When foreign-owned spaza shops — the informal convenience stores that serve South Africa's townships — shuttered their doors following weeks of anti-immigrant protests, many residents anticipated little more than a shift in ownership. What they encountered instead was a steep rise in the cost of everyday essentials.

The closures are the latest chapter in South Africa's long-running tension over immigrant-owned businesses, a flashpoint that has recurred periodically in township communities for over a decade. Past waves of xenophobic violence — most notably in 2008 and 2015 — displaced foreign nationals and destroyed businesses, but each episode also disrupted the informal supply networks that keep township retail prices low.

The scope of the current disruption is now coming into focus. Although no official count of closures exists, the Africa Diaspora Forum (ADF), a migrant advocacy organisation, reports that hundreds of foreign-owned spaza shops have closed across KwaZulu-Natal, Gauteng, and the Western Cape in recent weeks.

"We don't have a complete audit, but the number is in the hundreds," ADF chairperson Amir Sheikh told TechCabal in an interview on Thursday. "Most of our members operate in the fast-moving consumer goods sector, selling everyday essentials like bread, sugar and other basic groceries. Those are the products where we have seen the sharpest increases."

Bread, he noted, has climbed from roughly R16 ($0.95) to as much as R30 ($1.79) in some communities. For households in a country where unemployment has persisted above 30% — among the highest globally — even modest price increases on staples carry outsized consequences. "The concern from residents is becoming louder because higher prices are directly affecting household budgets," Sheikh said.

The price hikes have sparked vigorous debate on social media, where videos of foreign shopkeepers departing township businesses have gone viral. While some South Africans have welcomed the resurgence of locally owned enterprises, others question whether township consumers can absorb the elevated prices that have followed. The issue has also dominated radio call-in programmes, with East Coast Radio reporting sharp divisions among listeners over whether supporting local ownership should come at the cost of affordability.

Those frustrations surfaced at a KZN Spaza Shop Roundtable on Tuesday, where local shop owners called on the government for urgent assistance. Many acknowledged that while they welcomed initiatives to expand South African-owned businesses, they struggled to match the buying power, supplier networks, and operational efficiencies that had enabled many foreign-owned retailers to maintain low prices.

Yet beneath the political discourse lies a considerably larger commercial story.

The next battle for South Africa's estimated R900 billion ($53.6 billion) township economy may not centre on nationality at all. Government officials and fintech companies have told TechCabal that digital payments, merchant data, embedded finance, and smarter supply chains — not ownership alone — will determine whether local spaza shops can stay competitive while keeping prices affordable. The push mirrors a broader trend across sub-Saharan Africa, where mobile money and digital financial services have rapidly expanded into informal retail, enabling merchants in markets from Kenya to Nigeria to build credit histories from transaction data.

Building a digital spaza economy

That conviction underpins the Department of Small Business Development's strategy to modernise township retail.

For Minister Stella Ndabeni-Abrahams, the recent disruptions have underscored the urgency of helping South African-owned spaza shops overcome the structural barriers that have long eroded their competitiveness.

"Spaza shops are vital contributors to township and rural economies," Ndabeni-Abrahams told TechCabal in an interview on Monday. "They provide communities with access to essential goods, create employment opportunities and support local economic activity."

Despite their significance, many South African-owned spaza shops continue to grapple with limited access to finance, elevated operating costs, weak bulk-buying power, low rates of digital adoption, and intense competition, she said.

To address those challenges, the government established the R500 million ($29.80 million) Spaza Shop Support Fund in March 2025. Unlike earlier support programmes, the initiative pairs funding with digital infrastructure, including point-of-sale (POS) systems, inventory management software, digital payments, compliance support, and business development services.

"The Department has approved the Small Business Portfolio Digital Transformation Strategy," said Ndabeni-Abrahams. "The strategy sets out a range of digital interventions aimed at addressing the structural barriers faced by spaza shops and other micro, small and medium enterprises."

Among its flagship initiatives is a National Micro, Small and Medium Enterprise (MSME) Service Portal, designed to give entrepreneurs access to funding opportunities, business support programmes, and government services through a single platform.

The government also intends to deploy an Integrated Payment Gateway for electronic payments and a national Application Programming Interface (API) Gateway linking banks, fintech firms, and public systems to enhance access to finance and digital services.

"Through these initiatives, government seeks to build a more competitive, inclusive, digitally enabled and sustainable spaza shop sector by improving access to finance, supporting the adoption of digital payments, strengthening integration into broader business ecosystems and value chains, and contributing to township economic growth, job creation and broader economic transformation," she stated.

For retailers that have historically operated almost entirely in cash, these changes could fundamentally alter how they conduct business.

The Small Enterprise Development Finance Agency (SEDFA), the government's small business funding agency, has already started outfitting qualifying spaza shops with modern POS devices that perform far more than card payment processing. They enable barcode inventory tracking, real-time stock management, automated sales reporting, digital ordering, and business analytics that help owners identify which products generate profit and which quietly erode margins.

"Technology is expected to play a transformative role in the future of South Africa's spaza economy by improving competitiveness, operational efficiency, financial inclusion and long-term sustainability," noted Ndabeni-Abrahams.

The digital records generated by these systems also produce something many informal retailers have never possessed: a verifiable transaction history. Rather than depending solely on collateral, fintech lenders can leverage merchant sales data and cash-flow analytics to assess creditworthiness, providing small retailers with improved access to working capital.

"Digital tools can improve stock control, reduce losses, support better purchasing decisions and create transaction histories that strengthen credit assessments, making it easier for businesses to access finance," said Ndabeni-Abrahams.

From policy to the shop floor

While the government views digital infrastructure as a means to modernise township businesses, some spaza shop owners are already experiencing the benefits of adopting technology.

Terry Gatsheni, who owns two convenience stores and a tavern in Thokoza, says technology has revolutionised how he manages his business. His stores use touchscreen POS terminals to process sales, manage inventory, conduct stock-taking, and deter theft.

"Before, you had to count everything by hand, and sometimes you'd only realise stock was missing when it was too late," Gatsheni told TechCabal on Wednesday. "Now the system shows us what's coming in, what's going out, and what we need to reorder. It makes running the shop much easier."

The technology has also simplified overseeing multiple outlets without being physically present at each location. "When you have more than one shop, you can't be everywhere at the same time," he said. "The POS system helps me keep an eye on the business even when I'm not standing behind the counter. It gives me confidence that things are being managed properly."

Data, not nationality, is the competitive edge

That perspective is echoed by fintech company Lesaka Technologies, which contends that public discourse has fixated on ownership while overlooking what genuinely drives retail success.

"I have spent my career serving the underserved, and what our data across more than 100,000 merchants shows and what I lived myself growing up in (rural) KwaZakhele, is that the most successful spaza is the one closest to its customer, priced for what the household can spend that day, open when people need it, and run by someone who knows their name," Lesaka CEO Lincoln Mali told TechCabal in an interview on Monday. "That pattern holds regardless of size, location or who owns the shop."

According to Mali, the competitive edge that many foreign-owned spaza shops enjoyed stemmed less from nationality than from operational efficiency, access to working capital, and superior use of data.

"Bulk-buying power isn't magic," he said. "It's access to capital, supply and data, and that's exactly the gap fintech should close for any operator, regardless of nationality or background."

As foreign-owned businesses exit or suspend operations, many South African retailers are sourcing stock independently rather than through coordinated buying networks. Without the purchasing leverage that comes from bulk procurement, wholesalers extend fewer discounts, driving up costs that are ultimately passed on to consumers.

"The fastest fix for spazas is digitising payments and stock first, because that data is what unlocks credit and better supplier terms," Mali said. "Technology gives any retailer better visibility, lower transaction costs and a path to credit, but it can't fix a broken supply chain or replace affordable wholesale access on its own."

Across Lesaka's merchant network, he said, the strongest-performing retailers share one trait: they have moved beyond cash-only operations.

"Cash-only trading and manual stock records are the two biggest constraints we see. If you can't see your margins, you can't negotiate or borrow."

Dr Nsununguli Mbonglwane, a Johannesburg-based entrepreneur, told TechCabal in an interview on Wednesday that the recent disruptions have also exposed how reliant township retail has become on coordinated informal supply chains.

Foreign-owned retailers frequently pooled their purchasing power to negotiate more favourable wholesale prices — an advantage many independent shop owners find difficult to replicate.

"They normally worked together to negotiate prices with wholesalers," Mbonglwane said. "As a result, wholesalers usually gave them massive discounts, which allowed them to pass those lower prices on to their customers."

With those buying networks fractured, many local retailers are purchasing smaller volumes at higher prices, making it increasingly difficult to keep goods affordable. "The low-income groups who normally benefited from those lower prices are the ones who are now feeling the impact," he said.

For consumers, the consequences are already tangible. In Cosmo City, Johannesburg, resident Lelo Mathe said her household budget has come under mounting strain.

"The prices in some of these spaza shops have been steadily rising since the unrest," she said. "I hope things stabilise because we're not going to get any salary increases to match these prices."

In Alexandra, resident Andrew Matjila said higher prices represent only part of the problem. He noted that many shop owners are keeping reduced stock for fear of further unrest and looting, leaving shelves more sparsely stocked than before.

"Prices have gone up, but the bigger problem is that many shops are no longer keeping as much stock because they're worried about what might happen next," Matjila told TechCabal. "People are scared of looting. Before, you could walk into the shop and find everything you needed. That's no longer the case."

As anti-immigrant tensions continue to reshape township retail, the future of South Africa's spaza economy is unlikely to be determined solely by who stands behind the counter. It will hinge on who has access to affordable finance, efficient supply chains, and the digital tools required to keep prices low, shelves stocked, and small businesses competitive.