The Black Business Council (BBC) has called on the government to tighten law enforcement to ensure that spaza shops owned by undocumented migrants do not benefit from a new R500-million fund.
The council’s concern comes after Minister of Trade, Industry and Competition (DTIC) Parks Tau launched the R500-million Spaza Shop Support Fund this week.
Tau said the fund was aimed at helping the small businesses that generate employment, drive local commerce and channel much-needed income into communities that have long been underserved.
The fund, which will be jointly administered by the National Empowerment Fund and Small Enterprises Development Finance Agency, will provide funding of up to R300 000 per shop through a combination of grants and low-interest loans.
According to the Department of Small Business Development, funding may not be used for non-business-related expenses or personal costs unrelated to business development, as well as for the sale of alcoholic beverages. Applicants must own a spaza shop registered with the Companies and Intellectual Property Commission, have a valid South African identity document and a municipal permit.
The department said funding should be used to buy goods and services from accredited local suppliers whose goods and services are compliant with relevant regulatory requirements, especially for setup and operational costs.
During an interview with Sunday World, BBC deputy president Gregory Mofokeng stated that the fund was meant to allow South African entrepreneurs to get back into the spaza shop industry, not to benefit non-South Africans.
He said there was a need to warn South Africans about committing fraud by applying for a loan from the fund on behalf of undocumented migrants.
“Fronting means that we are denying our people an opportunity [to benefit from this fund] because there are people, especially landlords, who would want to continue benefiting from the rent that they are getting from these undocumented foreigners who are running spaza shops,” said Mofokeng.
“We want to encourage law enforcement agencies to make sure there is consequence management in this space. Those who are found guilty of fronting must face the full might of the law.
“We cannot have a programme funded by the government being undermined by people only to find that the illegal immigrants are the beneficiaries of that,” said Mofokeng.
He said undocumented migrants should not be allowed to run businesses in South Africa.
“The fact that they are extracting resources from the communities to benefit countries where they are coming from is another problem we need to confront head-on and make sure we stop this nonsense.
“We want the economy of townships to grow, but they are not going to grow if we have players who are going to extract resources and not reinvest in those communities,” he said.
“This also adds to the issue of grey-listing as well because we have guys who are shipping money out of townships and rural areas without following proper channels. They are not even contributing towards our fiscus because they are not paying tax.”
Trade Intelligence estimates that there were about 150 000 spaza shop owners nationwide in 2023, with a combined market value of about R197-billion.
Speaking about challenges faced by spaza shops, TymeBank’s group executive of business banking Miguel da Silva said that to improve safety, compliance, and regulation, the government had recently attempted to require store owners to register their enterprises.
“However, the registration is onerous to say the least. Shop owners need to assemble a mass of supporting documents, and the process is laborious and expensive.
“Tens of thousands of spaza shops have already been found non-compliant, and hundreds have been closed.
“Consider the effects on a sector estimated by the 2021 South African Township Marketing Report to employ 2.6 million people and contribute 5.6% to GDP if these closures continue,” he said.
