The new government regulations aimed at formalising the informal economy are creating uncertainty in the spaza shop sector, with unintended consequences, selective enforcement, and economic disruption, according to a recent analysis by market researcher Trade Intelligence and e-commerce service provider Yebo Fresh.
Spaza shops are a cornerstone of the township economy, providing essential goods and flexible services to communities with limited access to formal retail outlets, according to the analysis. However, concerns over food safety, illegal trade practices and the emergence of foodborne illnesses that plagued SA in 2024 have prompted the government to tighten regulations requiring shop owners to register, comply with hygiene standards and hold valid documentation.
At a media briefing on Sunday, Lebogang Maile, Gauteng MEC for finance and economic development, said 17,617 applications for registration had been submitted in person, and 29,116 inspections had been conducted before the deadline on Friday. However, noncompliance remained a major issue, with 15,478 businesses failing to meet requirements, and 498 being shut down immediately. Most cases of noncompliance involved food safety violations, environmental hazards, fraudulent documentation and issues with business locations.
Small business development minister Stella Ndabeni-Abrahams said despite challenges such as municipalities’ lack of electronic business registration systems, those who applied for registration would not be penalised while awaiting their outcomes.
While the government argues that these regulations will improve public health and level the playing field, Trade Intelligence warns that impractical requirements and inconsistent enforcement may undermine these goals.
“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, with inadequate enforcement and capacity, have created a system that can and might be circumvented or ignored,” said Trade Intelligence senior analyst Tshego Modise.
One of the biggest challenges of the new regulations is accessibility. According to Modise, many spaza shop owners, especially foreign traders, lack title deeds or formal lease agreements, making it difficult to register their businesses. This has led to a rise in “fronting”, in which SA citizens register businesses on behalf of undocumented foreign traders. While this workaround helps traders continue operating, it also opens the door to corruption, legal disputes and extortion, she said.
The Trade Intelligence analysis points out that inspectors often focus on “superficial” compliance, such as checking for expired stock, while neglecting broader issues such as proper product storage and overall business practices. Some shop owners report that raids are inconsistent, with many noncompliant businesses temporarily shutting down to avoid penalties, only to reopen soon after.
Modise said there were also concerns that foreign-owned spaza shops, particularly those run by Somali and Ethiopian entrepreneurs, were being disproportionately targeted.
“While these traders have outcompeted local shop owners through lower prices, efficient supply chains and extended hours, removing them does not guarantee that SA entrepreneurs will fill the gap. Structural challenges such as limited access to bulk-buying discounts, financial support and crime risks persist.
“Additionally, foreign-owned spaza shops contribute an estimated R25bn annually in rent, benefiting SA landlords and highlighting their role in the local economy,” she said.
Yebo Fresh data, according to Trade Intelligence, reveals a decline in spaza shop sales from October to November 2024, particularly in Gauteng, as traders hesitated to restock due to uncertainty over the new rules. While sales recovered in December, they warned that the full impact may become evident only in early 2025, as businesses and consumers adjust to the regulatory landscape.
Ndabeni-Abrahams said support programmes for spaza shops were already in place to provide training in inventory management, point-of-sale equipment and financial support. To scale up these efforts, a R500m Spaza Shop Support Fund would be launched in the coming weeks.
The fund aims to link spaza shops to bulk purchasing groups, enhance business capacity through training and improve competitiveness against larger retailers.
The minister said the government was working on streamlining business licensing to reduce red tape and make compliance easier. The National Business Licensing Bill, once approved, will bring clarity and consistency to business registration.
Yet, the analysis reveals that the real issue lies beyond spaza shops. Smollan trade expert Richard Mamokeane argues that counterfeit and harmful goods often enter the country due to weak border controls. Instead of targeting traders, he suggests, the government should focus on strengthening import regulations, cracking down on illicit pesticide sales and improving waste management systems.
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