Lebogang Maile’s office refutes Bosa’s R3 million ‘spaza shop’ claims

The Gauteng Department of Economic Development (GDEC) has dismissed claims made by Build One South Africa (Bosa) in the Gauteng Provincial Legislature (GPL).

Member of the provincial legislature Ayanda Allie accused MEC Lebogang Maile of lying about a distribution centre which the MPL labelled a “glorified supermarket”.

The argument involves the number of distribution centres listed, the funds spent of the centres and the relationship between GDEC and a company given the rights to operate the centres.

‘Spaza shop’ and ‘make-believe distribution centre’

In the final year of the previous administration, the economic development committee probed the operations of GDEC and Family Tree Holdings (FTH) in relation to the distribution centres.

The centres are billed as bulk outlets that offer informal traders access to locally produced goods and a variety of products provided by “member enterprises”.

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Bosa states that a forensic investigation was ordered in March, but that it had been blocked by the current administration.

“Maile continues to mislead the public about the Thokoza supermarket that is masquerading as a distribution centre,” Allie claimed.

“That facility is not a distribution centre, it is a former spaza shop that was converted into a Pick n Pay mini market, and when that failed, it became a make-believe [distribution centre].”

‘Virtual warehousing’

The committee had earlier pointed out three reasons why the outlets did not meet the requirements of a distribution centre (DC).

Their study, shared with The Citizen, found it did not stock enough locally produced goods, did not ensure bulk supply for local traders and did not have 20 or more employees.

In addressing these three claims, GDEC told The Citizen that the physical premises were augmented by “technology, transport, and logistics”.

“Though smaller in size, these DCs are strategically designed to assist walk-ins and provide bulk supplies to spaza shop operators within their communities,” the GDEC explained.

“South Africa has seen a rise in virtual warehousing, which can perform similar functions.

“The department has also partnered with big technology platforms and has to date onboarded more than 200 township products which open bigger markets for them.”

Number of operating distribution centres

Allie claimed earlier this week that Maile and GDEC were avoiding her questions about the number of distribution centres currently open.

The department confirmed to that two outlets were operational, but that the third centre had suffered a setback.

“Currently, two of the three DCs, in Mamelodi and Kagiso, are operational, while the Kathorus DC was recently damaged in an explosion,” the department told The Citizen on 12 November.

“Assessments are ongoing to determine the extent of the damage. A police case has been opened by the operator, and an investigation is underway to establish the cause.”

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The site is referred to interchangeably as the Thokoza or Kathorus DC by GDEC in their response, but both the department and Allie confirmed it was an establishment known as Matlala’s Market.

A representative of FTH confirmed to The Citizen that the Thokoza outlet was damaged “last week Monday” and that clean-up operations were underway.

However, Allie paid a visit to the outlet on 11 November, showing that the store had reverted back to a commercial outlet.

R9.9 million on three distribution projects

In Maile’s response to the committee signed off in August, the Thokoza outlet is listed as 60% owned by “Matlala” and 40% owned by FTH.

“Significant upgrades were required before reopening the Thokoza DC as a superstore/mini-distribution centre,” the department said.

These upgrades, completed before the December 2022 launch of the centre, amounted to R2.9 million, with just over R1.2 million spent on refurbishments and furniture.

An additional R1 million was spent on stock, with the remainder going to systems, marketing and overheads.

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However, despite this expenditure, Allie says that the store still looked like a franchise supermarket and not an outlet orientated towards for community development.

“Not only is it not a DC, but it could not have cost almost R3 million to establish because the structure and the store fittings were already in place,” stated Allie, asserting her suspicion that funds had been misappropriated.

In total, R9.9 million was spent on the three outlets — R2.6 million and R4.4 million on the Mamelodi and Kagiso stores, respectively.

April deadline missed

The report compiled by the committee earlier this year stated that the stores provided little access to bulk stack capacity.

On employment, the department claimed the Thokoza store absorbed 23 of the 28 employees from the failed franchise outlet, but further scrutiny by the committee revealed that number to be only eight.

“The committee observed inconsistencies in the reporting by both the department and FTH with respect to the operations, ownership model and financials related to the implementation of the project,” it read.  

The committee’s report stipulated a 30 April deadline to review the matter. This deadline was missed.  

Future viability being evaluated

Maile’s August response stated that the store was linked to 3 000 spaza shops and planned to have 45 local product lines featured by the end of 2024.

Clarifying the staff compliment, GDEC said, “At full operation, Thokoza mini-DC has about 18 employees under normal conditions, with staffing levels adjusted to meet seasonal demand.”

GDEC stated it was evaluating the impact of the distribution centres to gauge their success and future viability.

“The department will act accordingly should any evidence of wastage or misuse of funds emerge, not only in its retail programmes but within the Township Economic Partnership Fund as a whole,” it concluded.

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