Statistics at the Bottom of the Pyramid

These products are defined by only a few market players:

• Stokvels: are sophisticated buying co-operatives and lending services that operate in housing, health, food, energy and financial services
• Spaza shops: are sophisticated aggregated purchasers and redistributers of food, energy, telecomms and personal services
• The Taxi Industry: acts in product distribution and transport

Other sectors, like the shebeens and ICT are already highly sophisticated. SABMiller has a dedicated support network distributing products to their best customers. Vodacom and Cell C have their telecommunications strategy in the township clearly branded and defined.

In the diagram you can see how these different markets are represented as a share of the informal market's expenditure. MTN, Vodacom and Cell C are the most obvious and clear faces of companies who are profiting by selling products aimed directly at this market. The companies are valued at billions of Rands yet the ICT industry is only 1.8% of the informal economy. What else are the poor spending their money on that could be an opportunity for you?

Distribution of goods is often considered a problem in a highly agrarian society. But South Africa isn't very rural. More than 70% of India's population is rural. 57.7% of South Africans live in cities - distribution isn't your problem.

Here are a few more statistics about the informal sector:

• The informal market encompasses 53% of the entire adult population with a monthly income ranging from R 777 to R 2 205 - more than 40% earn less than R 1 000 per month.
• In 1999, StatsSA estimated the number of entrepreneurs (self-employed persons) to be about 1 630 000 or 3.7% of the population. About 70% of these 1,6 million entrepreneurs operate in the informal sector, 41% are women
• Gauteng and the Western Cape have the highest SMME densities, whereas it is much lower in the rural regions. In the Western Cape there were 12 urban enterprises for every one enterprise in a rural area; in the Eastern Cape and North West province - for each urban enterprise there were almost two rural enterprises; there was a one-to-one relationship in the Northern Cape. Mpumalanga there were 1.4 rural enterprises for every one urban enterprise and in the Northern Province there were 6 rural enterprises for every one urban enterprise. In Gauteng there were 34 urban enterprises for every rural enterprise.
• According to the Trade and Industrial Policy Strategies, ‘It must be emphasised that the weight of the smallest size categories (micro enterprises) is overwhelming. Although their contribution to GDP is minor, they represent between 1,2 and 2,8 million businesses, ie between 69 and 80% of all SMMEs’.
• Trade and service activities tend to account for more than 50% of the enterprises in both rural and urban areas – the sectors prone to ease of entry and exit, to low incomes and skill requirements. In rural areas, trade, services and agriculture together account for more than 85% of the self-employment activities.
• Informal entrepreneurship has boomed in South Africa, with a total growth of 10.9% in the period 2002-2003. Growth seems highest among African women at 13.9%, while for African men growth was 10.7%

• The informal sector was estimated to contribute more than 6.5% of GDP. According to StatSA, informal sector activities (which incorporate micro and very small enterprises) absorbed 2.7 million people or 26% of the employed labour force in 1999. The estimated income contribution in 2006 was R 97 billion.

Let's look at these major market players ...