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GG Alcock – On ‘Kasipolitans’; settlement in a flourishing township

By forcing people to stay at home, Covid-19 closure accelerated development the company of the town to the point that many residents support them and simply refuse to return to pre-pandemic shopping habits. In this fascinating interview, entrepreneur, author and informal economist GG Alcock explains how South African retailers are waking up to this reality and have launched land grabs into communities built by ‘Kasipolitans’. Alcock also blasts the ANC’s waste of taxpayers’ money to subsidize500 black craftsmen‘, a group of cadres who are qualified for “Stalinist” style distribution of taxpayers through their connections rather than business acumen. Taxpayers would be much better off, he believes, if the SA government would recognize already successful small-town entrepreneurs who have succeeded by overcoming dire odds – and whose businesses would take off with even a modicum of financial support. – Alec Hogg

GG Alcock is booming on informal kasi economy

Business in the industry is booming. It’s doing very well for a number of reasons which has actually led to many companies, retailers and so on entering that space. And the question is, why is there a boom? What has happened to a large extent is things like the cost of transportation and closures have actually created a situation where people are shopping locally. I talk a lot aboutCassipolitans,’ people who are deeply rooted in the town for everything from entertainment to shopping. Staying at home because of Covid meant people started looking around in terms of where they go shopping and to get their hair done and so on. It pretty much coincided with things like fuel costs and the inconvenience and cost of taxis. If you go to the mall, the queues since Covid are insane in the townships, people are queuing for 40 minutes to 2 hours.

About the use of the term kasi and what it refers to

When we look at the informal economy, we almost have to separate the informal economy and the town economy. And within the municipal economy, it is increasingly difficult to define what a municipality is. You have the historic townships, and if you look at Soweto for example, there were 29 suburbs in Soweto, now there are 35 suburbs and these new suburbs look nicer, like they’re not really townships, they’re townhouses and clusters. And then, of course, many of the municipalities have spread to the surrounding area, places like Naturena and so on. Wherever the towns are in nearby old white suburbs, they have become very numerous kasi-fied. You will find a car wash and a shisa nyama.

On how the formal economy and the media are ignoring the reality of what is happening in the informal economy

My second business book was called The KasiNomic revolution because I said there is a revolution happening in informal economies across Africa. The scale of these economies is useless and actually unrealistic. And by the same token, these unemployment numbers are a complete mess because no one is thinking about the businesses and other forms of income that are actually generated in such spaces.

In 2019 I found something closer to 12% and I would stick with the same number now. Just to dwell on the unemployment figures, I have said about 12% real unemployment and if you want to take the figures of say 40% that are listed, you have to put the word “formal” unemployment in front of that word because it reflects people who receives a paycheck, that has a paycheck and earns a wage or salary. If you look at it, if you look at this huge informal economy, the 150 billion rand sector of the spaza sector, fast food is 90 billion rand a year. The taxi industry is a 50 billion ISK industry per year. Traditional herbal medicine, an 18 billion rand sector. Hair salons, a 10 billion rand sector. None of them have paychecks.

Then beyond that there is a lot of passive income that we don’t measure. So, for example, all spazas are primarily foreigners or immigrant traders. They pay 25 billion rand a year in rent to the South African owners of the buildings where their spaza is located. There’s an additional $20 billion a year in the backroom rental industry, which is booming.

GG on the growth of the informal economy

So my question to people is often, is it true that townships have large homes with six or eight people in each home? Well, Stats SA shows that 25.7% of households are single-person households and 50% of households have less than three people per household. So 70 percent of households in South Africa have either 1 or less than 3 people per household.

Don’t be swayed by hearsay or media bias, which tells you a story about a grandmother with eight grandchildren living in absolute poverty in a shack, and then extrapolate that to say she is representative of the general population. Yes, these stories are true. Yes, there are unemployed people. Yes, there are poor people living in shacks, but 86% of South African households live in formal housing. So informal dwellings are a tiny minority. And why is it important? It’s important because when you look at it more and more, if you’re in a small home, you start spending more money on yourself and you start buying smaller premium sizes.

I have heard retailers say that consumers are under pressure because they are buying smaller pack sizes; are they buying smaller premium sizes because their budget is under pressure, or because they are actually a one or three person household? So one person does not need 12 kg of wheat or rice but 2 kg. People are spending more on comfort, if you live in a formal house you start spending on things like sofa and flat screen.

We see this in the construction and furniture industry in the malls, it’s just very booming, and we also see it in hair care and nails. The hairdressing salon is booming, as are the suppliers of these companies. If we look at the fast food sector, it is booming. Why is there a boom? Because again, if you are a small household, why would you go and cook?

There is a boom in the wholesale sector. Let’s look at the retailers. Shoprite is investing heavily in Usave and Usave Ekasi. Usave is essentially a local neighborhood store, Usave Ekasi is a containerized offering, it’s basically a mini Usave in it. There are around 280 Usaves across the country, which is their smaller version of Shoprite. And Pick n Pay has recently announced that they are going to launch a Pick n Pay Red format.

Mr. Price bought Power Fashion. Most people had never heard of Power Fashion, an affordable fashion company in townships or in informal settings, and they bought Studio 88. I think they paid $3 billion for it.

On key insights from the Kasi economy

A great insight is understanding the fact that consumers in the Kasi sector, the rural economy, are doing better and have more money than the big headlines tell you.

The second part about it is this recognition of local shopping that takes place in what I call city streets. If you look at the main arteries in the towns, more and more businesses gather around it, that’s where the foot is. Consumers are shopping there. It’s about the growth of the neighborhood, the smaller households. Covid has accelerated this growth significantly in the urban space.

There are 530 historic towns in South Africa. I built a database of the 80 that I call Town and Country Clusters. If you look to the north of Pretoria, there is a town called Soshanguve and next door to that is Mabopane, Garankuwe and Winterveld, it is what I call a town cluster. It is one geographic space and one economic ecosystem. Now, if you look at these clusters, they account for 80% of our urban and commercial turnover. If you are not in these spaces, you are half out.

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GG Alcock – On ‘Kasipolitans’; settlement in a flourishing township

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