Township Economy is Alive and Well in South Africa

Township Economy is Alive and Well in South Africa

FASA’s commitment to taking the franchise model into all sectors through an initiative with Inani and the Services Seta speaks to contributing to the upliftment of communities around the country. To this end, a key survey on township economy in South Africa by marketing strategists Roger Wilco lends credence to the potential that lies in the township economy. Their 2022 Township CX Report continues the momentum from their 2021 inaugural report by aiming to plug the gap with data collected from the very source – township and informal settlement residents.

According to the report, the vibrant, culture-rich Township Economy is alive and a thriving market representing hundreds of billions of rands in spending power – a market largely untapped and misunderstood.

Stuart Pennington, whose passion is promoting SA through The Good News (Pty) Ltd, shared these highlights from the survey in which 1421 respondents answered 29 questions. His take-out from this survey: “It would appear from this report that entrepreneurship, innovation and creativity are playing an increasing role in the dynamics of township life. Big business is taking a renewed interest.”

  • Half of South Africa’s population live in the estimated 532 townships around the country.
  • The aggregate township market represents hundreds of billions of rands in spending power; 8.2 million stokvels with 11.4 million members control R5 billion in savings
  • Half of South Africa’s population live in the estimated 532 townships around the country.
  • The aggregate township market represents hundreds of billions of rands in spending power.
  • 8.2 million stokvels with 11.4 million members control R5 billion in savings.
  • 75% prefer to buy local with many products growing their global presence such as Bathu footwear; Tshepo jeans and Tsonga sportswear.
  • E-commerce purchases have grown from 29% two years ago to 70% in 2022.
  • Social media plays an increasing role in purchase decisions Facebook 59%; WhatsApp 10%; Instagram 7%. Food delivery services are on the rise, currently at 29%.
  • Of the 1421 respondents who responded 6% had a monthly income of R30k +; 7% R20k-R30k; 8% R15k-R20k; 11% R10k-R15k; 11% R7k- R10k; 15% R4k- R7k; 22% $1k- R4k and 20% less that R1k. The respondents were evenly spread across all provinces.
  • Supermarkets and Spaza shops co-exist with Spaza shops increasingly upping their game technologically and becoming increasingly competitive with 29% growth.
  • Loyalty programmes are on the rise.
  • The most powerful influencers in terms of purchase decisions are Family/friends; newspaper inserts; social media; radio; special offers; TV.
  • Payments are made 35% cash; 30% card; 18% mobile phones; 17% store accounts.

Key insights can be summarised as follows:

  • South African fashion brands are increasingly seen as premium and desirable, with three-quarters of respondents choosing local over international when using their store accounts.
  • Township ecommerce is growing exponentially, with 70% of respondents having made online purchases in 2022, compared to 28% in 2021.
  • New delivery services are springing up around traditional township food.
  • While trust in banks has increased, they are seen as saving rather than investment vehicles. Fifty-eight percent of respondents belong to at least one stokvel; these are diversifying beyond the traditional saving model to offer investment opportunities.
  • Cash remains king, with trust in mobile payments and banks from a transactional perspective low. Education around smartphones and mobile payments is essential to grow this market.
  • For grocery shopping, convenience is key. Transport costs and proximity to SASSA offices make large supermarkets a strategic monthly venture, while spaza shops are used for daily items. Township loyalty programmes remain an untapped opportunity.
  • Word of mouth remains the most trusted recommendation source, while social media – particularly Facebook and WhatsApp – has overtaken TV. Trust in influencers and community leaders has declined substantially.

There remain significant challenges – with obvious opportunities.

  • Carrying cash
  • Service and cleanliness in shops not what it should be
  • Discounts advertised are not always delivered
  • Township consumers don’t like to complain, rather simply change supplier
  • Entertainment options still lacking

Full report available on Roger Wilco