South Africa’s township economy, valued at an impressive R1 trillion, is thriving, fueled by a strong growth trajectory within the informal sector, according to GG Alcock, founder of Kasinomics and a well-respected expert in the informal economy.

Alcock, who has long been at the forefront of the township and informal markets, emphasizes that the sector continues to show remarkable potential.

In 1999, Alcock founded Minanawe Marketing, a company that revolutionized marketing in South Africa’s townships by focusing on informal mass markets.

After selling Minanawe Marketing in 2018, he launched Kasinomics, an advisory firm aimed at providing businesses with insights, strategies, and access to the informal economy.

Kasinomics also invests in several township-based startups, making Alcock a leading voice on the subject.

The figures Alcock shares with The Real Network indicate that South Africa’s informal economy is valued at over R1 trillion.

He estimates an annual turnover of approximately R750 billion, though he notes that this only accounts for two-thirds to three-quarters of the total size of the informal sector.

In reality, the true value of the township and informal economy could range between R1 trillion and R1.125 trillion.

According to Alcock, several key sectors in South Africa’s informal economy are generating substantial revenues.

For instance, spaza shops contribute R190 billion annually across 100,000 outlets, while the fast-food sector accounts for R90 billion from 50,000 outlets.

The beauty industry brings in R10 billion per year, and the taxi sector generates R50 billion annually from 250,000 vehicles.

Additionally, savings stokvels (community savings groups) are worth R44 billion annually, and the rental economy, including backroom and spaza shop rentals, is valued at R45 billion.

Alcock also highlights the presence of other sizable industries within the informal economy, including automotive, construction, catering, car washes, and bakeries.

He observes that nearly every sector in the formal economy has a counterpart in the informal sector.

“They are successful, and in many cases, these businesses came from the formal sector to serve the informal sector,” he adds.

Capitec CEO, Gerrie Fourie, has also voiced support for the growing importance of the informal sector, stating that it plays a vital role in South Africa’s economic future.

Despite perceptions that informal businesses deal mainly in cash to avoid taxes, Alcock points out that card payments have surged in this sector.

One notable example is Lesaka, a company generating R2 billion annually through card payment devices.

In November 2021, 100% of its transactions were in cash, but by November 2024, 40% of those transactions were made via cards.

This shift away from cash payments demonstrates the informal sector’s growing integration with formal financial systems.

Alcock argues that this transition reflects the emergence of a hybrid model, where informal businesses adopt formal payment methods while retaining their informal nature.

He suggests that one way the informal economy can continue to grow is through greater formalization, which would secure business operations and allow owners to make investments and even sell their businesses when the time comes.

Drawing a comparison to New York’s hot dog stands, Alcock advocates for a formalized structure that allows businesses to flourish while maintaining some of the informal qualities that make them agile.

Alcock urges South African authorities to consider formalizing portions of the informal economy, which would provide necessary support and growth opportunities.

However, he stresses that it’s crucial to leave some of the informal characteristics intact, as they are key to the smooth operation of these businesses.

“We need to recognize that these are real businesses built by township entrepreneurs. Many of them are large businesses,” he says.

With the township economy continuing to grow, the call for greater recognition and formalization of the sector is louder than ever, as these informal businesses contribute significantly to South Africa’s economic development and future prospects.