Spaza Market Development Project

VISION

The Triple Trust Organisation’s vision is the alleviation of poverty in South Africa through making markets work for the poor. Their mission is poverty alleviation through enterprise development.

OVERVIEW

The Triple Trust Organisation has been working with informal sector enterprises in Cape Town for 18 years, providing business and market development services and assistance. This project will link up and develop the spaza shop market, providing business support, group buying opportunities, special links to wholesalers and capacity building training to spaza shop owners in Khayelitsha, Mitchells Plain, Manennberg, Delft, Langa and Elsies River. These small convenience stores, operating out of people’s homes or backyards, provide a vital service to the people living in under-resourced communities. Research indicates that there are around 14,200 spaza shops in Cape Town and by giving owners access to supply chains, business support services and networks; the Triple Trust Organisation can improve the lives of both the spaza shop owners and their customers.

WHAT WE LIKE ABOUT THIS PROJECT

• Triple Trust Organisation has a long track record in the sector and this project is based on clear and in-depth research.
• By offering training, mentorship and networking opportunities as well as help with buying, the project represents best practice in the enterprise development field.
• The Triple Trust Organisation has a clear idea of who the project will benefit and how.
• The organisation is well networked with other players in the sector, particularly corporate suppliers.

EXPECTED LIFE CHANGE

An investment of R 437,624 will help link up and support 700 spaza shop owners – around 64% of whom are women. The project will also:

• Provide an estimated 21,000 township households with better prices and an improved shopping experience.
• Be a boost for local entrepreneurs who act as service providers in their communities.

Estimated direct life change at R625 per person.

NEED

Spaza owners operate their small, local convenience stores by buying directly from wholesalers. They often have a limited range of stock and have to close their business in order to replenish stock. Even when buying from wholesalers, they do not receive any special treatment as their collective buying power is diluted. The transaction and opportunity costs are therefore much higher for spaza shops than for ordinary retailers and this has a knock-on effect on prices. In addition, spaza shops have by nature of their history remained a ‘hidden’ retailer not benefiting from marketing and branding of stores.

This means that township consumers are not always able to get the products they need, prices are higher and they don’t have a real shopping experience at their local spaza shop. Township consumers still therefore spend the majority of their shopping budget outside of the townships.

STRATEGY

The Triple Trust Organisation will develop the Cape Town spaza market by:

• Developing a business collaboration network, called Shop-Net, that will provide stock directly to spaza shops at competitive prices.
• Providing business services which will enable consumers to have a proper ‘shopping’ experience.
• Providing access to a voluntary buying group specific to spaza shops
• Building the capacity of spaza owners to become serious retailers through training and mentoring.
• Disseminating information relating to business collaboration networks and the benefits of working together.
• Eventually, formalising ShopNet using a pro-poor equity structure where spaza owners hold the controlling interest.

ACTION PLAN

Preparation

• Revisit Shop-Net recruitment strategy
• Develop new Shop-Net marketing materials
• Develop a resource schedule (including timelines and action steps)

Taking into account the concurrent nature of some of the preparatory activities, the preparation stage is likely to be completed within a month.

Implementation

• Recruitment of Shop-Net members
• Information dissemination
• Capacity building training workshops
• Promotion of voluntary buying group

The project will run for a further 12 months after completing this phase.

Monitoring

A specialist monitoring and evaluation consultant will be brought in to review and update the Triple Trusts current project monitoring strategy.

Currently Field workers for the project look after individual shops and keep records of information. Project monitoring and evaluation will take into account the following measures:

• Number of new members joining the networks
• Repeat orders by customers
• Growth in levels of ordering of individual shops
• Retention of Shop-Net members
• Attendance at group capacity building sessions

As part of the revised monitoring strategy Triple Trust will include more qualitative information about how the project is impacting on Spaza Shop owners service provision.

ORGANISATION ASSESSMENT

Triple Trust is a well established organisation with a clear idea of their purpose. All their activities are based on identified needs within their target communities. The organisation takes a holistic approach to poverty development through enterprise development and has a good track record of networking with other organisations in the field to achieve this goal. The organisation’s work is planned on a project-by-project basis and they do not have an over-arching fundraising plan. While the organisation has set systems for dealing with all aspects of their day-to-day running, not all of these processes are documented. The organisation does not have a current succession plan although they have a strong and experienced management team steering the organisation.

RISK PROFILE

Key Strengths

• Concept: The project aims to strengthen already existing markets within impoverished areas and will increase spaza shops’ buying power by creating a collective. It is based on clear and in-depth research and offers a combination of practical training and mentorship. The training is tailored to the needs of the beneficiaries.
• Design: The project is market driven, has been successfully piloted and is replicable. The training includes workshop training and mentorship which reflects good practice in this sector. Training material is multi-lingual and available in English, Afrikaans and Xhosa and the training exercises are practical and relevant to the learning of the participants. The organisation works with others in the sector to enhance the services they deliver.
• Capability: The organisation’s staff has run the project before and everyone in the organisation is kept abreast of the theory and methodology behind the organisation’s programmes. The organisation consults with experts in relevant fields when they feel that the have inadequate skills in a particular area – or could benefit from outside input.
• Control: The organisation has good project planning systems and they have built a consultation with a specialist into the budget to address any weaknesses in monitoring and evaluation. The organisation meets and reports regularly on the project and has good financial monitoring systems including annual audited financial statements. Field workers keep records of information like the number of re-orders participants make and what they sell.
• Sustainability: The project is increasing the capacity of already existing local markets by creating stronger networks and better services.
• External: People always need to buy and will buy local because it is convenient and there are fewer transport costs.

Key Risks

• Concept: The organisation has a clear idea of what may make the project self-sustaining in the long term but this is not a set plan so the organisation is currently strategising around this process. The nature of the informal sector is inherently risky.
• Design: Participants are not required to take part in the training component of the project – although apparently most do take advantage of the opportunity.
• Capability: They rely on contract staff to increase their capacity when the project they are running needs more manpower.
• Control: The organisation currently does not measure impact but they are planning to address this as part of this project.
• Sustainability: The membership fees charged by ShopNet – the buying component of the spaza project – do not cover the costs of the project. This problem is mitigated in the short term by the project fundraising plan.
• External: Crime – the more profitable a shop is, the more likely they are to be targeted. Xenophobic attacks. Increasing food prices will decrease sales and profit. Petrol prices will affect project sustainability as well as increasing shop overheads.

Project Profile ED-WC-MAR08-0001

Organisation: Triple Trust Organisation

Sector: Small Business Development

Project Duration: 12 months

Project Budget: ZAR 492 350

Shares Issued: 9847

Shares Available: 0

Risk Assessment (0 to 5)

Concept: 3

Design: 2

Capability: 1

Control: 2

Sustainability: 4

External: 4

Organisation Rating (0 to 5)

Purpose: 4

Planning: 4

Performance: 0

Resources: 3

Governance: 3

Sustainability: 5

Project Budget

Project Sector

Small Business Development

With South Africa's unemployment rate as high as 40 percent in terms of a broad definition, the accelerated creation of sustainable small and micro enterprises is essential both to economic growth and to future socio-political stability. Township and rural-based enterprises, in particular, have the potential to create jobs and alleviate poverty by channelling resources into disadvantaged communities.

Research shows that our country has a low rate of entrepreneurial activity compared with other developing countries, with entrepreneurs contributing only 35% of GDP, compared with 60% in countries like India and Brazil. In addition, only 80% of all new SA businesses survive past the first two years - a low rate when compared with other developing countries. According to the annual Global Entrepreneurship Monitor study, the key factor influencing entrepreneurial activity in South Africa is the lack of effective education and training in entrepreneurial skills and basic financial literacy.

The large majority of new small businesses are operated out of necessity - people eeking out a living through informal trading and service provision because there is no alternative. These necessity entrepreneurs frequently have little or no access to computers, telephones, transport, banks and government services, and lack the financial literacy and business administration skills to sustain and expand their businesses.

Opportunities exist to invest in educating informal traders and community members in business administration and financial literacy, and in supporting the expansion of entrepreneurship education in schools and colleges. There is a need to invest in the extension of services that advise and support start-up businesses to previously marginalised areas, and to support initiatives to create community investment trusts and co-operatives that undertake productive activity. There are also exciting opportunities to help dynamic entrepreneurs in poor communities to purchase new equipment or set up business premises, creating employment in their communities.

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SASIX Evaluation Metrics

The organisational rating

In partnership, Trialogue and The Funding Site developed an expert organisational capacity diagnostic test, which has been further refined by GreaterGood South Africa based on its consultations with Geneva Global and others active in this area. The result is a comprehensive evaluation and verification tool that GreaterGood South Africa uses to assess the capacity of non profit organisations according to both qualitative and quantitative metrics. The tool encompasses the purpose, strategy, performance, resources, governance and sustainability of the organisation and its activities. GreaterGood South Africa project managers are employed in the field to conduct the evaluations with the organisations implementing SASIX projects. The results of their findings are assessed through a peer review process, and then coalesced into the organisational ratings presented on the front page of each SASIX Project Profile.

The project risk assessment

In consultation with Geneva Global, GreaterGood South Africa uses a comprehensive risk assessment tool to evaluate target projects - a tool that encompasses the project's concept, design, capability, control, sustainability and external factors that will or may affect the successful implementation of the project. At the completion of the project, GreaterGood South Africa will issue a Project Performance Report that compares the actual life change with the expected life change forecasted on the front page of this profile. This report will also include the key lessons learned.

GreaterGood South Africa Services

Project identification - Through wide, expert consultation and screening processes, GreaterGood South Africa identifies top South African non profit programmes that address the greatest development needs in the country.

Site visits - In order to become a recommended SASIX project, GreaterGood South Africa's project managers must have seen the project first-hand and undertaken the necessary evaluation interviews with the project's implementer(s).

Desk research - International best practices and other references are used as benchmarks to measure the projects.

Peer review - Information gathered and project profiles are assessed through a peer review process.

Deal structure - GreaterGood South Africa's project managers work closely with the project implementers to establish the parameters with regard to the expected results, time-frames, monitoring processes, use of funds, budget and final evaluation.

When you invest in a SASIX project, GreaterGood SA will:

Document the agreement - Before funding is supplied to a project, GreaterGood South Africa concludes a Memorandum of Agreement with the organisation which covers expected results, timelines, reporting frameworks and acceptable uses of funds.

Assist with funds transfers - GreaterGood South Africa will assist with the necessary transfers of funds, according to the funder's requirements.

Obtain receipt of funds - GreaterGood South Africa confirms when the funds arrive with the project implementer.

Check progress - At around 3 months, GreaterGood South Africa confirms that the project is proceeding according to plan. The project managers are available to project implementers for advice and consultation on an ongoing basis.

Measure results - After the conclusion of the project, GreaterGood South Africa collects the necessary data and compiles a Project Performance Report which includes an analysis of the outcomes and the lessons learned. Each funder of every SASIX project receives the report.

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To fund this project

Please contact: SASIX
Tel + 27 21 794 0580
Fax: 27 21 794 2239
Email: sasix@ggsa.co.za

Postal address: Postnet Suite 293, Private Bag X16, Constantia 7848, South Africa