ATM parliamentary leader Vuyo Zungula has called on the Competition Commission to conduct a probe on potential price-fixing by foreign-owned spaza shops.
Zungula, an activist against illegal immigration, called on the commission, which has conducted a similar inquiry before, to do a follow-up owing to the present-day material conditions that are different.
In the letter, Zungula raises potential price-fixing and market cornering through bulk buying by foreign-owned spaza shops among his reasons for making the call.
The former ATM president also believes that the recommendations of the 2019 Grocery Retail Market Inquiry (GRMI) have not been implemented.
No effective implementation of reforms
“While the GRMI proposed actionable reforms, such as ending lease exclusivity and regulating buyer power, there is little evidence of effective implementation, especially at the municipal level,” wrote Zungula.
“Since 2019, new challenges have emerged. Child fatalities linked to unsafe spaza products, public unrest over unregulated foreign-run networks, and the entry of major supermarket chains into the spaza model.
“The GRMI identified that foreign-owned spaza shop networks often operate with a high degree of horizontal and vertical integration. These networks engage in centralised procurement, shared distribution systems, and common pricing structures. These create economies of scale unavailable to independent local operators,” he goes on.
“While the GRMI did not conclusively label these practices as collusion, it noted that such coordination raises concerns about potential price fixing, market segmentation, and barriers to entry for local spaza owners, who struggle to compete with these organised networks.”
Unfair bulk procurement systems
Zungula writes that among key problems is shared procurement systems such as foreign-owned spaza shops pooling resources to bulk-buy goods, often from informal suppliers, reducing costs and enabling lower prices that local traders cannot match.
“For instance, a network of spaza shops in a township might source stock from a single supplier. Thus securing discounts unavailable to individual local operators.”
He also raised the issue of coordinated pricing. This was just another rampant anti-competitive practices that the inquiry must seek to uproot.
“Anecdotal reports from township traders, as referenced in the GRMI, suggest that certain networks maintain uniform pricing across multiple shops. This is potentially indicating informal price coordination. This practice can squeeze out local competitors who lack similar bargaining power,” said Zungula.
The networks of spaza shop owners from foreign countries were involved in practices seeking to exclude native traders.
De facto market barrier
“Local spaza owners have reported being denied access to certain suppliers who prioritise network-affiliated shops. This as noted in the GRMI’s stakeholder submissions. And this creates a de facto market barrier, limiting competition.”
According to Zungula, the newest phenomenon to be zoomed into was also that of illicit and counterfeit goods. These have flooded the market, especially within the spaza shop economy.
He cited last year’s periodic incidences where children fell ill and lost their lives in various townships. These happened after they allegedly consumed snacks from spaza shops.
“Spaza shops are vital to South Africa’s economic and social fabric. They provide livelihoods and food access in underserved areas. However, unchecked network consolidation, illicit trade, regulatory failures, and non-compliance with the GRMI’s recommendations are stifling competition. They marginalise local entrepreneurs and jeopardise public safety.
“I trust the commission will consider this request in the spirit of promoting fairness, transparency, and economic inclusion. I am ready to provide additional evidence, media reports, or documentation. And I will fully cooperate with any further engagements,” he wrote. These are contained in the letter he addressed to the leader of the Competition Commission, Doris Tshepe.
