Local informal businesses should buy in bulk like their foreign counterparts – Godlimpi

Township businesses need to work together to procure from wholesalers if they wish to compete with foreign-owned spaza stores, says Deputy Minister of Trade, Industry and Competition Zuko Godlimpi.

He was speaking at the inaugural launch of the Rural Township Economy Project report released by the Competition Commission (CompCom) on Thursday.

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The CompCom wanted to better understand the constraints on township and rural businesses from participating and expanding in the economy, according to its chief economist, James Hodge. 

“This will inform our work going forward,” he said, suggesting increased interest by competition authorities in the informal market estimated at around R900 billion spend a year.

The report surveyed 600 businesses across townships and rural areas and spoke to 1 000 township consumers.

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Godlimpi said foreign-owned spaza shops operate about 20 spaza shops at a time and “when they go to procure the stuff, they procure it as one piece”.

He said buying in bulk for multiple stores gives foreign owners bargaining power and better prices, something local businesses need to emulate.

Xenophobic clashes have often targeted foreign-owned spaza stores.

Following a spate of food-borne illnesses, spaza shops now need to register with municipalities for a trading permit and secure a certificate of acceptability from local environmental health practitioners (health inspectors) to prove food safety standards are met. 

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However, the report found that township businesses face considerable red tape and regulatory barriers in accessing municipal permits.

“Prevalent regulatory barriers affecting township and rural businesses identified by the study include complex, onerous and costly regulatory burdens and challenges associated with permits, licences, zoning rules, municipal by-laws and service disruptions,” it said.

The report concluded that “ultimately, red tape can operate as a material barrier to effective participation and local economic development”.

Hodge said the CompCom has launched a regulatory review to try and determine “which government and municipal regulations may be holding back competition in these markets”.

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It initiated a cross-market review in April 2026 to identify and remove regulations that act as barriers to competition and small and medium enterprise growth.

Hodge added that failure to secure certain permits or registration or tax compliance is actually what is keeping these businesses out of the formal economy.

“They’re unable to register on an online platform, they’re unable to register for government support and they’re unable to move into formal channels such as shopping malls as well.”

Lack of service delivery hits hard

The report noted that lack of service delivery by municipalities, leading to water and power cuts, affects firms unevenly and falls most heavily on smaller and less formal businesses.

Speaking at the Money Summit, Citi economist Gina Schoeman noted that businesses struggle with failing municipal infrastructure.

Results from the Rural Township Economy Project show that independent and informal firms face huge procurement challenges and buy goods at higher prices from a limited local selection than mainstream retailers. 

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“They are often not integrated into larger, more formal corporate procurement channels and as a result face much higher prices when dealing with smaller suppliers, smaller order sizes and weak bargaining positions,” said Hodge at the launch of the report.

He said the commission will be focusing on addressing the “big gap in the procurement prices that small businesses face compared to large ones” – suggesting that large scale producers may face questions. 

The study found that “many independent and even informal retailers have expressed strong interest in formalising and getting access to formal distribution channels or shelf space on national retailers, including online channels as well”.

“But few are achieving this because of the barriers that they face.”

High rental costs in shopping malls, exclusivity arrangements and the preference of shopping centres for established national brands means smaller businesses are effectively excluded, the report noted.

The CompCom wants to better understand why exclusivity leases persist, keeping stores out of malls, when the commission previously recommended ending such arrangements.

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