💸 SA's Next Wave of Economic Growth…

We messed up 🤦🏼. Last week, we told you about a stealth AI startup with a bot that specialises in the SA elections. But then we shared the wrong link! Here’s the right one — go check it out!

To make up for the slip, here are 2 more cool things:

1. OpenAI just announced GPT-4o, a model that can reason and interact across text, audio and video in real-time.

2. Also… big news: We’re approaching 10k subscribers and to celebrate we are giving away R1’000 Takealot.com vouchers every Friday for the next 4 weeks. Be sure to read our Friday newsletter for details on how to enter and win!

In this Open Letter:

• Big transactions: Amped for a new wave of economic growth.

• Discovery’s Bitcoin, solar blinds & a slice of Post Office pie.

• Go deep: How to build a high-performance marketing engine.

• When the lights go off again: Your poll results are in.

• Free stuff: Share The Open Letter & get business tools.

In partnership with

TRENDING NOW

Where Will SA’s Economic Growth Come From?

South Africa has reclaimed its crown as Africa’s largest economy, at $373 billion in GDP per year, reflecting well on our resilience in an unstable global economy. But, in dollar terms, our economy has shrunk quite a bit since 2011’s GDP of $458 billion.

Are there still growth opportunities in South Africa? Absolutely. 

The key to unlocking economic growth, though, often lies in reducing the friction that prevents transactions. And one area where it’s becoming increasingly easy to transact is our townships. 

The Township Economy

More than 11.6 million people live in SA townships, and the economy here is estimated to be between R750bn and R900bn per year. But if you operate in the township, you’ll know there’s still more to be done to reduce the friction and make transacting even smoother:

1. Lots of time is wasted: Long queues at ATMs to withdraw grant money or wages take away time that could be spent hustling or building a business

2. They rob you: In your street, you are relatively safe, but venture out and everything of value is at risk.

3. It’s just too pricey: High costs of transport to an economic hub to buy or transact – let’s say you want to travel to town to buy a bus ticket for Christmas with the family, R30 a taxi round trip when you’re earning R2’000 per month… ouch.

To name but a few.

The key to overcoming a lot of this friction is through hyper-localisation. If the distance to travel to get access to services and/or products is shortened, you unlock:

1. Less time wasted trying to access funds

2. It’s safer, as you aren’t travelling long distances

3. You pay less or no taxi fare to get what you need.

And tap-to-pay, yes NFC-enabled debit cards, might just be a solution to reduce the friction for the 11.6 million South Africans that still call Ikasi home.

Getting rid of friction

In 2020, there were little to no cashless transactions in the township. Fast forward to 2023 – local FinTech enabler Kazang is doing more than R1 billion a month in tap-to-pay transactions.

This payment method already represents close to half of all the township-based payments they process, and adoption and usage are growing fast. 

But tap-to-pay is but one (albeit an important one) of the many building blocks in the ecosystem:

1. Being able to read bank cards, the Kazang device allows customers to draw money at a merchant… no more long queues.

2. With a network of 85’000 Kazang-enabled merchants across South Africa, they are everywhere. Meaning customers don’t have to travel too far to get access to it.

3. And, while VAS services such as prepaid airtime and electricity have been sold in these shops for a long time, Kazang now allows merchants to also sell bus tickets (something they’d normally have to travel into town for) saving the customer anywhere between 5% and 10% and adding a whole lot of convenience by not having to take a trip to town to buy it.

Layering in merchant benefits

But it is not only the consumers that benefit, the spaza shop owner benefits greatly from this, too: 

• Kazang offers benefits such as cashback rewards. When they launch a new service, for example, they reward merchants for selling that service. I.e. “sell 5 bus tickets this month and earn R50”. Great to drive self-learning of the services available, but also a great way for larger brands to drive on-the-ground action in this market segment, either by offering merchants rewards for showcasing, promoting and even selling more of their products in their shops.
  

• The ability to offer cash withdrawals digitises the cash (it appears in the merchant’s Kazang wallet), which decreases risk, but Kazang also enables the merchant to pay suppliers directly using their Kazang balance. This is way better than the traditional EFTs upfront which stretches cash flow.

• And finally, merchants get a steady stream of new products to sell on and make margins, allowing spaza owners to generate more income. 

Doing business in townships is complicated, but the adoption of digital might just be the thing that lowers friction enough to make this the next frontier of economic growth in South Africa. We’re definitely watching this space…

IN SHORT

Today’s coffee-time shorts are brought to you by CryptoCoffee.

☀️ Let the sun shine in (or not). A local electrical technician has designed a solar-powered window blind that’s capable of powering smartphones, laptops, powerbanks and UPSs. She’s since launched a startup called LC Dynamics to bring this unique solution to the rental and sectional title market.

🪙 Discovered Bitcoins. Discovery Invest has launched its own Bitcoin fund, The Discovery Bitcoin Fund, to offer its clients Bitcoin ETFs in Rands.

🤖 AppleGPT. Open-AI and Apple are getting closer to a deal that’ll see ChatGPT features in Apple's upcoming iOS 18 operating system.

📮 Licensed to (way)bill. The South African Post Office is hoping that the current review of legislation by SA’s communication minister will hopefully allow the beleaguered state entity to charge courier companies a small fee to act as a “designated agent” for parcels under 1kg.

🇨🇭 Swiss Army… tool? The world’s most famous pocket knife, Victorinox’s Swiss Army Knife, will soon no longer have a blade. This comes after tighter weapons regulations around the world.

PS. Remember the CatalyzU fellowship “How to Startup” we covered a few weeks back? Deadlines for applications are today, so it’s not too late… apply here.

BUILDER’S CORNER

How to Build a High-Performance Marketing Engine

Speaking to experienced founders and ecosystem players (not to mention some of our Open Letter polls), a major stumbling block for many SA startups and scale-ups is marketing, going to market and positioning.

And where many fall flat, is in failing to establish a brand. Basically — how many people get to know and trust you, and how fast can you make that happen?

And, just like you build a product to honestly solve problems, you gotta ask yourself whether both the content and marketing you put out on social media, for example, also honestly helps anyone – or is it just part of the background noise?

Well, one obvious key is to build a brand that solves problems even on social media, for example, just as your product would elsewhere. And I was quite inspired by this 3-minute social branding segment from Gary Vaynerchuk as a brand-building guide to lead into a full-on marketing strategy, so here’s how I’d tackle it…

A Social Brand as Foundation for Great Marketing

1. Go super granular on segments

Most brands (or people for that matter) only focus on 2 or 3 very broad customer types and then just kinda hope for the best. But if you’re really going to connect and add value, it pays to go super-specific.

Vaynerchuk advises to create 40–50 customer segments – as granular as you can:

• Female Xhosa-speaking university students, 18–24 in Gauteng

• English-speaking male lawyers, 28–34 in Cape Town, etc.

And then find the right channel(s) for each segment, know the current trends on each platform (what content’s over-indexing, where) and then start generating and measuring content performance.

2. Let the machine self-inform

Yes, you’re obviously going to be looking at quantitative data – how many likes, followers, clicks and conversions posts generate – but the key to getting smarter and better as you grow is to have specific team members review content for the qualitative feedback.

This means you have people analysing any posts that do super well – over-indexes, get a lot of comments and engagement and just seem to resonate with the audience – and make that formula and format the brief for the next post in that segment.

You keep doing this, rinse and repeat so that your marketing actually builds deeper and deeper affinity with time. Now suddenly, you don’t need millions of rands in ads anymore, because your team has learnt how to reach specific people on their level, in their mindset, where they gather.

3. Keep refining segments for affinity

As you repeat and grow, you can start eliminating those segments you’re just not hacking. And start looking closer at the ones you are finding affinity with for even deeper cohorts and segmentation.

This should all help feedback to your product, too, in terms of who your customer really is – or at least which customer you can reliably reach.

4. Get the support to do this properly

Now, I know this sounds big – many established brands don’t even approach their brand-building this holistically. But the truth is you can build this with even a small, competent in-house team – especially if you approach it as you would building a product:

• Segmentation: Your product person is ideal for this (it’s just your user personas, after all)

• Qualitative data: Your insights team can help set it up 

• Qualitative analysis & briefs: A smart marketing person will shine here

• Posting & scheduling: You can automate it all with tools like Buffer

• Design & video creative: Internal designers can help, else a visual agency/freelancers

• Copy: Often the hardest to nail, but it just got super-easy and flexible with unlimited, pause-and-grow specialist tech copy by Stream.

Got a startup hack or insights to share? Hit reply and we might feature you here, too.

YOUR VOICE

We asked when you think load-shedding will be back, and it’s super funny…

⬜️⬜️⬜️⬜️⬜️⬜️ 🕒 29 May at 11 pm (9%)

🟩🟩🟩🟩🟩🟩 🤣 30 May at 6 am (73%)

🟨⬜️⬜️⬜️⬜️⬜️ 💪 Doesn't matter, we will be OK! (17%)

⬜️⬜️⬜️⬜️⬜️⬜️ 😉 Never (1%)

Your 2 cents…

Ha ha, thanks for playing along, guys!

Sorry, CC, didn’t mean to offend — we have no idea if there’s any actual intent behind it, the story just comes from the fact that people have noticed there’s markedly less or even no load-shedding in the run-up to elections, etc. Our main intent was to show that there are business opportunities even within things like load-shedding, the poll was intended as some lighthearted fun.

Fully, Allistair. Also don’t think we’ve seen the last of it, but the general temperature is that SA might slowly be getting a handle on our power supply (we hope it’s true!)