Inquiry offers insight into retail space
THE COMPETITION Commission’s Grocery Retail Market Inquiry report, released last week, offers vital insights into the multibillion-rand township economy, detailing how crippling legislative and market restrictions have affected the sector.
The report, which aims to improve competition in the market and unblock barriers to access, offers valuable suggestions on how the struggling spaza shop market – estimated at around R40 billion a year – and informal traders could 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 rural towns, and the entry of the national supermarket chains into township areas.
The ensuing competitive dynamic has been exacerbated by increasing competition from foreign-owned spaza shops, which appear to thrive.
Numerous factors contribute to the success of foreign-owned spaza shops, including 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.
Restrictive apartheid-era trading times, burdensome regulatory processes for trading and limited, if any, access to credit are 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 spaza shops. However, it notes a “lack of co-operation among locally-owned spaza shops which prevents them from taking advantage of the opportunities for bulk buying at more competitive prices”.
What’s needed is a change in mindset from all stakeholders and role-players, as highlighted in the report, which calls for “greater levels of professionalisation 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 suite of avenues available for the achievement of broader and inclusive economic participation, given the lower entry barriers into these types of businesses, for example, offering the potential to build one’s own business and accumulate capital rather than engage in salaried employment.
Proactive legislation that supports the sustainable competitiveness of small and independent retailers will enhance their ability to respond to the changing competitive environment.
PROFESSOR HALTON CHEADLE | Competition Commission’s Grocery Retail Market Inquiry, partner at BCHC Attorneys