CLASH OF THE SPAZA SHOPS – the business of xenophobia

Given the recent spate of “xenophobic” attacks, we found ourselves asking whether the South African perpetrators really “dislike” or are “afraid of” foreign nationals, or if the problem runs deeper than what we see at face value. This level of violence towards foreign nationals was last seen in 2008 where the most common reason given for these attacks was “They are taking our jobs.”  This includes complaints that foreign nationals come to South Africa and open businesses that outperform those of South Africans and should therefore be stopped. Following the January 2015 Soweto incident and community uproar, the Minister of Small Businesses, Ms. Lindiwe Zulu, announced that the regulation of informal businesses must be fast tracked.  In an article posted by the Mail and Guardian, Lindiwe Zulu stated that:

“You cannot run away from the fact that there are underlying issues and that our people are being squeezed out by these foreign shop owners. Non-South Africans should not be allowed to buy or run spaza shops or larger businesses without having to comply with certain legislated prescripts”.

Regulation can be a good thing, if applied to all businesses equally. However, if one discriminates against foreign owned businesses just for being foreign then in fact this is anti-competitive and the end result may be that low-income consumers, who are already under strain, will pay the ultimate price.  At this point, South Africans are desperate for a solution but the real question should be: why are the foreign businesses doing better in the first place?

What’s in a spaza?

Spaza shops are one of the most common forms of business in townships. The word ‘spaza’ is derived from the township slang meaning “An imitation of a real shop”. These shops are run from home to supplement household income for the owners selling a variety of basic household and food items. Spaza shops are mainly popular due to the convenience of less distance travelled (as they are located in the communities themselves as opposed to most major supermarkets), as well as the fact that they are open for longer hours than supermarkets. To us having grown up in a township environment, it is glaringly obvious that spaza shops owned by foreign nationals often perform better than those owned by South Africans. The question is, why? If we contrast foreign to South African owned spaza shops this is what we observe to be some differences between the two:

South African owned spaza shops	Foreign owned spaza shops in SA
Stocks products alone / do not collaborate to purchase in bulk	Collaborate with other shop owners to buy stock in bulk (thus offering lower prices to the end consumer)
Work limited hours	Work longer hours (06:30am – 10:00pm)
Have limited items	Are more like supermarkets and have many stock items
Prices are higher	Have cheaper prices
Allow buying on credit due to relationships with consumers	Do not allow credit
Do  not support one another	Support one another

Clearly in most respects consumers would prefer the foreign shop owners, with the exception of the credit provision aspect. So why then are South African spaza shops not competing on these terms? Why do they not offer longer hours and lower costs? Why do they not work together in groups to buy in bulk? Last but not least – why does the government want to restrict the foreign owners when they are actually providing a better and cheaper service instead of thinking about how to help South African businesses become more competitive? Some possible suggestions for the South African government which would help improve competition and a business-driven mind-set include:

• Providing more loans to small South African businesses: If loans are provided to South Africans, they could buy in bulk and thus sell at cheaper prices.
• Business education: offering and promoting business education on business best practice and financial management to South African business owners.
• Fostering positive dialogue in communities: It is with no doubt that foreign spaza shops are thriving because they communicate and have relationships with one another – how can we break down the legacy of our past and increase the cooperation between South African businesses?
• Creating wholesalers: creating networks of wholesalers that can buy in bulk and link in to township based South African spaza shops will help those shops access the same sort of savings as their foreign competitors. In addition, it allows the promotion of new wholesale businesses and thus leads to overall job creation.
• Circulation of information: information can expand opportunities. Helping expand access to the internet and other sources of information in South African townships will help South Africans learn about opportunities, markets and various resources available to them.
• Engagement between foreign nationals and local nationals: xenophobia and violence hurts us all.  Of course, there needs to be regulation around who comes in to SA and how but once they are here we need to help them integrate into valuable members of our society if we are all to prosper.

Written by:

Boitumelo Modibo

Tumi, our Office and Project Administrator comes to Simanye with a strong passion for economic development and loves to be involved in activities that encourage empowerment and positive economic and social change in South Africa.