Thousands of spaza shops in South Africa are closing due to stringent registration requirements imposed by the Cooperative Governance and Traditional Affairs Department.
Image: Itumeleng English/ Independent Media
Thousands of spaza shops are under threat, with many having closed due to a slew of challenges including having had to register outlets after a directive by the Cooperative Governance and Traditional Affairs Department to do so by the end of February.
According to Miguel da Silva, group executive of business banking at TymeBank, small and medium enterprises in general must contend with big numbers such as high inflation and other challenges.
Da Silva noted that among the issues spaza shops are dealing with, is the fact that the requirement to register has proven to be too onerous for these outlets.
“Tens of thousands of spaza shops have already been found non-compliant, and hundreds have been closed,” he said.
“Consider the effects on a sector estimated by the 2021 South African Township Marketing Report to employ 2.6 million people and contribute 5.6% to gross domestic product if these closures continue,” Da Silva said.
There are some 150,000 that, according to Trade Intelligence, which estimates that this informal independent sector is worth about R184 billion a year. These range from pavement hawkers to home-based spazas and tuck shops, to small “Midi” wholesalers, it says.
The latest figures show that total registration applications nationwide were at 82 924, or more than half, as of February 21 when Thulisile Manzini, acting director-general Small Business Development Department briefed the Small Business Development Parliamentary Committee.
According to Tshego Modise, Retail Analyst at Trade Intelligence, the regulations include complying with laws such as the Immigration Act, Health and safety compliance, as well as providing documents such as ID, proof of residence and a business name reservation certificate.
The requirement to register followed hundreds of cases of foodborne illnesses in parts of the country, where nearly 30 people, including children, passed away after consuming snacks purchased at some spaza shops last year.
While this is aimed at creating a safer and more equitable business environment, as well as ensuring public health and safety, combating foodborne illnesses and formalising the informal economy, Modise said “the reality of implementing the regulations often diverges significantly from their intended outcomes, raising questions about their practicality”.
Among the issues Modise cited was that the regulations are impractical and open the door for extortion opportunities. “Another critical issue brought to our attention is that inspectors are often inadequately trained, focusing only on superficial compliance issues like expired stock rather than addressing deeper concerns such as proper product categorisation, storage conditions and overall good business practices,” she said.
Modise noted that this superficial enforcement allows non-compliant shops to continue operating, undermining the credibility of the regulatory framework.
Da Silva noted that the “registration is onerous to say the least. Shop owners need to assemble a mass of supporting documents, and the process is laborious and expensive”.
In addition, small businesses have to contend with the current interest rate, which is now 11%.
There may, however, be some good news for smaller businesses given that the Department of Small Business Development has been allocated R2.1 billion over the medium term to support about 120 000 competitive small businesses, particularly those owned by women, youth, and persons with disabilities in townships and rural regions,” Da Silva noted.
“Additionally, the government allocated R313.7 million to the establishment of SMME hubs to support business expansion, while the R1 trillion allocated to infrastructure will be a positive for SMEs due to its impact on the infrastructure supply chain, and because all businesses will benefit from investment in roads, water management and railways,” he said.
“April’s SME environment is anything but a joke. While government departments profess their desire to help SMEs, we must still contend with regulations, red tape, and a repo rate that keeps SMEs and citizens from gaining even the slightest financial relief,” said Da Silva.
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