NEWS ANALYSIS: Spaza shops and the informal economy need a fair chance to succeed

In modern-day SA, the concepts of “spaza shops” and the “township economy” have been subjects of considerable debate and controversy. They are often romanticised as symbols of black resilience and entrepreneurship as well as mechanisms to address the historical marginalisation of the black majority from the mainstream economy. However, it is important to recognise that these entities are a product of desperation and economic marginalisation.

Black South Africans have been forced to find creative ways to survive in a system that has historically excluded them from mainstream economic opportunities. Thus, this article sheds light on the misconceptions surrounding these concepts and the underlying economic challenges that persist in SA.

Ghanaian economist George Ayittey was critical of the lack of serious economic thinking by post-colonial states in Africa. African leaders have been content to rely on foreign aid and handouts, rather than developing their own economies. This has led to a culture of dependency and a lack of innovation. If Africa is to develop, its leaders need to start thinking seriously about economics and empowerment of its indigenous people, who remain the world’s laughing stock.

Unfortunately, post-apartheid SA is not an exception as it struggles to deal with colonial and apartheid continuities that are still responsible for the plight of the black majority and its noninvolvement in the economy. In the case of SA, dependency has not been so much about foreign aid, but unsustainable handouts in the form of BEE has exacerbated the dependency syndrome.

The economy remains colonial and the old, white, dominant players have a final say on the number of blacks that can be allowed into the fold. For example, the mining industry stood its ground a few years ago when it argued “once empowered, always empowered”. This simply denoted that the door leading to handouts for the highly economic-dependent blacks was forever shut, and the economy would forever remain unchanged.

Therefore, it is important to create an economy that is inclusive and equitable, where everyone has a fair chance to succeed. Some analysts argue BEE is a good idea in principle, but it has been implemented in a way that has benefited a small number of people while leaving the majority of black people economically marginalised.

It is unclear what is good about BEE as it has not substantially altered the ownership of key economic assets such as land and capital, nor has it reshaped the production structure to empower black communities. The net result is that the SA economy remains largely unchanged.

The ownership of the factors of production, particularly land and capital, has not changed a bit in the last three decades. The structure of production, from raw materials to finished products, is equally unresponsive and worsening.

It is against this background both spaza shops and township economy are problematic and unsubstantiable through economic theory or other means. During apartheid, blacks were crammed together in squalid townships far 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, the spazas are one of the most visible parts of township life, and a major component of SA’s vast informal economy. The truth is, however, that SA does not have an informal economy in the traditional sense because there is little or no value addition taking place in black areas. Spaza shops and township economies are not genuine economic opportunities for black South Africans. Rather, they are just products of apartheid and colonialism.

Therefore, it is illogical to argue for their retention because they are one of the ways of retaining the status quo in a country that requires serious recognition of blacks and their rights.

One argument in favour of spaza shop ownership by black South Africans is that they represent a sizeable economic opportunity. Research from Accenture Africa indicates that there are more than 150,000 spaza shops in SA, with an estimated market size of R178bn. Major retailer Shoprite is said to be smaller in comparison.

However, it is essential to recognise the majority of the goods sold in these shops are not produced within townships and other impoverished black spaces. This highlights the persistent lack of involvement by black communities in the broader production value chains and leaves them primarily as consumers and a source of cheap labour.

Furthermore, the dominance of external players, including large retailers such as Shoprite and Pick n Pay, presents a significant challenge. These retailers have implemented forward integration strategies, attempting to capture the vast buying power within townships and rural areas.

Every economic space in these areas is therefore dominated by merchandise from outside black or township control. This is unlikely to change since Tiger Brands, SA’s largest food company, recently announced its intention to tap into this market by partnering with 130,000 spaza shops.

This situation is further compounded by the presence of shopping malls, established mega-economic players, and large banks in townships and rural areas. Black people are awkwardly placed in defending or absorbing the onslaught.

According to a 2019 study by the Human Sciences Research Council (HSRC), most township businesses are small, unprofitable and focused on local markets, rather than producing goods and services that can be sold more widely, create good jobs and generate higher incomes. While black people may run car washes, beer halls, spaza shops and food outlets, these ventures often offer low-profit margins and limited opportunities for sustainable economic growth.

The concepts of spaza shops and the township economy symbolise a complex and deeply rooted economic dilemma. These entities have become a visible part of township life but are an inadequate response to the enduring economic challenges faced by the black majority. 

As Ayittey highlighted, SA, like many post-colonial states, must seriously consider its economic policies and strategies if it is to achieve true development and empowerment for all its citizens.

• Hadebe is an independent commentator on socioeconomic, political and global matters, based in Geneva, Switzerland.