Regulating spaza shops: policy versus practicality

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Spaza shop debate: reflections, regulations versus realities, and the road ahead

Spaza shops are the lifeblood of South Africa’s townships, providing essential goods and services to millions in areas underserved by formal retail.

These small, informal stores offer unmatched accessibility, often operating long hours and selling products in affordable, smaller quantities. They provide flexibility through credit options, negotiable prices and culturally relevant stock, catering to the specific needs of their communities.

However, recent government efforts to regulate spaza shops have sparked debate. While the intention to improve food safety through formalising the sector is commendable, the execution has raised questions about its effectiveness and potential unintended consequences.

President Cyril Ramaphosa has extended the registration deadline for spaza shops and food handling outlets to 28 February 2025.

Spaza shop owners urged to register before deadline

14 Feb 2025

Regulations and requirements versus reality

The regulation of spaza shops by the government is aimed at ensuring public health and safety, combating foodborne illnesses, and formalising the informal economy.

These regulations endeavour to enforce hygiene standards, promote fair competition, protect consumers and address critical issues such as waste management, environmental health and illegal practices like fronting (where a South African registers a business on behalf of an undocumented foreigner) and undocumented immigration.

By requiring spaza shop owners to comply with laws such as the Immigration Act of 2002, the government seeks to create a safer and more equitable business environment.

Foreign nationals operating spaza shops must possess valid documentation, such as a business visa, asylum permit, or permanent residency, and fronting is criminalised.

Registration requirements include certified copies of the owner’s ID, proof of residence and a business name reservation certificate. Health and safety compliance, such as obtaining a health certificate and a municipal trading license, is also mandatory.

These measures are intended to support small businesses through training and enabling them to operate sustainably and contribute to the formal economy.

However, the reality of implementing the regulations often diverges significantly from their intended outcomes, raising questions about their practicality.

One of the primary challenges is their impracticality and the opening of extortion opportunities. For instance, the demand for title deeds as proof of business location excludes many shop owners, particularly foreign nationals.

This has led to local citizens registering businesses on behalf of foreigners, fostering corruption. Transferring or using a title deed improperly may create disputes over property ownership.

In some cases, the foreign trader might falsely claim ownership, leading to lengthy legal battles. While this may seem like a workaround to regulatory barriers, it carries severe risks for both parties.

In addition, initiatives like the National Cleanup Campaign address waste disposal practices, but their impact remains limited without sustained enforcement and public cooperation.

Another critical issue brought to our attention is that inspectors are often inadequately trained, focusing only on superficial compliance issues like expired stock rather than addressing deeper concerns such as proper product categorisation, storage conditions and overall good business practices.

This superficial enforcement allows non-compliant shops to continue operating, undermining the credibility of the regulatory framework.

Moreover, enforcement efforts are often sporadic, as observed by GG Alcock, informal economy expert, during township visits. While high-profile raids and shutdowns occur, many spaza shops simply close temporarily during raids and reopen shortly afterwards.

While the government’s efforts to regulate spaza shops are well-intentioned, the disconnect between regulations and reality highlights the possible challenges. The impracticality of certain requirements, coupled with inadequate enforcement and capacity, has created a system that can and might be circumvented or ignored.

Selective enforcement

The enforcement of new spaza shop regulations has been uneven, with concerns that foreign traders, particularly Somali and Ethiopian entrepreneurs, are being targeted under the guise of consumer protection.

While these traders have outcompeted local shop owners through lower prices, efficient supply chains, and extended hours, removing them does not guarantee that South African entrepreneurs will fill the gap.

Structural challenges such as limited access to bulk-buying discounts, financial support, and crime risks persist.

Additionally, foreign-owned spaza shops contribute an estimated R25bn annually in rent, benefiting South African landlords and highlighting their role in the local economy.

Yebo Fresh data: spaza shop sales trends and market impact (FY2025)

The spaza shop registration announcement in late 2024 caused uncertainty, leading traders to delay restocking and consumers to adjust their shopping habits.

As a result it disrupted sales patterns and indicated by sell-out data collected by Yebo Fresh, a South African e-commerce platform that provides reliable, affordable, and efficient grocery delivery services to township businesses and communities to bridge the gap between formal supply chains and informal trade.

Spaza shop national sales experienced a notable decline from October to November (more pronounced in Gauteng), followed by a gradual recovery into December.

While the disruption was noticeable, experts largely agree that the impact will be short-term, with retailers and consumers expected to adapt over time.

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*It is important to note that the potential impact may be delayed, given the unique consumer behavior in December. As a result, the effects may only become evident from February onwards. Furthermore, the approaching deadline may have an influence, warranting a follow-up analysis to assess its full impact.

Regulations: a wake-up call or a misguided move?

Smollan trade expert Richard Mamokeane argues that the real issue extends beyond expired goods in spaza shops. Many health hazards stem from illicit pesticides sold in informal markets, not the shops themselves.

While the regulations are well intentioned and aim to improve food safety, they may be a superficial fix, unfairly burdening spaza owners rather than tackling systemic problems.

Mamokeane highlights that counterfeit goods often enter the country through weak port controls – suggesting that stricter border enforcement, rather than targeting traders, would be a more effective solution.

A call for balanced and practical solutions

The spaza shop debate is about more than just regulation; it is about recognising the vital role that the informal economy plays in South Africa. Any efforts to regulate must be carefully balanced to ensure that they do not inadvertently harm the very communities they aim to protect.

The government should focus on developing fair and practical policies that acknowledge the realities of the informal economy.

Poorly designed regulations create opportunity for corruption and “Tjo-Tjo” (bribes). Another critical flaw in the government’s approach is the narrow focus on spaza shops while ignoring the broader informal economy.

Mamokeane argues that instead of targeting individual traders, the government should work with industry experts and private-sector partners to develop a more practical regulatory framework.

This includes strengthening import controls, improving market access for local entrepreneurs and providing education on safe business practices.

While the need for regulation in the informal economy is undeniable, without addressing systemic issues, these regulations risk worsening challenges rather than solving food safety and compliance concerns.

While this effort aims to regulate the sector, does it ‘really’ solve ongoing food safety and compliance challenges?

A broader approach needed, including better waste management and continued support for these small businesses.