Can Spaza shops survive in township competition with large Nationals? What does the future hold

Abstract

It is a known fact that worldwide there is a high failure rate amongst Small, Micro and Medium Entreprises (SMMEs), and this also applies to SMME’s located in South African townships. The township economy in South Africa has gained significant attention in recent years due to its potential to drive inclusive economic growth and reduce inequality. As more than 40% of South Africa’s population resides in the townships, the development of township economies via formal and informal business development is crucial for employment creation as well as the alleviation of poverty. In order to achieve this, a thorough analysis of the state of retail networks in townships in South Africa is needed. Despite their access to huge markets in the townships, most of the SMMEs do not grow to become established large and formal businesses. The purpose of this study is therefore to develop a growth and development framework to guide and support the development of spaza shops to become large, self-sustainable and profitable businesses operating in the township economy.

To obtain empirical data, 500 spaza shop owners were asked to complete a questionnaire. A total of 196 useable response were received back which represents a response rate of 39,2%.

It can be concluded from the research that marketing plays a vital role in the growth and sustainability of a SMME although 97% indicated they do nothing to market their spaza shop. The majority of spaza shop owners (97%) indicated that they buy their stock from wholesalers while 13,3% bought their stock from Shoprite, a retailer in the area. A total of 75,5% of respondents indicated that there are too much competition in the township and this competition is primarily from other spaza shops in the area (88,2%). It was interesting to note that 73,7% of spaza shop owners believed the township is big enough to sustain their business. A total of 63,7% of respondents indicate a propensity to work together with national brands. Based on the findings there is a need to work together with national brands on a more formal level in order to be more competitive and sustainable.