South African FMCG players like SAB, Albany Bread, Pep, Shoprite and MTN have long recognised the economic power latent within this country’s sprawling townships. Others have too, but have not known how to tap into it. The rise of mobile commerce is changing that.
Sometimes it takes an outsider to spot the opportunity. Two years ago, Nederlander Jessica Boonstra opened an online business delivering groceries into the townships of Hangklip and Imizamo Yethu in Hout Bay.
Today Yebo Fresh delivers groceries across the greater Cape Town metropole, including Langa, Khayelitsha, Mfuleni and Gugulethu.
“There is a fascinating and dynamic food system in most of South Africa’s townships. It’s a market that is very much alive,” Boonstra says.
What struck her was that despite the opportunity, townships are underserved, forcing those who live there to embark on shopping trips at great inconvenience and expense.
“I was told that while the market was huge, it was fragmented with limited spending power and real safety concerns. So all the retail innovation and focus is on suburban shoppers. I thought this had to be an opportunity.”
Under lockdown, Yebo Fresh boomed. Already servicing consumers and small food businesses – from Kota Kota stalls to vetkoek sellers – it expanded to service NGOs, community soup kitchens and concerned individuals who wanted to ensure food reached those in need.
According to Boonstra, the company has delivered 65,000 food parcels since the start of lockdown. A small margin is charged on the groceries, and for orders under R500 there is a R50 delivery charge – but if families combine two or three orders this can be avoided.
“We went from a few hundred orders a month, to a few hundred orders a day,” Boonstra says. “We expanded our warehousing, grew the core team from six to 30 and built new systems.”
It was a case of catching the wave and riding it. Boonstra is not dismissive of the challenges of delivering into areas where there are barely streets, let alone street names and numbers, or of the risks. Safety and local know-how come from employees – drivers, pickers, senior management who are drawn from the communities:
“They understand the local dynamics, the areas where one needs to be wary.”
In addition, the company has partnered with community action networks and NGOs for additional insight. Boonstra is careful not to compete with established township businesses such as spazas and the bakkie brigade that delivers anything from food parcels to the kitchen sink. She says: “We want to work with them, possibly by supplying the spazas and partnering with local drivers.”
Manufacturers who previously had not taken the small business seriously, are now knocking on the door, which means better prices that can be passed on to consumers.
From food to fast fashion
In the past year, online fashion retailer Runwaysale.co.za has doubled its orders from customers in SA’s townships. It sells fashion items that appeal to brand-conscious consumers, but at discounted prices. The growth in demand came when the company built a mobile, or m-commerce platform and focused its attention on this sales channel.
“About 70% of our customers are using mobile to access our sites,” says Rob Noble, COO at RunwaySale. “This is up from 30% a few years ago, but in the townships, this is closer to 90%.”
The fact that a smartphone can cost as little as R500 is what is driving this trend, he says. Connecting with people over a mobile channel is not difficult but it’s important to ensure a good user experience. “The increase in takeup suggests we are getting it right.”
Orders are paid for via EFT or card – no cash. The company is exploring other finance options, but Noble is cautious on this point. “There is a moral and ethical side to this; we want the right partners with the right solutions that work for everyone – not just us.”
The company outsources its delivery, but as with Yebo Fresh, township deliveries are done in partnership with local drivers and small companies that know the lie of the land.
Recognising the value
GG Alcock, author of several books on the township economy, has for many years pointed out that companies are missing a trick if they ignore this market.
“The scale of the township economy is underestimated,” he says. Yes, many businesses are “survivalist”, with high failure rates and just one employee, but this cannot be assumed of all businesses. “We think the lady sitting on a box and selling vetkoek outside a school runs a survivalist business, but she sells 3,000 vetkoek a day, at R1 each. She would not change this job if you gave her a choice – she has been doing so for the last 26 years and in the process has put three children through university.
“What makes her business informal is that she cannot own her patch of turf, which makes it difficult to value or sell.”
Alcock estimates that there are 50,000 Kasi kos fast food outlets, 70,000 spazas, 30,000 spazarettes (smaller hole-in-the-wall shops) and more than a million hawkers across South Africa’s townships. And that’s just in the food sector. One way to connect with these operators, he says, is via mobile. But one should not assume this is a one-way street. During the lockdown, many of these businesses shifted to selling online, with Facebook or WhatsApp their preferred marketing tool. DM/BM
By Sasha Planting