South Africa’s “COVID-19 Social Relief of Distress grant” has been extended until the end of March 2022, this means millions of people will now have R350 burning a hole in their pockets. But how do you get it from their pockets to your pocket or if you are a recipient can you use that money to make more money?
Now I don’t agree with grants or universal basic income, I would prefer the money be used to teach people the value of an honest days work and be used to teach a skill for people to help themselves or to change the small business landscape structurally, but as an entrepreneur, I’m not going to look a gift horse in the house, this is free money totalling some R27 billion rand (conservatively). We can look at it as a welfare stimulus check considering the government closed down large parts of the economy, although the impact such a small amount of money will have on the individual is debatable. However, the way to think about this is that there will be more money in circulation among the common folk, remember this is just taxpayers money (the government doesn’t have or create anything) that is being transferred from the wealthy to the “poor”, most likely mainly mining taxes from the recent commodity boom.
Around 4.4 million people have signed up so far, but you can be certain to expect more, maybe around 10% of the (South African) population, so this money is going to be in a lot of different pockets rather than just a few.
Because we B2B and we look at whole value and supply chain in small business, we will look at both how to cater to people who know have this money, and for people that want to use the money to make more money.
What are people going to spend this money on?
According to the government and NGO’s in favour, this money is going to help people “survive”, now R350 is a paltry amount of money but when people have nothing then it maybe makes a small difference.
When people have little money they tend to buy mainly smaller portions or pack sizes, they might buy one item that is consumed daily (like maize meal or flour) in bulk but the vast majority will be smaller pack sizes of sugar, tea, coffee etc. There is thus an opportunity to make and sell hampers that contain a variety of smaller quantity items. Now it’s unlikely you can make and sell a hamper that will last a month for R350 that will be for more than one person. But if you can offer variety then you can make people think that it is a good deal. If you can buy in bulk and because you are selling in bulk (your profit per hamper) is more than selling an item individually you can most certainly undercut a local shop selling individual items, you can even put a guide price next to each individual item so they can see how much they are paying in the hamper compared to buying the items individually. You can also try to make smaller focussed hampers where the items required to make an item are packaged together like for example a vetkoek hamper consisting of flour, oil, yeast, small sugar, and salt just enough ingredients to minimise wastage. If people are really desperate then they would go for stuff like that.
If you can make up salvage/surplus hampers or factory rejects that will be even better and can stretch their money further.
Buy & Sell Distressed / Salvage Food Products
Buy & Sell Factory Rejects
Start a Hyperlocal Buying & Selling or Service Business
Open a Clearance Supermarket
Is there a case to be made for a breadmaking business?
Will there be enough money in circulation to support a new breadmaking business in certain communities? Maybe with this new money, people will buy more bread or eat bread above say vetkoek. Now I’ve said this before, South Africa’s bread industry is utter madness, there is no way that bread should be this expensive, because we have all these faceless multinationals that have mega factories far from customers so they need trucks (and all the associated costs) and truck drivers that need to be paid and because these companies are listed their shareholders demand high profits and then there are your local shop profits. Only a tiny fraction of the price of bread is actually the ingredients. Could this excess money sustain a new bread-making business?
Start a Bread Making Business
Many people will buy themselves clothing, we can assume Pep is going to be a big beneficiary. But there is an opportunity to sell better quality factory rejects at a good price. South Africans love brand names. To me, the opportunity is to buy rejects, surplus, or old stock in bulk and resell it has to be at real “clearance” prices.
R350 training courses
If we assume good faith, people want to use this money to their benefit, not waste it on alcohol then we can assume they want to better themselves with the money. Now R350 is not a lot of money, even if they make it permanent for the unemployed. R350 a month does not buy a good life or existence, the cost of living is high in SA. So we can assume that some will want to use that money to learn a skill to make more money, to learn to fish instead of waiting for a can of pilchards every month (metaphorically speaking). For the life of me I cannot understand why peer-to-peer training has not taken off in SA, people who have skills teaching other people, it can be from their home it can be from their backyard. Many people have skills and are sitting at home, they can train people. I’m talking mainly about hard skills. We’ve seen some woodworking courses offered from home but this is often treated as a novelty and not a way to get real skills. Now we can say most people don’t want to work for themselves, that is the only place where this skills is worth something because P2P training is not accredited. Yet, yet, yet, we have a multimillion-rand “forex training” industry that only sells pipe dreams and people buy into that like rabid dogs thinking they are going to trade themselves out of poverty. I had a real chuckle when I saw R350 forex training courses. Where are these people going to get money to trade? Are they going to wait another month to trade their next R350? And what are their chances of success in such a high-risk trading endevour that requires capital to be wagered?
Seeds and plants and related equipment so people can grow their own food
If we think of one of the smartest things a person can do with such money that they getting for free, they not expending any time or effort to get it is to start a little garden to grow some of their own fruit and veg. The fruit and veg industry in SA, like the bread industry, also grinds my gears. The prices are just insane and that is due to too many middlemen to transport it from the farm, store it and then it is sold at high markups at retail stores. It is a system that does not suit a majority poor country like SA, ironically in wealthy countries, you can often buy fruit and veg cheaper directly from farmers. Not everybody can grow their own stuff, usually because they are too lazy but people can even sell excess produce to neighbours. Regardless of the reason for doing it, I think we need more urban and suburban farms, even rooftop farms. The prices are just crazy from retail stores.
Start a Seed Company
Start Your Own Plant Business
Start a Compost and Fertiliser Manufacturing & Supply Business
Start a Hydroponic Farm Business
Start an Aquaponic Farming Business
Help people save money
People are going to be getting this money they did not work for, they didn’t really spend any effort to get it, and they will be having this money on top of the money they usually have. We assume they usually have some money, otherwise, they will die from hunger, so even if it’s on top of other grants in the household it’s still extra money. How will people think? Will they be thinking this money as a R350 that they did not have previously can perhaps be used to save money in future? So you can think of once-off items that cost R350 they can use used to save money in the future. Something that can save water or electricity or maybe a composting machine for leftover food so garden farmers don’t have to buy compost etc.
Where are these people?
Common sense tells you that this influx of money will most likely be in poorer, densely populated areas like informal settlements. If we look at Soweto, the most recent population estimate is close to 2 million people (1,272 million in the 2011 census), I don’t have age data to see how many are adults but we can assume a lot, so every month hundreds of millions of rands will now enter this 200 km² area. From a fulfilling needs perspective, ideally always try to think about how are the recipients are thinking.
I don’t know the mindset of a grant recipient, we have a lot of entitlement in this country, people think they are owed something they will act differently from people who are grateful for the assistance and this may reflect in their spending habits. In general, we are looking at this from a welfare perspective, some might see this as a universal basic income, the question is then, do people spend money differently that they did not work for? So far all the proponents and studies for a UBI (universal basic income( are from wealthy, well-educated countries. Those mindsets and studies are worthless here. UBI is a western concept it means nothing in Africa where corrupt governments pilfer away taxpayers’ money. So that is something to think of if you hoping this will change the landscape fundamentally to the point that you want to invest your money to target this situation.
Can you start a business with R350?
I said we going to look at the possibility of starting a business with R350 but I have rambled so much already, I won’t go into too much detail here.
If you poor and unemployed and have a R350 coming your way. Can you use this money to start a small business? And should it be a service business, manufacture or retail?
It depends where you are at. Do you have skills, do you have the equipment, and do you have enough money for raw materials?
Manufacturing business will require skills, equipment, and materials
Service business will require skills and maybe equipment depending on business
The easiest type of business to start with R350 is probably just going to be retail (buying and selling business), but stay away from small value items unless you have a busy place to sell from.
Business 101: Don’t Eat Your Seed Corn or Principal Money
What does this mean? When you expend something, you are not only giving up the item itself but all that the item could have produced in the future.
When your R350 ship comes in and you spend it you are not only spending a R350 but also the profits that that R350 could have created. So if you buy stock you must live off the profits.
Now a lot of people when they get into a retail business, they want to double their money, I don’t like that way of thinking because it limits you. You can’t double your money on everything (especially high-value items). You can make 100 packets of sweets for R3.50 each and sell them for R7 each but you have to sell 100 packets; or you can buying seven things for R50 each and sell it for R75 each or buy one thing for R350 and sell it for R500. Which is better? Well it depends on how long the item takes to sell
But what can you do with R350? There are a few strategies here, but it depends on your location and if you can get good contacts. Many people don’t know where to buy stuff especially from industrial areas, so if you can find a niche item that is not generally available then you can create a business from R350.
I started my first business with less than R350, I used to buy old computers, Pentium 2’s that were
dumped in imported to SA from wealthy countries for R200 each and resell them for R400 each. Back then you could still do that not anymore but it’s an example.
I know it’s pretty ridiculous to the average person to speak of a R350 in this way, but the amount of abject poverty in South Africa is insane, there are “informal settlements” everywhere where the quality of life is awful, I assume they don’t live like that by choice. There’s no hope and certainly no future depending on government handouts in a country with a shrinking tax base. So anyone that gets that money and can flip it let’s hope they can build a bright future for themselves.