Foreign spaza shop owners should get their own tax, Parliament told

Certain informal business sectors should be kept for South Africans, and spaza shop owners—particularly foreign owners—should pay a separate tax.

Parliament heard this as Minister of Small Business Development Stella Ndabeni-Abrahams answered questions during a National Assembly plenary on Wednesday.

Spaza shops don’t pay tax

Reverend Kenneth Meshoe of the African Christian Democratic Party (ACDP) asked the minister whether her department has mechanisms and/or databases in place to ensure that owners of spaza shops pay the requisite taxes to the SA Revenue Service (Sars).

“If not, what is the position in this regard; if so, what total number of spaza shop owners pay taxes and thereby contribute to the growth of the republic’s economy?”

Ndabeni-Abrahams responded that technologists estimate the informal sector contributes about R750 billion to the gross domestic product (GDP).

Of this, only 60–70% contribute towards tax. “Spaza shops are in the 30% that is not contributing towards tax,” she said.

However, her department does not have the mandate to monitor tax contributions, she said. “We are not able to see what is happening.”

However, the department can monitor businesses they are supporting for compliance. “[We are able to] ensure there is compliance to enable them to also be able to get access to markets and finances.”

She said the department is working with the Sars to share data and raise awareness among informal traders and SMMEs on tax benefits.

“Most of the informal sector does not want to be registered for tax because they are scared their profits will be reduced.

“This is why the commissioner has set up a special unit under Sars that is looking at tax for SMMEs that also introduces incentives for those that are tax compliant.”

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South Africa does not have effective regulation on spaza shops

When it was Meshoe’s turn to ask a supplementary question, he struggled to find it on his phone. Minutes passed, and so much time elapsed that the National Assembly had to move on to the next question.

In his follow-up question, Gavin Franklin Jonas of the Patriotic Alliance (PA) asked, in light of recent food poisoning incidents, what measures were being taken to address the non-compliance of illegal foreign national owners of spaza shops who are not registered for tax.

Minister Ndabeni-Abrahams responded that, as it stands, South Africa does not have effective regulation on spaza shops, whether owned by South Africans or non-South Africans.

However, the Businesses Act of 1991 gives authority to local municipalities to issue permits.

“As a department that has been recently established, responsible for the sector we are talking about, we are bringing legislation to Parliament to ensure we are able to give ourselves some authority to be able to issue certain directives when it comes to the licensing,” she said.

Regarding illegal foreigners running spaza shops, Ndabeni-Abrahams said the Department of Home Affairs is responsible for issuing visas to foreign nationals. If foreign spaza shop owners do not have a visa, they do not have a right to trade.

She said home affairs is working “day in and day out” to enforce this.

There is also the issue of foreigners renting out spaces to local business owners, the minister said. These people need to be checked; they have the right to trade.

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Sector may be set aside for South Africans

In another follow-up question, Makashule Gana of Rise Mzansi asked if the minister would lobby the National Treasury to lobby a special tax regime for foreign nationals who operate businesses in South Africa of whatever size.

“Whether you are selling shoes or vegetables, we believe there should be a special tax,” he said.

The minister replied that matters of tax regulation and incentives are the competency of the National Treasury. “But of course… what I said earlier about the amendments to the Businesses Act and Business Licensing Act, there should be certain sectors that are reserved for South Africans within the different segments of our economy.

Section 22 of the Constitution says everyone has the right to trade, but this may be regulated by law, she explained.

“National Treasury has introduced a public preferential bill [the Public Procurement Bill], which seeks to make sure it allows for certain sectors that must be reserved for SMMEs, especially those owned by South Africans.”

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