It’s a story well repeated, about a vast, unregulated informal economy operating in the shadows of the formal one. A world of cash, of survival, separate from the gleaming towers of the JSE.
In the story, the informal economy is framed as a problem to be solved, a sector to be lifted. But what if the story has been told backward? What if the heart of SA’s informal economy is not a drain but a silent, crucial engine driving some of our largest listed companies?
This week a note landed in my inbox about Kazang’s digital transformation of the township tavern industry. The note told a story about a R40bn-R60bn sector comprising more than 34,000 licensed taverns finally going digital.
For decades these taverns have been run on paper money and coins. Now fintech is sweeping in. But to see this merely as a charity project for small and medium-sized enterprises is to miss the shift entirely.
The real, untold story is how this digital bridge is funnelling value from township spaza shops and the local shebeens directly onto the balance sheets of JSE-listed behemoths.
Consider the humble point-of-sale device placed in a tavern. It scans stock, takes card payments and sells airtime. It feels like a tool for the tavern owner, and it is. But it is also a sophisticated extraction and distribution mechanism for corporate SA. Every time a customer taps a card to buy a cold drink a small fee flows to banks.
The informal economy’s transition from cash to digital is in essence an enormous, voluntary, transaction fee-generating machine for the financial sector. The sale of airtime and data through these terminals is the lifeblood of this partnership.
Kazang and its peers, such as Flash, have turned thousands of informal traders into a huge, low-cost, hyper-local distribution network for Vodacom and MTN. These telecom giants no longer need to build a store on every corner in every township; the informal economy has become their de facto and incredibly efficient sales force.
The billions of rand in low-value transactions processed this way would be economically unviable through formal channels, yet they represent a massive aggregate revenue stream. The question we must ask is: who is truly leveraging whom?
The ripple effects extend even further. Think of the value chain for a company such as Tiger Brands or AVI. The spaza shop is their frontline. When such a shop uses a Kazang, Flash or Spaza Pay terminal to offer cash-in, cash-out services it draws more footfall.
The customer who comes to withdraw R100 often leaves with a loaf of Albany bread and a packet of Bakers biscuits. For the first time the daily pulse of the informal economy — what sells, when and to whom — is being digitalised. This data is a gold mine for everyone, from banks assessing credit risk to retailers optimising their supply chains.
The real story is that the informal sector is not just being served; it is being mapped, quantified and integrated into the analytical models that drive corporate strategy. The value of this intelligence is immeasurable, yet it is being gathered for a pittance.
So, the next time we see a flash POS machine in a spaza shop, we should look past the simple convenience. We are witnessing a fundamental resetting of our economic reality. The wall between the formal and the informal is crumbling, not because of government policy, but because of tech.
The vibrant, chaotic and resilient informal economy is being wired directly into the JSE. This prompts uncomfortable questions. Is this a story of empowerment or extraction? Are we building a more inclusive economy or simply finding a more efficient way to monetise the margins?
As this township economy engine revs up, powering the profits of corporate champions it raises an important question: who is really driving and who is being taken for a ride? The future of SA’s economy may depend on the answer.
• Lourie is founder and editor of TechFinancials.
