This article forms part of the Youth Month 2016 series in which SME South Africa, throughout the month of June, will shine the spotlight on youth issues and highlight the work of young entrepreneurs and innovators who are shaping SA’s future.
With literally a ‘dollar and dream’ Neo Ramaphakela (32) built a budding multi-million rand empire serving what was traditionally one of the country’s most overlooked market – the township.
These sprawling, densely-populated and colourful areas are, however, becoming the new commercial hubs.
A 2011 study revealed that the townships have an estimated R307-R308 billion in annual consumer spend while the First National Bank estimates Soweto’s consumer spending power alone to be about R5 billion.
In 2010 Ramaphakela stumbled onto this emerging trend after spotting a gap in the market in his home turf in Johannesburg’s East Rand. He started his construction company, Seriti sa Basotho, making security gates, and is now one of the fastest-growing facility management firms in South Africa offering services such as construction, painting, plumbing, paving, roofing, plastering and renovations.
The key to his success, Ramaphakela places squarely at cornering the right market and delivering exceptional service.
“At the end of the day, whether you’re in the township or you’re in the suburbs everyone wants value for money. If you’re going to pay for a service it must be a good service,” says the young entrepreneur who was chosen as one of Forbes ’30 Most Promising Young Entrepreneurs In Africa 2016′ as well as Mail & Guardian’s 200 Young South Africans in 2015.
SME South Africa speaks to the young entrepreneur about what makes the township consumer so unique and why businesses often struggle to crack this market.
Q: Why construction and why the township market?
Firstly, construction was the obvious choice for me because South Africa is a developing country with a lot of infrastructure development, it seemed very attractive from that end.
Secondly, I needed some sort of way to create a cash-flow model and around where I lived there were a lot of gap-housing developments – the Cosmopolitan houses. What I noticed was that they were doing quite a lot of hand-overs where the houses were just shells, there weren’t any walls, or tiling or security gates, so I saw a gap in that and I wanted to solve that immediate need. From there I went door-to-door and the market received me very well.
Q: How did you deal with competition from established companies?
In the beginning, the one thing that I decided to do from the onset was to create the right brand for my business and invested a lot in my infrastructure as a business. I bought the right equipment, the right tools and so forth.
On top of that I branded my business very well and packaged it very well so that from a snapshot it looked like I’d been in business for a very long time. That established a lot of trust with my clients so it was very easy for me to compete with guys that were established at the time.
Q: Why do you think your business has done so well in the township?
The township market is a very big market and it’s a strong market. There’s a lot of spending power within the township. But a lot of businesses get it wrong because they don’t offer the right service at the right time and a lot of people are sort of ‘reluctant’ to do business with black entrepreneurs because they’ve been bitten in the past.
“At the end of the day, whether you’re in the township or you’re in the suburbs everyone wants value for money”
So I made sure impeccable customer service was absolutely key, I made sure that people were getting value for their money, my turnaround times were incredible. I made sure I gave them a good service. This is how they managed to refer me to other clients. So it was basically building a good business within the township. That was my advantage.
Q: What was your biggest challenge in cracking that market?
The township market is not really a saving market. You find that people may want your product but they are not ready financially. They haven’t saved the money to afford your product. So I had to work much harder to try and get more business in. But over the years what I’ve realised is that more and more people are actually starting to save and they’ve got better saving habits so you find that money is readily available now much more than it was when I started the business.
That was one of the biggest challenges – trying to find a way to accommodate the fact that I was in a market that was not really a big saving market and I was bringing products that were anything between R5 000 to R10 000 at the time.
Q: The township market is quite unique, why do you think most businesses struggle to understand it?
This is a very weird market because it is very impulsive – a lot of people are very impulsive buyers. But they are also very brand loyal as well. So what you find is that because they are very impulsive, you need to invest a lot in your first-contact infrastructure. You need to literally be at their front door at all times offering them the service for them to make that impulsive decision.
Creating a good, working first-contact infrastructure, takes a lot of trial and error and is quite expensive as well. A lot of companies try it but give up along the way.
Q: What has being named one of Forbes ’30 Most Promising Young Entrepreneurs In Africa 2016′ meant for you personally and the business?
It meant a lot because when I first stepped into this market a lot of people doubted its strength but I saw it from the onset. What it’s basically done is proven that point that the big commercial growth, especially for the next chapter of South Africa, is actually within townships.
That’s why you’ve got the township economic strategy at the moment being the buzzword. I’m just happy that I can be an example of it – a business that started in the township and got into the mainstream economy.