Transforming spaza shops from trouble into township titans

The recent deaths of children from consuming unsafe food sold in unregulated spaza shops has shocked us all, creating outrage and emphasising the need for change in the informal food retail sector. 

These heartbreaking events demand immediate action and President Cyril Ramaphosa’s decisive mandate to register all spaza shops within 21 working days is a critical step toward ensuring consumer safety and fostering a vibrant, inclusive economy. This is a wake-up call that we must all heed.

This crisis surrounding spaza shops needs us to move away from blaming and complaining to urgent action and immediate accountability. These informal food retail enterprises have not only provided essential goods but also embodied resilience and innovation in underserved and marginalised communities. 

To safeguard their future, we must address regulatory gaps, ownership patterns and issues such as extortion, while fostering collaboration among local entrepreneurs, foreigners and the private sector. 

This is a rallying call for all stakeholders — government across all spheres, communities and the private sector, especially the big five food retailers — to support the registration and formalisation of spaza shops, ensuring their continued contribution to South Africa’s economy and society.

Historical Roots: From general dealers to spaza shops

South Africa’s informal and semi-formal food retail sector has deep historical roots. General dealers — larger, family-run stores often managed by Afrikaans, Indian, African, Greek and Portuguese entrepreneurs — were the backbone of township and rural retail during the 20th century. 

Known for their personal service and trust-based credit systems, these stores became cornerstones of their communities, offering a wide range of goods from groceries to hardware.

The term “spaza” originates from isiZulu, meaning “hidden”, a fitting description of the sector’s origins during apartheid-era prohibition of black ownership of formal businesses. Hidden within homes, they catered to local needs and became symbols of defiance against economic exclusion.

Post-apartheid, spaza shops have evolved from modest corner stores to integral components of township economies. Today, they serve millions of mainly indigent South Africans, providing a range of basic groceries and household necessities. 

Despite their growth, many spaza shops remain informal, operating outside regulatory frameworks and facing significant challenges that threaten their sustainability.

The economic significance of spaza shops

South Africa is home to about 100 000 spaza shops, with a significant portion operating informally. Many operate outside regulatory frameworks, contributing to health risks, counterfeit food distribution and unfair competition.

Recent investigations by the department of small business development highlighted the circulation of counterfeit and unsafe food products. Compounding the issue, many of these shops are run by undocumented foreign nationals, which adds layers of complexity to enforcement and compliance.

Spaza shops are more than just food retail outlets; they are pillars of township economies, contributing significantly to local employment and economic activity. Estimates suggest that the informal sector, where spaza shops operate, accounts for 30% to 40% of South Africa’s annual food expenditure, representing a market value of about R178 billion. In recent years, ownership patterns within the spaza shop sector have shifted.

Problems facing spaza shops

Despite their contributions, spaza shops face numerous difficulties that hinder their growth and sustainability:

• Regulatory hurdles: Many operate without formal registration, leading to issues with compliance, oversight and access to support services.
• Health and safety concerns: The recent spate of foodborne illnesses has highlighted the dangers of unregulated operations. Expired and counterfeit goods often find their way into these shops, posing serious risks to consumer health.
• Intensified competition: The influx of foreign-owned spaza shops, coupled with the expansion of formal retail chains into townships, has created stiff competition, often disadvantageous to local entrepreneurs.
• Criminal extortion and insecurity: Many shop owners are subjected to extortion by criminal syndicates demanding protection fees. This not only threatens their livelihoods but also destabilises communities.
• Supply-chain inefficiencies: Small-scale shop owners struggle to access affordable, high-quality stock due to limited economies of scale and the dominance of intermediaries.

The role of foreigners

A significant number of shops are owned and operated by foreigners, particularly from countries such as Somalia, Ethiopia, Pakistan and Bangladesh. While these entrepreneurs have brought innovation and competitive pricing to the sector, their dominance, monopolistic, unregulated and, in some cases exploitative, business practices have raised concerns about the exclusion of local South Africans from economic opportunities. 

The recent death of children resulting from food poisoning has resulted in understandable anger and resentment at especially the spaza shops owned and operated by foreigners.

Key problems linked to this include:

• Illicit trade and unsafe products: Many unregistered shops, regardless of ownership, sell counterfeit or expired goods, posing severe health risks.
• Lack of local ownership: South African citizens often struggle to compete because of limited access to affordable stock, training and infrastructure.
• Community tension: The dominance of foreign-owned spaza shops has sometimes led to xenophobic tension, exacerbating social divisions.

To foster harmony and mutual growth, we must promote compliance, cooperation and collaboration.

Empowering South Africans to build and own businesses

As we address the problems in the spaza sector, we must also inspire South Africans to embrace entrepreneurship. Spaza shops are more than small businesses — they are lifelines for communities. By formalising and supporting these enterprises, we can unlock their potential to drive inclusive economic growth.

The department of small business development’s efforts to integrate township enterprises into broader supply chains are commendable. But we need to do more, such as:

• Provide mentorship programmes that connect aspiring entrepreneurs with experienced business leaders;
• Invest in digital literacy to help small businesses leverage e-commerce platforms; and
• Foster innovation by encouraging youth-led enterprises in underserved areas.

The path to a safe, inclusive and thriving sector

To transform the spaza sector, we must navigate the complex transition from its current state of informality and fragmentation to a regulated, inclusive and thriving ecosystem. This requires a multi-faceted approach and a coordinated strategy that addresses immediate risks while laying the groundwork for long-term growth.

1. Immediate actions

Mandatory registration of spaza shops is not just a bureaucratic exercise, it is a critical intervention to:

• Ensure food safety: Registered shops must comply with health and safety standards, reducing risks to consumers;
• Protect consumer rights: Licensing ensures accountability and recourse for communities affected by substandard products;
• Promote fair competition: Registration levels the playing field for local entrepreneurs, reducing the influence of illicit trade; and
• Strengthen local economies: By supporting locally owned businesses, we create jobs and stimulate economic growth.

To transform spaza shops into a vibrant and compliant sector, we must implement a multi-pronged approach.

Streamline registration processes: Simplify business licensing through the business licensing policy and bill which is in the pipeline. The South African Local Government Association must simplify by-laws on business rezoning, registration and compliance as well as create centralised databases for township and rural economies to reduce red tape. This is long overdue.

Intergovernmental collaboration: Provincial inspection teams must be established to monitor compliance. They need to work with municipalities to enforce bylaws and support local economic development initiatives.

2. Medium-term solutions

• Financial and non-financial support: Allocate government funding from the R500 million for South African-owned and operated Spaza Shop Support Programme to provide grants, loans and infrastructure support and for cold storage, secure premises and renovations.
• Training and digital tools: Provide training in inventory management, customer service and digital payment systems to enhance competitiveness. Offer training in food handling, hygiene and business skills to build capacity among local entrepreneurs.
• Strengthen supply chains: Develop partnerships with legitimate suppliers to ensure access to genuine products. Introduce technologies such as barcodes and radio-frequency identification  for product authentication.
• Public awareness campaigns: Educate communities and shop owners about the dangers of counterfeit goods and the importance of compliance. Promote the role of spaza shops as community hubs of economic activity.

3. Long-term goals

• Regulatory reforms: Simplify licensing processes and implement stronger penalties for non-compliance.
• Economic integration: Link spaza shops and general dealers to local manufacturers and farmers, fostering a more localised supply chain.
• Collaborative retail models: Encourage partnerships between spaza shops, general dealers and formal retailers to create synergies and expand market access.

The role of communities and the private sector

The transformation of spaza shops is not solely a government responsibility. Communities and the private sector must play active roles.

Community support: Encourage local consumers to support registered shops, fostering accountability and economic circulation.

Private sector players, particularly in retail and logistics, are critical to transforming the informal economy.

• Stock and logistics: Partner with spaza shops and general dealers to provide affordable, high-quality goods and reliable delivery services. 
• Security solutions: Work with communities to implement security measures that deter extortion and crime.
• Corporate investment: The private sector must invest in training, infrastructure and supply-chain networks to empower local entrepreneurs. Ensure localisation and improve ownership of the entire food value and supply chain.
•  Investment in innovation: Fund pilot projects exploring cooperative models, digital tools and eco-friendly retail practices.

To create a vibrant and sustainable spaza sector, we must think beyond traditional approaches. Here are some innovative ideas.

• Spaza franchising: Develop a franchise model where experienced entrepreneurs mentor and support new spaza shop owners, ensuring consistency and quality across the sector.
• Microfinancing platforms: Use fintech solutions to provide microloans to aspiring spaza owners, with flexible repayment options linked to sales performance.
• Eco-friendly practices: Promote environmentally sustainable practices, such as solar-powered refrigeration and reduced plastic packaging.
• Digital literacy programmes: Equip spaza owners with the skills to use digital payment systems and e-commerce platforms, enhancing convenience for consumers.
• Youth entrepreneurship programmes: Engage young South Africans through mentorship and funding opportunities to build a new generation of spaza owners.

In the ideal scenario, South Africa’s spaza shops will be:

• Safe and compliant: Every shop will adhere to health, safety and licensing standards, ensuring consumer protection.
• Locally owned and inclusive: The majority of spaza shops will be owned and operated by South Africans, with fair opportunities for foreigners who comply with regulations.
• Economically vibrant: These shops will serve as the bedrock of local economies, creating jobs and fostering entrepreneurship.
• Technologically advanced: Leveraging digital tools, spaza shops will be integrated into broader supply chains and equipped to compete in the modern retail landscape.

A call to action

The spaza shop sector stands at a crossroads. We call on all spaza shop owners — both local and foreign — to embrace registration and compliance without delay. 

To the private sector, we urge you to partner with the government and communities in building a sustainable and inclusive spaza ecosystem. 

Finally, to all South Africans, let us support this initiative, rallying behind the president’s vision for a safer and more equitable future. Stop the blame-and-complain attitude! 

The government’s interventions must inspire and empower citizens to build businesses that are safe, sustainable and community-centred. 

Together, we can transform the spaza sector into a model of resilience and opportunity. It must reflect the values of safety, inclusivity and shared prosperity. The journey ahead is challenging but the rewards are immense. Let us take this step together, transforming spaza shops into beacons of hope and opportunity for generations to come.

Let us reclaim and reimagine the informal retail sector, honouring its historical roots while building a future that reflects South Africa’s values of safety, inclusivity and resilience.

Together, we can transform these hidden gems of the township economy into township titans, driving economic growth and community empowerment for generations to come.

Faiez Jacobs is the former chairperson of the small business development parliamentary portfolio committee.