South Africa is using the COVID-19 pandemic to formalise spaza shops

The South African government’s Small Business Development Minister, Khumbudzo Ntshavheni, says her department has formalised over 2,000 spaza shops during the COVID-19 pandemic. Spaza shops are typically small, traditional grocery stores in black townships. Many operate from the shopkeeper’s home.

The cash flow crunch brought on by the COVID-19 pandemic left many informal retailers with nowhere to go, lacking access to business loans to support them during the lockdown. That need has proven to be a catalyst for spaza shops to formalise and access business finance.

So far, the South African government has formalised 2,242 spaza shops, and is processing applications from a further 4,406 shops. In this case, formalisation means that for the next 12 to 24 months small grocery retailers will get access to business support, business management, financial management and access to the market.

The government programme is one of a number of public and private sector initiatives to formalise and modernise spaza stores. New platforms such as Mobicash are aiming to bring a centralized platform that gives small store owners access to banking as well as more efficient procurement channels. In 2016, The Pick n Pay Spaza launched its Modernisation Programme in partnership with the Gauteng Department of Economic Development. The programme, designed to upgrade and modernise spaza stores, saw six stores open in 2016 and eight stores in 2017. Pick n Pay worked with its suppliers to fit out spaza stores with with new refrigeration and IT systems, enabling the stockkeeper to access 1,300 grocery SKUs.