Hotly contested township markets

Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service. (Photo: Finweek)
Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service. (Photo: Finweek)

As formal retailers like Shoprite and Pick n Pay vie to expand into the spaza shop market, Andile Ntingi weighs in on the diametrically opposed views of black business on the subject.

Talk of large formal retailers being allowed by government to spread their tentacles into the spaza shop market is splitting the black business community down the middle.

Two diametrically opposed views on the thorny subject are beginning to emerge, with one camp supporting a tentative push by white-owned retailers into the spaza shop market and another camp arguing for retailers to be stopped in their tracks before they gobble up the lucrative market straddling South Africa’s townships and rural towns.

The issue came under discussion recently at a second instalment of a live Facebook panel discussion, known as Lockdown Convo, which I participated in.

The theme of the discussion, moderated by Miso Tini, posed this question: What does it mean for black business if Pick n Pay and Shoprite can enter the spaza shop market?

The panel that tackled the matter of whether these retailers should be allowed to operate in the sector also included Sabelo Macingwane (president of the National African Federated Chamber of Commerce and Industry, or Nafcoc), Gauteng department of economic development (GDED) official Tseliso Motsimo, and spazashop start-up owner Mxolisi Goodman Buthelezi.

In the camp that entertained the idea of participation of formal retailers in the spaza shop market, either through franchising or partnership with black South Africans, were Macingwane, Motsimo, and me.

Buthelezi was vehemently opposed to big retailers owning spaza shops, fearing that they could end up totally dominating that market.

Although not opposed to participation, Macingwanedoes favour restriction of participation of formal retailers inthe long term. However, there are members of Nafcoc who support short-term, gradual expansion of retailers through franchising of stores owned and operated by black South Africans. Nafcoc members do not want white retailers to expand through corporate stores.

Some form of partnership between spaza shop owners and Pickn Pay is already happening in Gauteng. Motsimo, who is driving the programme on behalf of GDED, pointed out that provincial government was funding spaza shop owners that partner with Pick n Pay, which supplies the shops with 60% of stock. Beneficiaries of the programme are also supported with training and technology that help them to efficiently operate the stores.

During the debate, Motsimo said that GDED also approached Shoprite to request it to participate in the programme, but the retailer declined.

I argued for an introduction of a dual model, whereby the entry of black South Africans into the spaza shop market is facilitated through a partnership between government and formal retailers. After 1994, black South Africans were kicked out of this market following an influx into township and rural areas of immigrant traders, some undocumented and others asylum seekers. Around this time, big retailers also made inroads into this market, but operated from shopping malls.

I am not opposed to big retailers operating in the spaza shop market, provided they expand through franchised stores operated by black South Africans.

But I equally support an alternative entry route, whereby government financially backs the establishment of black-owned and -run companies that will roll out franchised stores operated by black South Africans.

In turn, these companies must be utilised to facilitate participation of black 

players in their value chains, from manufacturing to distribution of goods sold by their networks of spaza shops.

The panel welcomed pronouncements by finance minister Tito Mboweni that after the Covid-19 lockdown, it will be compulsory for spaza shops to have trading permits, bank accounts and be tax- compliant. Spaza shops will also be subjected to regular checks by health inspectors following complaints that some spaza shops sell rotten or expired products.

It is estimated that there are between 100 000 and 120 000 spaza shops in SA, most of them unregistered businesses operated by immigrants, mainly from Somalia, Ethiopia, Pakistan, and Bangladesh.

The failure to regulate the encroachment of unregistered, illegally-operated businesses has enabled immigrants to also dominate non-grocery markets such as hardware stores, bottle stores, auto spares, vehicle maintenance workshops, hair salons, panel beaters, internet cafe´s, and many other businesses commonly found in townships and rural areas.

In most of these markets, black South Africans have been muscled out, with Nafcoc claiming that the non-payment of taxes by immigrants was giving them an unfair advantage over tax-paying South Africans.

If the government tightens law enforcement, it will be able to collect taxes and clamp down on money laundering and illicit trading. Furthermore, extensive regulation of informal markets will level the playing field and give locals a chance to re-enter these markets.

The panel agreed that participation of immigrants must be restricted in grocery and non-grocery retail markets, but stopped short of calling for a blanket ban of foreign participation as is the case in countries like Ghana and Ethiopia and many other African countries, where immigrants are not allowed to operate shops.

During the debate, Nafcoc came under severe criticism for allowing township and rural markets to fall into the hands of immigrants and white-owned retailers. Nafcoc was once the face of township businesses, but after 1994 neglected its traditional constituency.

As the lobby group’s members and leaders were exiting the townships through the front door to integrate with white business establishment through black economic empowerment (BEE) deals, they opened the back door for foreigners and white retailers to set up shop in townships.

After the lockdown, this blunder will have to be rectified through meticulous state intervention that provides funding for locally-owned retail ventures and restricts participation of non-South Africans.

Read more
This article originally appeared in the 16 July edition of finweek. To read the full story, you can buy and download the magazine here.
finweel, july, 2020

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot