As we enter 2022, many people are looking to start a new business. Some unemployed have given up looking for a job and decided to start a business, working people are starting side businesses to supplement income, businesses starting new businesses to expand etc.
Regardless of the intentions one thing is certain: everyone can do with extra income. In South Africa inflation far exceeds wage increases (if you were lucky to even get an increase). South Africa’s official inflation rate is ANC propaganda the real number is far higher. And with petrol almost R20 a litre the cost of living will increase as most goods (and people) are transported via road and there is no end in sight to the disaster called Eskom.
From an international perspective the best business to get into in 2020 is finding utility for cryptocurrencies. The cryptocurrency market is worth over $3 trillion but outside of the majors (Bitcoin, Eth et al) it has very little use. The past year saw some major mainstream adoption and developments in decentralised finance. Now when you ask the meme token (the dog and cat coin boys and girls) why their token is worth anything they say it is because they say it is. Sure if a community is willing to come together and say “this is worth something, because we say it is” and are willing to put their money where their mouths are, then fine. But once the delusion fuelled euphoria wears off. One has to ask what use does it have?
Outside of buying and holding (and day trading) the main utility we have seen is in finance, you can lend your tokens out and earn interest or stake it and provide liquidity to exchanges so when people want to swap tokens they pay a fee and you get part of that fee or do a complicated combination of all. To me the utility of a currency is whether or not you can exchange it for sex. There are hookers that accept BTC but can you go down to Voortrekker Road take out your BabyDogeKittenInu wallet, scan a QR code and get a BJ? No you can’t. So I do think the worthless projects will eventually fail. But back to South Africa.
The South African Market
South Africa is a poor African country masquerading as something else. It is a bosduif trying to be an eagle. All the fundamentals point to serious future problems with lots of people and businesses struggling. Yes, there is still money to be made targeting the small minority wealthy in SA, and I will get to that in future.
When looking for opportunity it is sometimes best to look at a category of ideas than a individual idea. For example “Government Incompetence & Corruption” is a category has opened up massive opportunity in private healthcare, security and education.
It is easy to say to start a business to cater to South Africa’s declining spending power, but most businesses already have scale in the low cost sector, and surplus and salvage products have become so mainstream that good deals are hard to come by.
The category to look at going forward is bringing down the cost of items that have traditionally been expensive especially “infrastructure” that is essential to carry out certain functions:
> Cheaper Accommodation
> Cheaper Transport. Cheaper Travel. The increase in petrol price will increase demand for ride-share and lift-clubs.
> Cheaper impulse buys, example: a coffee and a muffin does not need to cost over R50 when cost of sales is less than R10.
Also look at a business that can get impulse buys and good margins such as:
Making smoothies in a gym, with extras such as protein powders
Pizza slice business using a electric conveyor belt oven
Donuts and coffee (cheap) on a busy spot
Take aways at a busy spot
Then also, instead of building manufacturing infrastructure and all the burdens that accompany it (trade unions crawling up your arse), rather become a marketer for a group of individual manufacturers. If you want to manufacture furniture rather work with existing and do marketing and earn commission.
From an existing business expansion perspective many are adopting a “wait and see” approach, they are not deploying capital, when the need arises they are applying band-aid solutions and kicking the can down the road. This should be a warning to us small business guys not to be reckless. South African spending is under pressure and many things considered a few years ago as standard are now a luxury.
If you have a lot of money, keep it safe, if you going to invest in a business go for safe bets like blue chip franchises and don’t settle for second tier if you can’t afford or get a good franchise (don’t settle for Maxi’s if you can’t get Mcdonalds is what a former Maxi’s franchise holder once told me). Don’t enter capital and labour intensive businesses in SA. Good help is hard to find in SA and bad help is hard to fire. Unless you can bring down the cost of a staple such as mielie meal or bread significantly don’t do any type of major manufacturing. This is at least what we can interpret from larger businesses.
And lastly if you can find cheaper ways to do things like maybe create a toilet roll that don’t retail for R5 that would be great.