Spaza shops are dynamic landmarks on the South African landscape, particularly in townships and rural areas where the informal trading sector supports millions of households.
Well-stocked and efficiently serviced spaza shops (local convenience shop) have the potential to become bastions within their communities. This unique business landscape, however, comes with its fair share of challenges, some of which include limited access to business financing or a line of credit, a substantial administrative burden, issues relating to safety and security, as well as storage problems.
However, with careful planning, foresight, and a solid business foundation, aspiring spaza shop owners can build their businesses from the ground up and garner invaluable lessons from becoming a key component of the country’s lively informal economy.
These three important factors need to be considered:
Location, location, location
There are an estimated 200 000 spaza shops in South Africa, the majority of which are concentrated in townships. There’s literally a spaza shop around every corner. Therefore, one of the first considerations you’ll need to make as an aspiring spaza shop owner is how to leverage your unique location.
Observe the volume of foot traffic through your area but also the nature of that foot traffic – where are people going? Is your shop located near popular transport routes? Are you positioned near a recreational area? These observances will give you key insights into the kind of products you should be stocking.
If people passing your shop are on their way to work, you could stock a limited batch of grab-and-go breakfast items like amagwinya (vetkoek or fat cakes), donuts or amakhekhe (biscuits or scones). If you’re based in a relatively enclosed residential area, then you may want to consider essentials like prepaid airtime, electricity, sugar and cigarettes – items that people in the area can purchase quickly and conveniently, and as needed.
Partner with reliable suppliers
The mainstay of your business as a spaza shop owner will be your suppliers. Aspects such as whether they are well-stocked to accommodate your needs, whether they deliver on time and whether their products are of a high quality will become make-or-break factors for your business.
As such, you should take your time reviewing your options. Ideally, you want to find a supplier who is willing to negotiate for your mutual benefit and someone who will be readily available within stipulated times, come rain or shine.
And although a spaza shop may form part of the informal economy, this does not mean that the agreements that underpin its business model need to be kept informal. In fact, formalising your agreements will go a long way in protecting you from risk and preventing misunderstandings. Therefore, once you have chosen your supplier, ensure that a formal contract is in place which outlines payment arrangements and terms, delivery and collection protocols, refund and return policies as well as stock replenishment plans.
Know what the law says
Regulations that govern the operations of spaza shops differ from municipality to municipality, so one of your first tasks will be to read and understand the relevant by-laws. There are also several national stipulations that apply.
For example, a spaza shop needs to be licensed appropriately and registered for tax. This license is obtained by following an application process facilitated by your local municipality. Some of the basic requirements include that the floor area of the shop cannot exceed 25 square metres or 30% of the total floor space of all approved buildings. Operating hours are restricted to 07:00 and 21:00, and the site itself must be accessible by delivery vehicles and refuse removal trucks.
Municipalities across the country have initiated support programmes to make the application process more accessible and efficient.
Complying with regulations from the outset will prevent unnecessary future complications, ensure that your operations are kept above board and allow you to realise maximum profits with the confidence that you are running a legitimate business.