By Thapelo Molefe
Small township businesses say they are being charged higher prices by suppliers because of their size, putting them at a competitive disadvantage against larger firms able to buy stock in greater volumes.
The Competition Commission’s Rural and Township Economy Project 2026 found that 49% of surveyed businesses believed suppliers charged them higher prices because of their size.
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The concern was most pronounced among independent businesses, with 61% saying they believed they were charged more because of their size. This was followed by informal businesses at 42% and franchises at 40%.
A similar pattern was found among businesses operating in rural towns.
The findings come despite 66% of surveyed businesses saying they were able to negotiate fair prices with suppliers.
The Commission said this suggested the problem was not necessarily an inability to negotiate, but that smaller businesses entered negotiations from a weaker position than larger firms.
“For smaller township and rural firms, the survey points to a setting in which bargaining takes place, but within narrower limits,” the report states.
Smaller businesses may be more exposed to minimum order requirements and penalties, less favourable credit terms, weaker rebates and higher logistics costs than larger firms, the Commission said.
The report found that procurement disadvantages were closely linked to the smaller quantities ordered by township businesses.
The most common procurement challenge across sectors was higher input and inventory costs associated with smaller order sizes and weaker bargaining power.
The problem was reported across agriculture, arts and crafts, automotive, construction, financial and business services, hair and beauty, hospitality and food services, ICT and electronics, manufacturing, medical and health services and retail.
Larger businesses generally have greater access to formal and efficient supply channels, allowing them to secure more favourable terms and more stable stock supplies.
Independent and informal businesses, by comparison, tend to rely more heavily on smaller suppliers, wholesalers and intermediaries.
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In townships, national chains largely source through large formal retailers or wholesalers, while independent and informal businesses rely more on smaller formal suppliers and medium-sized wholesalers or intermediary channels.
The Commission said these differences can leave smaller businesses facing higher costs before they even begin selling to consumers.
The disadvantage is more pronounced in rural areas, where businesses have fewer suppliers to choose from and may have to travel further or pay more to obtain stock.
Businesses reported higher costs not only because of smaller orders, but also because of a lack of local suppliers, stock shortages and, in some cases, supplier monopolies or limited alternatives.
The Commission said larger buyers can benefit from economies of scale in procurement and distribution, giving them structurally lower average input costs than independent, smaller and informal businesses.
Where wholesale markets are concentrated, the gap can be widened by minimum order requirements, differences in pricing and trading terms, and priority supply arrangements.
The Commission also considers discounts, rebates, credit and other trading conditions when assessing the effective cost of procurement. This means smaller businesses can face higher procurement costs even where there is no obvious difference in the initial price quoted by a supplier.
The disadvantage can create a cycle that makes it harder for small businesses to grow.
Higher procurement costs can make it difficult for businesses to compete on price, resulting in lower sales volumes. Lower volumes, in turn, make it harder to achieve the scale needed to negotiate better prices, rebates and supply conditions.
The Commission said independent and informal businesses often face higher unit costs because they buy in smaller quantities and have fewer suppliers nearby, while larger chains are better positioned to secure volume-related advantages.
These differences in input costs can affect which businesses survive and grow and how easily new businesses can enter local markets.
The report said the procurement problem was not simply about whether suppliers were available, but also about the terms on which smaller businesses could access them.
Smaller businesses may have access to suppliers but still face less favourable credit arrangements, fewer rebates, higher delivery costs, minimum order requirements and less reliable stock availability.
“Smaller and informal businesses are not excluded from supply chains altogether, but they tend to participate through more indirect and weaker upstream routes,” the report states.
The Commission said these procurement disadvantages could ultimately affect consumers.
Higher input costs can contribute to higher retail prices, reduced product choice, weaker availability and stock shortages. Consumers may also have to travel further to find better-stocked or cheaper outlets.
The report said procurement difficulties therefore affect not only individual businesses but also the ability of township and rural economies to support new businesses, growth and employment.
The Commission said stronger access to competitive supply channels could help smaller businesses reduce costs, improve their ability to compete and retain more economic activity within township and rural areas.
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