Kasinomics founder and informal economy expert GG Alcock says South Africa’s township economy, valued at around R1 trillion, is showing strong growth.
In 1999, Alcock founded Minanawe Marketing, an activations business pioneering marketing to township and informal mass markets in South Africa.
He sold Minanawe Marketing in 2018, after which he founded Kasinomics, an advisory service that provides insights, strategies, and a route to market to the informal economy.
Kasinomics is also invested in several township-focused startups, making Alcock an expert in the informal sector.
Alcock told The Real Network that South Africa’s informal economy is estimated to be worth above R1 trillion.
“The numbers I have access to add up to an informal economy of R750 billion a year in terms of turnover,” he said.
However, he said these numbers only represent between two-thirds and three-quarters of the full size of South Africa’s informal sector.
That means that the true size of the township and informal economy is between R1 trillion and R1.125 trillion.
Based on Trade Intelligence’s research, Alcock highlighted a few of the biggest sectors by turnover in South Africa’s information economy.
- Spaza shops account for R190 billion across 100,000 outlets.
- The fast-food sector accounts for R90 billion across 50,000 outlets.
- The beauty sector accounts for R10 billion annually.
- The taxi sector accounts for R50 billion a year across 250,000 vehicles.
- The multi-sector is worth around R18 billion per year.
- Savings stokvels are worth R44 billion per year.
- The backroom rental sector in townships is worth R20 billion annually.
- The spaza shop rental economy is around R25 billion per year.
He added that numerous other large sectors exist in the informal economy, including automotive, construction, catering, car washes, and bakeries.
“If you take a mirror to the formal economy, you will find every sector represented in the informal economy,” he said.
“They are successful, and in many cases, these businesses came from the formal sector to serve the informal sector.”
Capitec CEO Gerrie Fourie also recently said the informal sector is under-valued, and that it forms an important part of South Africa’s economic future.
Formalising the informal economy
Informal economy expert GG Alcock
Alcock said it was a misnomer that informal businesses trade in cash and want to stay under the radar to avoid paying tax.
He said card payments have rapidly grown in South Africa’s informal sector. One company, Lesaka, has a R2 billion turnover through its card payment devices.
“In November 2021, 100% of these transactions were in cash. In November 2024, 40% of these transactions were from cards,” he said.
This shows that there has been a dramatic shift away from cash in South Africa’s informal economy, and this trend is accelerating.
Alcock said this shows that a hybrid model marrying the informal and formal sectors is emerging in the country.
“While the business remains informal, the payment methods are moving away from cash to formal digital payments,” he said.
Another area where the informal economy can benefit from formalisation is to secure the place where businesses operate.
This will help these businesses invest and grow, which in turn will create value and allow the owners to sell if necessary.
He likened it to hot dog stands in New York, where the owners must get approval and pay rent for the place they operate.
Alcock advised South African authorities to consider formalising a part of the informal economy to assist and grow this sector.
This includes leaving some of these businesses’ informal characteristics, which help them operate seamlessly, alone.
“We need to recognise that these are real businesses built by township entrepreneurs. Many of them are large businesses,” he said.
Source: Businesstech https://businesstech.co.za/news/business/821520/south-africas-r1-trillion-invisible-underground-economy/?utm_source=everlytic&utm_medium=newsletter&utm_campaign=businesstech
