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The sleeping giant – informal trade in South Africa

| Economic factors

At a recent gathering of parties involved in the formal independent and informal retail trade, Trade Intelligence (Ti) MD Maryla Masojada shared some insights into the various trends affecting the industry. With CPI hovering around the 7% mark and food and non-alcoholic beverages showing increased costs of over 10%.


The South Africa public (many of whom are indebted up to 74% of their income) are sure to search for many solutions to source their food and household requirements from any and every retail and wholesale outlet that offers them convenience, quality customer service and value for money.

For the purposes of their studies, Ti classify the SA food market by analysing the sales of edible and non-edible groceries, commodities, tobacco and cigarettes, perishables, cosmetics, bakery products, red meat as well as fruit and vegetables. Specifically excluded from their measurement are both food service departments and stand-alone liquor stores.

Ti estimates that the SA food market is worth R485 billion.

Of this, 66% is accounted for by the major supermarkets and branded superettes (R320 billion); while formal and hybrid wholesalers with sales of R25 billion accounts, for 5% of the total market.

However, the most important factor to consider when analysing the bottom-end market is the size of the informal wholesale and hybrid market, with specific focus on the spazas and other township retail stores. Estimates of this market (the definition varies depending on who one talks to) range from R46 billion according to Nielsen to R50 billion according to AMPS.

Maryla and her team have spent an inordinate amount of time digging into this market and their estimate is as high as (R176 billion). If correct, this is an astonishing figure!   

No wonder many players are focusing their efforts in this market. Names that come to mind include UMS, IBC, EST Africa, Shield, ICC Buying Group Africa Cash & Carry and BEC, to name but a few. Not to mention efforts by Makro and Game, as well as Shoprite, Pick n Pay, Boxer, SPAR and Choppies.

Informal independent wholesale and retail outlets have recorded the highest turnover growth in the retail food market in 2016, especially those who focus their attention on the township counter service and spaza outlets.

What makes up this market?

Gill Mkhasibe of The Mkhasibe Group, a company that specialises in servicing the manufacturers’ informal market programmes, outlined the emergence of this market since the apartheid years.

During apartheid, black retailers were very restricted in what they could do regarding trading, and small high street trading stores were allowed to sell a limited range of products to the local community. All that changed when democracy established its roots in the country and the free enterprise system took over.

Counter-service stores cropped up in many parts of the country and very soon, The Mkhasibe Group recognised that many of the owners of such enterprises were foreigners. A typical comment was “We come from a place of war and famine and death. Here it is paradise! You have all that you need to make a living but, you South Africans are lazy. We are prepared to work hard to make a living”.

Today, it is estimated that over 85% of informal stores are run by foreigners. South Africans have chosen to rather rent their premises to these entrepreneurs instead of exploiting them for their own account.

These outlets stock all the basic needs required by a household, including basic perishable ranges. They have realised that pricing is an issue to their customers, so their profitability is low, relying rather on larger turnovers. Many township residents may buy their bulk requirements from the large branded supermarkets at month-end, but they rely on their local convenience trader to provide their fill-in shopping requirements. Generally, there is a good relationship between the traders and their clientele. Some elderly customers even get credit for their purchases until they receive their monthly Government grants. However, political opportunists, as well as inefficient competitors, will take advantage of any social or political upheaval to cause damage to these outlets.

Informal traders often live on the premises and trade between 5am and 10pm seven days a week. One cannot be jealous of their success when understanding the type of effort required to make them successful.

The arrival of the chain stores in the townships has made life a little more challenging for these traders. However, the wholesale sector, formal, hybrid and informal, are going out of their way to service the final retailer’s needs.

Innovative ordering and delivery processes are now available, as well as safe payment mechanisms to service the needs of such retailers. The manufacturing sector has also woken up to the fact that this market cannot be ignored and brand activation is now a norm in many parts of the country.

Channel blurring is definitely happening at this end of the market. However, solutions are available to all who work in this market. The rewards are definitely handsome.

For further information contact or This email address is being protected from spambots. You need JavaScript enabled to view it. 


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