RAPT BizTrendsTV: GG Alcock on KasiNomics - A growth trend reshaping Africa's economies

Afropreneur, marketer, speaker, and author on the subject, GG Alcock, unpacked the trends shaping the informal economy, why this economy is crucial for businesses and communities, and what it all means for South Africa's growth.

Alcock grew up in a Zulu Village, on the edge of the Tugela River in Msinga in KwaZulu-Natal, literally in a mud hut and like young Zulu kids.

In the late 80s and early 90s, he became a political activist.

“I moved to Johannesburg - Wandonga Zaduma in Zulu because it means a place where the walls thunder because it's a loud scary place,” he explains.

While he says he was not qualified for anything, so he never went to university, he did realise he had access to spaces that others did not and that this was a real opportunity.

“I could go into the Zulu migrant worker hostels and chat with my childhood Zulu friends. Equally, my political connections gave me access to the townships and hang out with the comrades in that space.”

The result is a business called Minanawe Marketing (which means you and I) he started with two friends.

While in the early 90s, the township and rural areas market was not considered a real economy, their business focused on the township and from that he has written books on the economics of the informal space, what he calls KasiNomics.

This interview is also available via downloadable App, Apple Podcasts and IONO.FM.

An underestimated economy

The informal economy/township economy is massively underestimated in terms of its scale and size.

"The word informal implies unstructured, unsophisticated, small scale, and low income, but the reality is that there are massive businesses in this space."

The concept behind KasiNomics is revealing that space. "In many ways, it is the future of economic activity, especially as the formal economy is in many ways flatlining, and this is a space that is growing,” he explains.

These are also not spaza shops.

“The reality is that if you take a mirror to the formal economy, you will find every one of those businesses represented in the informal economy, and there are a huge number of different businesses operating there. And in many cases, they are very successful businesses.”

He says the sector has a turnover of around R750m a year, but these are just the figures he has access to and this only probably represents two-thirds to three-quarters. Alcock also gives some of the numbers in the sectors that make up the informal economy.

A hybrid concept

There is a misconception that people stay informal or operate using cash because they don't want to pay taxes. There are many different reasons why people are informal. He also says that card payments have become huge in this space, which has seen a dramatic shift away from cash, leading to a hybrid concept.

“For a trader operating on a busy street corner on a taxi rank, informality is important because they're close to where their customer is, but at the same time, if they can formalise things like payments, and accept card payments, they formalise that part of their business.”

Formalising the security of tenure is also important.

Many people in this space operate from the front of a house in a container or a tabletop on a street in downtown Joburg. One of the reasons they don't invest in those spaces is because tomorrow, the metro police come and chase them off the streets.

Yet, he explains, that this is a real opportunity to create some sort of guarantee because once they are established there, they would pay rent, and invest in growing that business.

An example of this hybrid formality is hot dog stands in Times Square, in New York.

Importance of this sector

The formal sector recognises the importance of this market. For example, Capitec Bank’s audience is this market while if you look at shopping centres, township shopping centres are growing at 14%, and rural shopping centres at about 7%. Meanwhile, urban shopping centres are only growing at 4%.

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Misconceptions

Alcock points out misconceptions about the informal sector.

• Do not think these are not pretend businesses and entrepreneurs - businesses in the informal sector are real, with real entrepreneurs, and we need to recognise them as such.

• It is not a small sector as people think. The businesses are large.

• The misconception is that the sector is not doing well. It is doing doing well.

“For me the the starting point is that if we recognise them as businesses, then the formal sector, such as banks and financial services will build, products and services for this space and municipalities will cater to them to enable them to operate in these spaces,” says Alcock.

Advice to entrepreneurs, businesses, and brands

His advice to businesses and brands who would like to take the first steps to connect meaningfully with entrepreneurs in the informal sector is to recognise the depth and breadth of this market as every sector is represented and there are small and big businesses.

• Then you can choose what sector you want to engage in and at what level.

• Then understand what are their pain points or what are their issues that they struggle with to solve and to grow.

Alcock gives an example of a business he was involved with called Yebo Fresh, an online wholesaler that supplied bulk to spaza shops and fast food outlets. Yebo Fresh allows shops to order using the WhatsApp platform.

“This business understood a key pain point for spaza shops - that is when they have to get stock, they have to close their shop.”

The future

In his second book, KasiNomic Revolution: African Informal Economies> he says there is a revolution happening in this space.

Currently, he is working on the third book, KasiNomic Unleashed because he says in many ways there will be a liberation of the sector.

In addition, we will see continued growth and a continued formalisation of this sector, as he gives an overview of the sectors where he sees growth.

RAPT BizTrendsTVBizTrendsTV is a collaboration between Bizcommunity, Rapt Creative and The Real-Networks consortium, and the first-of-its-kind trend show focusing on global topics impacting future socio-economic trends from a uniquely Afrocentric perspective. Hosted by a leading voice in the African business trend ecosphere - fast-talking, fast-thinking Bronwyn Williams - futurist, economist, future finance specialist and business trends analyst - in conversion on trending topics such as AI, influencer farming, billionaire bunkers, distraction democracy, Gen Bees, hyper-capitalism, trade wars, exclusionary geopolitical policies, hot wars and more with leading PanAfrican futurists. A new episode is available on the last Tuesday of every month at 8 am on Bizcommunity’s official website and via The Real Network digital platforms.