An affiliate of the National Federated Chamber of Commerce and Industry (Nafcoc) has weighed in on the ongoing protests against illegal immigration that are spreading across South Africa.

The Nafcoc Retail Chamber (Nafret) says it supports the protests and will engage with civil society organisations spearheading the protests to explore how best to put pressure on government to enforce SA’s immigration laws.

The agreement covers cooperation in trade, investment, new energy and multi-lateral relations. The deal also laid the groundwork for giving 100% duty-free access to SA exports into China and will boost Chinese investment into SA. This creates significant market opportunities for SA exporters.

The protests are led by March and March and Operation Dudula while Nafret is an affiliate of Nafcoc representing informal and formal traders, spaza shop owners, wholesalers, and distributors.

Nafret wants government to enact laws that help black South Africans to reclaim the township and rural grocery retailing sector they were displaced from by foreign shopkeepers and large supermarket chains. The chamber says ownership of spaza shops -- which generate R178 billion annually -- must be reserved exclusively for locals.

“Nafret has consistently maintained that spaza shops and certain informal businesses should primarily be reserved for South African citizens, particularly within township and rural economies,” says Nafret spokesperson France Nhlapo.

The policy proposal that Nafret is making is not an anomaly in Africa. It is practised in several African countries including Nigeria, Ghana, Tanzania, Zimbabwe, and Botswana, where small-scale retail and grocery trading businesses such as corner shops and butcheries are exclusively ring-fenced for local citizens.

Nafret also wants government to crack down on undocumented foreign traders and bogus asylum seekers, who are illegally running businesses in violation of their permits.

“The organisation further believes that foreign nationals wishing to conduct business in SA should comply fully with the applicable investment and business regulations, including minimum investment requirements where applicable under SA laws,” says Nhlapo.

Foreigners establishing or investing in businesses are required to apply for business visas, which stipulate that they must invest no less than R5 million in cash. In addition, foreign investors are required to comply with SA's immigration, company, and tax laws.

SA hosts approximately 250,000 forcibly displaced people, comprising roughly 75,000 refugees and 165,000 asylum seekers. Ethiopians make up 25% of this group, followed by Congolese with 23%, and 11% Somalis.

Refugees are allowed to work and start businesses, but asylum seekers are only permitted to work, but not run businesses. However, lack of immigration law enforcement opened the door for Somali and Ethiopian asylum seekers and refugees to take over the spaza shop sector and push locals aside.

This is causing tensions between the locals and foreigners. Spazas are not just a crown jewel in the R1 trillion informal economy, they were once the backbone of black entrepreneurship during the apartheid era when blacks were barred from owning businesses in key industries like mining, manufacturing, banking, insurance, and agriculture.

For many years, local spaza shop owners have been complaining about the dominance of foreign immigrants in the grocery retail sector, particularly Somalis, Ethiopians, Pakistanis, and Bangladeshis.

Locals have also been displaced in the non-grocery sector, where foreigners predominantly operate hardware stores, bottle stores, auto spares, vehicle repair workshops, hair salons, panel beaters, fruit and vegetable shops. Foreigners also dominate unregulated emerging businesses like e-hailing taxis and food delivery motorbikes.

Over 80% of spaza shops owned by foreigners

The dominance of foreigners in the spaza shop sector was confirmed in Parliament last year by Lwandiso Makupula, executive manager for wholesale lending at Small Enterprise Development and Finance Agency (SEDFA).

Makupula revealed that Somalis owned 58% of the 150 000 spaza shops in the country, Ethiopians controlled 25% while South Africans owned a paltry 8% of market pie.

Local spaza shop owners have also been driven out of business by major supermarket chains Shoprite, Pick n Pay, SPAR and Woolworths, which collectively control 72% of the formal grocery retail market.

A report published by the Competition Commission in 2019 concluded that these big grocery retailers were benefiting from high entry barriers such as exorbitant rentals and exclusive leases in township malls.

Interestingly, foreign shopkeepers have managed to tighten their stranglehold despite facing accusations of selling counterfeit goods and expired food products. Their success has largely been achieved through exploiting informal sector’s lower entry barriers and poor law enforcement.

Since most of foreign immigrant-owned businesses are unregistered, they trade mostly in cash, helping them to avoid paying income tax.

Research published in 2019 by the Sustainable Livelihoods Foundation and PLAAS (Institute for Poverty, Land and Agrarian Studies) revealed that 33,3% of spaza shops are “survivalist”, owner-operated businesses.

The remaining 66,6% are larger, informal businesses that prefer to remain unregulated to exploit loopholes in the system. These larger shops tend to offer a broad range of goods, provide credit, and have stronger ties to wholesalers.

Foreign traders and big retailers started moving into the townships after the end of apartheid in 1994. Back then, little did local spaza shop owners know that they were no match for superior economies of scale of large formal retailers or cost-efficient business networks of foreign traders.

Typically, foreign traders pool capital among relatives or community groups; practise bulk buying; operate for longer hours; and use family labour to reduce staffing costs. This allows them to sell their products at lower prices than locally-owned spaza shops.

On the other hand, big supermarket chains also employ their massive buying power to purchase stock cheaply, giving them the ability to sell their products at discounts relative to spaza shops. The big retailers also use promotions and loyalty programmes to lure customers.

But two years ago, the government was put under pressure to enforce stricter regulations to curb undocumented foreign ownership and to crack down on unregistered businesses in the townships. This was after the public complained about a spike in cases of illnesses and fatalities caused by the consumption of stale biscuits and chips sold at spaza shops.

In response, the government embarked on a campaign to register spaza shops. However, there is no indication that the registration drive reduced unregulated shops.

The only commendable outcome from the registration process was the adoption of modern electronic business licensing systems, particularly in KwaZulu-Natal and Western Cape provinces. These systems could replace existing manual, non-electronic systems in many of SA’s municipalities.

The Business Licensing Bill that the Cabinet recently withdrew contains a proposal for introduction of a national digital business licensing system, among other sweeping reforms. It is hoped that the proposed licensing regime could help curb illicit trading activities associated with the informal economy.

Proposed licensing laws to curb illicit trading

The proliferation of foreign-owned unregistered businesses, along with massive growth in trade of counterfeit goods and expired foods has deeply angered South Africans.

Nafret made a submission on the Bill, where it proposed strict penalties and immediate closure of businesses that sell “illicit or unsafe products”. So, the Bill aims to close loopholes in the old Business Act -- the primary national legislation currently regulating business licensing and informal trading in SA.

The decision to withdraw the Bill was taken after it faced strong push-back from business lobby groups, opposition political parties, and think tanks. There are concerns that some of its proposals may deter investment instead of encouraging it. One of the Bill’s sticking points is Clause 16 -- a controversial provision that has unsettled investors. The clause proposes giving municipalities authority to designate exclusive geographic zones for small business trading.

The Institute of Race Relations (IRR), a Johannesburg-based think tank, has interpreted the clause to mean that large businesses could be barred from operating in the townships, if the Bill is passed into law. Roughly 15 million to 21 million people reside in 532 townships, making townships a gigantic consumer market. The IRR warned its submission that the clause may force large businesses to exit townships, undermining property rights.

“Excluding larger businesses from operating in townships or other historically disadvantaged areas on the basis of their size could also be in breach of the constitutional right to trade under Section 22 of the Bill of Rights,” IRR warned.

Business licensing is not the only intervention that government is leaning on to boost participation of black South Africans in the informal sector. It has also established a R500 million fund to provide capital for locally-owned spaza shops.

The fund, launched in November 2024, extends grant funding to locals for stock buying and store upgrades. Last year, MPs raised concerns about the low number of applications received for the fund.

It emerged the fund had received between 3 000 to 5 000 applications, figures that were too low for the comfort of MPs. These low numbers drove home the extent of displacement of locally-owned spaza shops, something that had gone neglected for too long.

So, it came as no surprise when it was reported last week that only R44.5 million had been disbursed to 728 spaza shops. This amount is less than 10% of the total fund.

With more than 12 million South Africans out of employment, the informal and township markets have become battlegrounds for people seeking to eke out a living.

This battle begs this question -- does government have the wherewithal to regulate the market in favour of SA citizens who are unhappy about being left out of formal and informal economies? The final draft of the Bill will provide an answer to this question.

Related Tags