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DREAMERS OR CHANCERS: INTERROGATING MIGRANT MICRO-ENTREPRENEURSHIP RESILIENCE IN SPAZA SHOP BUSINESSES,

SOWETO, SOUTH AFRICA

Simamkele Bokolo and Trynos GumboAfrica Institute of South Africa

Urban Informality and Migrant Entrepreneurship in Southern African Cities

10 February 2014Breakwater Lodge, Cape Town

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INTRODUCTION• The term informal economic sector was coined during the early 1970s after field

work research in Ghana by Keith Hart• The concept has since then received widespread acknowledgement as an

integral part of the global economic development• It employs millions of the unemployed populations in the world, providing

means of survival to some whilst lifting a significant proportion out of poverty • South Africa has not been an exception, as the country continues experience an

upsurge of the informal economic sector• Johannesburg as an economic hub of South Africa has a great number of the

country’s population and immigrants that [participate in the informal sector.• Townships such as Soweto have high concentrations of immigrants that

participate in the informal economic sector.

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PROBLEM IDENTIFICATION

• World one problem – world of everyday life – The growth of informal businesses, particularly trading is a cause of concern in most South African cities • Lack of jobs, poverty, high rural-urban and international migration are chief

causes

• World two problem – the world of science – Migrants have largely dominated the informal economic sector within the country’s large cities such as Johannesburg

• Why have migrants done very well in South Africa’s informal economy, particularly those operating spaza shops in Soweto, out-playing local informal entrepreneurs.

RESEARCH METHODOLOGY• Case study design was applied • Soweto high density and low income township was chosen

• Mixed methods approach was used

• Quantitative – Deductive, closed questions and experimental

• Qualitative – Inductive, open–ended questions and exploratory

• Sampling – Stratification, Random; Purposive and Snowballing sampling techniques

• Triangulation – a variety of data collection techniques were use – questionnaires, interviews, observations

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Questionnaires

Ethiopians Bangladesh Pakistan Somalis0

2

4

6

8

10

12

14

16

Migrant respondents

Nationality

No.

of r

espo

nden

ts

6

Interviews Target Group Frequency

Local Spaza Shop Owners 10

Officials 5

7

Illustrations

8

Illustrations

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RESEARCH METHODOLOGY CONT’D• Data Analysis

• Statistical use of excel – quantitative data

• Content analysis – qualitative data

• Limitations

• Non co-operation

• Language barrier

• Absence of shop owners

• Arrogance of spaza owners

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THEORETICAL FRAMEWORK• The study is underpinned by 2 sets of theories• Firstly, theories informing migration patterns.• Neoclassical theory - migration is informed by economic considerations of relative benefits and costs.

• Secondly, theories informing migrant entrepreneurship in host countries

• Cultural theory - immigrants in a host country are characterised by cultural features that encourage them to be self-employed.

• These features could include, dedication to hard work, membership of a strong ethnic community, economical living acceptance of risk, compliance with social value patterns, solidarity and loyalty, and determination towards self-employment.

• Disadvantage theory - immigrants are disadvantaged in many ways in the host countries that hinders their progress whilst at the same time changing their behaviour

• The theory views migrant entrepreneurship as simply an alternative to unemployment rather than as a sign of migrants wanting to succeed in the businesses

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RESEARCH FINDINGS : SOWETO CASE STUDY

General Characteristics of Spaza Shops in Soweto• The spaza shop business in Soweto is largely dominated by migrants,

outplaying their local counterparts.• This dominance signals the continued entrance of migrants in SA.

Less than 2 years 2-4 years 4-6 years 6-8 years02468

1012

Years of residence in SA

years

No.

of p

eopl

e

GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D

• Migrants are also continuing to enter the spaza shop business of Soweto.

3%13%

17%

30%

13%

13%

7% 3%Period of business operation Less than 1 month

1-6 months

6-12 months

12-18 months

18-24 months

24-30 months

30-36 months

36 months and above

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GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D

Below 30 30-60 60-90 90 and above0

2

4

6

8

10

12

14

3

8

13

6

Customers served per day

No. of customers

No.

of s

hop

owne

rs

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GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D

33%

27%

23%

17%

Sourcing of funds

SavingsLoans from relativesHire purchaseRotating Savings Credit Associ-ation

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GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D

37%

27%

20%

10%7%Assets value

Below R10 000

R10 001- R15 000

R15 001- R20 000

R20 001- R25 000

R25 001 and above

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STRATEGIES USED BY MIGRANTSStrategy Explanation

Mentorship High reliance on mentorship by relatives.

Location Street corners to maintain visibility.

Adaptation Learn to communicate in local languages.

Stocking Stock to meet demand.

Saving Maintain simple lifestyles to save for the business.

Small profit, quick returns Aim not to maximise profits at once, e.g. For a loaf of bread a 20cents profit is made.

Long operating hours Operating hours are usually form 6am-9pm

Security Their shops have buglers, and operate from buildings rather than makeshift structures.

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STOCKING 23%

46%

12%

12%

8%

Money used to stock goods

Below R250R251-R500R501-R750R750-R1000R1001 and above

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STOCKING CONT’D Frequency of stocking Goods stockedEveryday Bread, Cigarettes

2-3 days a week Soft drinks, milk, cheese, chips, sweets, airtime

4-5 days a week Yoghurts, modern medicines, spices, stock cubes, soups

Weekly Maize meal, rice, sugar, tea, coffee

2-3 times a week Washing and cleaning items, hair products

Monthly Batteries, locks, spirit, polish, matches, toys

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RESILIENCE FACTORS Resilience factor Cause Life skills Informal; self-taught

Enduring hardships Perseverance learnt through past experiences

Migration networks/ties Reliance on relatives in times of financial difficulty

Religious ties Strict adherence to their religious beliefs and practices and identify better with one another.

Adaptation Good relations forged with customers, suppliers and community members.

Savings Money is not misused but saved for the business.

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CONTRIBUTIONS BY MIGRANT SPAZA SHOPSContributions Examples

Sales to the suppliers They buy their stock from SA suppliers such as Cash and Carry, Devland Cash and Carry, Makro Stores, Jumbo

Infrastructural development Many are responsible for building the structures that they are operating from.

Rentals They pay rents to their landlords ranging between R1000 and R2500

Reduced prices of goods Customers are benefiting

Convenience to customers Proximity to customers and longer trading hours.

RENTAL CONTRIBUTIONS

17%

52%

24%

7%

R1000-R1500

R1501-R2000

R2001-R2500

R2501 and above

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CHALLENGES FACED BY SPAZA SHOP OWNERS• Both migrant and local spaza shop owners face a number of challenges in

operating their businesses.

Migrant spaza shops Local spaza shops

Hooliganism/harassment from customers and residences

Lack of funds to expand businesses

Theft and robberies Labour costs

High rentals Lack of entrepreneurial skills

Resentment from locals Non-strategic location

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CHALLENGES OF MIGRANT SPAZA SHOPS

Concern Explanation

Health concerns Shop structures have shared purposes, i.e. business and residential. Unhygienic, sell cheap unhealthy products

Employment creation concerns The owners operate their own spaza shops with the assistance of relatives. In cases where they hire they prefer foreign nationals and not locals.

Gender imbalance concerns Migrant shops are dominated by males,

Poor regulations and monitoring They do not pay any fees or levies to the city council, e.g. roads or any other.

Unfair competition The pricing system of migrants is flawed and does not reflect the obtaining prices from the market and this largely suffocates local spaza shops.

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DREAMERS OR CHANCERS?

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DREAMERSForeigners have managed to penetrate the spaza shop business in Soweto that was traditionally a means of survival for locals

1. The process of acquiring premises, skills and network developments

2. Placing or locating their spaza shops strategically -Proximity, convenience

3. Financing, Marketing and Pricing – business success

4. Stocking - a mixture of small and big -responding to demand

5. Operating hours –convenience and customer care and satisfaction

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CHANCERSThey are take advantage of less specific rules and regulations, also absence of clear

policies on the operation of spaza shops

1. The land use in townships is regulated through Annexure F of the Black Communities

Development Act of 1986 which permits trading in residential properties –primary rights

2. Spaza shops are not covered by the Informal Trading policy of the City of

Johannesburg, even the Metropolitan Trading Company of the city does not concern

itself with spaza shop owners.

3. Mixed use of premises that is not regulated and monitored – housing and business

operations under one roof

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RECOMMENDATIONS• Locals could draw some lessons from the strategies

employed by migrants

•Clear separation of use, i.e. business and residential use

•Proper regulation of migrant owned spaza shops by city officials

•Migrant spaza shops should be included in policy making.

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CONCLUSIONS

• The business strategies employed by migrants in their businesses have obviously given them the urge over local owned businesses.

• Their success is seen in their resilience even with reports of their shops being looted and robbed very often.

• Even though some local shop owners view them as a threat to their businesses they have been widely welcomed by customers who benefit from convenient location and reduced prices in migrant spaza shops.

Growth of Migrant Micro-

entrepreneurship

Historical Context

(democratic dispensation,

economic liberalisation)

Spatial Context (regional-

location of SA within the SSA, central location

of JHB in SA, proximity of

Soweto to JHB)

Structural context (social

e.g. black Africans, high population, economic,

governance, religious)

Institutional Context (laws

and regulations e.g. Asylum,

primary rights; globalisation)

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THE END

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