Excavating Silence:  The impact of the lockdown on the spaza & informal retailer

Ali is a bright and breezy Somalian, who has been in South Africa for 9 years.  He has an ID (non-resident) and SA drivers’ licence, so he is not an illegal resident. In fact many immigrant traders from Somalia do have some form of legal paperwork. The Somalis coming from a conflict zone can get official asylum status, the other 3 groups that make up the majority of the spaza sector, Ethiopians, Bangladeshis and Pakistanis are economic refugees and generally struggle to get asylum and as such are often illegally resident.  His business is registered with CIPC and relevant municipal requirements.

The robberies got worse and Ali looked around for a job in a shop.  “In November 2015 a friend of mine Hassan and his three other partners requested me to manage this shop where I am now.   They gave me a 25 % share. From then we expanded and opened 3 other outlets in Tembisa namely Freedom General Dealer 2,3 and 4.

Ibrahim Abdullahi has introduced me to the world of spazas, spazarettes, cash and carries and midi wholesalers.  Ibrahim knows this sector intimately, he’s a natural marketer and a whiz at getting brands distributed and listed into these stores, whatever the nationality.  His network and understanding opens up a retail world that is to a large extent invisible, mostly misunderstood and much maligned.  His business Hornafro Marketing (https://www.hornasmarketing.com/ ) accesses the world of the Somali trader and networks.  He is helping me keep in touch in this time of lockdown.   Ibrahim has introduced me to Ali’s story and that of Freedom General Dealer, which is very representative of the world of spazarettes in the townships.

Freedom General Dealer is on a busy intersection in Tembisa.  His store is what I call a spazarette, a supermarket type spaza with aisles, a huge range of brands and product sizes all priced on par or cheaper than formal supermarkets.  There are approximately 30 000 spazarettes, and a further 70 000 hole in the wall spazas.  At the back of the neat store with 5 shopping aisles is his “wholesaler” section where he sells bulk goods to hawkers and local food outlets that sell food like kotas, amaplati, vetkoeks etc.  This wholesaler section contains bags of sweets, large multipacks of savoury snacks for hawkers, and for the fast food sector big bags of flour and maize meal and 20 litre oil for vetkoek, pap and meat or slap chips meals.

Ali offers credit without interest to the locals, and any given month he has loans of up to R 10 000 for food items bought by between 50 and 100 gogos and moms. He only gives credit to gogos and moms, “only the trusted neighbours, moms and gogos, they’re reliable to pay back,” he says.   I also give charity he adds, “the local councillor will come by and ask for supplies towards someone’s funeral in the community, maybe they were a poor person. We give free food towards these.”

Ali rents the property from a South African and pays R 5000 a month.  This rental is an often ignored benefit of the immigrant spaza sector.  I calculated in Kasinomic Revolution that the spaza sector pay around R 30 billion a year in rental to South African homeowners.  Money they will continue to pay to the homeowners if they continue to trade during the lockdown.  An important and much needed income.

Ali does not see the formal sector as his main competition, he says “my main competition is other spazarettes, but recently the PicknPay which opened close to me, they are new so for now they are competition”.

Before the lockdown Ali’s business was growing well with turnover increasing despite the hard-economic times.  I ask him why he thinks this was happening? “Because of our long working hours, good prices and high stock levels in our store.”

I ask about his relations with the community considering the bouts of xenophobia that happen.  “The community are treating us well because they value our business. They can get what they want from us any time of the day which costs them nothing in terms of taxi fare. They send their children to shop at any time, because they trust us.”

So, what has happened since lockdown.

“Our business has been disrupted.  Police are disrupting our working hours forcing us to close, while we have got all the required documents.”  But despite this business is up over the lockdown, “Except the first day, our business is doing better. Customers are buying well like at month ends.”  Items like DSTV, airtime have gone up over this time.

The spazarette is in the street or on the high street, the busy street running through a residential area, unlike the spaza which is a tiny hole in the wall in the back streets. This proximity to consumers, the range and price means that the spazarettes save customers transport to the mall or shopping centre.  The result, the spazarette sector will probably grow turnover over this period.

Freedom General Dealer’s wholesale section is suffering compared to his supermarket section.  “The items there that are not moving are, 12.5kg cake flour, 5 & 20l oil, snacks like 50 cent sweets in bulk.  You see this is because most of the customers buying the above items either had kasi kos food takeaways or are tabletop hawkers.”

How do you plan to survive this lockdown?  “We are trying hard, going from wholesalers to wholesalers to get stock at the best price so we can pass this price onto our customers.”  Ali says some wholesale prices have increased in price by about 7 to 10% since the lockdown. Ali is more concerned about his customers “We are also worried because 50% of Tembisa resident are foreigners who rely on daily income like selling in the streets or work like waiters. They don’t get grants from government to replace their income.  But I even worry about many local people.  They rely on informal jobs, like kota shops, salons, building houses or labour work.   So they may run out of cash to buy food and loot the stores.”

For now, Ali like most spazarette owners has reduced stock levels, and restocks more regularly so that if there is looting, he loses less and can survive through the time and afford to restock again.  He is also ensuring his customers are protected, “we have taken all the precautions, we have gloves, face masks, sanitizers and we tell our customers about social distance, that they must be 1 meter apart.” I suspect that this is true for most larger spazarettes but not the norm in the smaller ones and in the spazas.

I ask him if he has plans for after the lockdown?  He is positive, after all he has survived the ravages of war in Somalia.  “No specific plans.  We hope to continue trading no matter what.  Yes, we are positive about the future. No bad condition is permanent and there will a solution to every problem.  Even this one.”

Observations of future trends

  • The prepared / hot food sector (currently closed) – fast food, catering and casual dining e.g. shisanyamas is going to seriously impact township incomes, considering that this sector unlike the spaza / rette sector is 100% South African owned. Ditto the street traders excluding vegetable traders.  This is also going to have an impact on food manufacturers and farmers, as a large portion of many categories of vegetables and food sales go through these food channels.
  • The real impact of lockdown will only be felt in April and May, when the impact of no trading in April is felt by the majority of the informal trade which has not been able to trade or has had reduced business, (not all informal businesses are spazas 😉). These include taxi owners and drivers, hair salons, fast food outlets & shisanyamas, taverns, non-vegetable hawkers, kasi internet cafes, kasi mechanics, muti traders, school mamas selling snacks to school kids, creches, caterers, kasi builders, car washes, among others in the kasi economy.
  • The spazarette sector is going to strengthen through and after this. Consumers will buy more of their groceries locally ie at the spazarette, for convenience and saving taxi fare.  A trend which was already in evidence before this lockdown.  Formal retailers in township suburbs will also benefit at the expense of malls and shopping centre based retailers (except at month end).
  • Number 2 brands will benefit as consumers trade down but try and stay with quality. Smaller packs sizes will grow in volume as consumers trade down from say a 1 Kg to a 500g, spazarettes are already seeing this growth of secondary brands and smaller packs.
  • Consumers shopping at spazarettes are already reverting to basics, staple food and non-luxury items. The exception is sweets, sodas and snacks. I suspect “I deserve a treat even if it’s a little one”. (the lipstick factor)
  • The majority of the small businesses, including the informal sector will struggle with restarting. They will have lived off their resources over the lockdown and will have no money to restock.  The lack of access to credit, terms on purchases, and limited government interventions (at this stage) exacerbates this issue.  On the other hand low overheads, agility and the fact most operate from residences / residential premises mean they will start slow, with small quantities of stock and slowly rebuild.