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Word of Mouth, South Africa

Word of Mouth, South Africa

Unlocking the potential of the informal economy

Unlocking the potential of the informal economy

The formal economy is not creating enough jobs for all, and the jobs it creates are often inaccessible to the most vulnerable. Those unable to find a formal employment rely on the informal economy to survive. This livelihoods crisis is particularly acute in South African townships, informal settlements at the margins of major urban centres, where unemployment and poverty are widespread, with women and youth disproportionately affected.

Many of them set-up small informal businesses that struggle to survive because they lack access to resources, connection with potential customers and have low levels of business knowledge. Furthermore, with transactions paid in cash, they have no proof of income: this makes access to credit impossible for them, with the consequence that they cannot invest in the growth of their activities.

Our partner Word of Mouth is a social enterprise whose mission is to unlock the potential of the informal economy, providing micro-enterprises with access to local markets, supply chains and training, so they can boost their businesses and create sustainable livelihoods for themselves and their families.

Word of Mouth has created an online platform that connects informal micro-enterprises in Cape Town with customers living in their local community. Today, over 13,000 users are registered on the platform and have completed over 4,500 transactions.

The micro-enterprises can also benefit from access to supplies at fair prices thanks to collective bargaining, and receive targeted training ranging from financial management to new vocational opportunities.

Word of Mouth aims at expanding its platform’s registration to a further 60,000+ users, so to help 640 micro-entrepreneurs generate more revenues and lift 120 of them above the minimum living wage.

Unemployed or underemployed women between 20 and 40 years old represent the majority of informal micro-entrepreneurs in townships and are those who will benefit the most from the project. The story of Zimkitha, a female entrepreneur registered to Word of Mouth’s platform, perfectly illustrates the virtuous cycle that the project can trigger.

Zimkitha has been running an informal nail business from her shack for the last two years, as she was unable to find formal employment. She learnt her trade online and dreamt of owning a beauty salon. However, before joining Word of Mouth’s platform, the odds were stacked against her. She was earning less than the living wage for the Western Cape and she did not have business experience. Without savings, formal qualifications and a consolidated network of customers, it was impossible for her to set up a stable and flourishing business.

Word of Mouth’s platform had a profound impact on Zimkitha’s business. Thanks to virtual connection with new local customers, she was able to save money and boost her activity. “Word of Mouth allows me to save for the first time and makes my dreams of being a businesswoman possible” she declares.

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