By: Anna Majavu
Giant supermarket retailers may have finally given up on using exclusivity contracts to keep small, independent supermarkets out of the malls, but SMME grocery stores are still unlikely to gain a foothold in shopping centres without financial assistance from the government. The high cost of shopping mall rents and the failure of malls to create spaces for smaller enterprises to trade will prevent SMME grocery stores from operating out of malls, say business forum leaders
Earlier this month, the Spar Group became the last huge grocery retail store to agree that it will stop insisting on exclusive leases with shopping malls by December 2026. In the meantime, Spar says it will not enforce exclusivity clauses that prevent smaller grocery stores from opening in the same mall. The Shoprite Group and Pick n Pay had already agreed to end exclusivity in 2020 and 2021. The Competition Commission, which brokered the deal after several years of mediation, said the end of exclusive leases opened opportunities for SMMEs and supermarkets owned by historically disadvantaged persons in thousands of shopping malls and convenience centres nationally.
But Dovhani Justice Nedzamba, co-ordinator of the Limpopo-based Thulamela Business Forum, warned that “exorbitant mall rents” would still prevent SMME grocery stores from opening in malls. He told Vutivi News that most of the small businesses that set up shop in Thohoyandou’s new Thavani Mall three years ago had been forced to vacate the mall after their profits plummeted during the Covid-19 pandemic. “Most of those spaces are now operated by big chain retailers. It comes back to what is the government doing in terms of supporting small businesses. Whatever chances are given to small businesses, if there is no funding thereafter, they always do not survive,” said Nedzamba, adding that the government must create a subsidy to help SMMES with high mall rents.
Andrew Fraser of Fraser Strategic, an SMME marketing strategy agency, said a further barrier to SMMEs setting up in malls was that they were charged higher rentals than big retailers per metre of space rented. They needed much higher margins to meet these costs. “It’s unlikely that any SMME grocery business will be entering any of those malls because of the asymmetry of rental prices,” Fraser added. Richard Gaybba, chairperson of the Eastern Cape-based Makhanda Business Forum, said consumers would probably benefit more than SMMEs from the end of the exclusivity agreements.
The Competition Commission’s resolution “somewhat levels the playing field”, he said. “However, competing against large retailers isn’t necessarily easy or accessible for SMMEs. I suspect Spar’s agreement to rescind the exclusivity agreements is more likely to open the door for other large retailers,” said Gaybba. Mzoxolo Kutta, the chairperson of the Khayelitsha Business Forum, told Vutivi News it was a great opportunity for local SMMEs to get into malls, but most would find it difficult to pay rent as high as R500 per square metre.
To set up in a mall next to Spar did not necessarily mean that an SMME grocer would attract Spar’s customers, he said. Kutta urged big grocery retailers to establish joint ventures with SMMEs on some products and malls to set minimal rents to attract small grocers. Nedzamba believes that malls also need to set up specific areas where microenterprises, such as fresh food vendors, can trade. With 50% of all grocery shopping done in malls and shopping centres, microenterprises should not be excluded from accessing this market.