The living legacy of the informal economy beating to a different drum in every community, the informal economy lives within the lives of its customers. South Africa’s township economy operates at close range to people’s daily lives. These spaza shops and informal traders thrive because they are aligned to the realities of the communities they serve. As active members of the community, they have a firsthand understanding of its unique needs. Their strength is their ability to match supply, pricing and access based on the lived financial conditions of their customers – simple things, like being able to buy only three nappies instead of an entire pack, are life-changing in many of these communities. This knowledge and flexibility is reflected in the rapid and remarkable growth of the informal sector. In 2025, employment in the formal sector dropped by 245,000 while the informal sector increased by more than 17,000.
The township economy is responsible for around R190 billion in turnover, equal to 5.2% of the country’s gross domestic product, and support in the region of 2.6 million jobs 2 . While the numbers for the informal sector aren’t as detailed as those in the formal with no official, widely used national forecast offering a clean percentage growth rate, the sector is showing a slow and incremental expansion that’s marked by unique approaches and tactics. Perhaps the most unique of these is how inventory is designed around need. Products are stocked in quantities that reflect daily or weekly income cycles rather than monthly purchasing power with smaller pack sizes, break-pack options and single unit sales.
Households paid weekly or daily can purchase what they need without committing to bulk purchases that will strain their cash flow or storage space, and wastage is reduced because stock moves in line with real demand. This responsiveness extends to location within communities. Most spaza shops function as one-stop points of access within walking distance of homes or from transport hubs so customers can easily source essential food items, household goods and, in many cases, prepared meals from within their neighbourhoods. Convenience has become central to how these small businesses remain viable in environments where transport costs and time constraints matter. In addition to the convenience, the responsiveness of the communities’ discerning and unique needs are also often catered too. If local communities have a large constituent of a specific cultural group, the products sold often match the need the community seeks. Another key value-add is trust.
A commodity in short supply in the world economy right now, but one that comes as part of the informal retail experience. It’s a relationship-built by design – shop owners know their customers, their routines and their financial situations and so they offer payment flexibility built on familiarity and accountability within the community. It’s a system that relies on social capital rather than on contracts and it remains successful because of long-standing social ties. Local procurement reinforces this ecosystem as spaza shops and micro-businesses typically source stock from independent distribution centres and wholesalers located within or near the communities. These wholesalers in turn often procure from local manufacturers that produce goods designed specifically for the market. Products are fit for purpose and priced appropriately, and the model shortens supply chains, reduces logistic costs and keeps economic value circulating locally.
This means compounded growth and increased wealth creation generated within townships as the money stays in the community. It also boosts employment opportunities linked to transport, delivery and order-taking which strengthens the internal value chain. While local procurement continues to gain momentum, it would be encouraging to see a deeper commitment from distributors and suppliers establishing operations within the communities, to ensure growth translates into genuine long-term and compounded growth and wealth creation for residents. The result is a model that adapts quickly as informal traders rapidly respond to supply disruptions, pricing pressures and competition in real time. This speed is a function of decentralised decision-making and the traders’ proximity to demand. Large retailers struggle to replicate this model because their systems are designed for scale and standardisation. So stock, pricing, payments, layouts – everything is governed by uniform processes that work well in formal retail environments (to an extent) but limit responsiveness. Right now, in a global and local economy that’s defined by disruption and change, these processes can be a limitation. Big retailers could benefit from decentralising operations, moving away from big central stores outside of townships and opening smaller outlets tailored to each township’s needs. The township economy shows the value of creating systems that are fit for purpose, allowing informal traders to operate within the changing patterns of consumer behaviours. When they use digital tools, they use them to help them better adapt to these patterns while reducing cash risk and improving transaction visibility.
The formal retail economy shows a pattern of low, volatile growth within a fragile consumer environment, the sector grew by 2.7% year-on-year as of October 2025, down slightly from the 3-3.2% noted earlier in the year 3 . While not an outright contraction of growth, the sector is facing challenges with 23.9% increase in business liquidations compare this volatility and complexity with the informal sector – currently contributing upwards of 900 billion to the economy, there are some lessons hidden within its ability to pivot and change to meet economic and customer demands. The informal economy is vibrant and connected to communities, and is set to continue its growth over the next 12 months. It is drawing increased attention from formal institutions because it has proven itself both resilient and ingenious. These stores show how retail can thrive when it is built around people rather than processes and their continued success may very well be the litmus test the formal sector needs to change its approaches and try something new.
