In Johannesburg’s bustling CBD, the streets are alive with activity from vendors and formal retailers. Yet, there’s another vital force at play, the Kasi economy. This informal sector, thriving in South Africa’s townships, is driven by small businesses like spazas, street vendors, and local taverns. It’s the heartbeat of these communities, providing convenience and vital social connections.
The World Economics estimates that South Africa’s informal economy constitutes 29% of its GDP, roughly $250 billion. With over 11.6 million residents relying on this sector, its significance cannot be overstated. According to Global Africa Network, the Kasi economy functions almost in a circular manner: businesses are started by locals and supported by their neighbours, with more than 70% of South African households frequenting informal traders.
Contrary to popular belief, spazas often offer cheaper goods than major retailers. This affordability, combined with the convenience of shopping close to home, means township residents spend a substantial portion of their earnings within their communities. Despite economic challenges like high food inflation and stagnant wages, the informal sector has shown resilience, with a +6.9% sales growth in 2023.
Technology is playing a transformative role in this sector. Digital adoption is expanding across informal trade from stock sourcing and marketing to e-commerce and payment systems. 26% of spaza shoppers now use online platforms for their purchases. Additionally, fintech innovations, such as affordable point-of-sale devices and digital payment options, are enhancing the sector’s efficiency.
With the combined market value of informal and formal retail sectors approaching R456 billion, there’s a significant opportunity for growth beyond South Africa’s traditional economy. Modise emphasizes that success in the Kasi economy requires learning from experienced players who have navigated its complexities. However, potential tax increases could threaten this vibrant sector, impacting the township economy and possibly driving some traders out of business.
The Kasi economy’s growth reflects the potential for transformation and expansion within South Africa’s informal sector and its pivotal role in the nation’s economic landscape.
