Informal funeral operators seen as new frontier to drive SMME development
Informal operators in South Africa’s multimillion-rand funeral service industry have been heralded as the new frontier to drive the development of SMMEs across the country. This is particularly in rural areas, such as in the Eastern Cape, where informal undertakers dominate the sector.
Quoting 2015 figures, financial services provider Old Mutual said projected growth for the industry was estimated at 12% a year.
Old Mutual was hosting a two-day funeral industry conference with members of the South African Funeral Practitioners’ Association (Safpa) in East London last week.
“Following South Africa’s sovereign credit rating downgrade to junk status last month, our economic vulnerability must be acknowledged,” Old Mutual’s foundation markets general manager Thembisa Mapukata said.
“Therefore, the role of SMMEs in our economy cannot be sufficiently emphasised. This industry should be looked towards as a driver of SMME development, transformation and financial inclusion.
“Empowering small business owners remains fundamental to economic transformation and financial inclusion, and is thus a foremost priority in the partnership between Old Mutual and Safpa.”
The conference, held under the theme “Breaking Barriers”, was aimed at empowering funeral practitioners from around the country, providing a platform to share best practice, promote SMME growth and drive credibility in the industry.
“We are working with Safpa to ensure that their members prioritise compliance, remain competitive by growing their businesses and continue driving employment in communities while expanding access to financial services at grassroots level,” Mapukata said.
Mapukata, who pointed out that informal operations and self-regulation had negatively impacted the credibility of the industry, said historically, financial institutions had focused solely on affluent and mass markets.
This was while the foundation market had relied on one another to save, invest, borrow and bury loved ones – leading to the establishment of stokvels and informal burial societies.
Safpa president Yongama Quma said members conducted 60 000 to 70 000 funerals across the country every year.
“As we are only one of many funeral associations operating in South Africa, our numbers clearly highlight the potential of this industry to grow and drive employment,” he said.
Old Mutual had helped ensure the registration of more than 300 funeral parlours as financial service providers since last year, he said.
Old Mutual communications manager for emerging markets Nawhal Foster said: “Funerals continue to be an important part of our culture and command respect.
“It is with this mindset that more people may be purchasing products, and/or covering more members of their family.
“The focus on the funeral sector is driven in part by the importance of funerals in the black market, which largely makes up the lower end of the market.
“If one looks at the customer needs around financial services, the main needs are: funeral, transactional and informal savings.”
Foster said Old Mutual was actively meeting these needs.
He said the funeral market was largely informal, which meant there was inconsistent compliance with regulation.
“Funeral parlours play a vital role in the growth of SMMEs in our economy. They have served the market with funeral services for decades.
“There is an enterprise development to grow existing SMMEs as well as new entries in the market.”