South African Spaza Shops and foreign competition

‘Spaza’ shops and foreign competition

Minister of Small Business Development, Lindiwe Zulu, has ordered foreign small business owners to share their trade secrets with locals, or else.

Foreigners who are entrepreneurs

The minister’s comments come on the heels of a series of xenophobic attacks and acts of vandalism against immigrant ‘spaza’ shop owners in Gauteng.

Minister Zulu is quoted as saying on Tuesday:

“Foreigners need to understand that they are here as a courtesy and our priority is to the people of this country first and foremost. A platform is needed for business owners to communicate and share ideas. They cannot barricade themselves in and not share their practices with local business owners.”

Spaza’ shops (derived from slang meaning “imitation shop”) are small grocery or convenience stores that have played an important role for decades as retailers of general household items in township communities.

Accounting for approximately 9.2% of home based employment initiatives, spaza shops serve as the primary means of income for many South Africans and their extended families. In recent times, the growing presence of immigrant spaza shop operators has been seen as a threat to that livelihood, and met with resistance from local vendors.

Research into the business dynamics of both local and foreign spaza shop owners revealed that the defining factors behind the foreign spaza shop owners’ success were:

  • Access to cheap labour (family members often work in the shop for very little remuneration);
  • Enforcement of contractual agreements by the network, with clan elders overseeing business deals;
  • Strategic investment in geographical areas to establish Somali strongholds;
  • Group purchasing to secure discounts and operational economies of scale;
  • Facilitating micro-finance by organising investments and business partnerships.

(Charman, A. & L. Petersen, 2010)

While it is true that some foreign spaza shop owners simply display more entrepreneurial flair than their local counterparts, there are also other factors at play. One landlord who owns over 300 commercial properties, is of the view that what seperates the foreigners from the locals is sheer determination.  “We often find that the Somali’s will sleep in their shops for the first few months in order to save money.  They use the money saved to buy stock in cash, thereby increasing their margins.  The lengths to which they are willing to go in order to make the shop work is amazing”.

Competition is a cornerstone of any free enterprise society, and its presence should serve to inspire the drive to compete, not incite violence. In the words of Judge Nugent of the Supreme Court of Appeal:

“Dignity has no nationality. It is inherent in all people, citizens and non-citizens alike, simply because they are human beings. And while that person happens to be in this country, for whatever reason, [their human dignity] must be respected, and is protected, by section 10 of the Bill of Rights.”

South African Spaza Shops and foreign competition

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