South African business
WHEN he is not studying, Mohlomi Tauhadi works in his uncle’s spaza (an informal store) in Mapetla, a suburb of Soweto, the vast urban sprawl west of Johannesburg. The store is a small kiosk in front of a single-storey house. It stocks mostly staples and treats: rice, maize-meal, sugar, eggs, biscuits and cakes. There are perhaps 90,000 such outlets across South Africa. On a weekday morning, business is slow. The spaza has lost customers to two local rivals, one run by a Pakistani trader, the other by a Somali. Mr Tauhadi is candid about the reason: “They are cheaper.”
An influx of traders from the Horn of Africa and Asia has been a headache for spazas run by South Africans. In less settled places than Soweto, they are also a target for violence. Last month in Refilwe, a shack settlement east of Pretoria, the capital, more than a dozen foreign-owned shops were looted when a ten-year-old boy died in hospital after he was reportedly beaten by a Pakistani shopkeeper for stealing sweets. In September Somali-owned spazas were looted over a four-day spree around Port Elizabeth, a big coastal city.
Immigrants with jobs might well be resented when barely two-fifths of working-age indigenous adults are in work. Yet such feelings are far from universal. The low prices and wider choice offered by foreign-run shops are a boon to South African consumers. Bangladeshi, Pakistani and Somali vendors have their own loyal customers, says GG Alcock of Minanawe, a marketing agency that specialises in informal retailing. There is no xenophobia in Soweto, he reckons. Most foreign shopkeepers have assimilated. Those who are attacked tend either to be new arrivals or to operate in newer, more divided settlements.
Informal retailing has swiftly become a foreign speciality. Suppliers have noticed. Spazasaccount for much of the wholesale business of the giant Kit Kat cash-and-carry in Soweto. A few years ago around 90% of its customers were South African and 10% foreign. Now 70% are foreign, says Essak Karrim, the manager. They come two or three times a week to restock, spending upwards of 2,000 rand ($200). They flit between Kit Kat and other cash-and-carries for the best deals.
An in-depth study of Somali traders by Vanya Gastrow and Roni Amit of the African Centre for Migration and Society in Johannesburg explains how they have bested their local rivals. They sell goods at lower mark-ups, preferring to rely on fast turnover of stock for profit. They pay more attention to customer service. For instance, Somali spazas will devise smaller servings of goods for cash-strapped shoppers; a small plastic pouch of sugar, say, instead of a 1kg bag. They are more likely to offer credit. And they open for longer hours.
Spazas run by other foreigners have similar business practices. Single cigarettes are a frequent purchase from the Bangladeshi-run spaza in Mdeni, another Sowetan suburb. Musharraf, who works here, says he will give credit to grandmothers (who receive regular social grants) but not to youngsters (“they’ll never come back”).
The changes to informal retailing coincided with an influx of refugees from Somalia as its civil war intensified after 2007. Migrants from other countries also sensed a business opportunity. The start-up costs of a spaza are fairly low. Newcomers rent from South Africans who were struggling to compete with supermarket chains. Many migrants can draw on clan networks to help get them started and generations of retailing experience to keep them going.
The locals are adapting. “We are trying our best to keep up”, says Mr Tauhadi. One reason his uncle’s store has kept some of its customers is that they are offered credit. The store is already open all hours. “Maybe you can’t beat them on price but you can beat them on service,” he says.