Pick n Pay on Thursday opens the first spaza-to-store conversion in Diepkloof township in Soweto, as it looks for more markets in a tighter economy.

The strategy comes as the number of new malls being built drops and competition from slicker foreign operators continues.

The move will allow Pick n Pay to move more rapidly at a lower cost in lower-income areas, where it has less penetration than rivals such as Shoprite.

There are 12 full-format Pick n Pay stores in Soweto.

Chris Reed, the grocer’s group executive for franchise, said on Wednesday that many independent township traders were experiencing tough times, as the economy tightens and competition becomes more intense.

"When we talk to spaza owners about the challenges, and how we might help, they frequently identify better access to quality products at good prices, a reliable distribution system, good business management systems, and business advice and mentorship as priority areas for them," he said.

The pilot scheme, which is being opened in partnership with the Gauteng department of economic development is owned and run by Solly Legae and his family, who have traded in Diepkloof since 1972.

On a tour of the store, which carries about 800 stock-keeping units, Mr Legae said the initiative would change the face of retail in townships.

"We were just buying and selling … that’s what you do in townships. The systems that Pick n Pay have brought make me think I’ve been playing all along.

"There’s a vast difference in how I’m running the business," he added.

The store offers services including social grant payouts, Lotto, bill payments, and the sale of prepaid electricity — all known drivers of footfall. The sales are linked to the grocer’s Smart Shopper scheme.

In managing the store, Mr Legae has received mentoring and advice from franchisee Bonny Sachane — who owns the Pick n Pay store in Protea Glen, Soweto.

Since its days of being headed by Raymond Ackerman, Pick n Pay has sought to play a role in local small business development. The company, which is in the midst of a turnaround after years of languishing sales growth, is investing R5bn in the next two years in new store development and infrastructure.

Mr Sachane said spaza owners would now have a fighting chance against foreign traders.

"Pick n Pay, as a partner, brings a distribution network and efficient systems for ordering and managing stock … a lot of our people don’t have systems to operate their businesses like this.

"Foreign traders do something that we as South Africans are not good at — clubbing together. Business is about economies of scale. Spaza owners can now have buying power to be competitive on price," he said.

Shoprite this week said its Usave format had felt the effect of consumers choosing to buy from informal traders closer to home.