Cape Town - Foreign-owned spaza shops have markedly different business approaches, giving them the competitive edge over South African-owned operations, according to a study.
The study, by online economic policy debate forum econ3x3, explains in part the proliferation – and success of – foreign-owned informal shops.
In 2010 there were an equal number of foreign and South African shopkeepers.
Last year, the number of foreign-owned shops increased by a third as 70 percent of the spazas owned by South Africans closed.
The research by the UCT-linked forum found South African shopkeepers typically operated in a weak social network, often limited to immediate family members providing labour and “little else”.
Foreign-owned shops, especially Somali shops, have access to cheap labour, strategic investment in certain areas to establish Somali strongholds, and group purchasing to secure discounts.
The study found most Somali-run “small” businesses appeared to be big enough to be considered formal firms – while the South African shops were typically survivalist micro-enterprises.
“Unable to compete with the foreign-owned shops on price or scale, South African spaza shops have closed or have continued to trade, but have had to diversify into alternative activities, such as the sale of alcohol or takeaway food,” the paper reads.
During a visit to Dunoon, the Cape Times found that about 90 percent of the spaza shops were foreign-owned.
“We have about 300 spaza shops and in one street there are about eight to nine shops,” ward councillor Lubabalo Makaleni said.
The number of foreign-owned shops increased dramatically from 2010 when visitors from Africa came here for the World Cup, he said.
“Those who came stayed here and started businesses.”
Makaleni said foreigners – most of them from Bangladesh, Ethiopia, Somalia and Zimbabwe – had set up shop in Dunoon.
“Their success is based on the fact that they buy in bulk so that (they) get discounts. It also means they have large amounts of stock to sell. Local shopkeepers buy their goods in smaller quantities and work on their own, which is no good.”
Somali shopkeeper Hassan Ali Mohammed, who has a spaza shop about 1km from the taxi rank, said he had a good client base in Dunoon.
“All of us work together and we have one big supplier. We help each other if we are short of products and we transport all goods together. The business here is good because my prices are cheaper. I always drop my price by at least R2.50 to attract customers,” he said.
South African spaza shopkeeper Doreen Makapela sells traditional African takeaways, cooldrinks and snacks at the Dunoon taxi rank – which is a hub of activity.
“I started in 2003 with a normal spaza shop at my house. About two years later I got a shipping container and set up business on the taxi rank. I decided to move here because of all the commuters,” Makapela said.
“I am close to the main road and the taxi, so my business is seen by almost everyone in Dunoon. There is competition from local and foreign shop owners. I don’t see the foreigners as a threat because business is business. There is no colour and race.”
There has been a series of interventions in the wake of a flare-up of xenophobic violence in 2008, in which shops were targeted.
“Since all the violence against foreigners and especially their shops we have established a committee for shopkeepers,” Makaleni said.
“It is made up of foreign and local shopkeepers and they discuss whatever problems there are. It has been going well since 2008.
“As councillor I have nurtured a working relationship between locals and foreigners that is working well. We need to understand that business should have no colour.”
Spaza shops account for 9.2 percent of home-based employment, according to figures from Statistics SA.
Econ3x3 is based at the Southern Africa Labour and Development Research Unit at UCT and supported by the national Treasury.
- Cape Times