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Transport Costs: Why Townships Are The Economic Future Of South Africa

In South Africa, where public transport can cost up to 10 percent of monthly income, informal spaza shops located conveniently in townships pose serious competition to formal supermarkets and other retail stores that are harder to reach.

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Spaza shops are “a multitude of small informal shops who form an invisible matrix in the informal economy,” said GG Alcock, CEO of Minanawe Marketing, in a BizNews report. Minanawe is a specialty informal sector activations business. Alcock is author of “Third World Child” and “Kasinomics.”

About 20 percent of all money spent in South Africa is spent in informal stores, to the tune of $2.94 billion US per year, according to to Nielsen, a New York City-based global information and measurement company.

Spaza shops offer goods in small quantities at cheap prices, and they’re evolving to be more organized and increasing the range and variety of brands and categories they offer. They’re conveniently located on commuter routes or close to shoppers’ homes or workplaces.

While modern trade stores have seen a 9 percent annual increase in spending, traditional trade stores have seen 10 percent increase, Nielsen reported. They’ve also seen a 7 percent increase in the number of goods sold compared with the modern trade sector’s 4 percent.

Improving business opportunities in townships is key to improving South Africa’s economic woes, said economist Moipone Molotsi, director for small business development at University of Johannesburg, ENCA reported.

Social grants have grown dramatically in South Africa, with large amounts of money suddenly entering the lowest income groups — $8 billion US was paid in grants in 2015 alone, according to Alcock.

Spazas are “an invisible giant … awakening in the informal sector which is winning the purse and growing faster than the formal sector,” Alcock said.

They also made headlines around the world when foreign-owned shops were vandalized during xenophobic attacks in South Africa.

In 2010, the vast majority of spazas were run by immigrant traders, according to DailyMaverick.

There are now about 100,000 outlets split 70/30 between spazas and spazarette outlets. What’s the difference between them? Spazas are a hole in the wall offering small quantities, “very much the forecourt of the township,” Alcock said. Spazarette are larger — more like small, informal shops.

Of the total, about 70 percent are foreign run, mainly by Somalis, Ethiopians, Bangladeshis and Pakistanis. Research shows that the average spazarette turns over between 85,000 rand ($5440 US) and 200,000 rand ($12,807) a month.

On average, informal retailers are 7 percent cheaper than formal retailers on a basket of branded groceries, according to an informal retailer grocery price survey, Alcock said.

By shopping at an informal retailer, consumers avoid transport costs (20 rand or $1.28 for a return trip) to a formal retailer.

Spazas are getting more popular among modern trade shoppers, according to Nielsen. In 2012, 38 percent of people surveyed said they’d visited a spaza in the last seven days compared to 48 percent of shoppers today —  a 10 percent increase.

Shoppers visit spazas more than four times a week on average (18 times per month) compared to supermarkets which they visit once a week. That means four times as many opportunities for brands to connect with consumers and increased opportunities to expose them to new products, Nielsen reported.

So why is the informal sector growing? The main reason is the cost of transport to the formal stores. Public transport can cost up to 10 percent of consumers monthly income and shoppers must also pay for a second seat for groceries. Recent research showed shoppers included the cost of transport in their grocery budget. Transport costs often negated the savings. Although a formal retailer may only be 3 to 5 kilometers away, a taxi will cost a minimum of 20 rand return, and no one is going to walk that distance when the informal shop is just around the corner, Alcock said.

“The informal economy … could be a large part of what is keeping our economy afloat,” according to Alcock.” Open your eyes to the invisible matrix of the informal economy, it is here to stay and may be taking over a shop near you.”

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Source: afkinsider


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South Africa: Tourism Has Potential to Create Jobs

Pretoria — The tourism sector has a huge potential to create jobs, says Tourism Deputy Minister Tokozile Xasa.

Speaking on Tuesday at the Tourism Trade show in Singapore, Deputy Minister Xasa said the tourism sector was continuing to think innovatively about new and exciting ways to attract visitors.

“This is exciting news for budding entrepreneurs and the youth of the country, as innovation is very often the cornerstone of what sets one business apart from the next and allows new start-ups an opportunity to gain market access.

“Especially in our townships and rural areas, cultural tourism is a niche that continues to offer opportunities,” she said.

The Department of Tourism is partnering with business owners in the sector to leverage off the unique heritage of the country, especially in terms of the country’s liberation struggle history.

Deputy Minister Xasa said the sector is valued due to the fact that it has very few barriers to entry for new businesses, especially when compared to other industries such as mining.

“In addition, the sector is less capital intensive than most others while also being more reliant on human capital,” Deputy Minister Xasa said.

She said the National Development Plan prioritises Small and Medium Enterprises as an important strategic driver of growth.

“Significant resources are being made available across a variety of departments to grow small businesses, stimulate a mindset of entrepreneurship and ease barriers to entry for our already enterprising South Africans,” Deputy Minister Xasa said.

She said the consistent increase in tourism arrivals over the past few years is testament to the success of a variety of initiatives from the side of government and in partnership with business

According to the national statistics agency, tourism made a direct contribution of R103.6 billion to the Gross Domestic Product in 2013, rising from R93.5 billion in 2012.

Domestic visitors contributed 57 percent of the total tourism spend in 2013, while international visitors contributed 43 percent.

“The tourism industry employs 655 609 people directly and 1.5 million both directly and indirectly. One in every ten jobs in our country is supported by tourism,” Deputy Minister Xasa said.

Source: iol


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