Bridging the gap

Johannesburg - The poor are not as poor as we think they are, and some smart partnerships between grassroots entrepreneurs and corporates are already showing positive spin-offs.
 
That's according to Tashmia Ismail, who heads up the Base of the Pyramid offering at the Gordon Institute of Business Science (Gibs).

Ismail's unit is involved in the development of strategies to help stimulate entrepreneurship at the low end of the market, and to help larger corporates engage businesses operating in the townships.
 
"It is vitally important not to underestimate the spending power, aspirations or savvy of low-income consumers. A company which can offer them innovative products or services to improve their lives and meet real needs can gain invaluable access to this group," Ismail said, pointing out that spend in this segment of the economy was growing in excess of 10% per annum.
 
Asked for practical examples of how corporates were tapping into this market, she pointed to soft drink distribution firm ABI, which is helping to kit out spaza shops with innovative and secure fridges so that they can show off their wares to greater effect.
 
"One business owner used to sell nine cases of ABI products a month and he now turns over nearly 50," she said.
 
She attributes this improvement to better visibility of the products on offer to passersby, as well as improved distribution lines.
 
Another statistic rolled out by Ismail is that a study conducted in townships found that while many young people were not financially supported by formal employment, they were still spending as much as R80 to R90 per month on data and cellphones.

Moving on to bigger things
 
"They are not as poor as we think they are," she said.
 
A third example she used was Masscash, the low-cost wholesale division of the Massmart group, which has used established taxi routes and transport nodes as a strategy for identifying potential store expansion.

This was in an effort to overcome the access and infrastructural challenges of its target consumer, who does not have access to private transport.
 
While corporates such as Metcash, Pick n Pay, Shoprite and Nestlé were all trying to get into the low-income market, Ismail said that it required some change of thought to support entrepreneurs in these markets as their clients tended to be volatile, brand conscious and very aware of how much they spend on a particular item.
 
"If I am selling a bag of tomatoes and the client is paying R5, then every tomato has to be perfect," she said.

While there has been much talk of bringing grassroots entrepreneurs into the formal economy, Ismail said it is no longer just lip service or a case of marketing for social responsibility projects.
 
"These partnership models do work and we've seen instances where after a year, entrepreneurs have managed to move out of the townships because their business has taken off," she said.
 
- Fin24
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