The author of Kasinomics, GG Alcock, believes that the secret to more jobs and economic growth in South Africa lies in the Informal sector. He is passionate about bringing awareness, regulations and support from the government and the formal sectors to help these businesses realise their potential. Through research for his company Minanawe Marketing, GG has gained a great understanding of these Informal markets and the huge potential they hold. – Lizzie Cornwell
GG Alcock you are really plugged into the informal economy, Kasinomics etc. your gift to the world. Unpacking things that many other people don’t see but that means you are well connected there, what’s the feedback like coming from the Kasi?
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I live in Kyalami and it felt like I was in Soweto, everyone was walking in the streets and the kids were playing in the streets and so on. The fast-food outlets were allowed to open with deliveries, which I think was a really good thing, a huge number of these outlets have opened. It’s a huge point to say are they doing deliveries or just allowing takeaways. There’s quite a frustration around people wanting to get back to work, around the issues of people needing to work. I think there’s going to be increasing ignorance of regulations, this is month-end which means social grants and things are paid, which means the spazas have been quite busy. With all my network frustration at the moment, I sense people want to get back to work.
There’s lots of debate. I got an email from somebody today who said that there are something like 500,000 people saying – end the lockdown, whereas 5,000 people say, keep it going. Is there any upliftment within the informal sector?
If you look at what we’ve seen with the spaza sector and I believe the same has been seen in the formal retail sector, is the growth of basics. An increase in sales of things like flour and maize meal and a drop off on categories like household products and those elements. Households are focusing on food items in terms of purchases. The guys manufacturing maize meal flour etc. are in a very strong position and will continue to do so. In fact, the spaza sector is complaining about shortages of things like cooking oil, flour, maize meal and similar kind of products. If we look at the informal sector the only sectors that are open are the spices spaza, fruit and vegetable hawkers and very limited opening of the fast-food sector. The vast proportion of everything else like the mechanics and auto sector are still closed down. This is wherein a sense, we really have a big need for people to go back to work. A very large proportion of our population that are in that sector are immigrants, foreigners if you want to call them that. We’ve seen these 10 km queues for people queuing up for food, I believe a large proportion of those are not South African and they don’t benefit from social grants or all sorts of interventions and I think there’s a very big danger. We can’t just ignore it, whether they’re legal or not, what are we going to do about it? We’re going to see a large number of immigrants going back to work or reverting to crime. We need to look at a solution for low-income categories that go beyond just saying you have to be 100% South African. We can’t create a welfare state, so how do we find ways to allow these small and one-person businesses to start entering the economy on a slow basis. In our first talk back in the beginning of March I said that the real impact is going to be felt and May, people received salaries and were working in February and beginning of March to an extent, I think that May is going to be a tough month.
What is your view on the e-commerce sector vis-a-vis the informal sector?
Well, the starting point is that behaviours that have been established over this time period will not suddenly change back to the previous. Whatever shopper behaviours, consumer behaviours will happen over this time and over the next six months will continue. We have to look at those and say well what are those going to be? I believe that instead of online and virtual marketplaces that we have in the Western or more formal world, the reality is going to be about the local and neighbourhood. For instance, if I was investing in malls – I would invest in what I call strip malls closer to people in the neighbourhood because I believe that that’s going to grow. It’s not going to be as much internet shopping as WhatsApp and Facebook. I was sent an order form from shisanyama in Soweto that has placed their menu on Facebook and you can WhatsApp them your order with the pin number and they will deliver to you. If we look at online, I think that WhatsApp and Facebook are going to be platforms that people are going to utilise more and more. People mistrust the Internet and websites but they trust WhatsApp they trust Facebook because of their relationship and group-based element, there’s certainly going to be growth. The opportunity for cashless payments I wrote an article about on LinkedIn because I think that we’ve done very little, it’s all been about money transfer. It is going to be big being able to go cashless to utilise more innovative things like eWallet and money transfer. Traders that we’re talking to are saying they don’t want to handle cash because it is a risk in terms of infection. So not because it’s easier but because it’s actually dangerous.
Fascinating. Even in the informal economy is as you see, these trends are accelerating.
The low data or data-free platforms I think are going to be very successful. There’s a hash data free platform, a South African one with a product called Moyo messenger as an example, you can have free apps and free messaging. I think that people’s issue is that data is still expensive and that most apps and most online elements are very data-hungry with high visual content and video. There must be a huge opportunity if you just look at that data free platform.
There’s a question here for you from George Marin in Port Elizabeth. He mentions, ‘our painter in Walmer township mentioned that the food parcels are collected in excess by some who then sell it to Somali spaza shops, who break them up and then sell it into the township again.’ Do you find this?
I have heard many stories of this, there’s been a lot of stuff on social media claiming councillors and politicians selling items. I have no reason to doubt it. I have heard lots of stories about it. I would say that the Somali traders are traders first and foremost, and if they can get cheap stock they’re going to buy it and resell it.
I suppose it’s one of those unintended consequences of trying to help people. Let’s go to Neil Boyce’s question and he says, ‘Guys why are big business so silent when it comes to crazy laws and draconian attitude as GG will confirm. We have a crisis with regard to our informal sector and poor people. Government is still playing politics and big business is quiet. GG, thoughts?
I think big business is playing a political game to a large extent. We come from a government that believes in a welfare state that believes in a socialist economy. They would rather dish out food parcels even if the numbers don’t make sense. If you just look at the numbers, as an example we have about 15-16 million-odd households in South Africa and we give out like 100,000 food parcels in Gauteng and so on and so forth, so we’re never going to fill the gap. We do have a government that believes in a welfare state and no one wants to irritate the government. So there’s a lot of political games going on and the immigrant story that I mentioned earlier is an example. That’s the elephant in the room. We have hungry people and yet politically we are all saying let’s give only South Africans. We don’t have a history of big business jumping up and saying unpopular things.
