What Somali Traders Know About Starting With Less

Many Somali traders arrived in South Africa as refugees in the mid-1990s, with very little. They started by hawking clothes, shoes and groceries. Within a decade, some were running wholesale cash and carry stores in major cities, with South African staff. That climb was not luck. It came from a business model built on pooled capital, thin margins and high volume.

Start small, and start now

One Somali trader reached Johannesburg in 2000, after fleeing Somalia’s civil war through Tanzania and Zambia. He rebuilt a panel-beating business with his brother, and lost it in the 2008 xenophobic attacks, along with his brother. He started again with what he could afford: selling coffee from a flask. Today he owns a convenience shop in Mayfair, employs six people and is thinking about a franchise.

The lesson is not that hardship is good. It is that he started at the size his money allowed, and grew from there.

Pool capital, and buy together

In the early 2000s, Somali traders formed networks to share the cost of wholesale warehouses. Another trader pooled resources with 30 immigrants from different countries to open his first cash and carry in Rustenburg. He and his partners went on to run one in every major South African city, employing 300 South Africans.

Buying together lowers the unit cost. Then the traders supply each other, so the money keeps moving inside the network.

Win on volume, not mark-up

If a competitor buys an item for R10 and sells it for R13, he sells it for R10.50. The margin is small, but stock turns over fast, and the volume adds up. A South African spaza owner in Soweto once described the result: her competitor sold paraffin for R4 when hers cost R6.

Reinvest, and keep records

One way could be a training programme that puts young people to work in the businesses while teaching them to run a business.

What this means if you are starting a business

• Start at the size your money allows, rather than waiting for the size you imagine.
• Find people to buy with, so that your costs drop below what you could reach alone.
• Price for volume when your market is price-sensitive.
• Separate your money from the business’s money from the first day, and write everything down.

This is the same principle as the stokvel. Collective structure lowers a cost of entry that individual founders cannot lower alone.