Business in Ghana

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Retailers Wake up to Africa’s Promise

Posted by Business in Ghana on August 7, 2012

By Andrew England in Johannesburg and Xan Rice in Lagos

When Taiwo Animashaun, who works at Tastee Fried Chicken in Lagos, needed a new hotplate, she decided to try the plush Ikeja City Mall, which opened in December, instead of her local market. Within minutes of entering Shoprite, the South African supermarket that anchors the complex, she had made her purchase.

“It’s a good place to shop,” says Ms Animashaun. “Everything is arranged nicely, and the prices are not bad.”

From Lagos in the west to Nairobi in the east and Lusaka in the south, trendy new shopping malls have sprung up across Africa as the continent’s mushrooming cities modernise and its emergent middle class swells.

With more cash in their pockets, increasing numbers of Africans are looking to shop in modern centres rather than the small, rundown, poorly stocked, often informal stores, that have been the norm in the past.

It is a phenomenon that last year lured Walmart, the US group, to become the first mass retailer to enter the continent with a $2.4bn deal to secure a majority holding in South Africa’s Massmart. And it reflects the strong growth Africa has enjoyed, with sub-Saharan Africa’s gross domestic product expanding at an average annual rate of more than 5 per cent throughout the economic crisis that has swept across the world since 2008.

“We think of ourselves as Walmart’s African investment vehicle,” says Grant Pattison,Massmart’s chief executive. “I think the global economy has got so bad that there’s a realisation that with South America, India and Asia tapped . . . there’s only one large billion-sized population left in the world and that is Africa.”

It has been South African companies, the continent’s largest and most sophisticated, that have been leading the charge.

Shoprite, Africa’s biggest retailer, last month announced the opening of its first store in Kinshasa, capital of the Democratic Republic of Congo, a country better known for conflict and crisis than shopping. Shoprite now has operations in 17 African countries and about 115 supermarkets outside South Africa.

Woolworths, a Cape Town-based retailer, plans to open 14 stores outside its home market this financial year, and almost to double its stores across the continent, excluding South Africa, to 104 in the next two to three years.

John Fraser, who heads Woolworths’ international division, says the expansion has been encouraged by the conscious effort that African governments are making to diversify their economies away from dependence on resources. But, he adds, “the other thing that’s happening for us is increasing urbanisation in Africa . . . and a growing middle class which is really our target customer”.

Woolworths already has stores in a dozen countries outside South Africa: its sales outside the country have tripled in the past two years, Mr Fraser says.

Oil-rich countries such as Nigeria, Angola, and Ghana are among the markets being targeted. But for all the enthusiasm and potential, the hurdles can be daunting – Africa’s 1bn people are spread across 54 diverse countries with different cultures, languages and demographics. There are sizeable bureaucratic and logistical barriers, while finding the requisite real estate can be a big stumbling block. Massmart, for example, has been unable to secure the property it needs to break into Angola and Kenya.

People moving from a rural lifestyle to an urban lifestyle need to be serviced

– Grant Pattison, Massmart chief

Massmart opened its first store outside South Africa in the mid-1990s in Botswana and has operations in 12 countries. It has two stores in Nigeria – deemed the golden goose of the retailing sector – and hopes to open another four in the country. But it could take years to reach its targets, primarily because of the problem of finding the right property, Mr Pattison says. “It’s very, very difficult . . . it’s a complicated country no doubt about that,” he says.

Still, Mr Pattison says that the harder it is to operate the “more profit opportunity there is” and Massmart plans to open food retail outlets across the continent. “People moving from a rural lifestyle to an urban lifestyle need to be serviced,” he says. “We will now transform Massmart into an African company.”

Not everyone is convinced. Ademola Olugunde, a 40-year-old electrical engineer who lives in Australia, was shocked by prices at the Ikeja City Mall.

“This place is a make believe that everything is well in Nigeria and is not what people need. Step across the road and you see the poverty: the reality is that it is really tough out there. Fancy malls are for the [wealthiest] 1 per cent.”

But Nigeria’s huge population of 160m – Lagos alone has more than 11m – means that still adds up to a lot of potential customers eager to embrace the new convenience.

“I can’t take my baby to shop in the market, with all the traffic, people and noise,” said Zaynab Salami, 32, who works for the National Blood Transfusion Service, and was pushing her trolley with her 10-month-old son sitting inside. “But I can here.”

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