July unrest clobbered spaza shops suffocated by Covid-19 downturn
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PRETORIA – The informal sector in South Africa, particularly spaza shops will find it difficult to bounce back from the impact of the July looting and vandalism as they were already battling for breath due to the economic downturn inspired by Covid-19.
“We do not need reminding of just how much the Covid-19 pandemic has shaken up the world and our country, let alone our industry. The impact on the informal trade has been far more devastating, however, as these small businesses are not able to absorb the costs of lost trading hours and increased hygiene regimes like the corporate,” said Natasha Smith, managing director of Trade Intelligence.
She said rental obligations are still more difficult to meet and traders have also seen their shopper base decline as more South Africans are retrenched or experience salary cuts during the prolonged Covid-19 lockdown.
“To this we also add the effects of the recent unrest in Gauteng and KwaZulu-Natal, the exact extent of which is still being calculated. According to a report from Yebo Fresh in collaboration with Ask Afrika, one in three spaza shops experienced looting, nearly 80% of spaza shops lost more than half of their stock and 87% of spaza shops require capital support to resume trade,” Smith said.
Founded in 2004, Trade Intelligence is South Africa’s “leading” source of consumer packaged goods retail business research and insights, and capability-building solutions designed to support achieving efficient and profitable retailer-supplier trading engagement.
Smith said informal businesses had grown exponentially in South Africa in response to shoppers’ needs for affordable and close-to-home solutions that the formal retail chains did not fulfil. The informal businesses thus became a pillar of the township economy that enabled people to shop at their convenience, any time.
“In order for the informal trade to rebuild and grow, it is vital that this aspect of “meeting shoppers’ needs’ be sustained and developed,” she said.
Like most emerging markets, South Africa has a large informal business sector often referred to as the “hidden economy”. Within the fast-moving consumer goods, the sector has as many as 200 000 spaza shops, spazarettes, superettes, midi wholesalers and a host of hawkers.
To leverage growth opportunities amid the unprecedented headwinds, Smith said Trade Intelligence will next month host the Independent Trade Forum which would give stakeholders across the independent trade sector a platform “to connect and hold effective discussions”.
In terms of grocery retail, as much as 40% of total food bought by consumers each year is from informal traders such as hawkers, small and larger spaza shops and midi wholesale traders, who service 77% of the population.
“Although this channel is constantly confronted with challenges, it is a resilient one, whose value was estimated to be worth R157 billion in 2019. Millions of people rely on informal traders not only to provide them with basic essentials, but also to sustain the kasi (township) economy and job creation,” Smith said.
“Just over a decade ago there were many within the FMCG (fast-moving consumer goods) industry who believed that the informal trade was ‘dying’. The major corporates were extending their reach into previously under-served areas at a rapid pace, understanding the enormous potential that the ‘mass economy’ represented.”
Smith said significant stumbling blocks stood in the big corporates’ way – poor infrastructure into these areas made the business of building and stocking stores arduous, “regional differences meant that what worked in Mamelodi could not automatically be rolled out in Umlazi”.
“This left the door wide open for informal traders to survive, and in many cases thrive,” she said.
In July, the government announced that the death toll in KwaZulu-Natal has been revised down from 258 to 251 as some deaths were found not to be related to the #FreeJacobZuma unrest.
In Gauteng, 42 murders were being investigated by the police and 37 inquest dockets had been opened.