South Africa to Introduce Legislation Protecting Local Economy and Regulating Spaza Shops

In a notable development for South African small entrepreneurs, Minister Stella Ndabeni-Abrahams, heading the Small Business Development department, has acknowledged the current inadequacy in the regulation of spaza shops across the nation. In her address to the National Assembly, she unveiled plans to introduce new legislation aimed at bolstering local economies and ensuring proper functioning and compliance of spaza shops, whether operated by South Africans or foreign nationals.

Spaza shops, the ubiquitous informal convenience stores that are integral to the South African economy, have been operating with little to no specific legal frameworks guiding their establishment and operation. This has led to disparities in compliance and contribution to the national fiscal pool.

The upcoming legislation, which the Minister proposes to bring before Parliament, will have the effect of reserving certain economic sectors exclusively for South African citizens. This move is seen as a strategic endeavor to support local business ownership and mitigate the flood of foreign-operated businesses that may compete with South African entrepreneurs.

Currently, the authority to issue business permits lies with municipalities, under the Business Act, but the proposed laws would provide the department with greater directive power regarding licensing. A crucial aspect of this legislation will also pertain to enforcement, ensuring that foreign nationals who wish to conduct business must satisfy the requirements of the Immigration Act, including a R5 million investment into the South African economy for a business visa.

Minister Ndabeni-Abrahams further detailed the complexities surrounding these businesses' taxation, noting that a significant percentage of spaza shops do not contribute to the revenue tax. In response, engagements with the Companies and Intellectual Property Commission and the South African Revenue Service (SARS) are aimed at improving compliance and educating small and medium-sized enterprises (SMMEs) on the tax benefits available to them.

The minister highlighted the reluctance of the informal sector to register for tax over concerns of reduced profits. In mitigation, SARS has set up a special unit to investigate tax incentives that could encourage compliance among SMMEs.

Answering to queries on foreigner business operators and potential tax advantages, the Minister insisted that tax regulation remains under the purview of the National Treasury. However, she noted the Public Procurement Bill initiated by the National Treasury as a relevant response, addressing the reservation of specific economic sectors for South African owned SMMEs.

Minister Ndabeni-Abrahams expressed optimism that Parliament would endorse the incoming legislation, stressing the overall objective of fostering a conducive environment for local businesses to thrive and, in doing so, bolster the South African economy.