BENBEN Solar Powered All Terain TUCKSHOP


Introduction

The informal street traders market sector is probably the least supported section of small/micro businesses in South Africa today. Apart from the often unsightly mish mash of many street traders in close proximity to each other which reflects poorly on the urban landscape, the traders themselves often find themselves having to move on or even pack up shop for a myriad of reasons.

The BENBEN SOLAR TUCKSHOP presents a new era for the informal trader with an array on potential new business opportunities because it enables the trader to have a larger selection of goods with a much more accessible display.

The BENBEN Eco-SOLAR TUCKSHOP also contributes to the Green Energy Sector. Instead of the informal trader having to carry their goods in Taxis or Buses and then setup shop using unsightly stalls often made up from cobbled together planks of wood and plastic crates etc they can now keep all of their goods neatly stored and displayed in the SOLAR Shop. Also, because the SOLAR TUCKSHOP is a self contained Electric Eco-Bicycle with a Solar Charged Electric Motor they can go to and from their place of business totally green and not have to use fuel consuming atmosphere polluting busses and or taxis.

Another advantage of the BENBEN eco-SOLAR TUCKSHOP is that because it has built in electricity supply to power the motor, we use the electricity to power low voltage LED lights making all their goods clearly visible, even when it isn’t daylight.

Practical Features

The BENBEN SOLAR TUCKSHOP has the following advantages:
• Totally self Contained
• The Bicycle is powered by an Eco Friendly Solar Charged Electric Motor
• Has charging points for up to 8 cell phones
• Has an insulated section for storage of cold drinks etc
• Lockable
• Fully alarmed
• Clear display area for products with easily seen pricing tabs
• Low Maintenance cost (very little knowledge needed To service the unit)

[View of goods display area]

[View of 8 cell charging adaptors]

Summary

The BENBEN SOLAR TUCKSHOP is the first business tool developed specifically for the informal street trader. It will enable them to grow and begin to enter the more formal Spaza market. It also allows them to move their goods around very easily so as their customers move during the day they can move to service them wherever they are.


Pricing Structure

The BENBEN SOLAR TUCKSHOP is supplied at R 33 000 excluding VAT per unit and includes the following
• 1 X BENBEN SOLAR TUCKSHOP
• R 2000 stock (Cost Price – should generate about R 1600 profit)
• 2 Day training course in basic business principals and on how to run a BENBEN SOLAR TUCKSHOP to its full potential
• Operating manual on how to service BENBEN SOLAR TUCKSHOP
• Proposed list of “best selling goods” in the specific area
• Introduction to proposed wholesalers of goods in the area

Implementation Alternatives

One way to implement and also finance a substantial rollout of the BENBEN SOLAR TUCKSHOP in the Free State without it being seen as a free handout would be to emulate the DTI Co-operative Incentive Scheme. But with a difference in so much as the Department actively works with the established Co-operative by providing business and administrative mentorship.

Overview of DTI Co-operative Incentive Scheme Program

The Co-operative Incentive Scheme (CIS) from the DTI is a 90/10 cost-sharing grant for a registered primary Co-operative (a primary Co-operative consists of five or more members). The objective of the CIS is to improve the viability and competitiveness of Co-operative enterprises by lowering their cost of doing business through an incentive that supports Broad-Based Black Economic Empowerment.

Objectives

• Promote Co-operative through the provision of a matching grant;
• Improve the viability and competitiveness of Co-operative enterprises by lowering the cost of doing business;
• Assist Co-operative to acquire their start up requirements;
• Build an initial asset base for emerging Co-operatives to enable them to leverage other support; and
• Provide an incentive that supports broad-based black economic empowerment.

Eligible activities through the grant:

• Business development services (e.g. feasibility studies; business, manufacturing and production systems; and production efficiency and improvement, etc);
• Technological improvements;
• Machinery, equipment and tools;
• Commercial vehicles;
• Infrastructure linked to the project (e.g. 3-phase electricity; boreholes, etc.); and
• Working capital.

Who benefits / Eligible criteria:

Eligible entities should:
• be incorporated and registered in South Africa in terms of the Co-operative Act of 2005;
• be emerging Co-operative with a majority black ownership;
• have projects in any of the different economic sectors;
• adhere to Co-operative principles;
• be owned by historically disadvantaged individuals (HDIs); and
• be biased towards women, youth and people with disabilities.

Possible Free State Implementation

One challenge related to the DTI program is the availability of funds, each year the program is heavily oversubscribed and projects especially new ones can take a long while before they become approved and be operational.
The Department can follow the basic structure of the CIS program, but make it quicker to implement. As the funds have already been earmarked it can dramatically reduce or even eliminate the time to market challenge. Clearly the SOLAR TUCK SHOP initiative can be taken to market in a matter of weeks rather than months or even years.

Rapid Rollout

If we adopt a basic principle that each Co-operative has 10 members and presuming the objective is to implement 1000 tuck shops throughout the Free State this would result in 100 new businesses and these business would by their very nature be owned and operated by the poorest.
The benefit would be felt immediately from the ground up, whereas typically new businesses grow from the top down with the lower echelons only receiving the smallest share of any profits and doing most of the work. A key factor in rolling out 100 Co-operative with 1000 SOLAR TUCK SHOPS is their immediate buying power. Especially if the Province intercedes on their behalf to negotiate better buying deals.

Immediate Financial Benefit

Given we are talking about the Informal Street trader they currently buy their wares from retail outlets so they are immediately at a disadvantage pricewise. If the Province can facilitate a buying group on their behalf they would immediately get much better prices and that means they could pass this on to their customers benefiting everybody involved in the entire lifecycle of the process.
Initially the Department could identify the first ten cooperatives (that’s 100 tuck shops), work with them to help them structure things properly and as part of the operating profit repay a portion of the cost of the SOLAR TUCK SHOPS purchase price.

Summary

An advantage of the second route (not using the DTI Program) is the Department can bend the rules, but the DTI is governed by legislation.

Department Sponsorship/Subsidy Approach

Of course the department can opt to go a much simpler route, but does this route really deliver long term viability. If the Department opts to simply donate the SOLAR TUCK SHOPS to deserving individuals then their sense of commitment is far less. Every successful business needs some “Skin In The Game” and more importantly simply giving an Informal Street Trader a better shop front won’t guarantee a long term viable business.

Registration of a Co-operative

In order to register as a Co-operative under the proposed scheme the following procedures and applications should be applied for and adhered to. This registration process will be an integral part of the mentorship process provided by the Department under the proposed scheme.
• Register with CIPRO as a Co-operative in terms of the Co-operative act of 2005
• Register with SARS for Turnover Tax
• Completion and signing of Founding Constitution of the Co-operative by all members
• Certified copies of all ID documents and proofs of residence as per current FICA rules and regulations
• Completion of Scheme Application Form by elected Chairperson of the Co-operative
• Proof of Bank Account
It is vital that the scheme is simple to operate and manage especially from the point of view of the Department but as importantly from the perspective of the applicants or the whole process could be too intimidating and result in a poor uptake thus undermining the entire initiative.

Co-operative Simplified Tax Scenario

Co-operative can register with SARS for Turnover Tax, this method of taxation has many benefits especially for “new” business owners. A Co-operative must register for Turnover Tax either before 1 March or within two months of commencing business.
The Turnover Tax replaces the 4 standard taxes applicable to a business, Value-Added TAX, Income Tax, Capital Gains Tax and Secondary Tax on Companies. Additionally, the Turnover Tax model increases the Vat liability threshold from R300,000 to R1,000,000 so there is very little chance that a Co-operative with ten SOLAR TUCK SHOPS traders will ever reach the threshold that would force them to deregister for Turnover Tax and fall under the normal scheme.

Turnover Tax Calculation

Turnover Tax calculation is simple as the Tax payable is calculated solely on the annual turnover, the current tax rates are:

What records must be kept under the Turnover Tax Model?

A micro business is required to keep minimal records.
These are:
• Records of all amounts received by the business for each year of assessment;
• All dividends declared for the year of assessment;
• Records of all assets with a cost price of more than R10,000 each;
• Records of all liabilities that exceed R10,000 each.

Exemption of Auditing Requirements

Under the Act, a co-operative can request that for the 1st three years they can be exempted from full compliance with Auditing requirements. This means that they don’t have to appoint or recruit the services of an external auditor which can be costly but someone in the Co-operative can act as the accounting secretary and submit their returns. To get this exemption they have to complete “Form CR8” which them allows them to opt for this simpler less costly administrative approach.
This exemption coupled with their registration for “Turnover Tax” dramatically simplifies the reporting and accounting requirements and after three years they with the help and guidance from the mentorship provided to them by the department should enable them to transition easily to being a fully fledged business into the mainstream of businesses in South Africa.

Conclusion

Given the nature of the business and the expected turnover of 10 SOLAR TUCK SHOPs it is extremely beneficial for the Co-operative to register for Turnover Tax as the record keeping required is minimal. Also, given that a Co-operative will have ten members the tax liability will be minimal but it will bring these informal traders into the mainstream and out of the grey economy which will eventually benefit South Africa and all its citizens.

Recommendation

There will always be the need to mentor the recipients and by structuring a program based on the DTI’s CIS Program will guarantee success, “Success” for the department, “Success” for the Informal Trader and “Success” for the Economic development of the Free State.
Rather than a 90/10 funding scenario, we recommend that the Department funds the 100% of the setup costs, including perhaps some initial stock holding, then get the Co-operative to repay a portion of the initial funding from turnover over several months. The portion to be repaid can be decided later but perhaps a 10% repayment in line with the DTI program is a fair and commercially viable amount.