Spaza Woes and Township Xenophobia
(The following post is a work in progress) :
In attempting to understand the sporadic manifestation of Xenophobic flareups in South Africa's townships and in light of certain comments made by the ruling party's politicians, the effects of over proliferation of foreign owned Spazas in S.A. townships must be investigated.
Although much of the background to this post is extremely well articulated in the groundbreaking study by the "Sustainable Livelihoods Foundation" study entitled " The Informal Economy of Township Spaza Shops" whose findings I wholeheartedly concur with on the basis of my 10 year long interaction with Spaza entrepreneurs on the Cape Flats, my conclusions differ somewhat.
It's analysis resonates well with the previous post on the global micro finance fiasco in that many of the ills resulting from foreigner dominated spazas are articulated in the Bateman expose of the micro-finance model namely that "...As new microenterprises quickly emerge, already struggling microenterprises thus see a progressive reduction in their turnover, and so also a reduction in their profits and wages - that is, they are made poorer.
Cramming more and more new microenterprises into already pretty well-served poor communities also leads on to hypercompetition, and so also tends to soften prices.
This, in turn, reduces average profits, income and wages pertaining to all microenterprises. That is, even more downward pressure is exerted on already minimal self-employment incomes (see ILO 2009). However, middle class consumers often do quite well from the availability of cheaper goods and services, thus typically exacerbating inequality " and "...Centrally, new microcredit-supported microenterprises do not find very many new unattached clients, but overwhelmingly simply end up taking away clients already attached to incumbent informal microenterprises operating in the same sector" all chillingly apply within this sector as well.(3)
1. The deregulation of smmes and micro businesses was a late Apartheid era strategy to placate the
furious masses with some kind of ideal that if they could have a viable means of emancipation from
poverty, they would forget about "the struggle". This was born from the notion that generally, the
SMME sector was good at creating jobs, so subsequently ...
2. Embarked on a process of relaxing restrictive redtape/deregulation
to encourage entrepreneurship to develop. The ANC too recognised from previous stats
that entrepreneurship was the key to sustainable employment creation and set structures inplace
for promoting this culture that had to be inculcated in the townships since decades of Apartheid
legislation strongly discouraged self reliamnce in the form of entrepreneurship.
3. Unfortunately, the new government overlooked the crucial need for maintaining a
certain level of protectionism - found in every country in the world
but especially vital in the new SA whose newly liberated masses
were restricted for decades from being entrepreneurial - that
culture was suppressed and needed to be nurtured in a protective
environment - It could never gain any traction because as soon as
the doors to democratic SA were opened, the flood of foreigners
seeking opportunities entered SA, many flush with cash and old
hands at micro and small retail businesses, the results of which were
itself akin to predatory business behaviour that put many local owned spazas
out of business.
4. There are still several derogatory misperceptions that need demythologising, amongst them
one that foreigners are prepared to work harder than locals is totally untrue - as if the
dangerous, backbreaking mining jobs (amongst others) that locals DID do and that helped build
this country was any less harder work than running a spaza.
Generally speaking, many Third and First world countries have strict guidelines for the qualifications of prospective immigrants or even prospective expat labour - I believe the UK way back in the early 2000's required at least a Masters degree in a scarce skill to consider you for employment above a certain age.
Many Third world countries deny foreigners the right to own small businesses - absolutely crucial as those types of businesses were there as protected employment havens for their poorest citizens.
In Trump's USA, it was not nationalism that made him proclaim an inward looking policy and a re-look at (amongst other things) outsourcing, but a fragile and tough global financial outlook. It then beggars belief that a developing nation such as South Africa can afford the unbridled colonising of these entry level type businesses.
Additionally, the following should be considered :
1. I have been personally advised by many South Asian (Bangladeshi
and Pakistani) business owners that their choice for coming to SA
was based on two criteria, i) SA has almost no restrictions to entry
for foreign business ownership in the SMME sector where these
foreigner businesses predominate (and where vital SA job security
is being threatened) and (ii) Nowhere in the world can you start a
small business for R30k ! - an amount that many South African
spaza owners do not even have access to when starting up.
2. In my line of work over the past 10 years I have witnessed an
astonishing amount of (previously successful) local Spaza owners
closing shop simply because the tide of foreign owned spazas
predominated - and the reason for their predomination was plain -
no "secrets business practices" here, just informed common
knowledge - the overwhelming majority of the foreign spaza owners
arrived here in their 20's (to earn a supplemental income) with no
family (hence no commitments and restrictions on their time and
income) with the express intention of making money, going home,
marrying there, and coming back again without their spouses and
family (ie, remaining expat) - this translated into a competitive
advantage because, by contrast, most local spazas were
subsistence entrepreneurs who were older and had families and
hence a need to maintain a certain (not unreasonable) pricing
regime. The foreigners were able to outperform them on pricing and
thats how the game played out until frustration boiled over and the
attacks began. Also, the South Asian and Somalis (Bangladesh and
Somalia have "remittance economies") had a base, a family network
spanning the globe that they could tap into - they could make a call
and get R50k wired to them in an instant from a brother or cousin in
the UK or USA - a huge advantage if your entire stock value in a
spaza is around half that. Locals have no such recourse to
"finance". Foreign youngsters in their mid twenties rapidly became
multiple store owners simply because of this and nothing else - not
because they were harder working or cleverer or had special
secrets (an amusing assertion made even by some ministers and
which serves to demonstrate the lack of understanding government
really has concerning this issue).
3. Predation - I have on several occasions been privy to conversations
amongst the foreign shop-owners plotting a a "hostile takeover" of a
small suburb or section of a township (usually a couple of streets)
by (i) targetting successful local spazas in a particular street (ii)
offering them a buyout (iii) failing which, they then knock on every
neighbourhood door to solicit rented space until someone allows
them space to setup shop. (iv) continuing the process until they
have established two or more shops. (v) immediately embarking on
an unsustainable price war (unsustainable for the local). (vi) Once
the local closes down, they raise prices on par with franchised
convenience stores in some cases (depending on surrounding
competition)
4. Most shockingly, the SLF study discovered a total monopoly by foreign
owned businesses and a massive takeover of local owned shops in the
short span of two years (the length of time it took the study to conclude
it's findings)
5. Reversal and curing the situation will be impossible without
appropriate legislation.
6. Job creation - Foreign owned small businesses do not employ
disproportionately more South Africans than other foreigners, and
in many cases, they do NOT employ South Africans at all - I'm
available for a tour of a local township to prove my point.
7. We welcome foreign entrepreneurial FDI in the manufacturing
sector that can employ disproportionately more South African Blue
collar workers and management.
8. Let government turn it's attention to low tech entrepreneurial
ventures in innovative and sustained ways by enacting protective
legislation in this sector and building supporting infrastructure such
as cheap business parks for artisans.
9. Forex loss - In Pres Zuma's address at the WEF, he explicitly mentions
IFF's as an issue. I assume he is focussing on MNCs, but if one considers
the sheer amount of these traders in the country, many of whom are
undocumented (illegals), the remittance numbers
could be cause for gconcern - I do not believe the government fully
comprehends the amount of remittances these largely unbanked foreign shopowners
are remitting monthly and what impact that would have on our balance
of payments.
10. Tax loss and the drain on our health and other infrastructure: VAT and PAYE
The majority of these shops do not register for vat whether they qualify or not neither
are they required to pay PAYE.
According to the Worldbank,
".....Remittances remain an especially important and stable source of private inflows to developing countries, as they bring in large amounts of foreign currency that help sustain the balance of payments. In 2013, remittances were significantly higher than foreign direct investment (FDI) to developing countries (excluding China) and were three times larger than official development assistance.... The East Asia and Pacific and South Asia regions will continue to attract the largest remittance flows.
India, with the world’s largest emigrant stock of 14 million people, will remain in the top spot this year, attracting about $71 billion in remittances. Other large recipients are China ($64 billion), the Philippines ($28 billion), Pakistan ($17 billion), Bangladesh ($15 billion)."
According to Pew research (http://www.pewglobal.org/interactives/remittance-map/), the worldbank estimated remittances from SA to South Asia using a statistical model in 2015 was:
India : R173mln
Bangladesh : R32mln
Pakistan : R27mln
Probably highly inaccurate: 10 000 South Asians sending R2000 home a month (also grossly understated), equals R20mln per month times 12 months equals R240mln per year.
For all intents and purposes, one could presuppose that this model would err greatly on the side of understatement due to the large amount of undocumented/ illegals and secondly to undocumented flows via "alternate" channels (e.g. Hawala). In reality, based on my own research , workers(non-owners) would mostly send smaller amounts - upwards from R3000pm on average and business owners around R5000-10 000 on average.
Can South Africa be regarded as a microcosm of the global trend? - possibly, the Delft study shows that colonisation of Township's spazas are primarily by South Asians (Pakistanis and Bangladeshis) rather than Somalis and other Africans.
Updates:
5.07.2017 The Sunday Times, 2 July 2017 reports that Spaza shops have staged a comeback despite moves by big retailers into townships - from a Nielsen report that showed that S.A.'s "modern trade" shoppers who also use spaza shops grew from 45% in 2015 to 53% last year.Unfortunately, it does not report that more South Africans are owning spazas. Pity that.
References:
(3)posted in https://africacheck.org/2015/04/17/analysis-are-foreigners-stealing-jobs-in-south-africa/
In attempting to understand the sporadic manifestation of Xenophobic flareups in South Africa's townships and in light of certain comments made by the ruling party's politicians, the effects of over proliferation of foreign owned Spazas in S.A. townships must be investigated.
Although much of the background to this post is extremely well articulated in the groundbreaking study by the "Sustainable Livelihoods Foundation" study entitled " The Informal Economy of Township Spaza Shops" whose findings I wholeheartedly concur with on the basis of my 10 year long interaction with Spaza entrepreneurs on the Cape Flats, my conclusions differ somewhat.
It's analysis resonates well with the previous post on the global micro finance fiasco in that many of the ills resulting from foreigner dominated spazas are articulated in the Bateman expose of the micro-finance model namely that "...As new microenterprises quickly emerge, already struggling microenterprises thus see a progressive reduction in their turnover, and so also a reduction in their profits and wages - that is, they are made poorer.
Cramming more and more new microenterprises into already pretty well-served poor communities also leads on to hypercompetition, and so also tends to soften prices.
This, in turn, reduces average profits, income and wages pertaining to all microenterprises. That is, even more downward pressure is exerted on already minimal self-employment incomes (see ILO 2009). However, middle class consumers often do quite well from the availability of cheaper goods and services, thus typically exacerbating inequality " and "...Centrally, new microcredit-supported microenterprises do not find very many new unattached clients, but overwhelmingly simply end up taking away clients already attached to incumbent informal microenterprises operating in the same sector" all chillingly apply within this sector as well.(3)
1. The deregulation of smmes and micro businesses was a late Apartheid era strategy to placate the
furious masses with some kind of ideal that if they could have a viable means of emancipation from
poverty, they would forget about "the struggle". This was born from the notion that generally, the
SMME sector was good at creating jobs, so subsequently ...
2. Embarked on a process of relaxing restrictive redtape/deregulation
to encourage entrepreneurship to develop. The ANC too recognised from previous stats
that entrepreneurship was the key to sustainable employment creation and set structures inplace
for promoting this culture that had to be inculcated in the townships since decades of Apartheid
legislation strongly discouraged self reliamnce in the form of entrepreneurship.
3. Unfortunately, the new government overlooked the crucial need for maintaining a
certain level of protectionism - found in every country in the world
but especially vital in the new SA whose newly liberated masses
were restricted for decades from being entrepreneurial - that
culture was suppressed and needed to be nurtured in a protective
environment - It could never gain any traction because as soon as
the doors to democratic SA were opened, the flood of foreigners
seeking opportunities entered SA, many flush with cash and old
hands at micro and small retail businesses, the results of which were
itself akin to predatory business behaviour that put many local owned spazas
out of business.
4. There are still several derogatory misperceptions that need demythologising, amongst them
one that foreigners are prepared to work harder than locals is totally untrue - as if the
dangerous, backbreaking mining jobs (amongst others) that locals DID do and that helped build
this country was any less harder work than running a spaza.
Generally speaking, many Third and First world countries have strict guidelines for the qualifications of prospective immigrants or even prospective expat labour - I believe the UK way back in the early 2000's required at least a Masters degree in a scarce skill to consider you for employment above a certain age.
Many Third world countries deny foreigners the right to own small businesses - absolutely crucial as those types of businesses were there as protected employment havens for their poorest citizens.
In Trump's USA, it was not nationalism that made him proclaim an inward looking policy and a re-look at (amongst other things) outsourcing, but a fragile and tough global financial outlook. It then beggars belief that a developing nation such as South Africa can afford the unbridled colonising of these entry level type businesses.
Additionally, the following should be considered :
1. I have been personally advised by many South Asian (Bangladeshi
and Pakistani) business owners that their choice for coming to SA
was based on two criteria, i) SA has almost no restrictions to entry
for foreign business ownership in the SMME sector where these
foreigner businesses predominate (and where vital SA job security
is being threatened) and (ii) Nowhere in the world can you start a
small business for R30k ! - an amount that many South African
spaza owners do not even have access to when starting up.
2. In my line of work over the past 10 years I have witnessed an
astonishing amount of (previously successful) local Spaza owners
closing shop simply because the tide of foreign owned spazas
predominated - and the reason for their predomination was plain -
no "secrets business practices" here, just informed common
knowledge - the overwhelming majority of the foreign spaza owners
arrived here in their 20's (to earn a supplemental income) with no
family (hence no commitments and restrictions on their time and
income) with the express intention of making money, going home,
marrying there, and coming back again without their spouses and
family (ie, remaining expat) - this translated into a competitive
advantage because, by contrast, most local spazas were
subsistence entrepreneurs who were older and had families and
hence a need to maintain a certain (not unreasonable) pricing
regime. The foreigners were able to outperform them on pricing and
thats how the game played out until frustration boiled over and the
attacks began. Also, the South Asian and Somalis (Bangladesh and
Somalia have "remittance economies") had a base, a family network
spanning the globe that they could tap into - they could make a call
and get R50k wired to them in an instant from a brother or cousin in
the UK or USA - a huge advantage if your entire stock value in a
spaza is around half that. Locals have no such recourse to
"finance". Foreign youngsters in their mid twenties rapidly became
multiple store owners simply because of this and nothing else - not
because they were harder working or cleverer or had special
secrets (an amusing assertion made even by some ministers and
which serves to demonstrate the lack of understanding government
really has concerning this issue).
3. Predation - I have on several occasions been privy to conversations
amongst the foreign shop-owners plotting a a "hostile takeover" of a
small suburb or section of a township (usually a couple of streets)
by (i) targetting successful local spazas in a particular street (ii)
offering them a buyout (iii) failing which, they then knock on every
neighbourhood door to solicit rented space until someone allows
them space to setup shop. (iv) continuing the process until they
have established two or more shops. (v) immediately embarking on
an unsustainable price war (unsustainable for the local). (vi) Once
the local closes down, they raise prices on par with franchised
convenience stores in some cases (depending on surrounding
competition)
4. Most shockingly, the SLF study discovered a total monopoly by foreign
owned businesses and a massive takeover of local owned shops in the
short span of two years (the length of time it took the study to conclude
it's findings)
5. Reversal and curing the situation will be impossible without
appropriate legislation.
6. Job creation - Foreign owned small businesses do not employ
disproportionately more South Africans than other foreigners, and
in many cases, they do NOT employ South Africans at all - I'm
available for a tour of a local township to prove my point.
7. We welcome foreign entrepreneurial FDI in the manufacturing
sector that can employ disproportionately more South African Blue
collar workers and management.
8. Let government turn it's attention to low tech entrepreneurial
ventures in innovative and sustained ways by enacting protective
legislation in this sector and building supporting infrastructure such
as cheap business parks for artisans.
9. Forex loss - In Pres Zuma's address at the WEF, he explicitly mentions
IFF's as an issue. I assume he is focussing on MNCs, but if one considers
the sheer amount of these traders in the country, many of whom are
undocumented (illegals), the remittance numbers
could be cause for gconcern - I do not believe the government fully
comprehends the amount of remittances these largely unbanked foreign shopowners
are remitting monthly and what impact that would have on our balance
of payments.
10. Tax loss and the drain on our health and other infrastructure: VAT and PAYE
The majority of these shops do not register for vat whether they qualify or not neither
are they required to pay PAYE.
According to the Worldbank,
".....Remittances remain an especially important and stable source of private inflows to developing countries, as they bring in large amounts of foreign currency that help sustain the balance of payments. In 2013, remittances were significantly higher than foreign direct investment (FDI) to developing countries (excluding China) and were three times larger than official development assistance.... The East Asia and Pacific and South Asia regions will continue to attract the largest remittance flows.
India, with the world’s largest emigrant stock of 14 million people, will remain in the top spot this year, attracting about $71 billion in remittances. Other large recipients are China ($64 billion), the Philippines ($28 billion), Pakistan ($17 billion), Bangladesh ($15 billion)."
According to Pew research (http://www.pewglobal.org/interactives/remittance-map/), the worldbank estimated remittances from SA to South Asia using a statistical model in 2015 was:
India : R173mln
Bangladesh : R32mln
Pakistan : R27mln
Probably highly inaccurate: 10 000 South Asians sending R2000 home a month (also grossly understated), equals R20mln per month times 12 months equals R240mln per year.
For all intents and purposes, one could presuppose that this model would err greatly on the side of understatement due to the large amount of undocumented/ illegals and secondly to undocumented flows via "alternate" channels (e.g. Hawala). In reality, based on my own research , workers(non-owners) would mostly send smaller amounts - upwards from R3000pm on average and business owners around R5000-10 000 on average.
Can South Africa be regarded as a microcosm of the global trend? - possibly, the Delft study shows that colonisation of Township's spazas are primarily by South Asians (Pakistanis and Bangladeshis) rather than Somalis and other Africans.
Updates:
5.07.2017 The Sunday Times, 2 July 2017 reports that Spaza shops have staged a comeback despite moves by big retailers into townships - from a Nielsen report that showed that S.A.'s "modern trade" shoppers who also use spaza shops grew from 45% in 2015 to 53% last year.Unfortunately, it does not report that more South Africans are owning spazas. Pity that.
References:
(3)posted in https://africacheck.org/2015/04/17/analysis-are-foreigners-stealing-jobs-in-south-africa/
