media & advertising
The informal market: it’s the township’s turn
There’s gold in SA’s vast and vibrant informal market, says an expert, who advises local companies to learn from those in other African markets
Many SA brands are losing out by not engaging with the eKasi, or township, market.
Strategic insights expert GG Alcock says this market segment was once "a swear word, a place to be feared, an apartheid ghetto". Today, it is "an amazingly transformed place".
"It’s a vibrant, eclectic mix of mansions, shacks, spaza shops, premium taverns, hawkers, taxis and hot wheels. To say I am a kasi boy or girl now has a sense of urban cool. [It is] said with swagger; you’re a survivor, a trend-setter, one of the mass majority of SA, with its majority urban and peri-urban populations."
Alcock believes brands that still believe townships are slums are making a huge mistake. "In this kasi market there are vibrant businesses, energetic people, a tight, networked social community, abundant hope and a glimpse of what our future is really like.
"Like the movie The Matrix, the informal economy is invisible but it is all around us, like a mist drifting by our car windows, hanging around on street corners, and covering the townships. It is growing at an organic pace unmatched by the formal sector."
Alcock, who has just written a book called KasiNomic Revolution, believes the statistics support his thinking. In SA there are more than 50,000 informal food takeaway outlets selling everything from kota (a quarter-loaf of bread with filling) to vetkoek and shisa nyama, and food trucks, where the top outlets turn over up to R50,000 a day, seven days a week. It’s a market, he says, that is worth more than R80bn a year. Furthermore, he says the R200,000. More than 500,000 hawkers or table-top vendors earn R1,500-R3,000 each a month in profit. And the backroom rental economy is worth more than R30bn a year.
"Not only are these outlets and traders paying VAT on their substantial purchases, but they are employing people and bringing in household incomes on a huge scale. In most cases the average rand circulates more often in a township informal economy than a formal one."
Alcock believes some brands are seeing value in the market segment. "Leading the revolutionaries is the Nigerian-based Tolaram Group, with its instant-noodle brand, Indomie. Within a decade [Tolaram] made Indomie noodles the No 1 consumer brand in Africa. Parmalat’s cheese slices have in 10 years become ubiquitous in township fast foods — kota and vetkoek — and domestic fridges, growing to a R1.5bn industry that never existed before. More recently, brands like Nivea are doing very well bringing premium brands into informal spaza stores in a premium way."
So why are brands failing to connect with this consumer segment?
"There are two primary issues," says Alcock. "The first is that, to a large extent, [brands] relate to consumers on a superficial level where Westernised black people are seen as brown on the outside but otherwise white. The second is that [brands] ignore the informal sector, perceiving it as subsistence, survival and unstructured.
"We assume our brands will trickle down from the retail giants and magically be successful in that space."
In reality, the informal sector is growing faster in retail, fast food and other segments than the formal sector.
Alcock says SA brands can learn important lessons from other African economies: "The rules for informal markets in Lagos are the same as those in Khayelitsha. It is critical to cater for local nuance and cultural anomalies, but overall the rules of the informal sector and the consumer or shopper in that segment are common and can be replicated."