Two seasoned financial professionals have come up with a plan, designed to solve one of the biggest finance headaches for township spaza shops.
It involves their establishing a “fleetless” logistics company.
Siya Ntutela, a private banker born in the Eastern Cape and raised in Mpumalanga, and Mdu Thabethe, an Mpumalanga-born and bred credit expert specialising in small and medium-sized enterprises, initiated Zande Africa back in 2015.
An innovative financial technology logistics company, its objective is to help the spaza shop market flourish.
It offers spaza shops with credit lines to stock up on various supplies.
It also delivers the supplies and has created a seamless ordering and payment system that is convenient and reliable.
Speaking to City Press at the company’s offices in Sandton last week, the two entrepreneurs explain the difficulties involved in forming Zande Africa.
Says Thabethe: “As part of our licence with the National Credit Regulator, we have to respect the National Credit Act (NCA). The bottom end of the market – our market – fits NCA requirements in that they do less than R1 million in turnover, are sole proprietors for the most part and do not borrow more than R250 000.
“So, we have a system that gives us trading patterns and activities because, in most cases, the spaza shop owners do not have documented financial records.
“This means that before we extend credit, we first trade with them on a cash basis for three to six months, and the system is able to tell us about stock levels and profitability,” Thabethe says, adding that the cash trading period also helps each spaza shop build a profile.
Thabethe, who is the chief operations officer, says that most owners also operate from their own unbonded homes and a snapshot of their profile would satisfy the NCA requirement as a solvent entity.
With the unbanked spaza shop market valued at an estimated R40 billion a year, and at least 90% of the transactions conducted in cash, Thabethe says there is a lot of potential to be unlocked through offering credit lines for the shops to stock up.
Through the company’s mobile phone platform, spaza shop owners are able to apply for credit, check outstanding balances and make payments using their phones.
The platform also facilitates cashless transactions between suppliers and retailers, in the process eliminating the cash-in-transit risk for suppliers.
Ntutela says that through research and development, Zande Africa discovered that one of the things that locals struggle with when competing against foreign-owned spaza shops is the lack of supply.
“One of the things you will find is that a South African-owned spaza runs out of stock often. That is the primary reason we say that if there is no cash, we will deliver the stock, and our credit lines go up to 14 days,” says Ntutela.
Turning to the model’s pricing element, he says it is extremely important – because Zande negotiates competitive prices with suppliers and stocks up its warehouse before distributing via a delivery network that uses a driver-owner model.
The company has two warehouses: in Ermelo and Nelspruit, both in Mpumalanga. These serve as regional distribution points that operate on a 24-hour basis for drivers to collect and distribute in their allocated areas.
The company employs 70 people.
Ntutela says more warehouses are in the pipeline and will be established before year-end. There will be one in KwaMashu, KwaZulu-Natal.
Ntutela points out that foreign-owned spazas have also embraced the service, but do not need the credit element as most have their own cash.
“The foreign owners want just the supply; they do not want the credit,” he says.
Thabethe says the company also stocks a wide range of supplier brands and have had some good-quality black-owned suppliers coming on board to take advantage of the opportunity to have their products on spaza shelves.
“We support local manufacturers, and there are already brands you have never heard of in our warehouses.”
Although the company started out with 20 vehicles, Thabethe says the fleet is being sold to the drivers so that soon, Zande Africa will be totally “fleetless”.
Thabethe says the company has had to tweak its distribution model slightly for the owner-driver to make more money, for clients to receive their stock on time and to avoid peak-hour traffic jams.
“In this business, it is about volumes – low margin and high volume. For that to happen, we had to burn a lot of cash that did not come back as profit.”
Thabethe says the company has also managed to do without an overdraft facility, and only recently have investors come forward.
The business has already scooped some awards, including third place in the SAB Foundation Social Innovation Award.