The spaza-shop sector is an integral part of the small, medium and micro enterprises (SMME) in the South African economy. Despite severe competitive pressures facing SMEs, immigrants (especially Somalis and Ethiopians) have established a strong foothold in the spa shop sector.
INTRODUCTION AND BACKGROUND
- Introduction and background of study
- Problem Statement
- Specific objectives
- Research Questions
- Significance of the study
- Delimitations of the study
- Literature review
- Migration and its effects on entrepreneurship
- Factors which contribute to the success of SMMEs
- Research Methodology
- Format and structure of the Project
Entrepreneurial success factors of immigrant-owned spaza shops in the local municipality of Thulamela have not been studied, therefore finding ways to reduce the failure rate of this important sector of the business world is a challenge. The main objective of the study was to investigate the success factors of immigrant-owned spaza shops in the local municipality of Thulamela.
This chapter provided a general overview of the study that was conducted under these sub- headings - introduction, definitions of terms and concept, problem statement, research question, aim of
The population of this study was immigrant spaza shop owners in Thulamela Local Municipality and the sample size was 25 immigrant spaza shop owners. The study's sample consisted of Somali and Ethiopian entrepreneurs who have been operating spaza shops in Thulamela Local Municipality for more than 5 years; purposive sampling was used to select the sample for the study.
Chapter Two will provide current knowledge and literature including research findings, as well as theoretical and methodological contributions to the topic of this study
This chapter will provide the analysis of the data collected
This is the final chapter, where the implications and limitations of the study are explored
LITERATURE REVIEW
Introduction
Migration
- Immigration motivation and trends in South Africa
- South Africa’s legislation on migration and mobility
The end of the apartheid regime and the removal of whites-only immigration laws gave immigrants from other African countries a chance to move to South Africa. McDonald et al., (2000), clarifies that the areas of origin of immigrants in South Africa are spread across the African continent and beyond.
Migration and entrepreneurship .1 Immigrant entrepreneurs in SA
- Motivation for immigrant entrepreneurship
- Disadvantage theory
- Retail as sector of choice for immigrant entrepreneurs
- The contribution of Immigrant entrepreneurs to the economy
The markets in which immigrant entrepreneurs operate are generally highly competitive due to low entry barriers (Kloosterman, Van der Leun & Rath, 2002). Kalitanyi & Visser (2010); Gebre et al., (2011), inform that immigrant entrepreneurs contribute to the growth and development of South Africa through employment.
The informal sector
- Political Characteristic of the informal economy
- Social Characteristics of the informal economy
- Economic Characteristics of the informal economy
Business migrants from the rest of Africa represent a critical new element in the post-apartheid South African informal economy (Fatoki & Patswawairi, 2014). The informal sector consists of those enterprises that are not registered in any way (Statistics South Africa, 2012).
The informal economy in South Africa
- Small, Medium and Micro Enterprises (SMMEs) as part of the informal economy
- SMMEs’ contribution to the Economy
Ligthelm (2008) states that 50% of the economic activity of the poor and disadvantaged in South Africa consists of informal trade. There is abundant evidence of poverty alleviation through the SME sector in various parts of the world (Philip, 2010).
Spaza shop
- Background of spaza shops
- The current nature of the spaza-shop sector in South Africa
- Immigrant entrepreneurs’ participation in the spaza-shop sector
Piper & Yu (2016) indicate that about 80% of the activities in the spaza shop take place in the informal sector. Historically, South African township merchants have not embraced price competition in the spaza retail sector (Charman & Petersen, 2007).
Success factors of immigrant owned SMMEs’
- Human capital
- Networks
- Social capital and networks
- Cultural attributes
The access to family and community networks of people in the same line of business. Brah (1996), argues that entrepreneurship is rather the survival path for those who cannot find work in the formal market;. Bates (1994), confirms that the success and survival patterns of Asian immigrant firms in the United States of America are the results of large investments and the impressive educational credentials of the business owners.
Light & Dana (2013) show that social capital supported by cultural capital increases business ownership, while Zhang, Ma & Wang (2012) indicate that human social capital influences business progress. This is evidenced by some communities such as the Chinese, Koreans, Jews, South Asians and Cubans in the United States (Piperopoulos, 2010).
Strategies applied by immigrant entrepreneurs in SMMEs .1 Identifying new niche markets
- Serving existing customers differently
- Location of the business
- Competitive intelligence
Indian immigrant entrepreneurs have cultural characteristics such as adaptability and strong work ethic that help them succeed in different host countries (de Vries, 2012). Immigrant entrepreneurs keep a close eye on competitors' prices and strive at all times to match or undercut them (Malan, 2017).
Challenges faced by immigrant entrepreneurs within the spaza-shops sector
- Social exclusion and violence
- Lack of funds
- Crime
- Competition
- Lack of business skills
- Health
- Custom regulations
Bear, Bradnum, Tladi & Pedro (2005) state that spaza shops are the targets of cash-in-pub robberies. A study in Cape Town highlighted that high crime rates in urban areas adversely affect the sustainability of spa shops (Bear, Tladi & Pedro, 2004; Hweshe, 2007). As the number of spaza stores increases, so does competition, which, together with a lack of business techniques, may cast doubt on the viability of many of these businesses (Snyman, 1990).
Rolfe, Woodward, Ligthelm & Guimarães (2010), highlight lack of business skills as a barrier limiting the growth of spaza shops. Bear, Bradnum, Tladi & Pedro (2005), identified inconsistent distribution as another major problem hindering the success of spaza stores.
Theories adopted by the study
- The cultural theory
- Human capital theory
- Resource-based theory
Due to the limited number of employees, the store owner is only able to bring in as much as he can carry (Skinner, 2006). Spaza store owners waste time and money traveling to suppliers when they could contact them by cell phone and have them fax invoices (Skinner, 2006). The above literature review has revealed the main characteristics of entrepreneurship among immigrant SME owners and these are honesty, trustworthiness, considerate, friendly and passionate (Kulitanyi .. The literature review also proved that the competitive strategies being adopted by SME owners Immigrants are identifying new niche markets, serving existing customers differently, business location, long business hours, and competitive intelligence Chu, Zhu & Chu, 2010; Mollayaaghobi & Badiee, 2011; Gastrow, 2013; Pellisier & Nenzhelele, 2013; Khali, 2014; Dludla, 2014; Stadler, 2017).
Conclusion
RESEARCH METHODOLOGY
- Introduction
- Study area
- Justification for a qualitative methodology
- Population and Sample
- Sampling technique
- Data collection
- Data analysis
- Trustworthiness
- Limitations
- Ethical issues
- Conclusion
It was also used to understand the feelings and thought processes of immigrant entrepreneurs in spaza shops. These interviews helped the researcher gain a deeper understanding of the lived experiences of immigrant spa owners (Maxwell, 2012). Data from existing literature and participant responses formed the basis of triangulation in the study.
The Research Ethics Committee of the University of Venda approved the purpose of the research and the study was allowed to proceed. The researcher also explained the content and purpose of the study and what was required of them.
DATA ANALYSIS AND RESULTS 4.1 Introduction
Presentation of the findings
Characteristics of immigrant spaza-shop entrepreneurs
- Nationality of the participants
- Personal characteristics
- Education
- Business experience
The study focused on Somalis and Ethiopians because of their dominance in the spaza shop sector. The main themes and sub-themes are indicated in Table 4.1 and are detailed below. Their circumstances at home have limited them from going to school, so practical experiences in the shops are the only form of training they have.
The only training I have is in the form of practical experience I gained while working here in South Africa." All participants in the study had previous business experience in spaza shops before opening their own shops.
Operational strategies employed by foreign spaza-shop owners
A store's reliability to meet customers' needs keeps them loyal to the store. Customers have become very price sensitive due to the many choices available in the grocery industry. Respondents and 10 claim that they remain competitive in the market because of their relevant prices.
R4: "I make sure I know my regular customers by name and the product they usually buy from me". Even if I don't have exactly what they're looking for, I make sure they at least leave with a replacement product in hand.
Success factors of immigrant spaza-shop entrepreneurs
- Culture
- Entrepreneurial attributes
Networks bring them to South Africa and they also help them to be successful in their business. Network brings us to South Africa and it also helps us to be successful in our businesses. It doesn't just have to be a family member, when we are here in South Africa we are all family”.
I am determined to succeed as a breadwinner for my family because it is part of my culture. If it wasn't for my culture, I don't think I would have come to South Africa.
Conclusion
I worked under my countrymen when I came here, but now it is time for me to work and earn money too”. Respondents 2, 8 and 11, who are Ethiopians, also indicated that earning a living as business people is in them and that is why they came to South Africa. R5: “I came to South Africa to work and start my own business so I can support my family.
DISCUSSION OF RESULTS 5.1 Introduction
- Characteristics of immigrant spaza-shop entrepreneurs .1 Personal characters
- Human capital
- Strategies applied by immigrant entrepreneurs in the spaza-shop sector
- Group buying
- Superior customer service
- Competitive prices
- Market intelligence
- Variety of products
- Business location
- Matching customer demand
- Factors contributing to the success of immigrant-owned spaza shops
- Networks
- Conclusion
Somali and Ethiopian spaza shop entrepreneurs possess the appropriate skills, knowledge and experience to operate successful ventures. In the case of the Somali and Ethiopian spaza shop owners in Thulamela, they work for more than 12 hours a day, all week long. The study reveals that Somali and Ethiopian spaza shop entrepreneurs are constantly monitoring their market environment.
Relations between the Somali and Ethiopian communities proved to be critical as they ensure survival and sustainability in the spaza retail sector. The use of family and ethnic resources has become part of the strategy of immigrant spa shop owners (Klinthäll & Urban, 2014).
CONCLUSIONS AND RECOMMENDATIONS 6.1 Introduction
Summary of Results
A possible explanation for this is that they work hard and are mentored by more experienced compatriots before starting their own business or after arriving in South Africa. In addition, the findings also revealed that immigrant entrepreneurs are highly optimistic despite the challenges they may face in their entrepreneurial endeavors. It is more than an internal factor of these entrepreneurs that also leads to successful businesses.
Another interesting finding of this study is that immigrant entrepreneurs are able to detect and exploit opportunities in the business environment. For example, the immigrant entrepreneurs are moving away from serving customers from a counter and have established walk-ins, where a customer can do self-service and then pay at the counter and although this is a risky move due to the situations of armed robbery, the immigrant entrepreneurs produce great success with such a strategy.
Conclusions from research objectives
It was also found that these immigrant entrepreneurs strategically locate their stores in busy intersections or crowded areas; the explanation for this is that in these places they can easily attract customers. Most major retailers such as Shoprite and Boxer close early around 19.00 after opening at 8.00, but the immigrant entrepreneurs open at 6.00 and closes around 21.00. The study also revealed that human capital is the biggest success factor resulting in continued prosperity of the immigrant spaza shops.
In addition, stronger networks among immigrant entrepreneurs enable the exchange of knowledge, experience and information; that is, companies are run collectively and not individually. This means that they also help each other to solve the business when the spaza shop is not working well, so networks are a success factor among immigrant entrepreneurs.
Conclusions on the research problem and contribution to the body of knowledge in the area of research
- Contributions of the study to the body of knowledge in this area of research
Implications for Theory
Implications for Practice and Recommendations for Policymakers The following recommendations were made from the conclusions of this study
The research results may be of value to other researchers in understanding specific immigrant success factors. In this respect, the data has provided insight into the success factors applied by some (not all) immigrant entrepreneurs. It is hoped that some of the future research can be conducted using quantitative research methods.
Conclusion
The impact of managerial competencies on the performance of expatriate-owned enterprises in South Africa. Immigrant Experiences in South Africa: A Case Study of Ethiopians in Durban, South Africa. Backward or forward?: Labor market transition and the informal economy in South Africa.
Transnationalism and Non-South African Entrepreneurs in the South African Small, Medium and Micro Enterprise (SMME) Economy. Economic Behavior in South Africa's Informal Economy.” Report to the Center for Disputes and Governance (CAGE).
