🎓 The R8.1bn SA Grads Play…

Plus: AI taxman, Apple’s canned car, 46% e-commerce growth & how to unlock SA’s R450bn township market.

Newsletter

March 1, 2024

Miss the good old days? Don’t worry, DVDs are back — Shanghai researchers are building the Super-DVD, a single DVD-sized 1.6 petabits (that’s 200k GB) storage device that holds 40k DVDs or 100 years’ worth of movies (if you live that long).

In this Open Letter:

Big niche: A R8.1bn opportunity in SA grads employment (what?)
SA’s AI taxman, Apple’s canned car & a 46% e-commerce growth.
Building big: How to unlock SA’s R450bn township market.
What you really use WhatsApp for: The results are in.
Free business tools: Share this and get cool gifts.

SA’s R8.1bn Grads Play

Unemployment in SA is out of control.

With the highest unemployment in the world, nearly 33% of working-age South Africans sit without jobs. And it gets worse (62%) for youth unemployment (15 to 24-year-olds), and 71% when you consider those who have given up finding a job.

Our economy is growing slower than our birthrate and to add to it, our wealth equality gap is widening. Meaning the little economic growth we are getting is likely moving to the wealthy, while the middle class is shrinking.

No wonder our tax base is getting smaller and smaller.

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The fight back

This doesn’t paint a pretty picture. But the government is attempting to tackle this:

The Presidential Youth Employment Intervention programme provides funding to qualifying NPCs and NGOs to employ youth in community service projects for up to 16 hours per week for 6 months.
The National Student Financial Aid System (NSFAS) distributes around R47bn per year to fund some 450k students’ education – with many first-generation graduates, it’s probably one of the top achievements of a post-democracy South Africa.

But is this enough? It’s when you start looking at SA’s 338k annual graduates that things get interesting…

The SA graduate opportunity

We recently covered how qualified doctors can’t find work. But it extends beyond the medical profession. In 2023 the graduate unemployment rate was 10.6% – significantly lower than the national unemployment rate. No problem, right?

Not exactly. 10 years ago back in 2013, the grad unemployment rate was only 5.5% – meaning this percentage has (nearly) doubled in the last decade.

But there’s reason to pay attention here.

See, South Africa produces more than 338’568 new graduates every year (StatsSA 2016) and with the average graduate salary of around R240k per year, that’s about R81bn per year of grad salaries.

Now, build a product or service that helps find, place, hire, upskill etc. graduates in SA alone, and charge a percentage fee (5-15% is standard in the recruitment space) and you’ve got yourself a market:

At 5%: R4bn
At 10%: R8.1bn
At 15%: R12bn

The future of grad recruitment in South Africa? AI seems to think so.

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Get those graduates hired

One of the major hurdles for graduates to get recruited is job experience. That’s why local startup Jobox is helping grads get their first gig. You pay Jobox a fee to source, equip and place a grad intern, they help them get a stipend from the government. So the intern doesn’t go on your payroll, you simply pay Jobox a fee.

Another startup in this space is Leaply. They use smart screening and AI to match graduate candidates with ideal graduate jobs at some of the biggest corporations in South Africa. Saves the corporates time screening and helps grads land great jobs. The best is it’s free for applicants as recruitment costs are passed on to the companies using the platform.

Keen to help solve the jobs problem? Well then consider applying for the Next176 Job Creation Unhackathon that’s all about startups in the job creation space. You will get supported by their venture team as you validate the idea and could even get some funding and ongoing support.

What’s more, if you build a successful tool in the graduate niche, who’s to stop a founder from expanding overseas or to the larger, more general recruitment market? The space is big, and we are definitely watching it…

IN SHORT

📦 Prime Time. With the launch of Amazon in SA happening soon, they also announced they will be launching Amazon Prime as well. The subscription service includes free unlimited expedited shipping on any order size as well as other Amazon services like Prime Video (similar to Netflix), Music, Photo, and Gaming.

🫗 Bitcoin Crash. Bitcoin rallied so hard, it crashed Coinbase with some users of the trading app reporting a zero balance. In this major rally, Bitcoin passed $60k, inching closer to its all-time 2021 high.

💀 Canned Apples. Apple has announced that the autonomous car they’ve been teasing since 2014 is getting canned. Many of its engineers are joining the AI division and a magnitude of retrenchments is also expected.

🤖 AI Taxman. SARS has been using AI to get back some R210 billion for the current financial year. In part, SARS leveraged AI for its debt propensity modelling to help identify cash-strapped taxpayers more likely to settle their tax bill.

🛵 Delivering Growth. Woolworth’s Food division’s online sales have jumped 46% year-on-year in the last half of 2023, driven by Woolies Dash, its on-demand delivery venture. Great progress, but still lagging behind Sixty60.

HOW WOULD YOU BUILD IT?

How to Unlock SA’s Township Market

If you’re looking to unlock a share of SA’s massive R450bn township economy, this week’s podcast is for you. We sat down with Leon Qwabe, founder of Order Kasi, whom you might recognise from Covid-time news reports on their then-township-focused food delivery startup.

Well, Leon and his team have since pivoted into broader township last-mile solutions and, as you can imagine, business is good.

Catch the highlights

1. Townships are hungry for e-commerce

With over 6 years of hard lessons in the township delivery space, Leon says here that now’s the time for more advanced offerings. With a sudden rise in kasi entrepreneurs building businesses via WhatsApp and looking for innovative ways to get paid via socials, there’s room (and spend) for more online retailing.

Particularly in the health and fitness space, says Leon, where you have a broader lifestyle element to each purchase. Apparently, Herbalife does really well in SA townships right now.

2. People are banking and shopping online

For years, the mantra was that townships ran on cash so payments were an issue. But, as Leon explains here, that was due to the reversing trend of people growing up and moving to the suburbs. Nowadays, the trend is to stay in the township and upgrade the family home.

With that, you have a growing younger, employed market using banked money within their local market. To the point where Order Kasi’s entire niche is now township dwellers with a bank card, who are used to shopping online.

3. It’s all about keeping it local

As Leon says here, navigating and route planning in a township is a different game – some areas have roads and street names, some not so much. And one of the key ways Leon learned to overcome that hurdle is to use local drivers, guys who know the area and can communicate with the customer like a local.

That, however, extends to Leon’s own approach to building a business in this space. One of his biggest sources of information is the local merchants whom he signs up as customers – don’t just try and sell them your service, sit awhile and ask for guidance, they know the game inside-out.

You can also grab the Spotify and Apple Podcast links on our website here.