The minister of Trade, Industry and Competition, Parks Tau says the launch of a R500 million Spaza Shop Support Fund represents and investment directly into South Africa’s grassroots economy.
The support fund was launched on Tuesday in Soweto to support South African-owned township community convenience shops, including spaza shops, to increase their participation in the townships and rural areas retail trade sector.
According to Tau, with this fund, government is taking a concrete step to formalise and empower the informal sector.
“These small businesses generate employment, drive local commerce, and channel much-needed income into communities that have long been underserved. Studies show that small businesses account for a significant portion of job creation in South Africa. By providing spaza shop owners with financial support, infrastructure upgrades, and essential business training, we are setting the stage for sustainable job creation,” said Tau.
“It is an investment in our people, our neighbourhoods, and ultimately, the entire South African economy,” he said. “We are committed to ensuring that every spaza shop that benefits from this fund also gains access to the necessary health and safety training and resources.”
Research published by Accenture Africa in 2023 revealed that more than 150,000 spaza shops are integral to South Africa’s “hidden economy,” which has an estimated market size of R178 billion.
So if R500 million were evenly distributed among the 150,000 shops, each would receive around R3,330.
The informal sector represents around 42% of total employment and contributes approximately 6% to the national GDP.
With South Africa’s GDP projected to reach R4.8 trillion in 2025, this would translate to roughly R288 billion from the informal sector.
Over the past five years, the informal sector has expanded rapidly, outpacing the formal sector with a Compound Annual Growth Rate (CAGR) of 14.17%, and there are no indications that this growth will slow anytime soon.
The kasi economy operates in a largely circular manner, with businesses formed by local residents and supported by their community. More than 70% of South African households regularly purchase from informal traders, including hawkers, small and large spazas, superettes, and mini wholesalers.
By 2030, small retailers in this micro economy are expected to generate 70% of all new jobs.
With the launch of the R500 million Spaza Shop Support Fund (SSSF), the minister of Small Business Development, Stella Ndabeni said that the government is ready to assist entrepreneurs who want to establish startups, expand their businesses, and gain essential business skills to improve the performance of their enterprises.
With the recent drive to have spaza shops registered, government has received 87 407 applications and of these, a total 53% is from South African-owned spaza shops.
“Our commitment with this fund is to support those who heeded the president’s call to register their spaza shops. As the Department of Small Business Development (DSBD), we can help you when you have an idea and want to start a business.
“We have incubators that help new and startup businesses. We can help you from being an informal trader to a formal trader, to start a spaza shop and to own a wholesale or an entire distribution channel. We will be working with you to help you to turn things around,” said Ndabeni.
Jointly administered by the National Empowerment Fund (NEF) and the Small Enterprise Development Finance Agency (SEFDA), the fund provides critical financial and non-financial support to township businesses, including community convenience stores and spaza shops.
The fund provides various types of support, including the initial purchase of stock via delivery channel partners, upgrading of building infrastructure, systems, refrigeration, shelving and security, as well as training programmes, which includes point of sale devices, business skills, digital literacy, credit health, food safety and business compliance.
“The fund will address economy of scale disadvantages by linking spaza shops to buying groups for aggregation and bulk purchasing; building business capacity through training and support to improve shop operations; and enhancing market competitiveness to help spaza shops compete with larger retailers,” the minister said.
The fund will be rolled out nationally to impact spaza shops across all major townships, as well as rural areas.
“Logistics management partners will offer logistics management services, including warehousing and delivery solutions. They will ensure that products are stored safely and delivered efficiently, reducing transportation costs, and improving the overall supply chain efficiency for spaza shops,” the minister said.
Two funding packages were introduced at launch to support business growth and development.
The first package, valued at up to R100,000, includes a R40,000 grant for initial stock purchases and a 50:50 blended R50,000 grant and low-interest loan for upgrading infrastructure. This covers enhancements to building facilities, systems, refrigeration, shelving, and security. Additionally, the package provides R10,000 in non-financial support for training initiatives.
The second package, designed for fully registered and compliant entities, is valued at up to R300,000. It includes a R40,000 grant for initial stock purchases, alongside a R250,000 blended finance component for upgrades, marketing, and the acquisition of digital tools such as point-of-sale systems and inventory management software.
This package also offers R10,000 in non-financial support to help implement efficient stock management, accounting systems, payment gateways, and affordable logistical solutions for deliveries and warehousing.
