PRETORIA, Gauteng — A recent report estimating that R6.3 billion linked to foreign-owned spaza shops in Tshwane may have been moved offshore through informal channels has ignited a national debate on economic regulation and security in South Africa. While the findings highlight significant concerns regarding money laundering and potential terrorist financing, the report explicitly clarifies that it does not establish any direct involvement of spaza shop owners in terrorism.
To understand the scale of the sector, recent data indicates that approximately 38% of the 87,000 recently registered spaza shops nationally are owned by non-South African citizens. This equates to roughly 33,000 shops. Research has identified operators from various communities, including Somali, Ethiopian, Bangladeshi, Zimbabwean, and Mozambican nationals.
Tebogo Mashilompane, National Leader of the Forum for South Africa, addressed the size of this sector and its implications for the country’s economy and security during a recent broadcast. Mashilompane emphasized that the movement of these funds largely bypasses the formal banking sector, making it difficult for institutions like SARS to track.
“It is common sense that there are financial institutions that are not South African,” Mashilompane explained, noting that there are visible offices in towns where money is deposited and transported to foreign destinations. “The money goes through other channels… it does not contribute to our economy at all.”
He pointed out that the R6.3 billion estimate is specific only to Tshwane, excluding major economic hubs like Cape Town and eThekwini, suggesting the national scale of the financial outflow is vastly larger.
Market Competition and Local Struggles
The financial outflow is compounded by intense market competition that local South African operators say they are struggling to survive. Mashilompane highlighted that local spaza owners are frequently crowded out, with foreign nationals sometimes opening multiple stores around a single local business.
Furthermore, foreign operators are able to offer significantly lower prices. According to Mashilompane, this is partly due to the importation of cheaper materials and unregulated backyard manufacturing.
“They manufacture their own product… there are no costs in that because they are doing it in the backyard,” he stated. He added that because these operators allegedly do not pay taxes or levies, they can drop their prices, creating an uneven playing field for South African owners who must buy from registered, taxed manufacturers at higher costs.
Calls for Policy Intervention and Funding Transparency
The discussion also touched upon the lack of effective communication between local operators and the government. Mashilompane questioned the efficacy of a R500 million government fund set aside to support local businesses, noting that answers regarding how the money was spent remain scant. He argued that too many departments and agencies are involved in funding, leaving local entrepreneurs in limbo while foreign operators continue to pay high premiums for land and shop ownership.
Concluding his thoughts, Mashilompane reiterated his organization’s core stance, calling for immediate regulatory intervention to address ownership, tax compliance, and fair competition.
“Our call has always been that we cannot have foreigners running our township economy,” Mashilompane stated. Drawing comparisons to other African nations, he asserted that foreigners are typically not permitted to run small businesses in those countries, and urged the government to ensure that spaza shops belong to South Africans.