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DREAMERS OR CHANCERS: INTERROGATING MIGRANT MICRO- ENTREPRENEURSHIP RESILIENCE IN SPAZA SHOP BUSINESSES, SOWETO, SOUTH AFRICA Simamkele Bokolo and Trynos Gumbo Africa Institute of South Africa Urban Informality and Migrant Entrepreneurship in Southern African Cities 10 February 2014 Breakwater Lodge, Cape Town 1 Slide 2 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 countrys 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. 2 Slide 3 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 countrys large cities such as Johannesburg Why have migrants done very well in South Africas informal economy, particularly those operating spaza shops in Soweto, out-playing local informal entrepreneurs. 3 Slide 4 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, openended questions and exploratory Sampling Stratification, Random; Purposive and Snowballing sampling techniques Triangulation a variety of data collection techniques were use questionnaires, interviews, observations Slide 5 Questionnaires 5 Slide 6 Interviews 6 Target GroupFrequency Local Spaza Shop Owners10 Officials5 Slide 7 Illustrations 7 Slide 8 8 Slide 9 RESEARCH METHODOLOGY CONTD 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 9 Slide 10 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 10 Slide 11 RESEARCH FINDINGS : SOWETO CASE STUDY 11 Slide 12 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. Slide 13 GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONTD Migrants are also continuing to enter the spaza shop business of Soweto. Slide 14 GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONTD 14 Slide 15 GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONTD 15 Slide 16 GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONTD 16 Slide 17 STRATEGIES USED BY MIGRANTS 17 StrategyExplanation MentorshipHigh reliance on mentorship by relatives. LocationStreet corners to maintain visibility. AdaptationLearn to communicate in local languages. StockingStock to meet demand. SavingMaintain 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 hoursOperating hours are usually form 6am-9pm SecurityTheir shops have buglers, and operate from buildings rather than makeshift structures. Slide 18 STOCKING 18 Slide 19 STOCKING CONTD Frequency of stockingGoods stocked EverydayBread, Cigarettes 2-3 days a weekSoft drinks, milk, cheese, chips, sweets, airtime 4-5 days a weekYoghurts, modern medicines, spices, stock cubes, soups WeeklyMaize meal, rice, sugar, tea, coffee 2-3 times a weekWashing and cleaning items, hair products MonthlyBatteries, locks, spirit, polish, matches, toys 19 Slide 20 RESILIENCE FACTORS Resilience factorCause Life skillsInformal; self-taught Enduring hardshipsPerseverance 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. SavingsMoney is not misused but saved for the business. 20 Slide 21 CONTRIBUTIONS BY MIGRANT SPAZA SHOPS 21 ContributionsExamples 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 goodsCustomers are benefiting Convenience to customersProximity to customers and longer trading hours. Slide 22 RENTAL CONTRIBUTIONS Slide 23 CHALLENGES FACED BY SPAZA SHOP OWNERS Both migrant and local spaza shop owners face a number of challenges in operating their businesses. 23 Migrant spaza shopsLocal spaza shops Hooliganism/harassment from customers and residences Lack of funds to expand businesses Theft and robberiesLabour costs High rentalsLack of entrepreneurial skills Resentment from localsNon-strategic location Slide 24 CHALLENGES OF MIGRANT SPAZA SHOPS ConcernExplanation 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 concernsMigrant 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 competitionThe pricing system of migrants is flawed and does not reflect the obtaining prices from the market and this largely suffocates local spaza shops. 24 Slide 25 DREAMERS OR CHANCERS? 25 Slide 26 DREAMERS Foreigners 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 26 Slide 27 CHANCERS They 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 27 Slide 28 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. 28 Slide 29 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. 29 Slide 30 Growth of Migrant Micro- entrepreneurs hip 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) Slide 31 THE END THANK YOU 31