Spaza shops, also called tuck shops, play a significant role in South Africa’s economy. They’re one of the country’s biggest township business sectors, providing everyday essentials to residents – and they’re increasingly seen in suburban areas too. Spazas are at the forefront of the informal economy, which produces more than 5% of South Africa’s GDP.

So, if you’re planning to start your own tuck shop, there isn’t a lack of demand – provided you’re in the right location, with the right products, at the right price. But whether you’re operating from home or on the street, you’ll have to comply with certain rules and regulations.

Choosing the right location for a spaza

In any retail operation, the right location is critical to business success. This means a high-traffic area that is close to your customers – but this could take different forms.

• Spaza from home
  Many spaza shops operate out of homes. This can be cost-effective because you won’t have to pay added rent for business space, but you still need the required licences and permissions.
  
  
• Leased space
  Leased space for a small shop in a busy area means your spaza is more formal, but you may have access to more customers.
  
  
• Mobile spaza
  You can also operate a spaza shop by using a vehicle or cart to move between different locations, catering to areas with less competition or moving to areas with more customers.

Licences and regulations for your tuck shop

• Business registration
  Register your spaza shop with the Companies and Intellectual Property Commission to formalise your business. This will help you open a business bank account and access financial support.
  
  
• Licences and permits
  Depending on the municipality, you may need specific licences to operate – especially if you plan to sell tobacco or prepared food. You can’t sell alcohol without the relevant liquor licence. Check zoning laws with your local government office for any permits that you may need.
  
  
• SARS registration
  When you register a business, you must also register it with the South African Revenue Service (SARS) to get an income tax reference number. However, if your turnover is below R1 million a year, your business may qualify for tax relief.
  
  
• Compliance with zoning regulations
  Your tuck shop must comply with the zoning regulations set by the local municipality. This means that your location must be in an area zoned for commercial activities and must not be in violation of any land use restrictions.
  
  
• Health and safety standards
  Your spaza will need to meet health and safety standards set by the Department of Health. This may include having proper sanitation facilities, refrigerated storage for perishable goods, and a clean, hygienic environment for customers.

Running a successful spaza

As with any small business, you’ll need some planning and strategy to become a successful spaza owner. Your business plan should include:

• Startup costs
  Work out how much you’ll need for essentials like stock, rent (if applicable), and equipment – especially point-of-sale (POS) equipment, which can be as simple as a smartphone.
  
  
• POS devices
  These are essential to transact and keep track of the money that goes in and out of your spaza business. There are several affordable digital and mobile options for POS devices. Nedbank offers expert advice and support for this key part of your business.
  
  
• Identifying your target market
  Who are your customers, and what are their product needs and likes?
  
  
• Revenue targets
  Work out what you can reasonably expect to make in a month or a year, so you can focus on ways to reach your targets and check that your long-term goals are on track.
  
  
• Marketing strategy
  Whether you have a mobile spaza, fixed premises, or you run a tuck shop from home, have a plan to attract and retain your customers. For an entry-level spaza, use word of mouth, clever signage, special offers, and social media to market your business.
  
  
• Stock and suppliers
  Successful stock management is key to making your tuck shop a success. Make sure you can track what sells and what doesn’t, and how much of each product you need. Typical products include bread, milk, soft drinks, snacks, chocolates, and basic toiletries. Work on setting up supplier relationships with wholesale stores or local producers.
  
  
• A business account
  You’ll need a competitive business bank account to handle your spaza’s finances and grow your business. Nedbank has a range of competitive small-business account options.

Finance options for your tuck shop

Spaza shops are not the kind of business that needs a large upfront investment, especially if you’re setting it up on your property. But there are funding solutions if you need them. 

• Personal savings are the simplest way to invest in your business without taking on debt.
• Banks offer small-business loans.
• There are also agency funding opportunities available for spaza owners, such as the Township and Rural Entrepreneurship Programme.  

Support, networking, and advice

A spaza is a definite possibility as an entrepreneurial venture. If you go about it the right way, you can grow a sustainable business that supports your family and your community. Formalise your business to give it opportunities for added growth and financing, and you could turn a humble venture into a profitable business. 

SimplyBiz, powered by Nedbank, is a dedicated small-business hub that can help you grow your tuck shop business faster through advice, networking, support services, and marketing. Nedbank offers useful advice on entrepreneurial businesses and how to develop them. We have accessible options to fund, invest in, and grow your small business. These range from a suite of banking options for your small-business needs to various small-business solutions, services, and support.