There are over 150,000 spaza shops or small informal groceries in operation in South Africa. They add R120 billion ($7 billion) to the local economy a year, and with other forms of traditional trade, contribute 35 percent of total grocery sales in South Africa.
Spaza shops are the backbone of township economies, but the lack of credit and struggles to compete with modern retailers are serious challenges they face daily. It is estimated that 90% of transactions are in cash, making them vulnerable in a country with a high crime rate.
Informal trade is growing at 10% a year, but for many South Africans living in townships, shopping is a logistical challenge. Most rely on public transport and a trip to large shopping malls is costly, stressful, and time consuming in long taxi rides. Shoppers often have to walk back from the taxi drop-offs with heavy grocery bags. Township dwellers are often excluded from low prices and items they need most, are often out of stock.
Many consumers would like to shop closer to home, but townships were historically ignored by large companies in favour of shopping malls and town centres. However, with an increase in disposable income and a growing population, it is making them an attractive market for modern retailers.
South African retail giant Shoprite is taking note, and is accelerating the roll-out of its Usave eKazi container stores in townships. Usave eKasi is much smaller than Shoprite’s other formats, but much larger than a traditional spaza outlet. Shops range from 100m² and 200m² and have three cashiers and two packers. Shoprite’s competitor Pick n Pay, has partnered with independent traders and upgrading existing spazas. The retailer is helping to revitalise the township economy in partnership with the Gauteng Department of Economic Development (GDED).
However, it is particularly the South African startup community that is rapidly transforming the way spaza shops do business and access credit. Companies are connecting informal traders to suppliers and customers, and making it easier for spaza shops to procure goods, sell their products, and manage their businesses. By digitising the supply chain for spazas, it allows banks to better understand their cash flow and daily purchases — determining which customers to extend credit to — irrespective of their size.
The South African startup community is constantly evolving, and below are a number of players to keep an eye on:
Zande provides logistical and financial support to spaza shops, informal traders and their suppliers. The startup cuts out the middlemen and makes bulk purchases directly from manufacturers. They provide last-mile delivery to spaza shops through its driver program. They also plan to launch their first physical store or “spaza hypermarket” in Orange Farm, a township 45 km from Johannesburg.
Shopit’s mobile app allows small groceries to order stock at affordable prices — all delivered to their storefront. Spaza owners can compare wholesaler’s prices and place an order without paying a commission fee. The app promotes wholesaler’s products to a wider audience, assists them with their inventory control, and helps them make better business decisions.
Spazapp is an android application that connects informal traders directly to large consumer goods companies. Traders can order a wide variety of products at competitive prices — providing them with collective bargaining power on the Spazapp platform.
Selpal connects informal traders to suppliers with its digital distribution platform and provides dealers with a point-of-sale device — enabling them to sell digital products such as airtime, electricity, and insurance in South African townships.
Flash connects spazas and their customers to a digital platform that includes physical goods usually sold at spaza shops, and digital products such as airtime and electricity.
Pamodzi Smart is a trading platform that supports stock management, cash management, and reporting. The platform also sells digital products such as airtime, electricity, and Lotto tickets.
Vuleka’s platform enables spaza shops to place orders for consumer goods and tap into bulk savings on offer. The app is linked to a virtual wallet payment system — allowing for cashless payments. It has two user interfaces, one is for spaza owners, and another for consumers — enabling them to redeem discount coupons from manufacturers.
Spoon Money is a group-based micro capital finance platform for female informal traders and helps stokvels become more successful. This platform enables them to access credit to support their businesses and create a more sustainable and predictable income. Stokvels is an integral part of South African society and is a community of people serving as a savings scheme.
A2Pay provides point-of-sale terminals that provide business intelligence and stock management. The terminal helps spaza shops to log transactions and establish transaction history — enabling them to better manage inventory, measure performance, track costs, make payments, and make better decisions based on data. The vending platform also allows them to sell digital products such as electricity and airtime.
Nomanini provides a retail point-of-sale device — allowing informal traders to sell digital goods such as electricity and mobile airtime. The startup’s data is collected from prepaid services or bill payments, and it analyses transactions and connects traditional micro retailers with financial service providers for loans and credit.
uKheshe is a micro transaction platform and enables a person without a bank account or smartphone, such as a spaza shop owner, to get paid in real-time through an uKheshe card — featuring a Quick Response (QR) code linked to their mobile phone number. The app is Masterpass certified, and also accepts payments from Zapper, SnapScan and other banking apps.
Other mobile point-of-sale (mPOS) players that are gaining a foothold in the spaza market is Yoco and iKhokha. Their devices attach to a merchant’s mobile phone and are able to handle credit card swiping, and give merchants an overview of sales, settlements and tax invoices.