South African township expert says BEE misses the mark

South Africa’s foremost expert on the informal economy, GG Alcock, founder of Kasinomics, said the government’s current Black Economic Empowerment (BEE) policies are misguided.

He argued that BEE policies should focus on supporting black entrepreneurs in South Africa’s informal market and scaling up their businesses.

Alcock, who has studied South Africa’s informal sector for decades, explained that BEE policies should be about scaling up, not starting up.

In a recent interview with BizNewsTV, Alcock stated that the government has a misconception that South Africa needs more entrepreneurs, and that current BEE policies address this need.

Based on Alcock’s research, the country already has millions of entrepreneurs who have been running very successful businesses for years. However, because these entrepreneurs operate in the informal sector, they are often overlooked.

Alcock believes this is a significant missed opportunity for South Africa, estimating that the value of this economy is between R600 billion and R750 billion.

“That is BEE. We shouldn’t be doing any form of BEE in terms of saying you have to appoint this or that person, we should be doing enterprise development,” Alcock argued.

“We should be doing enterprise development, where we say, ‘How do we build these businesses? How do we grow them, not as suppliers but actually as businesses in their own right?”

He believes that the government’s vision of an entrepreneur is mainly limited to people like Elon Musk, who run big corporations in the formal sector.

The government’s goal with its current BEE policies is to ensure that historically disadvantaged groups are employed in the formal sector, which often overlooks successful entrepreneurs in the informal sector.

“But actually, the real opportunity to change our economy lies in this space,” he said.

He said the goal should be to scale up existing businesses that are already performing well, rather than starting new companies.

Alcock explained that support for existing businesses in the informal sector can take many forms, ranging from education on marketing and management skills to helping them transition into the digital economy.

Government programmes could also provide them with finance models based on their turnover or help them with procurement closer to their sites.  

“There’s a multitude of things that would be completely transformative. At the flick of a button, quite honestly, we could transform this space,” he said.

Unlocking the informal sector

In an interview with Daily Investor in June, Alcock explained how the involvement of large corporations has also proven beneficial for the informal sector, and vice versa.

For example, Alcock advised Heineken Beverages on its Tavern Transformation Programme in South Africa. 

Through this programme, the company aimed to formalise and elevate township taverns as safe, well-managed social spaces that contribute meaningfully to local economies.

He said this programme proved highly successful and mutually beneficial for both Heineken and the informal taverns it supported.

Heineken was able to unlock a far larger customer base and sell more products without needing to open its own storefronts in townships.

At the same time, the tavern owners gained access to resources that ensured their already successful businesses were safer and better managed, ultimately enhancing the experience for both the company and its customers.

The immense value hidden in the informal sector has led several large corporations in South Africa to enter the market over the past few years.

Capitec’s business banking services are focused on small and medium-sized businesses, including those in the informal sector.

JSE-listed real estate investment trust Dipula Properties is also benefitting significantly from its retail portfolio located in underserved areas of the country, including townships.

Food producer Tiger Brands and South Africa’s largest food retailer, Shoprite, have also found significant success in this sector.

Over the past few years, Shoprite has rapidly expanded its Usave offering in townships and around informal settlements.

The brand was first launched in 2001 as a way to tap into the burgeoning informal economy. Its primary focus was on townships and ‘forgotten’ towns outside of major metros. 

This strategy has paid off, as these small-format stores currently dominate township retail. The company now has around 450 Usave stores across South Africa.

In the first half of Shoprite’s 2025 financial year, Usave increased sales by 6.8% and opened a net of 18 supermarkets.