Local, foreign-owned spaza shops can thrive side by side
But restrictive legislation is hobbling multibillion-rand township economy, research shows
THE Competition Commission recently released the Grocery Retail Market Inquiry report.
Inquiry chairperson, Professor Halton Cheadle, looks at what its research discovered looking into the spaza shop sector in townships.
Adapt or die: how local spaza shops can survive and thrive alongside their foreign counterparts – and how the government can help:
The report offers vital insights into South Africa’s multibillion rand township economy, detailing how crippling legislative and market restrictions have affected the sector.
Significantly, the 650-page report, which aims to improve competition in the market and unblock barriers to access, also offered valuable suggestions on how the struggling spaza shop market – estimated at around R40 billion per year – and informal traders can overcome the hurdles of a shifting competitive environment.
The inquiry found a direct correlation between the reduced number of spaza shops and independent retailers, especially in the rural towns, and the entry of the national supermarket chains into townships since the fall of apartheid. The ensuing competitive dynamic has been further exacerbated by increasing competition from foreignowned spaza shops, which appear to thrive despite restrictive trading environments and barriers to entry, said Cheadle, a partner at BCHC Attorneys.
“Numerous factors contribute to the success of foreign-owned spaza shops; these include longer trading hours, a greater variety of stock, greater efficiencies in the procurement of goods from co-operative arrangements, and also greater price competition from trading in counterfeit goods,” he said.
Restrictive apartheid-era trading times, burdensome regulatory processes for trading, particularly in relation to zoning and land use and limited, if any, access to credit are just a few of the barriers to success for informal traders and entrepreneurs, who could contribute significantly to the economy and job market.
The report lists these and other restrictions, as well as suggesting various measures the government can put in place to ease the burden on local spaza shops – but also notes a distinct “lack of co-operation among locally owned spaza shops which prevents them taking advantage of the opportunities for bulk-buying at more competitive prices”.
What’s needed, said Cheadle, is a change in mindset from all stakeholders and role-players, as highlighted in the report, which calls for “greater levels of professionalism and improved business management skills in the context of more sophisticated competitors entering these areas of operation, and the need to adapt the businesses to such competition”.
“Spaza shops and independent retail operations are part of the avenues available for the achievement of broader and inclusive economic participation, given the lower entry barriers into these types of businesses. For example by offering the potential to build one’s own business and accumulate capital rather than engaging in salaried employment,” Cheadle said.
“Proactive legislation that supports the sustainable competitiveness of small and independent retailers will enhance their ability to respond to the changing competitive environment.”