South Africa

South Africa’s hidden R750 billion economy

South Africa’s informal economy is estimated to be worth at least R600 billion, with the exact value being closer to R750 billion. 

This was revealed in the release of Lesaka Technologies’ South African Informal Economy Digitalisation Index, which tracks digital adoption in the informal economy. 

Informal economy expert GG Alcock explained that the informal economy mirrors the structure of a formal economy, with various formal sectors mimicked in townships and informal settlements. 

Alcock said that the spaza, superette sector – which he likened to the formal fast-moving consumer goods (FMCG) sector – dominates the informal economy. 

He estimated its value to be around R180 billion, with over 100,000 spaza shops nationwide and nearly 500,000 mobile traders. 

Blue chip JSE-listed companies, such as Shoprite and Tiger Brands, have begun trying to enter this market to capitalise on its rapid growth. 

Alcock said the informal FMCG sector is growing at around 22% per annum, compared to the formal sector at 14% per annum. 

Tiger Brands aims to have its range of products available in 130,000 to 150,000 stores within the next five years. 

It has partnered with 46,000 stores in the last two years to stock its products. 

The informal alcohol trade, including bottle stores and taverns, is another sector worth over R100 billion. 

Alcock said this sector, in particular, benefits the South African economy by paying a significant amount of tax. 

Other informal sectors, including salons and barbers, back-room rentals, and muthi traders, are valued at more than R10 billion each. 

In total, Alcock estimated the value of the informal economy to be at least R600 billion and is probably worth around R750 billion. 

Source: GG Alcock, Lesaka Technologies