ATHY LE ROUX: State does not get what it is asking spaza-shop owners to do

SA’s informal retail sector, especially spaza shops, plays a vital role in supplying goods and services to nearly 11.1-million South Africans, supporting more than 3-million jobs and contributing about 5.2% of the country’s GDP.

With about 150,000 spaza shops operating across the country, the government’s push for formal registration aims to introduce regulation, safety and compliance to this essential R750bn sector.

While regulation, including adherence to health and safety standards, is necessary, the current tight registration deadlines overlook the complexities of navigating the process and the potential unintended consequences. Driven by a crisis, does government fully grasp what it is asking of spaza shop owners?

To understand how challenging the registration process is for our 5,000-plus merchants in the A2Pay network, we attempted to navigate it ourselves. What we found was an administrative nightmare, not to mention the substantial costs involved.

Our on-the-ground experience

We began by compiling a list of all 257 municipalities in SA and searched their websites for registration information related to spaza shops. The results were disappointing to say the least — less than 1% of municipal websites provided clear and accessible details.

We then reached out to municipalities via email, but only five responded. Attempting to call municipal offices proved frustrating as we were either left on hold, disconnected or transferred between departments without receiving any answers.

Due to these challenges we decided to visit a local municipality in person to gather the necessary registration documentation for spaza shops. The experience was marked by significant confusion and inefficiency. After a 30-minute wait we were given some documents, only to learn that the application needed to be filed at the local health department.

At the health department, we discovered staff members forced to work outdoors under shade cloth due to malfunctioning air conditioning. During our visit we found out that registering a spaza shop necessitates submitting a certificate of acceptability application, along with a variety of supporting documents, including:

The ID of the property owner;
A lease agreement or proof of property ownership;
Proof of address;
A certificate of business registration (via the Companies & Intellectual Property Commission website);
A consent of use document (from the town planning department);
An approved building plan (from the town planning department);
A fire clearance certificate (from the fire safety department);
An occupancy certificate (from the town planning department); and
Other business-specific certificates (to be determined by the health department)

The challenge for spaza-shop owners

If you understand the informal market, you will realise that while some of these documents are relatively easy to obtain, others are nearly impossible. Many spaza shops operate from rented or family-owned premises without formal lease agreements. Approved building plans and occupancy certificates are often nonexistent for informal trading spaces.

The requirement for multiple approvals from different departments creates an administrative nightmare for spaza-shop owners who simply want to operate legally.  Added to this, the cost is prohibitive for many smaller stores, whose owners are barely scraping by in this difficult economic climate as it is.

As one spaza-shop owner explained: “I paid R3,500 for a plan of an existing house, which they lost. Then R1,850 for resubmission, plus R2,200 for the licensing process. This is too much. Where are we supposed to get all this money? What about those who use containers? They are not allowed to apply for a licence because you cannot submit a form without an approved municipal plan. This is impossible.”

 Another stated: “I haven’t been able to register because they said they do not cater for informal settlements.”

 A call for practical solutions

 If we as a country truly want to empower small businesses and grow our economy, we need to ensure regulations do not become barriers resulting, as in this case, in the closure of spaza shops, which could heighten economic challenges and contribute to unemployment. Should even 20% of spaza shops be compelled to shut down due to these regulations, it would lead to a staggering loss of R150bn in revenue and about 60,000 jobs.

We strongly encourage the government to undertake a comprehensive investigation into the registration process and establish an efficient, practical system that addresses the unique needs of informal traders. Potential solutions may encompass the following:

Uniform and accessible guidelines for all municipalities;
Adopting a gradual approach to formalisation, allowing informal businesses to register with fewer requirements initially and gradually progress to full compliance (health and food safety a first key requirement);
A dedicated, simplified online registration portal with multilingual support;
A one-stop registration service that consolidates municipal, health and safety approvals;
Acknowledgment of alternative verification methods for traders lacking formal lease agreements or approved building plans; and
Examining how other nations, such as India, Ghana and Peru, have streamlined the registration process for their informal markets. From this analysis we can develop a set of best practices tailored for SA.

The government must engage with stakeholders, including spaza-shop owners and support organisations, to design a system that works for the people it is meant to serve. If not, SA risks pushing thousands of businesses further into the shadows, undermining the very objectives of regulation and economic development.

Government leadership is crucial, but transforming the spaza sector demands a collective response from NGOs, private sector companies and community organisations to engage actively in supporting spaza-shop owners during the registration process.

• Le Roux is COO of A2Pay