The battle for South Africa’s R180 billion spaza shop economy

Local entrepreneurs in South Africa’s informal economy are under pressure from foreign competitors and the growing interest of large JSE-listed companies in the sector. 

The impressive growth of South Africa’s informal economy in recent years has garnered attention from major JSE-listed companies such as Shoprite and Tiger Brands. 

The growth has also attracted the attention of immigrants to South Africa, whose growing presence in this market threatens to overwhelm local businesses. 

Trade Intelligence valued the informal grocery sector, including spaza shops and mobile traders, at R184 billion. 

This sector is vital to absorbing many formally unemployed South Africans, supplementing their incomes and providing consumers with low-cost goods. 

Its research shows that around 11.1 million South Africans do their grocery shopping at these stores, citing convenience and low prices. 

As much as 40% of food consumers buy each year is from informal traders, who service 77% of the population’s calorie consumption. 

Research also shows that most of the country’s 150,000 spaza shops are run by foreign nationals who have come to South Africa to seek economic opportunities. 

This became a point of major contention in the build-up to South Africa’s national elections at the end of May, with parties calling for shops in local communities to be run by South Africans only. 

Others called for increased sector regulation to align it with the standard applied to formal food retailers following a spate of suspected food poisoning cases in townships and informal settlements. 

This has also opened up a significant opportunity for large, formal retailers to move into this market, leveraging the public trust in their brand and produce. 


Shoprite, in particular, has seized this opportunity by moving rapidly into this space through its Usave offering. 

This chain, launched in the early 2000s, trades in even lower-income segments than the company’s main Shoprite brand and is specifically geared towards the township market. 

In an investment note, Nedbank said these early moves into the market have put Shoprite in a strong position to continue growing its market share in this sector. 

“The group’s ‘low cost, no frills, limited assortment discounter’ Usave caters to the low-income segment of the market, with stores largely located in underserved communities,” Nedbank said.

Shoprite has also launched its Usave eKasi offering in recent years to quicken its pace of expansion and improve its ability to compete in price with local spaza shops. 

“These small and flexible-format stores require only five or six shipping containers and overcome some of the challenges faced by retailers and landlords in developing a presence in townships.” 

This strategy, Nedbank said, will help Shoprite continue its streak of 58 consecutive months of market share gains in South Africa. 

The company’s growth has largely come at the expense of Pick n Pay, which has tried to move into the lower-income segments of South African retail and come off second-best. 

Pick n Pay introduced the Ekuseni strategy a few years ago to compete with Shoprtie in the township and informal retail sectors. 

This was to be done through a new brand, Pick n Pay QualiSave, that would be aimed at the mass market below the company’s traditional middle-class market. 

However, this did not work out as expected for Pick n Pay, with many of these stores being loss-making. Under new CEO Sean Summers, these stores are being converted into its Boxer brand.