With the budget speech in South Africa (by Finance Minister Pravhin Gordhan) coming up this week, it is anticipated that the Finance Minister is likely to be focused on growing the sluggish South African economy, but a hidden online economy has quietly been thriving beneath the surface that we have not yet begun to explore fully.
"E-commerce is a hot topic in South Africa, with varying opinions about its success in the country."
However, these analysts only measure a small and formalized part of the larger e-commerce realm. For example, within e-commerce we have several pure-breed digital players, born and raised in the cloud, such as Takealot.com or Superbalist.
The next layer mirrors offline retail, e.g. a grocer who offers an online store front with home deliveries. (Only about 1% of retail transactions occur in this way currently, but it is growing rapidly).
Then then are services such as AirBNB and Uber, and the e-tail long tail (such as Hellopretty and Etsy).
Lastly, the biggest players of all – online classifieds. :-)
All of these fall under the umbrella of e-commerce, despite being so different. All fall in different locations along the life cycle bell curve – some are in their infancy, others are innovating to sustain growth, and some have already heard the death knell marking their obsolescence. Perhaps surprisingly, the players that have made the biggest impact are the ones that could be classified as the informal model. I say 'perhaps' because if you consider the marketplace, it’s no wonder that conventional retail is less popular.
"Many couriers do not deliver to townships or areas without street numbers. Many South Africans are wholly with a bank, and definitely do not have credit cards. Others are put off by the lack of choice and variety. The store model of we supply, you buy is being disrupted in a big way."
What has taken its place is ordinary South Africans who are buying and selling and trading using their cellphones.
An entrepreneur selling home-made furniture or refurbished goods may seem insignificant when viewed on his own, but have you ever considered what we would look like if we had a conventional retail store?
We offer close to 1 million products and services under a single roof. Our car lot contains over 90,000 cars ranging from 1980 Citi Golfs to luxury Ferraris, averaging a value of R120,000, 1.3 million car shoppers visit this car lot every month – impressive, seeing as how less than 650,000 new cars were sold in 2015.
What has taken the place of the traditional online store model is ordinary South Africans who are buying and selling and trading using their cellphones. Tweet
We would need 3,500 clothing rails to display our clothing (and would always have something in your size!). We would never be out of stock, despite clearing our stock once every 30 days, and we’re never closed. That is a mind-boggling business, operated entirely from personal computers and cellphones across the country.
Lean Hard On His Cabinet Colleagues
If Pravin Gordhan really hopes to see more South Africans employed in 2016, he needs to lean hard on his cabinet colleagues responsible for our telecommunications framework and get them to do everything possible to expand the reach and speed of our data infrastructure and to reduce the cost of its use.
According to a recent article in Business Day, an estimated 2.4 million South Africans are employed in what is called the 'hidden economy'.
If, every three years, each of those people gained a new colleague, the current unemployment problem would be solved within 10 years. (Globally, it is already responsible for 1.8 billion jobs). According to analyst Robert Nuewirth, the global informal economy will contribute up to 50% of world economic growth over the next 15 years.
Here’s another compelling thought: if all the informal online traders were actually a country on their own, their nation’s economy would be worth 10 trillion US dollars – making it the second largest economy in the world, after the United States.
It’s an economy of under-appreciated power and scope.
Most of us also know that our bandwidth speeds are low by global standards and our data costs are sky high. If we can sort out those two hydra-headed monsters, then each of those smartphones can become an economic liberator, particularly for undervalued and underemployed youths.
Youth across the economy are comfortable in this trading space, either as a business tool or as a way to get some much-needed cash from unwanted goods, and for finding almost anything – transport, accommodation, employment.
South Africans are already taking the budget into their own hands – and it is working.
Cover Image, Vilakazi Street, Soweto, South Africa | South African Tourism