South Africa, a beloved country affectionately known as a Rainbow Nation, represents among the highest gap between the rich and the poor. To understand how many inhabitants of a country are poor, it is not enough to know a country’s per capita income. According to www.infoplease.com , the number of poor people in a country and the average quality of life depend on how equally or unequally income is distributed across the population. A Gini index value of 0 represents absolute equality, and a value of 100 indicates absolute inequality. In 2009, South Africa was ranked 10th at Gini index of 57.8 on countries with the greatest inequalities.
This is still a major concern for South Africa’s new democracy. Since 1994 the new government has sought to implement ambitious programs to redress past discrimination against the poor and address issues relating to quality of life -. One known fact is that government is going to need help in narrowing this gap between poor and rich.
While a dominant assumption that the poor have no purchasing power and, therefore, do not represent a viable market is apparent, we believe otherwise as Kasi Initiatives.
If one was to take the aggregate purchasing power in developing countries where most of the low Living Standard Measure (LSM) group or Bottom of the Pyramid (BOP) market exists. Developing countries (BRICKS) offer tremendous growth opportunities, evidence of which is major multinational companies from developed countries seeking new markets for investment and growth in these emerging markets. Within these markets, the Low LSM or BOP represents a major opportunity. Take China as an example, with a population estimated at ~1.2 billion and an average per capita gross domestic product (GDP) of US$1,000, China currently represents the second largest economy in the world, similarly India’s economy is growing at a fast pace and is estimated to be among the top 3 biggest economies in the world in the next decade. One thing these two countries have in common is a greater number of Low LSM group or BOP markets. These markets require innovative and out of the box thinking, as some companies have shown like Procter and Gamble (P&G) and Capitec Bank in offering products that are relevant and cost effective for this market.
Another example specific to South Africa, is the informal saving clubs called Stokvels which have been around for years and represents an estimated market-share of R25 billion (According to African Response Survey, 2014). While banks have came up with different products for these Stokvels, none offering great returns for these Stokvels, hence majority of the estimated market share is outside the financial formal sector. In these markets profitability will be inevitable, if companies are innovative, have the right mind-set, focus and understand these markets in their own special context.
As C.K Prahalad suggest that 4 billion poor can be the engine of the next round of global trade and prosperity, and can be a source of innovations. Serving the BOP market will require collaborations between large firms, civil society organisations and local government. Furthermore, market development at the BOP / Low LSM group will also create millions of new entrepreneurs and most importantly sustainable employment, which is desperately needed to alleviate poverty.
As Kasi Initiatives we are in the forefront of making that change and transforming townships (which represents the majority of the BOP/Low LSM group) into economic hubs through innovative sustainable initiatives.