Foreign shop owners in SA – How to trade like a foreigner

2012-08-04 15:05

These spaza shops seem to owe much of their success to the power of collective buying

The old South African motto, unity is strength, is a reality for foreign spaza shop traders who are beating their local counterparts in the highly competitive business.

While locals operate on their own, their foreign colleagues have learnt that pooling their resources affords them big discounts and bigger profits.

“A local guy takes R5?000 to buy stock, maybe three times a week. Now this means he’s spending more money on transport and is unable to get the same discount as people who approach a wholesaler with, say, R500?000,” says René Munya.

This puts them at an advantage because they are able to sell at lower prices.

They also have more variety of stock, which attracts more customers.

Munya runs the African Askari project in Midrand, north of Johannesburg, which helps both local and foreign nationals run their spazas professionally.

African Askari is also planning an exchange programme for local traders to work with their foreign counterparts and, in the long term, visit their countries of origin to give them a better understanding of where the other comes from.

Amir Sheikh, a leader of the Somali Community Board, an organisation that helps Somali nationals in trade and social issues, explains: “A foreigner will look for a 30c margin, while a South African will look for R2. The reality is that people buying in bulk can afford to do that, but if you are acting on your own, it will ruin your business.”

Residents of Khayelitsha, outside Cape Town, say they support Somali traders because they are cheaper, trade from 5am to 10pm, are friendlier and extend small amounts of credit to regular customers.

Somali trader Abubakar Hassan says pooling money to buy stock in bulk from wholesalers is key, along with more conservative mark-ups.

The reason South African shop owners struggle, says local trader Erick Mdaka (44), is because the South African business community is riven with jealousy.

“We don’t want to see our friend excel,” Mdaka says.

Masud Alam, who owns a string of spaza shops in Mangaung, also provides another reason for the success of foreign businessmen.

“In the first six months you have to invest all the money back into the business. You have to keep your shop properly stocked and you have to work hard and irregular hours.”

Tembisa businessman Samuel Motaung, who rents out business space to a consortium of Somalis, agrees that working as a united front gives foreign nationals an advantage.

“They are together, united, unlike our people here. Their prices are also quite good. For instance, they would sell a packet of headache powders for R1, but when you go to local businesspeople you find that they sell the same product for R1.50 or even R2,” Motaung says.

Sheikh says one of the secrets to their success is selling basic commodities such as bread at a much lower price, which helps to attract customers who are interested in more than just the basics.

“What then happens is that one is able to recoup that money from other products like maize meal because then you will charge a higher margin there,” he says.

Isaac Motoko, who is a member of the Midrand-based United African Trading Network, which helps spazas buy consumer goods at discounted prices, says he’s seen how township landlords work together to protect foreign nationals trading on their premises.

“It’s business,” says Motoko.

“People want to eat and they realise it’s not going to help them to discriminate against these people because they make money from rent.”

Residents of Khayelitsha are also fighting hard to protect their local Somali shop owners.

On March 21 in the informal settlement of Harare, residents stood in front of Somali-owned shops to prevent members of the Zanokhanyo Retailers Association from burning them down. Subsequent efforts were met with similar resistance.

Resident Mambhele Tyathu says they benefit from foreign-owned shops.

“Somali shops open until late and open very early. The locals close at eight, sometimes they’re short of stock, and they are very expensive.”

But even in Du Noon, an informal settlement on the other side of Cape Town where relationships between local and foreign traders are amicable, the competition Somalis pose remains a concern.

Ward councillor Lubabalo Makeleni says the local business community approached him to discuss the number of shops that Somalis should be allowed to operate there.

“At the moment they find it too difficult to compete,” he says.

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