The first time bank executive Lee Meyer strayed into South Africa’s rough Alexandra township, he spent a nervous half hour trying to get out without being attacked by local gangsters.
Several years later, apartheid is over, Alexandra is safer, and Meyer is back.
He and a group of mostly white executives are here to learn how to tap the buying power of poor black areas from people who make their living peddling cigarettes and fizzy drinks in those neighbourhoods.
”It’s an inspiration to see how some of these people can take R90 ($12,53) and turn that into a real business,” Meyer said after meeting a local wholesaler in his tiny storeroom, jam-packed with individual-sized bags of biscuits and chips.
Meyer and about 20 other executives from Africa’s biggest bank, Standard Bank, have abandoned their risk analysis charts and financial modelling to spend a morning exploring this chaotic black township and chatting to small businessmen.
The field trip was organised by the Gordon Institute of Business Science (Gibs) in Johannesburg, which is helping executives understand how to do business with people who live hand-to-mouth in corrugated iron shacks.
”As businesses, we are not reaching these people. I don’t think anyone has really spent time with them. How could we help them get credit? How can we help them grow their business?”
While South Africa’s top companies have drafted in black managers to meet affirmative action targets, only two top 40 companies have black chief executives.
Many business leaders have never been to a township and do not understand how the poor black majority live and spend.
”You get these pointy-headed types with an IQ ‘off the spanner’ who take decisions on things like credit worthiness without visiting people and understanding their businesses,” said one regional bank manager on the field trip.
Money to be made
Under apartheid, most companies simply ignored black South Africans and focused on selling products — from trendy clothes to life insurance — to middle class whites.
Now many firms realise they can make a lot of money both from South Africa’s burgeoning black middle class, and from the millions of poorer South Africans who may not have much to spend but still want a cellphone, new clothes and basic banking.
Cell phone companies Vodacom and MTN were at the vanguard of the new push into the township market with pay-as-you-go products geared for poorer people.
Banks have launched no-frills accounts for the poor and retailers are opening gleaming shopping malls in Soweto and other townships.
But Nick Binedell, chief executive of Gibs, says companies need to spend more time in townships, and dream up new products and more appropriate ways of distributing them — fore example in smaller quantities.
Gibs takes executives on field trips to the townships as part of their business courses and tackles prickly issues by bringing people from both sides of an issue together. For a lecture about crime, for example, students quizzed ex-offenders.
”There are enormous opportunities in an emerging market like this but we need to understand them,” he told Reuters in an interview. ”Businesses need to rethink their products and services for the South African consumer in the widest sense.” – Reuters