03/02/2023
SPEAKERS CORNER: TOWNSHIP INSIGHTS
HOW SPAZAS AND SME’S ARE COPING WITH EXTENDED PERIODS OF LOAD SHEDDING IN SOUTH AFRICA, VERSUS FORMAL BUSINESSES WHO HAVE THE MEANS TO UTILISE INVERTERS, SOLAR ENERGY AND GENERATORS, WHILE OUR ECONOMY TAKES STRAIN.
As South Africans, we are incredibly resilient. Time and time again, we've seen South Africans show up in the spirit of Ubuntu, doing what they do best despite the headwinds of lockdown, high interest rates, higher cost of living and of course load shedding.
During lockdown, we at the AKELO Group and across our products and brands like Bonsella and 2Engage, found that our lives as we knew them, were pretty much locked down, whereas life in the townships simply carried on as ‘normal’. Life in the informal sector is one of necessity - it's a pragmatic thing. You can't not go out and buy food, simply because many do not have a deep freeze or even fridge at home, for example.
Says... Stuart Hoy, Head of 2Engage & Retail Engage
As a corporate South African business, we’ve had to deal with the load-shedding problems that directly impact our employee efficiency and productivity, and therefore our bottom line. For example, when the nation experiences load shedding, businesses are negatively impacted by intermittent, and often no internet access due to the rolling outages, but this does not impact the spaza businesses in the same way.
What we have seen through the extended periods of load shedding, within the +2500 spazas and SME’s that we work with to attract, connect and engage with customers, is that life pretty much continues. Not quite as usual but “as usual.” They normalise it.
In our interactions with the main market at our independent retailers, they have generators, and again, life carries on during load shedding – even though the traffic lights go out and cause havoc in the cities etc. South Africans make a plan, many of the spazas themselves just turn the power off during the day – a lot of the business is cash transactions, so they’re not affected by online transactions etc
The biggest negative impact in the spaza areas is that they rely at some point on technology like fridges for things that need to be kept cold throughout the day. With that said, we’ve seen the shop owners getting ice when they buy their products, and making a plan.
South Africans in general are resilient. Our informal trade, even more resilient. Without finance to install the necessary measures, they get up every day and make it happen. Everyone works around it as best they can, while ‘waiting’ for something to happen or change. Perhaps we are a society that is too complacent.
Employers are not able to give employees an increase, and the nominal increases year on year are not inflation linked. Everyone is trying to make the best out of the situation we find ourselves in, and what we value. The average nominal take-home pay was recorded at R14,633, 4.8% lower than the R15,403 reflected in the previous year. (Ref: The average take home pay in SA published in BusinessTech)
The big opportunity has always been how we're able to enable that ‘person’, being the spaza shop owner or SME business owner and their families or employees, to live a more empowered life. And this is what we've always tried to build with bonsella.
Bonsella rewards people's behaviour, and we've seen that continue through the impact of load shedding. We've seen people being more in demand for that. And we believe that bonsella mobile will be a great addition to that.
As far as industry goes within that area of business, informal industry has always made a plan. And we don't have a barometer for that. But what we can tell you is that people are still buying, people are still eating, people are still drinking, they're still partying and life carries on. Kids still need to go to school, they still need to be fed, nappies still need to be bought, Aquafresh still needs to be put on the brush, and it’s the same.
We've seen our FMCG clients continue to grow, year-on-year. And in fact, everyone seems to be showing more and more attention to this area. So it is a big opportunity, I believe. I think the biggest problem is that it's a brake on the entire economy, as opposed to stopping the entrepreneurial spirit of Ubuntu and businesses and people alike always making a plan. With that said, it has just gotten harder than ever, and no one seems to be helping.
The only way we can push through these challenging times, is to keep churning; and support local. Local economy needs empowering, but we're not going to do that by charity. We're going to do that by enabling, and getting the local painter to paint a wall, for example. And that’s what we do within WHM, our subsidiary that brands and maintains our customer sites and wall spaces, engages with the trader to gather stock data, influences the decision maker’s buying behaviour, and digitally rewards the consumer for “stickiness”.
In addition, we pay media fees to the local owners, whereas most media owners don't in this space. We also give them free Wi-Fi and enable them with discounts to the wholesalers and to the retailers. So we have a big drive to do that from an FMCG sales and engagement point of view, which would look at spazas, taverns, salons, hardware stores, and so on. In other words, they don't have bank cards, everything is cash and they try to keep a low profile. As a result, financing of power solutions or alternatives, is not an option for them as banks won't consider them because they don't have to credit rating.
One of our AKELO Group projects that we are busy building out, is our bonsella trader model, which builds out SME’s and spaza shop owners’ credibility, based on their transactions. Through that, we're able to then reward them with product, not financing, which they can then sell and restructure, and refinance. There are opportunities, through our partnership point-of-sale model, that allows them to claw back a percentage of the costs through the transaction fees of that, and that's also in the pipeline for us as well. But right now, it doesn't exist and the best option is to enable, understand and grow the market by buying in bulk discounts and being able to enable them that way.
We love the African spirit. Regardless of politics and the current situation around all the parastatals in South Africa, everybody makes a plan - and that will always drive us forward. There's this huge amount of necessity to feed ourselves and feed our children.
We have got 2.1 million Bonsella subscribers and they are engaging and willing. To add, we've also got all these independent traders nationwide, we've got FMCG campaigns, and all this cool stuff happening. Business is not going anywhere. You could say it's “business as usual, despite the challenges”, but only on the surface. We see promotions working, but people are finding business harder. Our customers like what we do, because essentially it puts ‘money back in their pocket’ through our bonsella promotions.
We have seen time and again that consumers will make a purchase decision for a 10% (R2 to R3 airtime reward) will shift the needle on the market and on individuals’ willingness to buy. For example, you buy 10 items of ours and that's R20 airtime that you can spend on a taxi or get your kid to go to school or buy lunch with etc.
So essentially it is business as usual for us on the surface, but much like a duck peddling its feet frantically beneath and calm on the surface, people are finding it hard; and fortunately they are resilient.
On a group level, the AKELO Group’s purpose is to make a real impact in the day to day lives of millions of people and merchants, by simplifying access to products and services in emerging markets – despite the difficulties and impact of load shedding on our current economy.
We love our country’s Ubunti spirit and attitude to rise, no matter what, and we will continue to support and enable SME’s and spazas with what we believe to be a great opportunity to provide products that solve problems and that are cost effective, whilst enabling and empowering the lower LSM with bonsella and bonsella mobile.
Join me at Tapping Spaza Growth 2023 webinare series on 22nd and 23rd March for astute inisghts. https://comms1.everlytic.net/public/landing-pages/TMO_2023_program-IPQigL8sJ3BI5RpC
Need help marketing your products? Id live to hear from you.
Stuart Hoy
Head of 2Engage & Retail Engage
M: +27 (76) 107-2896
E: [email protected]
For more information on AKELO and its affiliate companies in the AKELO Group, please visit https://akelo.co | [email protected]
