It’s not a spaza matter

2011-06-18 14:49

Recent media reports about South African spaza shops evicting and, in some cases, using violence to chase away their foreign counterparts have focused mainly on the possible reasons for the evictions.

Xenophobia has been put forward as a possible explanation and so has price competition.

There is a feeling that there is no place for foreigners in the township business set-up. But to gain a better perspective about the issues confronting owners, one needs to look over and beyond the apparent xenophobia.

In a country where unemployment is escalating and poverty is rife, people with no income have resorted to all sorts of creative businesses, including spazas.

Without any support from government, financial institutions, the wholesalers they support and with very little assistance from the training institutions set up by government to provide sectoral training and education, spaza- owners are left out in the cold.

On top of this, the arrival of ­major retailers and malls in the townships has meant that spazas face even more hardship.

Spazas are not well-placed to compete as their owners often lack basic business skills.

As a ­result, their customer service, for example, sometimes leaves a lot to be desired. But then again, ­customer service in South Africa, generally speaking, could be significantly improved.

And spaza ­prices can be high – even though a recent comparison between a spaza owned by a South African and one owned by a foreigner found the South African spaza to be cheaper.

The reason for taking an interest in spazas and their owners should be because they play an important role in the economy and the communities they serve.

About 75% of people in the informal economy shop at spazas.

There are more than 120?000 spaza shops with a collective yearly turnover of between R12?billion and R30?billion, and they make up 10% of local retail spend.

Spazas are also important job creators. Each employs between two and three people.

This means that up to 360?000 people are ­employed by spazas.

Assuming each person employed in a spaza supports a family of four, close to a million South Africans are ­dependent on them.

The economy benefits from these entrepreneurs who, ­although they are outside of the formal economy, participate through proxies such as bankers, wholesalers and transporters.

It is imperative that spazas be brought into the formal economy so that they can contribute more formally and directly as well as enjoy the protection offered by formality.

However, for this to happen, government needs to consider developing a different approach to the formalisation of informal businesses.

Current legislative, tax and ­other regulatory requirements are too onerous for micro-businesses such as spazas, township hairdressers and fast-food shops selling “kotas”. The one-size-fits-all approach hasn’t worked.

The first step towards bringing spazas into the formal sector is the acceptance that South Africa has two active economies – the formal and informal.
Viable plans need to be developed to merge these two to grow the economy and create formal employment.

Thus far, there has been little or no attempt to do this. Instead, the formal sector has been given preference at the ­expense of the informal sector.

An example of this is the arrival of major supermarkets in the townships. Clearly, not much thought was given to the effect these supermarkets would have on spazas and slightly more formal corner shops. Their ­arrival has forced many corner shops in Soweto, for example, to close.

Perhaps as part of real broad-based black economic empowerment, government should have negotiated with the major retailers opening shops in townships to develop plans to work with and empower existing retailers, such as spazas.

The fallacy that spazas want to remain informal is just that – a ­fallacy.

An overwhelming number of owners see their business ­future in the formal sector. In fact, many spaza owners are keenly ­interested in growing businesses to occupy the vacant corner shops. So, the will is there but the means are not.

The slow pace of registration of spaza-shop cooperatives has shown that the idea of cooperatives is not the panacea for the problems of small spazas.

Spaza owners do not see themselves as a unit – which is part of the ­challenge when they want to engage in collective bargaining – but rather as individual entrepreneurs competing for the same market. With this insight, there is an urgent need to change the mindset of policymakers.

spaza owners are entrepreneurs and should be regarded as such.

They should receive all the support afforded other entrepreneurs in the formal sector – training is one such intervention.

Almost all spaza owners we spoke to have rated business training as one of their top three priorities. Most have said they want to diversify and would require a good set of business skills to successfully do so.

For many small businesses, ­finance is also an obstacle. The current lending models are not suitable for spazas, which require micro-loans of between R1 000 and R5 000.

Such loans – accompanied by good business skills – can assist spaza owners to grow out of the spaza-shop ­market, ­leaving space for new ­entrants, whether they be locals or ­foreigners.

Also listed in the top three priorities is transport or the lack thereof.

With the exception of a few suppliers, no one makes deliveries to spazas.

In fact, manufacturers hardly liaise with spazas and ­research by Unisa shows 87% of spaza owners say they would promote a particular manufacturer’s products if they were properly informed about them.

If these issues are addressed and a different approach is taken by policymakers towards informal businesses, and in particular, spazas, it is very likely there will be far fewer attacks on foreigners.

Condemning the violence will not be enough to address the ­attacks on foreign spaza shops.

Proactive steps need to be taken. Until then, all other approaches will remain spaza.

» Ndhlovu is a partner at Spaza Media, a consultancy specialising in spaza shops and publisher of the Spaza News newsletter

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