With an estimated 150,000 spaza shops operating nationwide, the government’s push for formal registration seeks to introduce regulation, safety, and compliance to this vital R197bn sector.
While the need for regulation, including health and safety compliance, is understood, the current registration process is not straightforward.
Achieving compliance within a short timeframe may be unrealistic, leading to unintended consequences that could jeopardise this crucial driver of economic inclusion.
The government’s approach — though driven by necessity — raises an essential question: Does the government truly understand what it is asking spaza shop owners to do?
A2Pay, a company that provides digital financial services to informal businesses, in an effort to understand the challenges faced by its 5,000+ merchants within its network, attempted to navigate the registration process. This experience revealed an administrative nightmare for spaza shop owners.
A2Pay compiled a list of all 257 municipalities in South Africa and searched for spaza shop registration information on their websites. The results were reportedly disappointing — less than 1% of municipal websites had clear and accessible information.
Further efforts to contact municipalities via email yielded responses from only five. Calling municipal offices was equally frustrating, with long hold times, frequent disconnections, and being shuffled between departments with no clear answers.
To gain firsthand insight, A2Pay visited a local municipality to obtain the necessary registration documentation. This visit uncovered significant confusion and inefficiency. After a long wait, documents were eventually provided, only to discover that applications needed to be filed with the local health department.
Upon arrival at the health department, staff were found working outdoors under shade cloths due to malfunctioning air conditioning.
It was eventually explained that the registration process requires a Certificate of Acceptability application along with numerous supporting documents, including:
Many of these documents are extremely difficult — if not impossible — for informal traders to obtain. Many spaza shops operate from rented or family-owned premises without formal lease agreements.
Approved building plans and occupancy certificates are often non-existent. The requirement for multiple approvals from different departments creates a bureaucratic nightmare for spaza shop owners striving to operate legally.
Additionally, the financial burden of compliance is overwhelming for many small business owners.
As one spaza shop owner lamented:“I paid R3,500 for a plan of an existing house, which they lost! Then R1,850 for resubmission, plus R2,200 for the licensing process. This is too much! Where are we supposed to get all this money? What about those who use containers? They are not allowed to apply for a license because you cannot submit a form without an approved municipal plan. This is impossible!”
Another shop owner added: “I haven't been able to register because they said they do not cater for informal settlements.”
If South Africa truly wants to empower small businesses and grow its economy, regulations must not become barriers that force spaza shops to close — resulting in heightened economic challenges and rising unemployment.
Should even 20% of spaza shops shut down due to these regulations, it could lead to a staggering loss of R150bn and approximately 60,000 jobs.
A2Pay urges the government to conduct a comprehensive review of the registration process and establish an efficient, practical system that accommodates the unique needs of informal traders.
Potential solutions may include:
Government leadership is crucial, but transforming the spaza shop sector requires a collective response from all in the industry.
