A common trait among successful entrepreneurs is their good fortune in having started early. Few, however, kicked off as five year olds – the age at which Nthabiseng Sejake began helping in her mother’s spaza shop and tavern. Sejake used skills acquired as a pre-teen to develop B Evolution, a fast-growing ‘backroom’ renting business in Soweto. She was identified by informal economy guru GG Alcock as epitomising this much misunderstood R20bn area which succeeds despite being starved of capital by SA’s formal banking sector. In this interview with Alec Hogg of BizNews, the budding property mogul shares her story – and dreams – and how, in four years, she has built a portfolio with dozens of quality apartments on three sites in Soweto. An inspirational story of a woman for whom the sky is surely the limit once scales lift from the collective eyes of SA’s financial institutions.
Excerpts of the interview with GG Alcock and Nthabiseng Sejake
GG Alcock on the backroom rental sector
One of the huge sectors is the backroom rental sector. I wrote about it being a 20 billion rand a year sector. The tendency is to think that the backroom houses a whole family crammed into a little backroom. You know, that’s got no facilities or anything like that but far from it. I mean, if you look at South African General Household Survey figures, 18% of our households in South Africa today are one person households and another 23% are two person households. So what we see is that actually households are growing faster than the population. So actually it’s a bit like the market. IKEA works towards supplying small households in smaller kinds of flats. And this is actually what most of the backrooms are, these kind of fairly sophisticated, nice units – that points to the growth in backroom rental needs. And so this story is just fantastic because I love how Nthabiseng has fought to get financing for it. I mean, it just shows this massive sector. She’s got a thriving business but is struggling to get financing for it as she tries to grow her business. But it also just indicates someone who’s moved from a formal kind of environment into the informal economy.
Nthabiseng Sejake on how she started and the first building she bought
I had a passion for property, and I was very lucky. I work for the municipality, so I have to deal with a lot of property and stuff. So I just grew interested from there. And then I started looking for finance. I was lucky I found a company called uMaStandi which works with TUHF. Basically they fund for bedroom accommodation. That’s how I started and they did my first building. I have my own house that I’m living in on the property, but it’s got 14 units on it. So the 14 rooms, each house has got a washing machine, connection to DStv, it’s got WiFi, it’s got its own bathroom and shower. It’s got a braai stand upstairs and downstairs and it’s also got separate parking from me. So those tenants have also got parking space – it’s a very safe space.
On the difficulty in getting financing from the banks
When it comes to qualifying, your normal banks, traditional banks, they don’t actually fund property development. So it’s very hard to find those companies. You go there and say, I’ve got this idea, even now you can go to any bank and say, “I’ve got this rental income that is coming in an extra maybe, let’s say R30,000. I’ve got my salary. Please give me a loan of about a million. I’ve got this – and they’ll decline”.
GG Alcock on banks not understanding the business model of the informal sector
They don’t understand the business model. It’s informal or township and so they kind of don’t recognise it. I mean, she’s renting out 14 backrooms for between two-and-a-half thousand and 3,000 rand each. Now she’s got a second property with 12 backrooms, which is renting out for nine thousand rand per room for student accommodation. Those are furnished and equipped inside. So I mean, you’re talking 12 times 9000 and 14 times two-and-a-half thousand. It’s a serious income and she’s wanting to grow that business, yet it’s not recognised.
Nthabiseng Sejake on her big dream
I would love to own a lot of these buildings in the township. A lot of these buildings, there’s very great potential in the township. Moving out would be expensive to start, but if you get the turn over NSFAS is still paying me the same amount that they’ll be paying in time, you understand? So I would love to grow. It’s got a very big market.
GG Alcock on why financiers are struggling to wake up to this reality and the benefits of development finance
I mean Nthabiseng’s staying in the township and focusing on her business there because she’s saying this township is where the businesses are lower cost, easier to do business, easier to utilise local supply as the ecosystem works much better together within that kind of thing. She knows who to use. She doesn’t have to randomly find a builder. You know, someone’s referred to that builder and stuff. So, on the one hand, the people in the township are very comfortable that there’s actually a better way to do business. But I think people outside of that don’t recognise the upside in terms of how big the opportunity is. But even more so, they see risk, you know, like all townships must be crime hotspots.
The biggest liberating factor is what people call development finance, which is, in essence, fairly small-scale financing of informal businesses. And you look at how the Somalis have been so successful, they’ve put money together within that group and they capitalise their business, they carry more stock and so on and so forth. South Africans are much more individualistic. But financing could completely open up the space. And we talk about enabling businesses, creating more business and stuff like that, but here’s a very successful business model. Here’s a person who isn’t relying on that business for an income, to feed themselves and put fuel in their vehicle. And yet they aren’t seen as that. I think it’s really about a case of changing the mindset around where those opportunities lie.
Nthabiseng Sejake on if there’s any competition from the retail side
We do have competition because you find big businesses, people that can afford to have bigger apartments and so forth, but they don’t have space. So that’s our upside. Most of the vacant areas left in Soweto are quite small. So we have an advantage and we know people are not even willing to pay that much for the same service. So I think that’s where we beat them. I think if given a chance, this can grow into something. I started this in 2017 and I’m on my third property right now. So you can imagine how this thing can grow if given the chance.
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