Quitting your job to embark on a new business venture is always a risk. But leaving stable employment when living in Khayelitsha, South Africa’s third largest township where half the population is out of work, almost borders on insanity… or genius.
Wongama Baleni (23), Vuyile Msaku (25) and Vusumzi Mamile (24) have done exactly that. The childhood friends opened Khayelitsha’s first real coffee shop in July that sells cappuccinos, espressos and americanos brewed from top quality coffee beans.
“It was our dream to own our own business. We convinced each other that it was time to try something new,” says Msaku, who used to work as a barrista at a well-known South African coffee shop chain and brought the professional know-how to the venture.
Something new they did indeed. In a place where stores are usually housed in metal containers or rickety wooden stalls, the Department of Coffee (DOC)—a professionally branded shop with a modern logo and corporate colors—is the real deal.
“We are the first and only ones to sell quality coffee and cappuccinos in the township. The only other coffee you get here is instant,” says Msaku full of pride.
As a trained barrista it was Msaku’s job to source fresh beans for their store. He got a supplier to prepare a special blend of Arabica, Ethiopian and Italian beans that will be sold solely to the DOC.
“It’s a mild, medium roast, not too bitter. I created it with the people of Khayelitsha in mind,” he says, explaining that his average customer comes from an instant coffee culture and isn’t used to Italian-style strong, thick coffee.
At $0.80 for a regular americano, $1 for a cappuccino and $0.90 for a double espresso, the DOC is an affordable place to get one’s caffeine fix. The shop also sells muffins at $0.30 a piece and cookies for a mere $0.25. In summer, iced latte and cool drinks will be added to the menu but the food offering will remain limited.
“We don’t want to go too broad. We rather focus on our brand, on coffee. At most, we might sell sandwiches and coffee in a combo.”
Baleni, Msaku and Mamile have given careful thought to the branding of their store. The primary color is a warm, bright orange “to attract customers”, says Baleni, combined with either white or black. The uncluttered logo is made up of two stylized coffee beans, diagonally placed so that they form a heart shape, symbolizing love for coffee. The three owners wear stylish black shirts with the orange DOC logo stitched onto their back under orange aprons with the same logo printed in black. Trendy straw hats round off the look. The message: drinking good coffee is hip and cool.
Six weeks after opening its doors, the trio already sells more than 200 cups of coffee a day. With 30 to 55 cents profit per cup, that’s about $2,500 in earnings a month—not bad for a small start-up in a township setting. A key to their early success has been the choice of location. Positioned opposite the Harare train station, one of Khayelitsha’s main commuter hubs, and close to the local magistrates court, hospital, shopping mall and taxi rank, the DOC benefits from the bustling foot traffic of hundreds of residents each day. To make sure they won’t miss early risers, the DOC opens its doors at 4am, seven days a week, closing only at 6pm, when the after-work rush is over.
Apart from take-away sales, numerous people who work in the area call in for deliveries.
“In the beginning, we were worried that the township people wouldn’t understand [coffee culture], but they surprised us. There’s a new generation in Khayelitsha that is keen to change the perception of the township, lift the standard,” Says Msaku.
For this young crowd, drinking cappuccinos is fashionable, a small status symbol that shows “I’m moving up”. It’s something worth spending a dollar on, at least once a day.
The DOC’s business premise is spot on. According to a report by the African Development Bank (AfDB) last year, the continent’s middle class tripled in the past three decades. Now, a third of all Africans, or 313 million people, belong to this group. Although the data has to be treated with caution—the AfDB’s definition of lower middle class includes anyone earning $4 to $10 a day, while those earning $10 to $20 a day count as upper middle class—one thing is certain: Africa’s growing middle class has brought a new kind of consumerism to the continent as more and more people can afford to buy things beyond their most basic needs. Cappuccinos are just one example.
It was a difficult road to travel until the trio’s dream of opening a coffee shop became reality. In early 2011, Msaku, Baleni, a fireman, and Mamile, a worker in a towel factory, quit their jobs to pursue a “Micro-MBA” at business school—The Business Place eKapa, which specializes in small to medium-sized enterprise development. They studied store management, costing, pricing, stock control, marketing and accounting, and after several months of intense market research identified a gap in the market: the cappuccino in the township.
“We took a huge risk leaving our jobs. [Financially], it was a very difficult period for us until the opening,” says Mamile.
The three men lived off their meager savings and relied on support from their families until they hurdled the problem of finance. In the beginning, it didn’t look promising. Several banks had turned down their applications for a loan, as neither had enough financial security to qualify for credit. But then a chance encounter helped getting their venture under way. A group of private entrepreneurs from Cape Town, who were looking for an opportunity to “pay it back” and liked the trio’s coffee shop idea, offered them an interest-free loan, repayable within three years.
“They liked our concept and decided to mentor us,” says Baleni.
How much venture capital they invested to get the shop up and running, the three young owners are reluctant to disclose, however.
“We don’t want to attract too much attention,” says Baleni, fearing envy from the community that might lead to theft. In Khayelitsha, where high unemployment rates have caused massive poverty, drug abuse and crime, safety remains a prime concern. The set-up of the coffee shop reflects this, too. The windows are protected by thick burglar bars. Intruders are kept at bay by a heavy security gate and a wooden door, which is locked at all times. Earnings need to be banked at least once a day to lower the risk of a hold-up. The short walk to the bank is never done alone.
But that’s the reality of South African township life, Mamile says, something every entrepreneur who wants to do business here has to reckon with.
“We’ll do whatever it takes to make this work,” he promises, because the trio’s business plans don’t end here. Once they have paid off their loan—the three count on a return on investment within the next two years already—Msaku, Baleni and Mamile want to turn the Department of Coffee into a chain.
“We plan to open more stores in Khayelitsha and in other townships,” says Baleni.
With that, he does not only think about their own success but has a bigger picture in mind: economic growth and upliftment within previously disadvantaged urban communities.
“At the moment, all money is flowing out of Khayelitsha. Everyone spends their hard-earned cash in the city. The wealth doesn’t stay here,” he says.
The DOC might be one step towards changing this.