alcock: Yeah, I wish I made money from "I told you so".

So I think what's happened, to a large extent, and you know, my last book, my Kasinomics book, I call Kasinomics Unleashed, because in my mind this sector has become unleashed. It's not an emerging economy any more, it's really one that is at the forefront. And, to your question, if you look at a broad range of businesses that have exposure to or are involved in that so-called informal economy, most of them are actually doing incredibly well. And, in my mind, the informal economy is cushioning the impact of a very lethargic formal economy. And so, you know, look at Capitec, look at Shoprite, look at companies like Premier, the food business, look at, you know, Tiger Brands was really struggling until probably two years ago, when they had a whole strategy which they publicised, saying that they're entering the spaza sector and so on and so forth. I don't know what took them so long, but Tiger is doing suddenly incredibly well. Other businesses, exemplars, a listed business, the Vukile Property Fund: if you look at shopping centres in rural areas and townships, Jason McCormick will tell you how they're getting double-digit growth, even double the inflation rate, in shopping centres in townships and rural areas, which is counter to what you would expect. If the impact of the economy is so bad, and unemployment so bad, how come, and particularly in sectors like fashion, beauty, personal care, in a sense FMCG retail is relatively flat, the growth of Shoprite and Boxer and so on is primarily coming from new stores in townships and rural areas.

But if you look at other businesses, I profiled a business called DNI, Andrew Dunn. It's an extraordinary business doing, I think, about eleven, twelve billion rand a year, and everything from SIM and mobile handsets to financial services. They've got a product called PayMeNow that Bryan Habana heads up. You know, they started delivering bread and SIM cards, and then, this massive privately held business, they've just invested a couple of billion rand into Vox and Hyper, into fibre in the townships. Now, again, that's a sector that's booming. Financial services, Lesaka just bought Bank Zero. Their Kazang business is basically spaza-on-counter, spaza card acceptance devices.

Alec Hogg: By doing what?

GG Alcock: You'll have seen Flash and Shop2Shop. Shop2Shop's an extraordinary business, started by a guy, Peter Berry, who started Flash, sold it to Pep, and then started Shop2Shop. And that business is basically card acceptance or card acquiring, and VAS services, which is electricity, airtime and so on.

Alec Hogg: Just pause a little bit there. You mentioned Pep. And that is a big story with the financial services side, which has now come out into the open, as it were, because they've disclosed it on the stock exchange news service. Should we be excited about Pep as a company now that they're in that financial services sector?

GG Alcock: Look, they've been a client of mine over the years, so I'll disclose my interest, and I've worked with Pieter Erasmus and his team extensively. It's an extraordinary business. Let's take out the bank for now, I think the bank has massive opportunities, but let's just look at Pep. So Pep has got Flash, which, if you look at the growth of Flash, it's growing at about 30% year on year in terms of turnover. Flash is basically, you go to a spaza shop, a hair salon, a tavern, and you want to buy airtime, electricity, lotto tickets, and so on. But also, now they've incorporated the ability to tap your card on the device and do what's called cash back, where you withdraw money from the till or you pay for your groceries.

Alec Hogg: Yeah.

GG Alcock: Yeah, it's a retailer. So what's happened is that we've seen this extraordinary move away from cash as a result of the likes of Kazang, Flash, Shop2Shop, Capitec incredibly aggressively going into the sector. So Pep has Flash. They have a product called Paxi, which is an extraordinary delivery, a courier business, and they have six and a half thousand Paxi points of delivery. They have almost like the courier guide, but it's from one Pep store to another. And almost all, like, UNISA exams are passed through this. It's just a phenomenal and huge business, the delivery. I've used it to deliver into townships. Remember, Pep has a massive footprint outside of shopping centres and townships, on literally every street corner. And again, I profiled them a bit in my last book, and, you know, they've got a Pep in Uitenhage, there's nothing else in Uitenhage except that. And then, if you look at their, sorry, they have the loan business, is it Fintech or whatever it's called, which is monstrous. They've got a handset, so they sell, Pep was selling about one point two million handsets a month, of which 70 to 80 percent were smartphones. Then they launched a product called FoneYam. FoneYam is a handset financing offering, you get credit on your handset, but it's a very innovative product, you don't have to have a payslip or anything like that. You prepay for a couple of months, and then you get the handset and pay for the balance over the year. That's boosted them from one point two million handsets, and I mean it's not exact numbers, to about one and a half million handsets a month, just by bringing in this handset financing offering. Well, I've worked with them, I hope to say that they were stimulated by my thinking and things like that, you know, Pieter and his team would have to tell you that, I won't take total credit for it. I think they're an extraordinary business.

Alec Hogg: Yeah, I've got to stop you, because if you have a look at the companies that are performing in South Africa, you've mentioned Shoprite, you've mentioned Pep, and you didn't really mention Capitec, but I know you and Gerrie Fourie were pretty close, and you've engaged a lot, and in fact on public platforms supported each other. So now that he's out of the way at Capitec, they're still, well, he's not really out of the way, I believe he's looking around the world for interesting opportunities, but are they still taking your ideas?

GG Alcock: So I shared a platform with Graham Lee, the new CEO, the other day at a talk, and I've done work with them in the past, probably about a year or two ago, and he kind of said in that session, he echoed all the stuff and said, in essence, the sectors that I was saying were booming, they see them in their figures. They have three trillion data points and twenty-six million customers in that sector, and they are aggressively going into what they call the emerging market, which is their term for the informal market business sector. They launched a product called an entrepreneur account, and they're very aggressive on launching into the space, and very successful.

Alec Hogg: So the template's there. GG's template.

GG Alcock: And they're carrying on with it. So when I was first engaged by them, they said, "We want to bank the unbanked informal business sector." And I said, "There's no such thing as the unbanked." They're personally banked. And I told them to go and have a look at their personal bank accounts, and they'd find most people using a personal bank account for their business. Alec, within probably a couple of months, they had launched a product that was native to their personal bank accounts, where you could go into your personal Capitec bank account and open an entrepreneur account, which was, in essence, parallel, so that it was replicating the benefits of a personal bank account, but giving you the benefits of a business bank account. And just doing that, the learning they took from me, they just execute incredibly rapidly. And the success in this space is about recognising the opportunities and then executing. So if you want to look at which businesses are doing very well, it's just purely down to execution in this space.

Alec Hogg: The guys who can execute. Addison77 sent a question through: please ask GG if the Kasinomics sector is registered and paying taxes into our system.

GG Alcock: Yeah, I get a lot. In fact, I've got a chapter in my book, I suggest you read it, called "To Tax or Not to Tax", because I get asked this so much that I actually have a whole thing about it. So the short answer is that they pay, so when we talk tax, we've got to say what are we talking about. Are we talking about UIF, PAYE, are we talking about fuel levy, are we talking about VAT, are we talking about a personal income tax on a person—

Alec Hogg: No, no, no, no—

GG Alcock: —it's, yeah.

So let's look at the spaza sector. The spaza sector turns over two hundred billion rand a year, the vast proportion of them are not VAT registered, they pay VAT and don't claim VAT. There's a net benefit to the fiscus of about eighty-five billion rand a year. Well, they're purchasing their goods from a wholesaler.

Alec Hogg: Just explain that. From Shoprite, or from—

GG Alcock: Yeah, no, from Devland Cash and Carry, Kit Kat, those kind of large independent wholesalers, and they're not claiming it, they're not claiming it because they're not VAT registered. So there's a net benefit of that value addition. If you look at the taxi industry as an example, fifty billion rand a year, they travel about fifty million kilometres a year, they pay probably about six million rand a year in fuel levies.

Alec Hogg: Climbing.

GG Alcock: Well, I met someone who's involved in the taxi industry, and I said it's fifty billion rand a year, and the person said, "GG, I think you've got it wrong." I thought, okay, they're going to say it's like thirty or something. So now it's probably three times bigger.

Alec Hogg: What did you say? Six? How much did you say? Taxis?

GG Alcock: I said fifty billion, really. Fifty. Yeah, and that's just taxis. So that's not the bakkie brigade and other transport.

Alec Hogg: But fifty billion feels better.

GG Alcock: Could be much more, yeah. Figures from people like the previous Transaction Capital, now Mobalyz and so on. So—

Alec Hogg: And the VAT that is being paid by whoever it is buying the products, I think that's the big one. They're not claiming it back.

GG Alcock: That is a big one. But I think here's another one, Alec: if you look at just, let's take Unilever, Tiger, Premier Foods, RCL, between sixty and seventy percent of their business is going through the township, through wholesalers in the township economy. And that's probably a large portion of their profits. If they did not have the demand coming out of this kind of space, their profits and their tax on those profits would be substantially less. So the demand created by this economy is huge. In my book, I wrote, in the chapter, I was approached by SARS, and I thought I was in trouble for my personal tax, and they were like, "No, no, no, we want to know how do we bring this sector in more," and we had a really interesting discussion. But one of the biggest problems is that we have too much friction in how we get people to register for VAT, how we get people paying tax and so on. So I don't think it's, over the last, it's not a case of people not wanting to pay tax or using cash. We've seen a shift where cash today is probably close to thirty to forty percent of all transactions. Cash is in dramatic decline, and seventy, eighty percent—

Alec Hogg: Was it?

Alec Hogg: Fine.

GG Alcock: —of these entrants that I mentioned, who brought these devices, so it points to the fact, and I quote in my book, the International Finance Corporation did some research called MSME Voice, micro, small and medium enterprises voice, and they found that the reason people use cash, only three percent of them said they didn't want to pay tax. So it's not that people are evading taxes, actually the tax net needs to be broadened, and we have to create an easier and frictionless way for businesses to enter into this system. But I think that the benefits of this economy accrue far higher than the benefits of a simplistic thing of saying, well, they don't pay tax.

Alec Hogg: We see some retailers are really struggling, Pick n Pay, an example. Is this, in your opinion, because they haven't embraced the township economy? What do you call it, by the way, township economy, Kasinomics? So they haven't embraced Kasinomics.

GG Alcock: I called it Kasinomics. I wanted to get away from the term informal, because it's not informal, actually, I mean, it's rather, say, township and rural economies.

Alec Hogg: A million bucks a day turnover is hardly informal.

GG Alcock: Exactly, exactly. And that wholesaler is VAT registered and has a company, and so on and so forth. But so yes, I will say, I've met with Sean a few times, and Gareth Ackerman before that and so on, and I believe that Pick n Pay went the wrong direction. They assumed that there's an affordability issue within townships and informal spaces, and they launched this disastrous product called QualiSave, where they took a Pick n Pay and basically turned it into a cheaper, nasty store. And I think the reality is that the consumer is going the exact opposite way. Consumers in townships have moved into the lower and middle classes, the vast proportion of people live in a really nice house. We're talking three trillion rand in high-value real estate. Car ownership in the townships is so high that Jason McCormick of Exemplar said, "We are changing the way we design shopping centres because car ownership in townships is high." So we're talking about middle-class people who own a car. The taxi sector's in trouble because people are using taxis less and less, which is why you see the violence. And so you're talking about a lower to middle to higher middle-class consumer in townships. Townships are not an income sector any more, it's a demographic, and it's got a range of different incomes. You drive around the average township, when I take executives around a township, they're like, "This is not different to a suburb." And you have a full range, from the low income through to the high income. And launching something like QualiSave, which was targeting the low-income sector, was just never going to be successful. Go and have a look at Boxer. Boxer went from this kind of, real, it looked like a wholesaler, now you walk in there, it looks like a premium supermarket. So Pick n Pay went the wrong direction with that.

Alec Hogg: Have they changed? Have they woken up?

GG Alcock: Yeah, I think, well, they've had to close a lot of those stores, and I think they're refocusing on that. I don't know enough, I haven't done work with them recently. But I have done work for people like Shoprite, and if you look at their outlets, not only are they rolling out aggressively into more and more rural areas and townships, an average Shoprite is like a very premium store, it's not low end. But they've also doubled up on things like financial services, on their bank account, their money transfer and remittances business is huge, their VAS, which is airtime, electricity, those kind of things, is big. So they've also, and this is where the big growth is, and people like Lesaka doing the same, it's like, and Pep's doing the same, it's like you're not just a retailer any more, you're also a courier business, and you're also a money transfer business, and you're a handset business, and you're a clothing business, and finance is important, and, as a fintech, so the biggest growth is happening in this kind of diversification, where people are using their distribution capability, whether that's store footprint or device distribution, and they're combining distribution with a massive loyal user base. We look at Shoprite, and Pep is the same, massive database, of known customers, these are customers that they have their phone number, they know who they are, these are people who lay by, or have credit, or financed a handset, or, in Shoprite's case, extra savings business. So they've looked at that market as a sophisticated market that they've built relationships with, they're offering a broader and broader offering to those sectors. So, you know, you have to change your mindset.

Alec Hogg: If we had a GG Alcock portfolio for the future, forever shares to hold, Piet Viljoen loves to talk about his ten forever shares, he hasn't got them all yet, but from what I'm hearing from you, the obvious ones would be, because this is the part of the economy that's growing much faster than the formal side, if you want to call it that, you'd definitely have Shoprite in there, you'd definitely have Pep in there, you'd have Lesaka in there too.

GG Alcock: Yeah, absolutely.

Alec Hogg: Who else would you add to that?

GG Alcock: Yeah, I think people like Premier, they've just bought Rhodes Foods, Rhodes Foods is a great business, I think it was probably badly done, but it's really powerful brands, and I used to work on that and Rhodes was like a really powerful number two brand in those kind of spaces.

Alec Hogg: Yeah, yeah.

GG Alcock: Realising profits, I mean, Premier is a very well-run business in that space, from bread distribution to maize and flour and so on. So Tiger is growing dramatically, I mean, the new, not so new any more, but CEO's done an incredible job and they're certainly entering that.

Alec Hogg: Tiger? Yeah, Tiger.

GG Alcock: I look, I think that the likes of Shoprite and Capitec are probably expensive, because they've really done well. I would have said that people like Pep's share price is like so low, I have no idea why, but I'm not working with them or anything to say that, I won't tell you where I personally put my money, but I think that the people who are kind of off the radar, and Pep is on the radar, but they have a languishing share price, the likes of Lesaka. But also the traditional banks, as they enter this market more aggressively, I think that they have such a competitive advantage, and I think what's happening now, I saw an article this morning, FNB is talking about the community sector that they want to enter, they don't want to call it informal. I'm working currently with Standard Bank on a range of different initiatives in these kind of spaces. So don't ignore people who are re-entering or trying to grow the sector, because I think, and then I think those shopping centres, the Exemplar portfolio, the Vukile Property Fund, Dipula, Twin City, I think, is the other one. I'm talking as an observer, just from the outside, I'm looking at those guys and going, like, they are getting shopping centres in the right places, they are talking about double-digit trading density growth. Trading densities is, in essence, turnover per square metre, look at the trading densities of those shopping centres, look at the occupancy of rural and township shopping centres, sitting at, you know, ninety-five, ninety-eight, a hundred percent, hundred and five percent occupancy.

Alec Hogg: You're queuing up to try and get in.

GG Alcock: Everyone wants to get in there, you know, and people from Clicks to Shoprite, desperately, I mean, we're talking about a land grab, everyone's desperate to get in there, everyone's desperate to sign up the spaza shops and so on. I think that the hardware sector is a sector set to grow, I think there's a lot of informal and probably illegally imported product in that sector, which should be clamped down on by government. But I think that the construction sector in the townships is set to start accelerating. PPC, in one of their recent financial statements, said that while the formal construction sector was fairly flat, they saw growth in rural and informal construction sectors.

Alec Hogg: Why is it growing more strongly in the Kasi sector than in the more formal areas?

GG Alcock: Why is the economy grey?

Alec Hogg: Kasinomics, your—

GG Alcock: I don't want to call it informal, informal, yes, so the Kasi—

Alec Hogg: Yeah, which comes from lokasie.

GG Alcock: Yeah, so I was just trying to change the word for informal, and even "township" often sounds, you know, wrong, or low-income. So there's a number of factors, Alec. First of all, there's far more economic activity and circular economies happening in townships. The average rand circulates four, five, six times within a township. I'm working with Premier Flour, an RCL brand, with about 4,000 township bakeries. Now, we're talking people who bake anything from 2,000 loaves of bread to 12,000 loaves of bread a day. Now, who do they sell to? They don't sell to Shoprite, or Boxer, or Woolworths, whatever. They sell that bread to the spaza shops, they sell it to the fast food outlets, who then, they buy it from the bakery, they're selling it to a consumer, and so on and so forth. So that money is circulating, you know, and that's the one element that's happening, we have circular economies. The second part is that there are very low debt levels in townships. So according to Experian, twelve percent of South African households are exposed to vehicle and housing debt.

Alec Hogg: And presumably owning the car would be becoming more affordable because of the influx of Chinese and Indian vehicles, which are much cheaper.

GG Alcock: Yeah, absolutely. And we're seeing it already, but a lot of those vehicles are second-hand. So if you look at, say, WeBuyCars, I think fifty-five percent of their vehicles are purchased cash. Now, that could be someone who got a loan somewhere else, but that's roughly that number, I don't know exactly, but let's call it half of their vehicles are purchased cash. Of the twelve million motor vehicles on our South African roads, nine and a half million are unfinanced. So now you're talking about someone in a township who lives in a house that they own and they don't have a bond on, who's driving a car that they own that they don't have HP on, they're often earning multiple incomes. Gerrie Fourie said the other day in an interview that when they looked at social grant recipients, the average social grant recipient was earning five times their social grant through hustles, other income and so on. So let's say the average social grant recipient earns a thousand rand social grant, they're earning another four to five thousand rand from other businesses. So when we look at that social—

Alec Hogg: We shouldn't be laughing at that, I mean, we, the taxpayers, are funding them, funding them the thousand bucks, that should be taken off the books.

GG Alcock: Yeah, yeah. Except, well, except, I mean, there are different ways to look at it. So Kheri Ferry's point and my point is, as well, that we disincentivise entrepreneurship. If we see that as seed capital, that person earns that social grant and invests it in growing their hustles and their businesses, and they continue to do that.

Alec Hogg: How do you look at it?

Alec Hogg: Right.

GG Alcock: At what stage do they then say, "Listen, the social grant's too much of a hassle." I've built this business. And I've seen that. I wrote about a lady who rents out back rooms, and for ten years she took her social grant, and she lay-byed building materials. And at the end of ten years, she had, here in Khayelitsha, she had six rental units that she rented out for three thousand rand each. And she'd financed that construction through lay-buying, taking half her social grant every month.

Alec Hogg: GG, seriously, if that was where social grants were going, I think we'd all pay happily. But a big percentage goes straight to the bottle store, I've seen that with my own eyes, wherever, it's—

GG Alcock: But yeah. So according to the SA General Household Survey, twenty-three percent of social grant recipients say the social grant is the only or main form of income. Seventy-seven percent say it's not the only or main form of income, and those people are, in essence, running some sort of hustle or side income. So look, I mean—

Alec Hogg: And if they're telling the truth, because it could be more than seventy-seven percent, if you ask me, yeah, I get other income.

GG Alcock: I look, I mean, anecdotally I agree with you, you do see people who take that social grant and, but if we take twenty-three percent of, say, fifteen million social grant recipients, it's a large number, it's three million. You're seeing the three million, you're not seeing the twelve million who are not going to the bottle store. And if you did, that bottle store would be booming.

Alec Hogg: It is, but it's complex, and there's no easy answers to that. There's a question here from David Gray, he wants to know, is there an appetite for crypto payments in this sector?

GG Alcock: I think it's too soon. I believe that the two forms of payment that are going to accelerate in the next couple of years, the first one is card payment, which I alluded to. And what we've seen is that with the collapse of the post office, the post office paid cash to social grant recipients, with the collapse of that, they all moved to Lesaka's product, Easy Pay, they moved to Capitec, moved to TymeBank. So we have massive penetration of debit cards in our society. So that, aligned with the ability to tap your card and pay, means that the card is now, in many ways, mentioned, it could be 60 to 80 percent of township transactions. Then I was involved in the launch of a product called PayShap. PayShap is a rapid payments product, so in essence you use your phone number as a proxy for your bank account, and you pay instantly across banking rails, so whether you're paying from FNB to Capitec, it's instant payment, up to 30,000 rand or 50,000 rand.

Alec Hogg: So crypto doesn't really—

GG Alcock: PayShap is, good, PayShap and card. Now if you look at PayShap, there's a product called PIX in Brazil, Trump hates it, he's been shouting off about it because he says it's competition to Visa and Mastercard, which are American companies. But PIX is the same as PayShap, using your phone number as a proxy and so on and so forth. PIX has now replaced cash in Brazil, to the extent that 70% of all transactions in Brazil, by value and volume, are PIX. UPI in India is the same as PayShap, and UPI is now about 80% of transactions are now UPI, and probably about 60, 70% in value in India. So in South Africa, PayShap and card are going to be the dominant form.

Alec Hogg: Yeah, yeah.

GG Alcock: It's a banking industry [product]. BankservAfrica, now also called PayShap in essence, it was dictated by the Reserve Bank, who said to the banking industry, "We need to incorporate this rapid payments product." So PayShap is going to be dominant. So crypto—

Alec Hogg: That's a banking industry [move]. I don't believe—

GG Alcock: So I do think it has big opportunities, there is an entity in Mossel Bay who are doing crypto very successfully, I think, but they're kind of, in essence, a closed user [group], and I think, until you get, banks will tell you the same, you need to get it as, not as a store of value, but as a transactional currency where you can buy a loaf of bread. I don't think we're there yet within this economy.

Alec Hogg: Pat Spainer says: I'm a London-based Australian entrepreneur, currently moving to Swartland, Western Cape, longtime Business TV follower. What Kasinomics opportunities does GG see in our farming communities surrounding our cities?

GG Alcock: Sure. So I've said before, I think that the goat sector is a massive sector, that's a three billion rand a year sector, three billion rand's worth of goats a year in South Africa, of which ninety-nine percent comes from smallholder farmers, only one percent from the formal sector.

Alec Hogg: Many rugby players, goats, or goats, proper goats.

GG Alcock: And we import 500 million rand's worth of goats a year from Namibia and Botswana, because we can't satisfy the demand. So I don't know if you can do goats, but I think there's a number of agricultural sectors that are doing well. If you just look at the fruit and veg markets, sixty percent of the fruit and veg markets is going into townships. So Joburg Fresh Produce Market does nine billion rand a year, sixty percent of that is going into townships around Johannesburg. There's a lot of business in terms of from farm gates into townships, bypassing formal retail and bypassing formal markets, and that ranges literally from fruit and veg to chicken. There's a chain called Roots. Roots is a wholesale and retail butchery. Roots is booming, supplying the township catering sector with meat products.

Alec Hogg: So if it was Pat, and he's now come from, well, he or she, come from London, Australian, living in Swartland, you would not go through the traditional route of whatever you're producing, but you'd actually go into the townships close by and start talking to the spaza shops there?

GG Alcock: Yeah.

Alec Hogg: The people in that space.

GG Alcock: Yeah, because even within those townships you have a lot of redistributors, people who are buying in bulk from a wholesaler or from a farmer, and then they are going and delivering it to different people. The potato business, eggs, eggs is just, you have no idea how big it is. Some of those wholesalers are doing one and a half million rand a day, they'll tell you that probably ten percent of their business is eggs. And there's a shortage, these guys are not getting eggs, eggs is a big thing in the township. So eggs, potatoes, most fruit and veg, fruit is big, meat, but it's interesting, it's certain cuts, so it's blade steak, which is the front of an animal, and rump and everything's at the rear. And many farmers have told me that they love this market because they can sell the rear of an animal to the formal sector, and then the front quarters, which are lean, like chuck and blade and so on, which are preferred in the townships, they sell that to the township sector. But it's about understanding what those offerings are. There's something called umleqwa, which is hardbody chicken, which is, in essence, a hardbody chicken, chicken. So it's, in essence, a luxury, leqwa is to chase the chicken in the yard, it means the chicken you are chased in the yard. It's a very firm, tough chicken that's boiled and cooked for probably, you know, two hours or so, but it's a delicacy in the townships, and most of them are layers that have reached the end of their laying time. I met a guy the other day who said, he's a young guy, he couldn't find a job, and so then he heard about these hardbody chickens, so he went to the guys who had layers out near Magalies, and then he said, "Can I buy your layers?" He got a cooler vehicle, he bought these layers, and then he'd go and sell them in town. He was selling like four hundred thousand hardbody chickens, he'd literally go and park in a rank, and these traders would buy from him and go and resell. Selling four hundred thousand a month, and he couldn't keep up with it. This youngster is like, and there's a white guy from the northern suburbs, and he was doing this business, he was like, I can tell you about Kasinomics.

So if you understand the, if you understand and you have to put in some work, like any business, understanding what are the flavours, the tastes, what are the, there's certain expectations people have in terms of what they're looking for. If you're supplying bread to the fast food outlets, it's unsliced white bread as an example, not sliced bread, and so on. So there are really big opportunities in terms of that, and the starting point is really mapping out the businesses in your closest little town, township, rural area.

Alec Hogg: GG, once again, you've opened my eyes, and I'm sure for anyone who's watching this conversation, the same thing as well, and it does appear to me that it's all about changing your view, changing your attitude, changing your perception, and you need to have an open mind to be able to do that. And thank heavens, we've got GG Alcock, who has a unique circumstance, whose pedigree comes from an area where he's been plugged in to a sector of the economy that's now really, really growing fast. And what I find so interesting is when you look at those retailers who are succeeding, why are they succeeding, and you dig a little bit, or scratch a little bit deeper, and it all now seems to make a lot of sense. GG Alcock is the author of the whole Kasinomics series of books. You can pick them up and educate yourself. I'm Alec Hogg, from BizNews.com.

GG Alcock says SA's R1-trillion "informal" economy is anything but