FIELDWORK SEMINAR

DREAMERS OR CHANCERS: INTERROGATING MIGRANT MICROENTREPRENEURSHIP RESILIENCE IN SPAZA SHOP BUSINESSES, SOWETO, SOUTH AFRICA

Simamkele Bokolo and Trynos Gumbo Africa Institute of South Africa Urban Informality and Migrant Entrepreneurship in Southern African Cities 10 February 2014 Breakwater Lodge, Cape Town 1

INTRODUCTION • The term informal economic sector was coined during the early 1970s after field work research in Ghana by Keith Hart • The concept has since then received widespread acknowledgement as an integral part of the global economic development • It employs millions of the unemployed populations in the world, providing means of survival to some whilst lifting a significant proportion out of poverty • South Africa has not been an exception, as the country continues experience an upsurge of the informal economic sector • Johannesburg as an economic hub of South Africa has a great number of the country’s population and immigrants that [participate in the informal sector. • Townships such as Soweto have high concentrations of immigrants that participate in the informal economic sector. 2

PROBLEM IDENTIFICATION • World one problem – world of everyday life – The growth of informal businesses, particularly trading is a cause of concern in most South African cities • Lack of jobs, poverty, high rural-urban and international migration are chief causes • World two problem – the world of science – Migrants have largely dominated the informal economic sector within the country’s large cities such as Johannesburg • Why have migrants done very well in South Africa’s informal economy, particularly those operating spaza shops in Soweto, out-playing local informal entrepreneurs. 3

RESEARCH METHODOLOGY • Case study design was applied • Soweto high density and low income township was chosen

• Mixed methods approach was used • Quantitative – Deductive, closed questions and experimental • Qualitative – Inductive, open–ended questions and exploratory • Sampling – Stratification, Random; Purposive and Snowballing sampling techniques • Triangulation – a variety of data collection techniques were use – questionnaires, interviews, observations

Questionnaires Migrant respondents 16

No. of respondents

14 12 10 8 6 4 2 0 Ethiopians

Bangladesh

Pakistan

Nationality

Somalis 5

Interviews Target Group

Frequency

Local Spaza Shop Owners

10

Officials

5

6

Illustrations

7

Illustrations

8

RESEARCH METHODOLOGY CONT’D • Data Analysis • Statistical use of excel – quantitative data • Content analysis – qualitative data

• Limitations • Non co-operation

• Language barrier • Absence of shop owners

• Arrogance of spaza owners

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THEORETICAL FRAMEWORK

• The study is underpinned by 2 sets of theories • Firstly, theories informing migration patterns. • Neoclassical theory - migration is informed by economic considerations of relative benefits and costs.

• Secondly, theories informing migrant entrepreneurship in host countries • Cultural theory - immigrants in a host country are characterised by cultural features that encourage them to be self-employed. • These features could include, dedication to hard work, membership of a strong ethnic community, economical living acceptance of risk, compliance with social value patterns, solidarity and loyalty, and determination towards self-employment. • Disadvantage theory - immigrants are disadvantaged in many ways in the host countries that hinders their progress whilst at the same time changing their behaviour

• The theory views migrant entrepreneurship as simply an alternative to unemployment rather than as a sign of migrants wanting to succeed in the businesses 10

RESEARCH FINDINGS : SOWETO CASE STUDY

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General Characteristics of Spaza Shops in Soweto • The spaza shop business in Soweto is largely dominated by migrants, outplaying their local counterparts. • This dominance signals the continued entrance of migrants in SA.

Years of residence in SA No. of people

12 10 8 6 4 2 0 Less than 2 years

2-4 years

years

4-6 years

6-8 years

GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D • Migrants are also continuing to enter the spaza shop business of Soweto.

Period of business operation 7% 3%3%

Less than 1 month 1-6 months

14%

6-12 months

13% 17%

12-18 months 18-24 months

13%

24-30 months 30-36 months

30%

36 months and above

GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D Customers served per day 14

No. of shop owners

12 10

8

13

6

8

4

6 2

3

0 Below 30

30-60

60-90

90 and above

No. of customers 14

GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D Sourcing of funds 17% 33%

Savings Loans from relatives

23%

Hire purchase 27%

Rotating Savings Credit Association

15

GENERAL CHARACTERISTICS OF SPAZA SHOPS IN SOWETO CONT’D

Assets value 10%

7% Below R10 000

36% 20%

R10 001- R15 000 R15 001- R20 000 R20 001- R25 000 R25 001 and above

27% 16

STRATEGIES USED BY MIGRANTS Strategy

Explanation

Mentorship

High reliance on mentorship by relatives.

Location

Street corners to maintain visibility.

Adaptation

Learn to communicate in local languages.

Stocking

Stock to meet demand.

Saving

Maintain simple lifestyles to save for the business.

Small profit, quick returns

Aim not to maximise profits at once, e.g. For a loaf of bread a 20cents profit is made.

Long operating hours

Operating hours are usually form 6am-9pm

Security

Their shops have buglers, and operate from buildings

rather than makeshift structures. 17

STOCKING Money used to stock goods 8% 23%

12%

Below R250 R251-R500 R501-R750 R750-R1000 R1001 and above

11%

46% 18

STOCKING CONT’D Frequency of stocking

Goods stocked

Everyday

Bread, Cigarettes

2-3 days a week

Soft drinks, milk, cheese, chips, sweets, airtime

4-5 days a week

Yoghurts, modern medicines, spices, stock cubes, soups

Weekly

Maize meal, rice, sugar, tea, coffee

2-3 times a week

Washing and cleaning items, hair products

Monthly

Batteries, locks, spirit, polish, matches, toys 19

RESILIENCE FACTORS Resilience factor

Cause

Life skills

Informal; self-taught

Enduring hardships

Perseverance learnt through past experiences

Migration networks/ties

Reliance on relatives in times of financial

difficulty Religious ties

Strict adherence to their religious beliefs and practices and identify better with one another.

Adaptation

Good

relations

forged

with

customers,

suppliers and community members.

Savings

Money is not misused but saved for the 20

CONTRIBUTIONS BY MIGRANT SPAZA SHOPS Contributions

Examples

Sales to the suppliers

They buy their stock from SA suppliers such as Cash and Carry, Devland Cash and Carry, Makro Stores, Jumbo

Infrastructural development

Many are responsible for building the structures that they are operating from.

Rentals

They pay rents to their landlords ranging between R1000 and R2500

Reduced prices of goods

Customers are benefiting

Convenience to customers

Proximity to customers and longer trading hours. 21

RENTAL CONTRIBUTIONS 7%

17%

R1000-R1500

24% R1501-R2000 R2001-R2500 R2501 and above

52%

CHALLENGES FACED BY SPAZA SHOP OWNERS • Both migrant and local spaza shop owners face a number of challenges in operating their businesses.

Migrant spaza shops

Local spaza shops

Hooliganism/harassment from customers

Lack of funds to expand businesses

and residences

Theft and robberies

Labour costs

High rentals

Lack of entrepreneurial skills

Resentment from locals

Non-strategic location 23

CHALLENGES OF MIGRANT SPAZA SHOPS Concern

Explanation

Health concerns

Shop structures have shared purposes, i.e. business and residential. Unhygienic, sell cheap unhealthy products

Employment creation concerns

The owners operate their own spaza shops with the assistance of relatives. In cases where they hire they prefer

foreign nationals and not locals. Gender imbalance concerns

Migrant shops are dominated by males,

Poor regulations and monitoring

They do not pay any fees or levies to the city council, e.g. roads or any other.

Unfair competition

The pricing system of migrants is flawed and does not reflect the obtaining prices from the market and this largely suffocates local spaza shops. 24

DREAMERS OR CHANCERS?

25

DREAMERS Foreigners have managed to penetrate the spaza shop business in Soweto that was traditionally a means of survival for locals 1. The process of acquiring premises, skills and network developments 2. Placing or locating their spaza shops strategically -Proximity, convenience 3. Financing, Marketing and Pricing – business success

4. Stocking - a mixture of small and big -responding to demand 5. Operating hours –convenience and customer care and satisfaction

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CHANCERS They are take advantage of less specific rules and regulations, also absence of clear policies on the operation of spaza shops

1. The land use in townships is regulated through Annexure F of the Black Communities Development Act of 1986 which permits trading in residential properties –primary rights 2. Spaza shops are not covered by the Informal Trading policy of the City of Johannesburg, even the Metropolitan Trading Company of the city does not concern itself with spaza shop owners. 3. Mixed use of premises that is not regulated and monitored – housing and

business operations under one roof

27

RECOMMENDATIONS • Locals could draw some lessons from the strategies employed by migrants

• Clear separation of use, i.e. business and residential use • Proper regulation of migrant owned spaza shops by city officials • Migrant spaza shops should be included in policy making. 28

CONCLUSIONS • The business strategies employed by migrants in their businesses have obviously given them the urge over local owned businesses. • Their success is seen in their resilience even with reports of their shops being looted and robbed very often. • Even though some local shop owners view them as a threat to their businesses they have been widely welcomed by customers who benefit from convenient location and reduced prices in migrant spaza shops. 29

Historical Context (democratic dispensation, economic liberalisation) Institutional Context (laws and regulations e.g. Asylum, primary rights; globalisation)

Growth of Migrant Microentrepreneurs hip

Structural context (social e.g. black Africans, high population, economic, governance,

Spatial Context (regionallocation of SA within the SSA, central location of JHB in SA, proximity of Soweto to JHB)

THE END THANK YOU

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