A value chain analysis of the formal and the informal economy: a case study of South African Breweries and shebeens in Soweto

AbstractSouth African Breweries Limited (SAB) is the dominant player in the beer market within theSouth African economy. The company owns 95 per cent of the market. This astoundingdominance in the market is strongly linked to the informal economy. Over 82 per cent of SABbeers are consumed in illegal shebeens in townships like Soweto. During the height of apartheid,SAB went against the apartheid government and formed illegal relationships with townshipshebeens in order to increase their market in these areas. Thus, SAB was instrumental in theexpansion of the informal retailing of beer in shebeens. SAB also grew from this informality.The very backbone of SAB is the township market, which is called the quarts (the 750 ml bottledbeer) market. Even at present SAB uses shebeens to increase its market share. Given this, there isa clear relationship between the formal and the informal economies. The main reason that SABinitiated relations with shebeens was because these enterprises formed the most crucial part oftheir value chain. The value chain analyses demonstrate the linkages between the formal and theinformal economies through a case study of SAB and shebeens in Soweto.