One Man Collects Grants and Earns Over R1 Million a Year Without Paying Tax: What It Reveals About South Africa’s Hidden Economy

But perhaps the more interesting question is what this tells us about the South African economy. According to informal economy researcher and author GG Alcock, whose work was highlighted in a 2026 BusinessTech article, a township businessman earns roughly R70,000 a month from his butchery business, receives rental income from backyard dwellings, and benefits from government grants, resulting in household income exceeding R1 million a year. Yet he reportedly operates outside formal tax systems and pays no income tax. [businesstech.co.za]

The story immediately grabs attention because it challenges many assumptions about wealth, poverty, entrepreneurship, and taxation in South Africa.

For decades, economic discussions have focused largely on the formal sector: corporations, listed companies, banks, registered businesses, and formally employed taxpayers.

Yet beneath the formal economy exists a vast network of economic activity that many South Africans encounter every day but seldom fully appreciate. This is the informal economy. And it may be far more significant than most people realise.

Looking Beyond the Headline

The headline itself is designed to provoke. A man earning over R1 million a year while paying no tax sounds like a tax loophole story. However, the reality is more complicated.

According to the report, the businessman earns income from multiple sources. His butchery reportedly generates about R70,000 per month, while rental income from backyard rooms contributes another R9,000. His wife earns additional income from piece jobs, and the household receives social grant support. Combined, these sources exceed R1 million annually. [businesstech.co.za]

What’s particularly striking is that the business reportedly operates with minimal formal structures.

The entrepreneur buys products in bulk and sells them in smaller quantities within his community. According to Alcock, the business has limited formal paperwork and has remained outside traditional regulatory systems. [businesstech.co.za]

This raises an important question. How many other businesses across South Africa operate the same way? The answer may surprise many people.

The Informal Economy Is Not Small

When people hear the term “informal economy,” they often think of survivalist traders selling a few items on the roadside. While those businesses certainly exist, the informal economy has evolved into something far larger and more sophisticated. According to data cited in the BusinessTech report, South Africa’s informal economy is estimated to be worth around R900 billion and accounts for approximately 12.3% of gross national product and 19.5% of employment. [businesstech.co.za]

Those numbers are enormous. If accurate, they suggest that millions of South Africans depend on economic activity that falls outside traditional corporate structures. The informal economy includes:

• Spaza shops
• Hair salons
• Butcheries
• Street vendors
• Bakers
• Mechanics
• Tailors
• Construction contractors
• Transportation operators
• Backyard rental businesses

Many of these entrepreneurs generate substantial revenue despite never appearing in traditional business discussions.

Why Some Businesses Stay Informal

A common assumption is that businesses remain informal simply to avoid paying tax. While tax may play a role, the reality is often more nuanced. For many entrepreneurs, informality offers practical advantages.

Formalising a business can involve:

• Registering entities
• Maintaining records
• Filing tax returns
• Complying with regulations
• Paying business-related fees
• Managing administrative requirements

For a business owner already working long hours, these processes can feel overwhelming. Some entrepreneurs also see little immediate benefit from formalisation. If customers are buying products and income is growing without registration, many ask a simple question:

“Why change what already works?”

This mindset is common not only in South Africa but across emerging economies around the world.

The Hidden Entrepreneurial Talent in Townships

One of the most fascinating elements of stories like this is what they reveal about entrepreneurship.

There is often a perception that successful businesses require:

• Fancy offices
• Bank financing
• University degrees
• Complex business plans

Yet many township entrepreneurs build profitable operations using practical experience, local networks, and a deep understanding of community needs. The businessman highlighted in the report appears to have identified a simple market opportunity. According to the article, he purchases products in bulk and sells them in smaller, more accessible portions to customers in his community. [businesstech.co.za]

That is business at its most fundamental level:
Identify demand.
Meet demand.
Generate profit.

The lesson here is that entrepreneurial ability exists across all economic groups. The challenge is creating systems that allow these businesses to grow without losing the advantages that made them successful in the first place.

The Rise of Backyard Rentals

Another interesting aspect of the story involves property. The report states that the family received an RDP home and later developed multiple rental units on the property, creating an additional income stream. [businesstech.co.za]

Across South Africa, backyard rentals have become an increasingly important source of income. For many families, the primary house is no longer their only asset.

Additional rooms, converted garages, and backyard units can generate significant monthly cash flow. In some communities, rental income now rivals employment income.

This trend highlights an important principle of wealth creation: Assets are often more powerful than salaries. While wages depend on continued employment, assets can generate recurring income year after year.

The Debate Around Grants

Whenever social grants and business income are mentioned together, public debate usually follows. Some people believe grants should only be available to households with little or no income. Others argue that grants serve important social purposes regardless of other income sources.

The broader point is that South Africa’s social support system intersects with a highly complex economy. People are often neither completely poor nor fully affluent. Many households combine:

• Informal business income
• Casual work
• Rental income
• Social grants
• Family support

Economic reality is rarely as simple as official categories suggest.

Why SARS Is Paying Attention

The South African Revenue Service (SARS) has become increasingly focused on broadening the country’s tax base. According to the report, government increasingly views the informal sector as an area with significant revenue potential. [businesstech.co.za]

This focus is understandable. A relatively small proportion of South Africans currently contribute most personal income tax revenues. At the same time, government spending pressures continue to rise. Expanding the tax base rather than increasing taxes on existing taxpayers is often viewed as a more sustainable solution.

The challenge, however, is implementation.

Tracking formal salaries is straightforward.

Tracking thousands of small cash-based businesses is considerably more difficult.

The Problem With Measuring Success

Stories like this also reveal how difficult it can be to measure income accurately. Many informal businesses lack:

• Audited statements
• Formal bookkeeping
• Registered accounting systems

This doesn’t mean they are unsuccessful. In some cases, it simply means their success is not captured by traditional measures. As a result, official economic statistics may underestimate the true scale of entrepreneurship taking place in South African communities.

Some economists have argued that the informal economy may be significantly larger than existing estimates suggest. [businesstech.co.za]

If that is true, policymakers may have an incomplete picture of national economic activity.

Formalisation Isn’t Always the Answer

A common policy response is to encourage more businesses to formalise. There are certainly benefits to this approach. Formal businesses typically gain better access to:

• Bank financing
• Business loans
• Government support
• Commercial partnerships
• Investment opportunities

However, formalisation also introduces additional costs and administrative burdens. For some small businesses, those burdens can outweigh the benefits.

The real challenge is creating a system where formalisation feels like an opportunity rather than a penalty.

If entrepreneurs believe registration will simply lead to higher costs without clear advantages, many will continue operating informally.

What Can We Learn From This Story?

The lesson is not that people should avoid paying tax. Nor is it that everyone should remain outside the formal economy. Instead, the story highlights several important realities. First, economic activity exists far beyond what is captured in traditional statistics.

Second, entrepreneurship thrives even in environments with limited resources. Third, asset ownership can be a powerful generator of wealth. Fourth, policymaking becomes increasingly complex when millions of people operate outside conventional economic systems.

Finally, financial success often looks very different from what people expect. The image of a successful entrepreneur is often associated with corporate offices and formal business structures. In reality, significant wealth creation can occur in townships, informal markets, and community-based enterprises.

The Bigger Conversation About Wealth in South Africa

Perhaps the most valuable aspect of this story is the conversation it sparks. Who gets counted in the economy?

Who pays tax?
Who benefits from government support?
What does financial success really look like?
There are no simple answers.

What is clear is that South Africa’s economy is far more diverse and dynamic than many official statistics suggest. Behind every township shop, backyard rental, street stall, or informal enterprise lies a story of entrepreneurship, adaptation, and opportunity. Some of those stories involve survival.

Others involve remarkable wealth creation. And increasingly, they are forcing policymakers, economists, and taxpayers to rethink what economic participation actually means.

Conclusion

The story of a township entrepreneur earning more than R1 million a year while reportedly paying no income tax is about far more than one individual. It shines a spotlight on South Africa’s vast informal economy, the realities of township entrepreneurship, and the challenges facing policymakers seeking to expand the tax base.

While the headline may be controversial, the deeper lesson is that significant economic activity often exists outside formal systems. Understanding that reality is essential for anyone interested in South Africa’s future growth, financial inclusion, and economic development.

The informal economy is not simply a side note to the country’s economic story. For millions of South Africans, it is the economy.

References

1. BusinessTech, “One man collects grants and makes R1 million paying zero tax in South Africa”, 20 September 2026. [businesstech.co.za]
2. GG Alcock, KasiNomics Unleashed, referenced in BusinessTech reporting. [businesstech.co.za]
3. Statistics South Africa data cited in BusinessTech regarding informal economy contribution to GDP and employment. [businesstech.co.za]
4. Standard Bank township business research referenced by BusinessTech. [businesstech.co.za]