Local Spaza Businesses on the back foot- Nkosi

President of the South African Spaza and Tuckshop Association (SASTA), Mrs. Rose Nkosi, reckons that black townships may have lost around 60 percent of the Spaza business since 2005, thanks to growing number of big malls and the resurgence of African and Asian immigrants, operating in the township space.

The Spazas are community shops,” she said, pointing out that they sell in small amounts, such as half loaves of bread, to meet the needs of the poorest customers. But the sudden penetration of big retailers, through new shopping centres and the immigrants coming to our townships, has made life difficult for our members” “To add salt to the wound is African and Asian immigrants. Few of them are properly documented, most of them are illegal inhabitants in the country and that’s the duty of government to properly check them and close borders”, she quipped Before 2019 xenophobic attacks on foreign owned businesses, Nkosi had warned the government about the ticking time bomb within township small business communities. She said the townships informal traders were fuming because of the government’s failure to enforce laws. “We are definitely on thin ice because the government is lax. We have been pleading with them to do the right thing. “If there were to be xenophobic attacks tomorrow, government would be to blame,” she warned, adding that the government was fast to enforce by-laws against locals but seemed not to bother with foreigners. “The government has allowed foreigners to take over informal trading. What is disheartening is the speed at which the government acts when big business is threatened by foreign competition or businesses. “For example, when Rainbow Chickens was threatened by foreign competition, the government raised tariffs [tax on foreign goods] to increase the price of cheap chickens imported from Brazil. “But for us the by-laws punish local traders only. When locals trade in the street, they get chased away and stock is taken away but when foreigners trade at the same place nothing is done. “They don’t bank, they don’t pay taxes and get preferential treatment from metro police and even health inspectors,” she said.

Some members of her organisation had been chased away from trading near malls in Soweto, only for foreigners to be allowed to trade at the same spot, she said. Sasta started off with more than10 000 members and now has only 3 500. She blamed the decline in membership on the dying businesses in the townships. “Our organisation is shrinking because a lot of people are going out of business and that is what we are fighting against,” said an angry Nkosi. She further told City Press that, although locally owned businesses faced foreignowned competitors and major retail malls, it was the foreigners who gave Sasta’s members sleepless nights. “The malls have killed our general dealers and the foreigners have killed the Spaza shops. “The malls are coming into our spaces because the government officials get shares and get land easily. “It is shareholding,” she said, adding that the malls also did not let out shops to local businesses and did not contribute to local communities even though they, unlike the foreigner-owned businesses, paid taxes. Nkosi said besides not complying with the country’s law, the foreign-owned businesses had a meticulous value chain system and supplier syndicate that guaranteed them regular stock from non-traditional warehouses and at very low prices, enabling them to out price local competitors. “They don’t employ anyone because they are employees in their syndicates which are run from warehouses.” Nkosi, who has a background of working with late struggle veteran Winnie Madikizela-Mandela in the ANC before democracy, said almost all the foreigners who were running businesses in the townships did not have business permits but arrived as asylum seekers. “If they were meant to run businesses, they were supposed to come with R5 million to invest in the country, get permits and the right visa but all of them came as asylum seekers. They were supposed to invest and empower local people,” she said.. Asked what solutions the organisation offered, Nkosi said there were very few options. “We cannot say they must not leave.

Let them leave if they can leave. As long as there is space for our businesses. If they comply, they can stay and we can work with them. Nkosi said her organisation continues to knock on doors at various levels of government, including the municipalities and the Department of Small Business Development in order to assist in tackling the problems her constituency faced. Over the years, Nkosi has even tried to team up with a number of consultants like Songi Pama, to bring Spaza shop owners together to buy direct from suppliers such as South Africa’s Tiger Brands and the local units of Unilever and Nestle. But that’s still work in progress. ECONOMIES OF SCALE At a certain corner in Soweto, the biggest building used to be the Catholic Church. Now it’s been overshadowed by a big shopping centre, housing big well known retailers Rose Nkosi is unhappy about state of affairs in townships & rural small businesses. - By: Staff Reporter. These retailers are able to use economies of scale to undercut Spazas, which usually buy in small volumes and from wholesalers, driving up costs. Grace (surname held) has been running the Spaza shop with her husband since 1993, the year before South Africa’s first all-race elections. They used to earn around R1, 500 a day, but are down to a third of that now. Like many proprietors of Spaza shops (and the informal stores that dot township corners), Grace barely manages to keep afloat as more of her neighbours head to the mall. “Once people get paid, they buy their groceries at the malls,” she said, sitting among dusty shelves of tea-bags, small packets of biscuits, loose cigarettes and butter. “They used to buy their groceries from us. Now they only come for few items,” she said. During apartheid, blacks were crammed together in squalid townships miles away from cities. Some residents began to sell staples such as maize meal and cooking oil out of their own homes. The informal stores became known as tuck shops or “Spazas,” a slang word that connotes “just getting by”. Along with shebeens, or corner taverns, Spazas are one of the most visible parts of township life, and a major component of South Africa’s vast informal economy.

While recent data on the informal economy is not readily available now, a 2002 study by the University of South Africa’s Bureau of Market Research (BMR) estimated that Spaza shops brought in around R10 billion a year, employing up to over 300,000 people. Those numbers will have come under pressure over the last decade as real estate developers and big grocers such as Shoprite and Pick N Pay push into black areas, targeting rising consumer spending. GETTING THE CAKE South Africa’s emerging black middle class grew at annual 6.5 percent between 2001 and 2007, according to the BMR, which estimated the growing socio-economic group at 9.3 million in 2007, out of a total population of around 55 million. “The emerging consumer market has been very, very good for construction of retail outlets in non-traditional locations,” said Mike Upton, chief executive of South African building company Group Five. “It’s kind of like first mover gets the cake.” Grocers have been big beneficiaries of this broadening wealth.

Shares of Shoprite, Africa’s top retailer, have more than trebled over the last five years, lifted by a push into sub-Saharan Africa and previously underserved South African markets. The Cape Town-based company’s no-frills Usave discount outlets pose a major threat to Spaza shops. The warehouse-like stores appear tailor-made for low-income customers: most of the laundry soap is for hand washing, not machines. Some dispense with large parking areas as customers come on foot.

The only milk available is full cream - no skim, organic or soy - while bags of frozen “walkie talkies” - chicken heads and feet - are plentiful and cost just few rands. In Soweto, a flashpoint of the anti-apartheid struggle, where stone-throwing black youths battled heavily armed soldiers and police with their snarling dogs, the 65,000-sq-meter Maponya Mall is one of several shopping centers that have sprung up in recent years. Just down the road from Regina Mundi church where former President Nelson Mandela is depicted in stained glass, the mall boasts a Pick N Pay hypermarket, more than a dozen restaurants and a Virgin Active gym. Although still poor, Soweto is unmistakably on the rise, evidenced by the growing number of tidy brick bungalows and shiny Toyotas, and even the odd BMWs. The survival of Spazas is critical to the fabric of the townships because so many of the owners are women, Pama said. “The little that they get out of these outlets they use to feed their children and take their children to school.” Too few owners are real businesspeople, said Noel Ndhlovu, who publishes industry newsletter Spaza News.

Most are just looking to make enough get by, he said. “Unfortunately, the bulk of Spaza shops, about 60 or 70 percent, are survivalists. And because they are survivalists, they don’t have skills - no business skills, no financial literacy, nothing.” In one workshop he ran, Ndhlovu said it took him several sessions to get some of the owners to understand how to work out their gross and net profit. Not far from Grace, middleaged Vincent Jonyane leans out the window of his tin-roof shop and laughs. Business is good, he says. While elderly rivals are stuck in the past, he is thinking of expanding his wooden shack. “I’m still young, I know where to buy things cheap,” Jonyane said, pointing to stacks of eggs in cardboard cartons on a shelf. Even the malls don’t worry him. “You can’t buy one egg at the mall. I sell one egg. Additional reporting by:Fin 24