South Africa’s informal retail sector, particularly Spaza stores, plays a critical role in providing goods and services to close to 11.1 million South Africans, generating more than 3 million jobs and contributing approximately 5.2% to the country’s Gross Domestic Product. With an estimated 150,000 Spaza stores operating nationwide, the government’s push for formal registration seeks to introduce regulation, safety, and compliance to this vital R197 billion sector.

While the need for regulation, including health and safety compliance, is understood, the current registration process is not straightforward. Achieving compliance within a short timeframe may be unrealistic, leading to unintended consequences that could jeopardize this crucial driver of economic inclusion. The government’s approach—though driven by necessity—raises an essential question: Does the government truly understand what it is asking Spaza store owners to do?

Our On-the-Ground Experience

A2Pay, in an effort to understand the challenges faced by its 5,000+ merchants within its network, attempted to navigate the registration process. This experience revealed an administrative nightmare for Spaza shop owners.

A2Pay compiled a list of all 257 municipalities in South Africa and searched for Spaza shop registration information on their websites. The results were disappointing—less than 1% of municipal websites had clear and accessible information. Further efforts to contact municipalities via email yielded responses from only five. Calling municipal offices was equally frustrating, with long hold times, frequent disconnections, and being shuffled between departments with no clear answers.

To gain firsthand insight, A2Pay visited a local municipality to obtain the necessary registration documentation. This visit uncovered significant confusion and inefficiency. After a long wait, documents were eventually provided, only to discover that applications needed to be filed with the local health department. Upon arrival at the health department, staff were found working outdoors under shade cloths due to malfunctioning air conditioning.

It was eventually explained that the registration process requires a Certificate of Acceptability application along with numerous supporting documents, including:

• ID of the homeowner
• Lease agreement or proof of property ownership
• Proof of address
• Certificate of business registration (via the CIPC website)
• Consent of use document (from the Town Planning Department)
• Approved building plan (from the Town Planning Department)
• Fire Clearance Certificate (from the Fire Safety Department)
• Occupancy certificate (from the Town Planning Department)
• Other business-specific certificates (to be determined by the Health Department)

The Challenge for Spaza Owners

Many of these documents are extremely difficult—if not impossible—for informal traders to obtain. Many Spaza shops operate from rented or family-owned premises without formal lease agreements. Approved building plans and occupancy certificates are often non-existent. The requirement for multiple approvals from different departments creates a bureaucratic nightmare for Spaza shop owners striving to operate legally.

Additionally, the financial burden of compliance is overwhelming for many small business owners. As one Spaza shop owner lamented:

“I paid R3,500 for a plan of an existing house, which they lost! Then R1,850 for resubmission, plus R2,200 for the licensing process. This is too much! Where are we supposed to get all this money? What about those who use containers? They are not allowed to apply for a license because you cannot submit a form without an approved municipal plan. This is impossible!”

Another shop owner added:

“I haven't been able to register because they said they do not cater for informal settlements.”

A Call for Practical Solutions

If South Africa truly wants to empower small businesses and grow its economy, regulations must not become barriers that force Spaza shops to close—resulting in heightened economic challenges and rising unemployment. Should even 20% of Spaza shops shut down due to these regulations, it could lead to a staggering loss of R150 billion and approximately 60,000 jobs.

We urge the government to conduct a comprehensive review of the registration process and establish an efficient, practical system that accommodates the unique needs of informal traders. Potential solutions may include:

• Uniform and accessible guidelines for all municipalities.
• A phased approach to formalization, allowing businesses to register with fewer initial requirements and gradually progress to full compliance (prioritizing health and food safety first).
• A simplified online registration portal with multilingual support.
• A one-stop registration service, consolidating municipal, health, and safety approvals.
• Recognition of alternative verification methods for traders without formal lease agreements or approved building plans.
• Learning from global best practices, such as those implemented in India, Ghana, and Peru, to develop a tailored registration model for South Africa.

A2Pay Calls for Collaboration

Government leadership is crucial, but transforming the Spaza sector requires a collective response from all in the industry.

A2Pay is committed to supporting Spaza owners and calls on government leaders, NGOs, and private sector stakeholders to work together to create a registration system that promotes compliance without forcing businesses into the shadows.

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