Foreign shop owners give local counterparts a run for their money

2014-09-05 13:47

Spaza shops owned by foreign nationals in Soweto are thriving and prospering, a Human Sciences Research Council survey has found.

The research, conducted by Dr Trynos Gumbo and Simamkele Bokolo of the Africa Institute, a division of the research council, found that foreign-owned spaza shops generally recorded huge successes compared to those owned by their local counterparts.

Most of the foreigners who run spaza shops in Soweto come from Ethiopia (47%), Bangladesh (31%), Pakistan (23%) and Somalia (19%).

The foreign nationals, says the survey, employed savvy business skills to give them the edge over their local counterparts. Their strategies include:

» Maintaining simple lifestyles and saving a lot for the business;

» Long operating hours (6am to 9pm);

» They aim for small profits that offer quick returns;

» Spazas are located on busy street corners;

» They buy in bulk as cooperatives to maximise on savings; and

» Generating loyalty by selling on credit.

“They had strict saving habits and extended soft loans to their compatriots. They also practised hire purchasing by helping relatives start businesses and making them pay back the capital in instalments; the newcomers only owned the businesses once all the money was paid in full,” said the report.

The survey comes at a time when South African spaza shop owners are complaining that foreigners are taking their customers. This has often resulted in foreign-owned shops being attacked and robbed.

“Migrants maintained simple lifestyles, channelling their profits towards the growth of their businesses by buying delivery cars and other equipment to use in their business operations. They had also forged strong relations with community members, customers and suppliers, generating loyalty and trust among their key business stakeholders.”

Researchers found that foreign nationals are attracted by the large, lucrative market of high-density populations in South African townships.

The majority of the spaza shops (75%) owned by migrants had been operating for at least one year, while very few had been in operation for either less than one year or more than 10 years.

“A large share (86%) had also invested huge amounts of money – more than R30 000 – in their businesses, resulting in significant investments in the township,” said the research report.

The researchers concluded by saying that foreigners should be encouraged to employ locals and enter into partnerships with young South Africans and share their experiences, knowledge and business skills as a strategy for peaceful integration.

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