The Freedom Front Plus (VF Plus) is seriously concerned about the Department of Small Business Development’s funding plan for spaza shops.
According to this funding plan, spaza shops will be required to purchase all their stock from a single state-approved “distribution partner”, which will presumably cut costs.
This could, however, undermine competitiveness in the value chain and lead to extensive fraud.
This was the conclusion after the Department briefed the Select Committee on Economic Development and Trade on the fund in the National Council of Provinces (NCOP).
The fund aims to support black South African entrepreneurs in the retail sector.
The funds earmarked for assisting spaza shops will not be paid directly to the small businesses, but to the “distribution partner”. This could stifle healthy competition, severely disadvantage established wholesalers and lead to job losses.
An even greater cause for concern is participation in this project. Out of approximately 200 000 spaza shops, only around 3 800 applied to participate in the fund. Of those, just 790 owners qualified. The reasons behind this were not clear from the briefing.
While the planned fund could disrupt the ecosystem of micro-retailers, it appears that participation will be too limited to have any significant impact, whether positive or negative.
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