According to Stats SA, the informal sector is a cornerstone of the South African economy, providing nearly a fifth of total employment. Accounting for roughly half of informal businesses, traders such as spaza shops and tuckshops form a key part of vibrant economies in townships, rural areas and, peri-urban settings.
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In addition to creating jobs and helping earn an income for millions of families, these businesses bring services closer to people and keep cash circulating in the community.
Yet these micro-businesses operate under tough conditions and were historically excluded from digital infrastructure and financial services formal retailers take for granted.
Challenges such as low margins, exposure to cash crime, and poor access to financing and working capital put informal traders’ resilience to the test.
This is where modern fintech solutions and digital technology have a valuable enabling role to play.
Simple, affordable devices and mobile connectivity are helping micro-merchants to run better businesses.
Fintechs such as Kazang have come to market with solutions that enable micro merchants to profit by vending prepaid services as well as improve efficiencies through digitalisation.
We have seen first-hand how these digital tools are reshaping the township and rural economies.
Here are some ways these solutions make a difference.
1. Creating new revenue streams
Transactions are small and margins are low in the informal sector. Value-added services (VAS) terminals enable merchants to sell prepaid services such as electricity, airtime, data, lottery tickets, and gaming vouchers.
The merchant earns commission on each transaction, improving revenue and profits.
2. Boosting customer footfall and loyalty
Informal traders can attract more foot traffic by offering a single place for customers to shop for basics as well as draw cash, pay bills, or purchase prepaid services. This gives traders a chance to upsell and grow their baskets — without spending more on advertising or stock.
Once customers know they can withdraw cash, pay DStv, or recharge electricity from a local vendor, they will keep coming back.
3. Reducing reliance on cash
At Kazang, around 60,000 of our 90,000 devices now accept card payments, with many also supporting cash-out functionality. Merchants can also use a digital wallet linked to a Kazang terminal to pay suppliers from wallet funds.
Less cash on hand means less exposure to theft; it also reduces fees associated with cash withdrawals and deposits.
4. Enabling access to financial services
When a merchant uses a VAS terminal regularly, they will start to build a digital transaction record. That opens the door to microloans, insurance, and other financial services that were previously out of reach.
By helping informal businesses go digital, we can lay the groundwork for future access to working capital and growth finance.
5. Driving economic growth and consumer benefit
A successful network of informal traders helps to foster more prosperous communities. Customers no longer need to travel long distances or pay taxi fares to withdraw money, buy electricity, or make bill payments.
This translates to tangible savings in time and transport costs for consumers, while keeping money circulating within local economies.
Affordable fintech tools bring the best modern tech to the informal market
Businesses are bringing modern fintech tools to the informal market, enabling small traders to digitise, diversify, and grow. These solutions are designed to be easy to use, affordable, and accessible, bringing financial services to the doorsteps of excluded South African populations while helping informal traders to grow their businesses.
