Entrepreneur and informal economy expert GG Alcock said there is a false narrative regarding South Africa’s economy, which is much healthier than what people are told.

“We are bombarded by terms like South Africa being the most unequal society on earth, surrounded by poverty,” he states. “There are pictures in Time magazine of rows of shacks right next to fancy houses. We see the same shacks as we fly into Cape Town International Airport.”

Therefore, people believe that poverty, inequality, and living in a shack is true for a majority of South Africans. Alcock said it is a false narrative that is not true for most South Africans.

He highlighted an example of this false narrative in a recent headline, “Cash-crunched consumers turn to alcohol and clothing”.

The article was based on the fact that Shoprite’s alcohol business grew by 17% and Pick n Pay’s clothing business grew by 12%. Alcock said the growth had nothing to do with consumers struggling. In fact, it was because consumers had more money to spend on alcohol and clothing.

There are also many stories of a grandmother living on the breadline struggling to feed the eight children she looks after. Although the story is true, it is not representative of the majority of South Africans who are living far more comfortably.

Alcock said there had been a tremendous transformation of housing in townships across South Africa, seen in the latest statistics. Over 86% of South African households live in formal dwellings. Only 12% of households live in informal dwellings, like shacks.

“If you go into townships today, you will find that most houses are impressive formal houses,” he said. In Orange Farm, for example, there used to be rows and rows of shacks a decade ago. Today, most people live in nice houses.

It is striking that none of it has happened through official home loans. These houses were mostly built using lay-bys, stokvels, and informal loans.

Another misconception is that South Africa is characterised by large households with many people living under one roof. Alcock said the average household has 3.3 people. 23% of households in South Africa have only one person, and 18% have two people. “People are moving out of their communal households into their own homes, creating a massive sector of backroom rentals,” he said.

The backroom rental economy has grown to an estimated R20 billion annually. “That is a conservative figure. It is most likely double that,” he said. This is part of the move to smaller households with more disposable income and where people spend more money on themselves.

The result can be seen in shopping patterns, where there is a decline in buying large bags of flour, sugar, and rice. “This decline is sometimes mistakenly attributed to consumers struggling when the real reason is that smaller households don’t require large pack sizes,” Alcock said.

He said while many South Africans are struggling, the reality is that most people in the country are still consuming products. “People in South Africa are largely under budget pressure and not income pressure,” he said.

South Africa’s black middle class is now estimated at 3.4 million people, accounting for nearly half of South Africa’s total middle class.

“There are a lot more incomes out there than what the official unemployment figures suggest,” he said.

Informal economy

Alcock said the informal economy, often left out of official national figures, is booming in South Africa.

  • South Africans earn at least R20 billion per year in backroom rentals.
  • Salons and hair extension sellers earn R10 billion per year.
  • R25 billion per year is earned by spaza shop rentals.
  • The spaza shop market is worth R160 billion annually across 100,000 spaza shops.
  • The informal fast-food market is worth around R50 billion annually across 45,000 outlets.
  • 45,000 licensed taverns and shebeens earn R110 billion each year.
  • The taxi industry earns R50 billion per year.

He said the first business unemployed young people start in a township is car washes. It shows the booming car market in these areas. “There are 10 million unfinanced and generally uninsured cars on our roads. We now have traffic jams in townships,” he said.

He said the fact that car washing services are booming in townships shows that cars do exist in numbers.

There is also a boom in township mechanic businesses. “There are 80,000 mechanic and panel beating businesses servicing the taxi industry and unfinanced car sector,” he said.

Many other examples of thriving informal economic sectors exist, which are overlooked by mainstream reporting and media articles. “There is incredible growth in entrepreneurship and independent businesspeople in South Africa,” Alcock said. “We should be celebrating this entrepreneurial revolution and look at how we can enable and support them.”