Direct selling provides an economic benefit for both individuals and their country’s trade balance.
For numerical context, the direct selling industry in South Africa made over $2.2 billion in 2020. This is an incredible economic impact for one industry, especially considering how severely the COVID-19 pandemic affected the global economy.
New technologies are one reason that direct selling has been so successful on the African continent. These were helpful to entrepreneurs even during the pandemic. Through social or video commerce, salespeople were able to continue providing quality products and personal service while staying safe. Because the direct sales industry is constantly evolving, it has kept up with technology.
Direct selling continues to boost the economy in Africa. Experts have called the continent the “new frontier of direct selling”. In 2020, the World Federation of Direct Selling Associations reported an 11.6% increase in global sales in Africa.
The economic growth we’ve seen as a result of direct sales in Africa is incredibly exciting. A boosted economy positively impacts not only the government, but also many individuals in many sectors of work.
What is Direct Selling?
Although many still confuse direct sales with multilevel marketing or pyramid schemes, this form of commerce stands alone. Direct selling is costumer and product-focused and does not charge distributors for membership in the company. Direct sales is one of the oldest forms of commerce. Despite the lies and disinformation that critics have spread, the industry isn’t going anywhere.
The direct selling industry prides itself on its ethics and the way it empowers businesspeople. Because the start-up costs are minimal and there is no overhead, anyone can become a direct salesperson. Annually, the direct sales industry contributes $180.5 billion to the global economy. This sum is a major yearly boost to the economies of multiple regions.
What Does it Mean to Boost the Economy?
The direct selling industry is very successful at boosting the economy because of its accessible nature. Direct sales require few start-up costs, no overhead, and offer the flexibility of working for oneself. It’s simple to make a profit and contribute to growing the local economy.
Economic growth is the most exciting phase of the business cycle. When an industry boosts the economy, it creates production growth, increases incomes, and contributes to a rising GDP.
A boosted economy is vital for a healthy, thriving community. The rise of direct sales in Africa is directly contributing to a boosted local economy. This in turn is beneficial for the entire population.
The Business Cycle
- Growth
In this phase, there is an increase in employment, income, production, and sales, causing the GDP to rise. The direct selling industry is contributing to this phase currently in Africa.
- Peak
This term refers to the phase of the business cycle in which growth hits a ceiling.
- Contraction
The opposite of growth, a contraction phase causes a decline in economic activity.
- Trough
A trough point is the opposite of a peak, or when the business cycle reaches its lowest point.
How Does Africa Benefit From Growth in the Local Economy?
2020 was a year of crisis for many countries. The world was experiencing its worst pandemic in a century, and the effect on the economy was devastating. Despite the global struggle experienced by so many, the direct sales industry in Africa made record-breaking sales. In such an uncertain time, this boost to the economy was surely welcome.
Economic growth is good not only for governments and politicians, but also for individuals. These impacts are far from just financial. A 2018 study on direct selling in South Africa demonstrated how using information communication technologies (ICT), such as social media, can change women’s lives. The study concludes that using ICT can transform the social, political, and economic lives of these women.
Direct selling boosts the local economies, yes, but it also empowers individuals. This empowerment may come in the form of increased wealth, opportunities, social capital, or status. The direct sales industry “encourages an environment of learning, personal development, and business building,” according to the South African Deputy Minister of Small Business Development.
African individuals benefit from direct sales as incomes increase, unemployment rates decrease, and the economy grows. They also get to experience the lessons learned as a result of being a businessperson. These are less tangible rewards, but gaining experience is crucial for future opportunities.
Direct Selling’s Impact on Regional Economic Development
Disinformation about direct selling hurts economic growth. Many entrepreneurs never take the first steps needed to start their own businesses because they fear the industry is a scam. Not only does disinformation harm their career potential, but it also hampers nationwide economic development.
While touring QNET’s Malaysia offices, journalist Kenneth Awotwe Darko of Joy News in Ghana said “I am convinced that with the current economic situation in the world and especially in Africa, a lot of people need multiple streams of income to be able to stay afloat.”
Although this statement sounds dire, the gig economy is rapidly growing, especially in developing countries. In those regions where underemployment and unemployment rates are often staggering, there has never been a better time to diversify income streams.
As we have seen from WFDSA’s 2020 report, the direct sales industry has contributed to Africa’s economy in significant ways. By countering disinformation about the industry, we hope to encourage budding businesspeople to try it for themselves. Many have found that direct sales help them not only to stay afloat but also to thrive.