Ecommerce.co.za

The term "informal economy" is bull$&!t

by Simon Hartley: Founder at WumDrop.com.
WumDrop delivers stock replenishment consignments to township spaza shops
I wasn’t always in logistics.

Before I started WumDrop in 2014, I studied television scriptwriting, managed an editorial team, and wrote for eNCA. So I understand that words matter (despite the strange name of my business - but that’s a much longer story). I like words, and I like stories.

Words matter, because there’s a kind of magic, or sleight of hand to them. We tell ourselves that words are tools to convey meaning, and leave it at that, but in truth they also create, and then reinforce meaning over time. That’s because language tends towards efficiency. It takes less energy - less effort - to convey something at twice the speed and at 80% accuracy than at half the speed with 100% accuracy. But what we gain in convenience we lose in nuance.

Businesses understand this well, and leverage it to their advantage - it’s why branding exists, and it’s also why you look for Lip Ice™ when your lips are cracked, Tupperware™ when you’re keen to lose half of something, and a Frisbee™ when you’re eleven and/or own a border collie. Those names became nouns because over time, the subtext of the utility of the widget swallowed the original fact of the word; a brand name. And if you didn’t know any of those brands-as-nouns, Bing them.

The best consumer businesses value words, and understand their power, deeply.

It’s precisely because businesses understand the importance of words and the meaning they accrete over time that I say the following with my chest: the term “informal economy” is bull$&!t, and needs to be decommissioned, now.

“Informal economy” has become a catchall of complication and mess. A veritable woodworker’s screw jar of definitions, it means cash. It means a lack of compliance with the registering authorities. It’s a place where anything goes, except company taxes. Above all, it’s a place where we - the formal, legitimate businesses - aren’t, and don’t really plan to invest significant capital any time soon for any reasons besides CSI budget and public relations. It’s the place where we let loose the fresh MBA candidates to cure them of their idealism and energy.

As of 2021, “informal economy” is a phrase that absolves South African businesses of meaningfully serving the overwhelming majority of South Africans when things get hard, or complicated.

And I do mean most of us. Our “formal” retail economy comprises a whole 5% of total outlets in South Africa. We’re not even into double digits.

Why are South African corporates so operationally allergic to the spaces where most South African’s live? It’s hard to trade there, they’ll tell you. It’s not profitable. It isn’t efficient.

That’s fair. I think it’s hard, too. And I agree that most corporate route to market strategies for trading in townships are grossly inefficient.

Why is it hard and inefficient? Don’t ask corporate South Africa unless you like the feeling of your brain being full without the satisfaction of nourishment. You’ll get long, sanitised, analysed, quantified, reported, and duly noted tales of failed route to market strategies for “the informal economy”. It’s not a good story.

Here, let me try.

It’s hard because it’s the (apartheid) economy, stupid.

The Group Areas Act of 1951 removed black and brown people from choice living areas, and dumped them into significantly less desirable and non-arable areas. The choice land was either filled with or reserved for the population growth of whites. Local and national state infrastructure development continued at a decent clip to facilitate the comfort of the white populations. Professionals like town planners and engineers were enlisted to plan living and working areas, and the transport nodes that connect them. Trees were planted and parks constructed, as much for their relaxing and restorative qualities as their shading and evaporative cooling effects.

No such professional service or aesthetic consideration was given to the areas that would come to be called townships.

The underdeveloped black and brown areas were far enough away from white populations to protect their grotesque fantasy, but close enough to bus black and brown bodies into developed residential areas or peripheral industrial areas to exploit for cheap labour during work hours.

Corporate South Africa didn’t need to expand its footprint and infrastructure to townships in any meaningful way because, reduced to not a lot more than machines for white convenience, black and brown people didn’t represent a significant slice of spending power. You don’t need to pay a machine very much, if anything at all.

And in any event, the small quantities that they had to spend could be coaxed from them at some point in their commute. There wasn’t a lot of concern about how stressful it was for a black customer to have a choice between being late for work, or being late for curfew in a police state. There wasn’t a lot of concern that shopping outside of a township was an expensive prospect - one’s groceries would oftentimes attract an additional bus or taxi ride fair.

Build it (in the white area) and they (in the absence of any real consumer alternative) will (commute a significant distance to) come.

The net result of the dearth of town planning in townships is that no two townships are the same, logistically speaking.

This may shock you, but regular people are not engineers, or town planners. Town planning is not something that someone shows talent for in primary school. It’s a learned discipline. The only thing reliably common to all city-adjacent townships in South Africa is a big fat main road to drive a casspir down. So township spaces grew organically, differently, resulting in places that were non-replicable.

And this is the key thing that corporate South Africa, in general, has failed to grasp so far. If you’re selling (and therefore moving) physical goods, there is no such thing as one common route to market for “townships” (plural) or the “informal economy”.

There is no silver bullet. There is no panacea. That neat boardroom pitch deck is a beautiful pipe dream.

When you’re done grieving the bill you paid to McKinsey, let me give you some hope.

The specifics of how we do deliveries in any given township is a detailed story that I’ll be happy to tell you about if you ask me. But for the sake of brevity I’ll say this: each township needs to be approached on it’s own merits.

While there is no solution for townships, there is a solution for Soweto, Umlazi, Khayelitsha, Tembisa, Katlehong, Mamelodi, Soshanguve, Mitchell’s Plain, Ibhayi, Sebokeng, and so on.

The solution involves engaging the individual community, hiring from the community, and yes, it involves dealing with cash, and it will for a long time. Most importantly, it involves staying obsessed with the experience of every person in the delivery supply chain. Being focussed on someone’s lived experience is the beginning of empathy, stuff that is in short supply in a country where we exist in different universes, metres apart.

Empathetic solutions are more likely to be reliable, because they’re based on considerations that actually matter. Reliability wins trust. Trust reduces anxiety. Trust wins.

You know what else reduces anxiety? Being able to afford food.

If we can make township supply chains more reliable and efficient, we can make them cheaper.

If we can make them cheaper, we can pass the transport cost saving on to spazas, and empower them to compete.

When competition happens, we’ll put more spending power into the pockets of South Africa’s citizens and residents.

Creating consumer infrastructure is rarely profitable, and almost always very painful, and hard.

I’m reminded again of the lack of trees in Alexandra, and Tembisa. There isn’t a lot of shade in Tembisa on a hot day. In a city, the comfort and convenience of a shady avenue is the consequence of infrastructure and investment decades before.

In many ways, businesses like ours, and the ones who trade in townships now are pioneer plants. Very few of us will survive to enjoy the cooling shade of the canopy, but the canopy will eventually exist because enough of us broke ground with our small roots.

So at WumDrop we’re calling that ground the Main Market, because that’s where most citizens and residents of our country are, and it’s our mission to serve them. We’re following some large businesses into this space, some large businesses will follow us into this space. We need more. Join us, meaningfully.

It’ll be good for all of us.

Useful resources:
WumDrop
We’re obsessed with eliminating friction from last-mile delivery in Africa and creating an anxiety-free logistics experience for businesses, individual users, and drivers alike.
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