Move beyond spaza shop economy for growth, governments urged

African governments have been urged to help grow small businesses “beyond spaza shops” in a bid to improve productivity.

Honorary professor at the Nelson Mandela School of Governance at the University of Cape Town Carlos Lopes told the Southern Africa Europe CEO Dialogue in Johannesburg on Thursday the continent’s prospects remain dire as only 17% of African countries have their national accounts up to date, according to the methodologies approved by the UN Statistical Commission.

Lopes said this means most countries do not know the structure and size of their economies. About 40% of Africans do not have a civil registration or IDs and 90% of land in Africa is not properly registered.

“How are you going to combat informality if this is the situation? After six decades of independence, you still have citizens who can go from birth to death without any form of transaction because they do not have any form of ID. That is the reality,” Lopes said.

“The priorities of our governments are not right. We have been infused with the idea that small is beautiful, microcredit is fantastic and you don’t need to challenge the formal sector. We are not going to develop that way. We can love spaza shops, but that is not the way we are going to increase productivity.”

DHL Africa CEO Hennie Heymans said the small and medium enterprises sector is the single biggest provider of employment.

“We have to ask ourselves as business and policy [leaders] whether we are focusing our energy making that part of our macro economy thrive and whether the policies are enabling them to thrive, and whether from a business point of view we are accessible to help them explore and grow their business,” he said.

Despite mineral endowment, Africa’s prospects have been hamstrung by deteriorating infrastructure, slow economic growth and high debt levels.

Old Mutual chair Trevor Manuel told the conference the continent is on the back foot as five of the biggest economies in Sub-Saharan Africa — SA, Nigeria, Kenya, Ethiopia and Angola — are in a slump.

The rate at which SA’s infrastructure is deteriorating is problematic, he said. “If you look at the state of electricity in our country, we will not grow unless we fix Eskom, unless we bring in renewables in the energy mix.”

In addition to power supply constraints, Manuel said logistics bottlenecks pose a threat to the economy.

“The challenge in Gauteng is it is a landlocked province, it needs access to rail and ports. We need to preserve our roads by removing trucks off the roads,” he said.

The government has introduced structural proposals to turn around Transnet Freight Rail’s poor performance and will introduce third-party access on the rail network.

Manuel said tax collections remain “abysmally low”, notwithstanding the continent’s mineral wealth. 

Hydrogen has the potential to unlock the continent’s economic growth prospects, he said, adding that the government has an ambitious plan to use the country’s endowment in hydrogen, an alternative to methane, to reduce emissions and create 14,000 jobs by 2040.

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