How South Africans are learning from Somali businesses

A busy day at the Salahadin Cash & Carry in Crown Mines, Johannesburg. Photo by Yumna Mohamed.

Yumna Mohamed

7 September 2015

Saeed Furaa arrived in South Africa in 1998 after fleeing Somalia where he had worked as a shepherd. Against the backdrop of xenophobic violence in April, Small Business Development Minister Lindiwe Zulu said that foreigners needed to share their business practices with local business owners. Yet this is exactly what Furaa and other Somalis have been doing.

A 2014 report from the Migrating for Work Research Consortium (MiWORC), an organisation that examines migration and its impact on the South African labour market found “People born outside the country were far less likely than those born in South Africa to be employees, and far more likely to be own account workers (self-employed without employers) or employers.”

This is apparent in Johannesburg’s “Little Mogadishu” where the city’s Somali entrepreneurs thrive in streets full of busy shops selling everything from underwear to internet services at very low prices.

Furaa has teamed with other Somali businesspeople in South Africa to start programs that pass on entrepreneurial skills to unemployed South African youth, especially in the informal sector.

“My plan has always been to get successful entrepreneurs, starting within the Somali community, to mentor and train local youth. I hope this will contribute towards creating sustained employment and entrepreneurial spin-offs. It also promotes integration between our community and our host society,” Furaa said.

Furaa is particularly interested in the informal sector because this is where most of the country’s Somali business owners got their start.

The first trickle of Somalis came to South Africa as refugees in the mid-nineties. Most made their start by hawking clothing, shoes and non-perishable groceries until the early 2000s when they formed business networks to share the cost of establishing “cash-and-carries”, wholesale warehouses selling a variety of products at lower mark-ups with profit coming from the fast turnover of stock. This is the key to what sets Somali businesses apart from local competitors.

Abdul-Wahid Bundidsalah came to South Africa in 2005 and pooled resources with thirty fellow immigrants from different countries to open his first Cash & Carry store in Rustenburg. He and his partners now own a Cash & Carry in every major South African city which employ a total of 300 South Africans across the country.

“South African wholesalers and retailers sell at a higher price but they keep the stock for too long,” he said. “I’m selling for a very low price, but I am selling huge amounts. The stock doesn’t stay in my warehouse for long.”

“For example,” he added, “my competitor might be buying a product for R10 and reselling it for R13, while I will sell it for R10.50. Those 50 cents in large quantities, if you sell a lot, can add up to a good profit.”

Bundidsalah does not seem concerned about a possible surplus of Cash & Carry stores. “We are happy to have more warehouses, because we trade with each other. In fact, this is part of the Somali model. When a Somali person comes here from back home, they work with one of us for a couple of years and then move on to start their own business, and I want our South African brothers to do the same, because I am thankful for the opportunities this country gave me.”

In fact, his employees also have the option to buy shares in the new Cash & Carry stores that he opens.

“We are working together with some ex-employees now to open another one in Soweto,” he said. “So now they are our partners and have contributed to opening a new Cash & Carry soon.”

Furaa, who is currently completing an MBA from Johannesburg’s Gordon Institute of Business, has previously competed a social entrepreneurship programme at the institute with a research focus on the transfer of entrepreneurial skills between the Somali community and locals in an attempt to foster mutual learning and business partnerships. He also founded the Sama Business Academy in South Africa in 2011, aiming to share the Somali experience with local youth.

“I could see young people in the townships without jobs and losing hope in any sort of future. I think that’s what motivates them to try anything, and these are the people we are targeting,” he said.

The academy selects young people primarily in Gauteng and employs them in the Cash & Carry stores where they are being trained and gaining work experience while earning a salary.

“There are small and medium businesses that come and buy their retail stock from the Cash & Carry stores and so the people who are working in our warehouses in whatever capacity also have an opportunity to interact with these business owners,” Furaa said.

The academy also holds informal classes after work on the theoretical side of starting and running a small business. Since its inception, the academy has seen 70 trainees go on to start their own businesses. Though most started small spaza shops, others are using their training in a variety of businesses ideas, like 30 year-old Rashida Hassan who is planning to open a crèche.

Hassan worked at Salama Cash & Carry between 2011 and 2013 after moving to Johannesburg from Port Elizabeth to escape a bad marriage. She worked in a management position at the warehouse and is now studying Human Resources (HR) while she prepares to open up her own business.

“I fell in love with HR when I was working there,” she said. “I learned about problem management both with customers and employees.”

“I also learned about sacrifice,” she added. “When you start a business, it’s not going to be a success right off. You’ve got to know how to budget and build from small. With every rand you make, you need to put some away to reinvest in your business. We South Africans are too used to eating from our businesses and not keeping records.”

Furaa first put himself in the shoes of South Africans after visiting Robben Island in 1999, where he decided he did not want to be a burden on South African society. People like Hassan are the reason he believes in his efforts.

“It is only fair to give back to a society that has given sanctuary and opportunity to so many Africans who have come to fix their fractured lives,” he said. “As immigrants we must remember we are also part of this country and we should not be insular. But South Africans just need to recognize that immigrants also come with skills and opportunities that can benefit our hosts while we also learn from them.”