Trade Intelligence partnered with Yebo Fresh to analyse the impact of new spaza shop regulations on the informal economy, exploring their challenges, implications, and market dynamics.
 

 

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.

Popular opinion often paints spaza shops as poorly maintained, dirty, and run by owners who sleep in their shops. While some face challenges in maintaining hygiene and organisation due to limited resources or space constraints, this is not the reality for most spaza shops. The majority of owners take pride in their businesses, ensuring cleanliness and proper storage of goods. Many owners and spaza managers are hardworking entrepreneurs.
 

outlets to 28 February 2025.

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

 

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 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. 
 

 

Targeting Foreign-Owned Spaza Shops

Additionally, the enforcement of these regulations has not been uniform. Alcock argues that the new rules are being used selectively against foreign traders under the guise of consumer protection. Foreign-owned spaza shops mainly run by Somali and Ethiopian entrepreneurs have outcompeted local traders. Instead of addressing these economic realities, the government’s approach assumes that by removing foreign traders, South African entrepreneurs will naturally fill the gap.

However, history suggests otherwise. Before foreign traders became dominant, South African spaza shop owners struggled to compete against major retail chains like Shoprite and Pick n Pay. Now the informal sector fills a gap that traditional retailers cannot, offering competitive pricing and convenience. The assumption that South Africans can simply reclaim the spaza trade ignores deeper structural issues, such as the difficulty in accessing bulk-buying discounts, supply chain inefficiencies and a lack of financial support for local entrepreneurs. Foreign nationals dominate the sector, offering lower prices, longer operating hours, efficient supply chains, often supported by diaspora networks. Many South Africans lack access to startup capital and economies of scale, while also facing crime risks. 

Also, let's not forget, foreign-owned spaza shops contribute significantly to the economy, generating approximately R25 billion annually in rent which directly benefits South African landlords and demonstrates the economic interdependence between foreign traders and local South African communities, according to Alcock.
 

 

 

Yebo Fresh Data: Spaza Shop Sales Trends and Market Impact (FY2025)

When President Cyril Ramaphosa announced the spaza shop registration drive in late 2024, a wave of uncertainty swept through the sector. Many traders, fearing potential closures, hesitated to restock their shelves, disrupting the flow of goods. At the same time, shoppers adjusted their purchasing habits, amid concerns about both the food quality and the future of their trusted community stores. This lead to a noticeable decline in sales across the informal trade sector.

This is supported 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. 

Here we can see that spaza shop national sales in FY2025 experienced a notable decline from October to November (more pronounced in Gauteng), followed by a gradual recovery into December, though from a lower base. 
 

 

 

Category performance varied notably, with grains experiencing a decline ahead of the usual January slowdown. Snacks, sweets and bites’ was the most affected category, facing the sharpest drop in October to November, followed by a partial recovery in December, likely exacerbated by concerns over reports of children consuming contaminated snacks.

* 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.

The data indicates that the spaza shop registration announcement may have disrupted sales patterns. However, despite this short-term dip, sales are stabilising, and experts largely agree that the registration is unlikely to have a lasting impact on business. Retailers and consumers are expected to adapt, with sales gradually returning to normal in the coming months.
 

Regulations: A Wake-Up Call or a Misguided Move?

Smollan General Trade expert, Richard Mamokeane argues that the real issue is not just about expired or counterfeit goods sold in spaza shops – it runs deeper. Many health hazards, like poisonings, are linked to the misuse of illegally repackaged pesticides in homes, not the shops themselves. While the registration drive is well-intentioned, it risks being a superficial fix. Instead of tackling systemic problems like hazardous chemicals or expired goods from suppliers, the burden falls on spaza shop owners, leading to accusations that the regulations unfairly target foreign traders rather than addressing the root causes.
 

Food safety is a key concern, but the focus on spaza shops may be misplaced. Poisoning cases are often tied to unmarked pesticides sold in informal markets, not spaza shop products. While counterfeit and expired goods are also a real issue, Mamokeane points out that the problem starts at the ports, where illicit goods enter the country. Stricter controls there could be more effective than cracking down on traders. It is also worth noting that expired products have been found in corporate supermarkets, yet spaza shops bear the brunt of the blame. This raises questions about whether the regulations are truly about safety or if they are missing the bigger picture.

Conclusions: 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. Rather than enforcing poorly designed regulations that create opportunities for corruption and “Tjo-Tjo” (bribes), the government should focus on developing fair and practical policies that acknowledge the realities of the informal economy. This means addressing structural barriers, empowering local entrepreneurs and recognising the economic contributions of all traders, both foreign and South African.

In practice, registration requirements have led to an increase in bribery and corruption, with officials allegedly demanding payments to facilitate approvals or ignore non-compliance and new consulting businesses claiming to register business on the trader’s behalf. This further undermines trust in the process and highlights the limitations of enforcement. However, the lack of formal training still contributes to these issues in some cases. In addition, a critical flaw in the government’s approach is the narrow focus on spaza shops while ignoring the broader informal economy. South Africa’s townships are filled with unregistered businesses, including hair salons, food stalls and auto repair shops. Yet, the crackdown has almost exclusively targeted spaza shops while leaving other informal businesses largely untouched. This selective enforcement raises concerns about fairness and intent. 

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, the government’s rushed and poorly designed approach has created more challenges. By failing to engage with stakeholders, address systemic issues and provide adequate support, the regulations risk exacerbating the difficulties faced by informal traders.

While this effort aims to regulate the sector, does it ‘really’ solve ongoing food safety and compliance challenges or is a broader approach needed, including better waste management and continued support for these small businesses?