Spaza shops, taverns, fast food outlets, salons, and auto repairs are among the rapidly growing business sectors. Alcock said there are around 50,000 out-of-home fast food outlets in townships, which generate around R90 billion in revenue.

“There is a misconception that people support these outlets because they are cheaper than well-known fast-food brands like KFC, Nando’s, or Steers.”

“People don’t buy this food because it is cheaper. It is generally more expensive, but people prefer that food.”

The spaza market, which offers clients products through an informal superette, is another booming sector. A recent Nielsen survey estimated that the spaza sector achieved an annual spend of R189 billion across 100,000 outlets.

“The growth in the informal spaza sector has been around 24% per year compared to 15% in the formal sector.”

These spaza shop owners, often foreigners, pay around R25 billion in rent to South Africans who own properties they operate from. Alcock disputes the false belief that South Africa needs more company launches and entrepreneurial activity, pointing out that the country’s fastest-growing sector – its informal economy – has an annual GDP of R750 billion.

“The businesses and entrepreneurs exist already. We have hundreds of thousands of them but don’t recognise them,” he said.

“We do not need to start new businesses. We need to help them scale up. We need to give them the resources and support they need.”

As well as tax them. The fact that the industry is rarely included in official economic statistics and that not much tax revenue is generated is one of the reasons it is not given much credit.

Investec said informal businesses and entrepreneurs typically do not contribute directly to the fiscus through taxes, and SARS has virtually no presence in the informal economy – informal businesses pay value-added tax (VAT) on purchases, but that is where the taxman’s reach stops.

UCT researcher Luvuyo Mncanca added that businesses operating in the informal economy do not want to be regulated or registered for tax.

Alcock’s overview of the size of different parts of the informal economy during the Biznews Conference paints an amazing picture:

• South Africans earn between R20 billion and R40 billion per year in backroom rentals.
• The spaza shop market is worth R189 billion annually across 100,000 spaza shops.
• Spaza shop rentals earn R25 billion per year.
• The informal fast-food market is worth around R50 billion annually across 45,000 outlets.
• 45,000 licensed taverns and shebeens earn R110 billion per year.
• The taxi industry earns R50 billion per year.

I’m no economist, and it seems that so-called Kasinomics is too big to have completely slipped by SARS, as noted by Alcock. I also doubt that so much of the poverty that we see daily is just entrepreneurs ‘flying under the radar’.

But if true, R750 billion in uncollected taxes would go a long way to funding the NHI that Ramaphosa conveniently signed up for before the elections. Pull the churches into the tax ring, and we might all be able to scrape by.

You can read more about GG Alcocks’ Kasinomics here.

[source:businesstech]