Africa’s booming retail sector set to attain China’s lofty standards
JOHANNESBURG, (CAJ News) – THE continent’s retail industry is earmarked for a boom, such as one experienced by current economic powerhouse China in the late 1980s, on the back of a rapidly increasing population and significant investments in the sector.
The comparison with the Asian country has earned Africa the tag of the ‘next big story” in the foreseeable future, similar to China’s meteoric rise to current trends of yesteryear retailers are expanding four to five times faster than retailers in the United States and Europe.
Statistics and investments suggest Sub-Saharan Africa is on course to attain those lofty standards.
Kearney’s 2015 Global Retail Development Index has listed Sub-Saharan Africa as the ‘big story’ for 2040.
It lists three Sub-Saharan countries-Botswana, Gabon and Angola- in the top 30 developing countries for retail investment globally.
Another think-tank, the Economist Intelligence, noted over the last decade, that annual inward direct investment in Sub-Saharan Africa has more than tripled from around US$ 3billion to over $18 billion as investors continue exploring alternative opportunities to the western markets hit by the economic crisis.
At an annual rate of 2,5 percent Sub-Saharan Africa has a faster growing population than any other region in the world; more than double most other regions and well above a global average of 1 percent.
The populations of key regional markets such as Nigeria, Kenya and Angola are projected to more than double by 2050 while long-term United Nations population forecasts project Africa to be home to almost one-third of the world’s population by the end of the century.
Some 12 cities, including those in Angola, Nigeria and South Africa are expected to surpass the 10-million population mark, making them megacities (10 million people or more).
Presently the region has three such cities, Cairo, Kinshasa and Lagos.
Overall, the South African Council of Shopping Centres (SACSC) reports that 900 000m2 of shopping space was in various planning stages across Africa, excluding South Africa.
Analysts believe such trends highlight opportunities for growth of the retail sector in Sub-Saharan Africa.
Steve Burd, Acting Vice President of Sales for DHL Sub-Saharan Africa, the logistics company, said the rising middle class, coupled with market and infrastructure development would continue to drive demand in the retail space in the years to come.
He pointed out to the Kearney’s 2015 Global Retail Development Index suggesting Ghana, Namibia and Zambia, were likely to be included on the list of top 30 developing countries in the coming years.
Referring to the index, Burd said it was refreshing to see that smaller markets were emerging and to rival Nigeria and South Africa, historically considered the continent’s powerhouses.
Gabon, Botswana and Angola, in that order, are listed above the pair with Tanzania also on the list.
“Developing countries, as well as early stage markets with little to no formal shopping culture, are increasingly becoming viable markets for retailers. However, while there are increasingly more opportunities, businesses and investors need to look at each market individually before expanding, as there is no one size fits all strategy for the African market,” said Burd.
He said according to market intelligence agency, WARC, West Africans had an outlook closely aligned to the United States, whereas East Africans tended to find Asian brands more appealing.
“Understanding the differing cultures and brand preferences is therefore important when considering a retail expansion strategy,” adds Burd.
In line with projections by analysts on the prospects of the retail sector, some South African companies recently acquired the plush Ikeja City Mall, Lagos’ largest shopping centre.
David Morley, Head of Real Estate at Actis, which sold the facility for an undisclosed amount, said the transaction highlighting growth prospects for investors seeking to grow their portfolio of dominant quality retail malls in Sub-Saharan Africa.
However, Burd said while the opportunities were on the rise, challenges remained.
These range from customs regulations to supply chain management.
“Supply chains in Africa are more challenging than many other markets in the world, and the key to success is understanding these in order to offset the risks versus the opportunity which the continent offers,” Burd said.
– CAJ News
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