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Big retailers must allow space for SMEs to grow, MEC says

‘Malls are not operating in the best interest of the people. The broader community must benefit.’

The Gauteng provincial government doesn’t have a problem with the existence of big grocery retailers in townships, but it is perturbed by their dominance, said the province’s MEC for Economic Development Lebogang Maile.

“It’s clear that the big companies are monopolistic and controlling the space, which is creating a lot of barriers to entry for small businesses,” he said at the Competition Commission’s inquiry into the grocery retail sector on Friday.

This was the first time that the government made submissions at the inquiry, which examines the general state of competition in the grocery retail sector.

Entrepreneurs told the inquiry last week that the “big four” grocery retailers have profited at their expense by entering into townships – resulting in spaza shops shutting down their operations and retrenching employees.

The big four in question are Shoprite, Pick n Pay, Spar and Massmart.

Read: Big 4 grocery retailers use no name products to ‘control the market’

The government has been accused of being lax in protecting small business owners. However, Maile denied this, saying when his administration took over in 2014, government’s procurement spend on small business was sitting at R800 million – it has since swelled to R7 billion across 7 000 businesses.

By 2019, 30% of government’s procurement spend will go to townships from 12% in 2014. “Our worry is building sustainable businesses that are not dependent on government. Getting a government tender must be a consequence of your existence and not a business strategy.”

Pick n Pay criticised by SBA

The government has come under fire for supporting the four retailers that already dominate the township economy, which is estimated by Maile to be worth R100 billion.

Mphuthi Mphuthi, chairman of the Soweto Business Access (SBA), criticised government’s support of Pick n Pay’s new franchise system – to convert spaza shops into Pick n Pay outlets – in Soweto’s township of Diepkloof. Five similar shops across Gauteng are set to open in 2017.

“Pick n Pay already operates large stores in Soweto. Now the retailer is converting spaza shops into Pick n Pay stores, which is really painful,” said Mphuthi, who represents entrepreneurs in townships.

Maile defended Pick n Pay by stating that it was the only retailer that showed interest in its “township revitalisation programme”, which aims to rebuild the productive capacity of the township economy. “The shops are not owned by Pick n Pay, but are owned by shop owners, who are given capital by the government.”

The agreement, Maile argued, was for Pick n Pay to supply the converted spaza shop with 60% of goods and the remaining 40% could be sourced from township-based suppliers. “We need to bolster the manufacturing and production capacity of townships so that the number of products consumed can be manufactured in the townships.”

Trully Masinge, who has been the owner of Gross Corner Supermarket in Gauteng’s Sebokeng since 2002, said sales at his supermarket declined after Evaton Mall opened its doors with a Spar and Checkers (part of Shoprite) outlet five years ago. “We are on our way to closing the business as I can’t compete with big retailers,” he said. Since the shopping mall opened, Masinge was forced to reduce his staff complement from 12 to three.

Protecting spazas from retail monopolies

To grow small businesses, the focus will be on access to retail trading space, said Maile. In other words, the big four retailers would be limited on the number of stores they operate and plan to open in township areas.  

The inquiry has heard that anchor grocery retail tenants block their smaller counterparts from trading at shopping malls. 

Read: Exclusive lease agreements under the spotlight again

Maile said conditions must be imposed by municipalities on land zoning for new shopping mall developments including regulations for communities to hold strategic stakes in shopping malls. “Malls are not operating in the best interest of the people. In some instances, big grocery retailers don’t hire local people. The broader community must benefit.

“If the commission finds big retailers guilty of anticompetitive behaviour, we urge that the fine imposed be used as equity to fund township businesses.”

The inquiry will start its KwaZulu-Natal leg of hearings in July.

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“If the commission finds big retailers guilty of anticompetitive behaviour, we urge that the fine imposed be used as equity to fund township businesses.”- yep.. again and more free money coming the way of township businesses.

Creating a spoon-fed, I demand and a want free township society, lacking vision, ambition and drive to reform into a sustainable community able to develop into a economic hub.

With nearly 30% of government’s procurement spend, will to go to townships by 2019, they got nothing to complain or blame, but self-pity, lack of ambition and laziness.

MEC for Economic Development Lebogang Maile: “If the commission finds big retailers guilty of anticompetitive behaviour, we urge that the fine imposed be used as equity to fund township businesses.”

Uhhhm, not quite. Section 59(4) of the Competition Act reads as follows:
“A fine payable in terms of this section must be paid into the National Revenue Fund referred to in section 213 of the Constitution.”

It seems the MEC will have to find another source of plunder, blackmail and redistribution.

Can’t help to question the credibility of this statement/thought process. Some questions that need to be investigated:
1. Is the underlying objective to win votes of the poor (to keep the ANC in power)?
2. Is this ANC 101 economics: short term more money goes to the poor, but long term ALL suffers as the economy is paying the price (same logic what they applied to Eskom)?
3. Is this statement based on the (a) the need to win votes or (b) sound research, facts and considering long term impacts? Most likely it is based on (a).
4. Will the MEC allow this to be investigated independently by industry experts (or will the MEC appoint an ANC task force that knows nothing about economy and the retail sector)?

Experience is an expensive school but the fool will learn in no other.

Clearly there is a complete lack of understanding of the fundamental principles of economics.

The argument is very similar to that of minimum wages. Wages cannot be determined arbitrarily or by decree but only by the marginal productivity of labour.

It is not the fault of the big retailers, the Illuminati, white monopoly capital or Judge Judy but the township consumer is entirely to blame. It is they that prefer to buy superior goods at a lower price and refuse to by the noncompetitive goods of “politically correct” ANC first choice. If they did there would be no issue. This behaviour is ubiquitous. One thing we can be certain of is that the spaza owners behave in a similar manner when purchasing their goods.

Like a dog returning to its vomit.

Maille should be talking to the civic organisations who from 1992 co-erced developers and large retailers to open shopping centres in black areas as a social commitment as the local people had to catch trains/taxis to do shopping in Joburg – this goes back to 1990. Black Chain was one of the centres that was used as a poor example of spaza shop operations, it was dirty, dark and dingy and over run by taxis and totally disorganized. The traders could not agree on most issues facing this retail space as they were all in it for themselves, and could put together a collective guiding body. Spaza shops will in likelihood not prosper (especially the SA owned ones) because the owners seldom understand business and more pertinently don’t aspire to being business orientated, hence so many of these shops being run by non South Africans. To fine or curtail large retailers from operating in black communities will be a disaster to the community

CLOSE ALL major retailers in the townships immediately – They are clearly not wanted there by the govuningmunts and da peeple.

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