South Africa Is Not One Of The Top Five Countries For Retail Expansion – Report
South Africa does not even make it to the top 5 of the list of countries that have the most attractive markets for retail expansion, according to the 2015 African Retail Development Index released this month.
The index reveals that South Africa ranks sixth on the list, despite having the most developed economy and retail sector in Sub-Saharan Africa.
“As attractive as it is, South Africa’s retail market is competitive, across sectors. South Africa’s grocery leaders are trying to tap into the informal market, which still owns 40 per cent of the country’s sales, or are looking into Africa expansion strategies – two steps that do not necessarily lead to quick results, as revenues are typically lower,” revealed the study.
SA is no longer the retail gateway to Africa – AT Kearney
The 2015 African Retail Development Index released this week revealed some surprises.In contrast, the index shows Gabon, Botswana and Angola ranked in the top 3 respectively, as the most attractive markets for retail expansion.
The country that topped the list this year is Gabon, a small country on the west coast of Africa, an oil dependent country but it has the highest GDP per capita in all of Africa, almost twice that of South Africa’s – so truly great opportunity in Gabon,” said Jaco Prinsloo, Principal with at AT Kearney
He added: “The capital city Libreville is one of the most expensive cities in the whole world so it provides a perfect opportunity for specialty retailing.”
South Africa’s neighbouring country, Botswana came in second, despite being a landlocked country; Prinsloo says there’s great potential there.
“There is a lot of mineral wealth that has lead into shopping malls being development, the wealth is being distributed evenly in the country and there are great opportunities there,” he said.
Botswana’s ranking has to do with its geographical positioning, the increase of shopping centres and shopping culture that is developing there.
“The supply chain infrastructure is really well established, it makes it easier for retailers to enter and it is a very stable country.
“If you look at Botswana, all your key South African retailers, particular, Shoprite are very strong there, Woolworths and other players as well so there’s already quite a strong presence of South African retailers and that you find in Botswana or Namibia and even in Mozambique,” said Prinsloo.
Angola came in third as “they have the fastest growing GDP in all of Africa, in excess of 7 per cent, as confirmed by the IMF”, Prinsloo said Angola has “wonderful opportunity” opening up.
It’s a diversified economy and there’s great potential there to come and invest for a basic offering but yet drive it on scale,” said Prinsloo.
Nigeria came in fourth despite having the largest economy in Africa, and close to 180 million inhabitants; Prinsloo attributes that to the country’s dependence on oil and the significant amount of residents that are in the lower income level.
“The trouble with Nigeria is two-fold, the economy is highly skewed towards oil production, and yes the government is trying to diversify that potentially even into automotive manufacturing and that will help a lot but the problem.”
“Almost 60 per cent of the country survives on less than 2 dollars a day, that doesn’t yet provide the opportunity for big retailers to come and invest; you need the strong middle class.”
Having said that, Prinsloo suggests entering with the basic offering, going into the country with the basic goods (dry goods, grains, maize, pulses), buying it in bulk and breaking it down to sell in small consumable units, an investor could do well.
“What we often say about investing in Africa is that you need a long breath, you need the patience to endure and by doing that, your rewards will be plentiful,” said Prinsloo.
“South Africa used to be the key gateway for entering for retail development in Africa and that is not case anymore – you can enter in other routes and still be successful in Africa.”
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