Technology could formalise spazas and boost growth

Laptop Picture: Free stock image/pixabay
Laptop Picture: Free stock image/pixabay

I contend that the lack of detailed information of township consumers today is as discriminatory as the exclusion they suffered under apartheid.

Detailed empirical data for township research and marketing is nonexistent, a surprising fact given that half of South Africa's urban market lives in these settlements, according to a 2014 World Bank research report.

The study found that Diepsloot, home to more than 200000 people, had R2-billion spending power that was mainly spent in the white suburbs of Sandton and Fourways.

But ask any of the country's main supermarket chains or indeed fast moving consumer goods producers and none of them would be able to provide a complete profile of their township customer, more than two decades after the end of the apartheid economy which created these areas as pools of cheap labour.

Amidst the information spawned by the internet and improved data and information collection, there really should be no reason for the dearth of market information on a massive segment of the market that can only grow.

I believe that one of the ways we can improve the lives of township and informal settlement dwellers is through the transformation of the retail value chain. This is a role only the private sector can play, harnessing the power of market forces, entrepreneurship and technology to change lives.

The technology that proliferates around us and which we take for granted should be at the forefront of efforts to gather information on a population segment discriminated against during apartheid, which now finds itself again at the end of a long and inefficient value chain.

So who needs to do what?

Manufacturers need to gain a better understanding of one of their main market segments in order to increase sales just as much as the retailers need to know who is emptying their shelfs.

That this information is lacking more than two decades after the dawn of democracy is a perpetuation of the economic discrimination the group suffered under apartheid and should invite the same opprobrium that brought apartheid down.

Better information means improved marketing and transparency which in turn should result in efficient pricing and value for money for some of the most marginalised groups in our society.

Huge opportunities exist for growth in the informal retail sector with prospects to expand the service offering and convenience for customers to include new distribution channels for banks, insurers and other financial services providers.

The technology that can help township merchants to also buy from their suppliers and pay without using cash, is available.

By bringing data, transparency and efficiency to more than one level of the supply chain, it is possible to further reduce prices for township consumers and build a rich set of data throughout the supply chain.

 By using technology to provide updated pricing and transparency to township consumers, we enable better decision making on their part which should result in direct cost savings.

A start on this journey would be a more concerted effort to collect data on the merchants that serve these underclasses.

Estimates of the number of spaza shops in South Africa are reported to be north of 100000 by global researchers Nielsen. Our (conservative) estimate is that this number could be as high as 350000 outlets.

Knowing where these shops are, what they sell, in what quantities and who they are selling to is an important part in breaking down the township market into bite sizes that will enable us to understand them better.

Technology could be the catalyst for formalising the spaza sector and the start of the long road to bridging the gap with the formal sector while contributing to building the inclusive economy South Africa desperately needs.