Is Botswana really Africa’s most promising retail market?

  

Botswana is sub-Saharan Africa’s best new market for global retailers. This is if A.T. Kearney’s Global Retail Development Index (GRDI) for 2012, a ranking of the top 30 developing countries for global retail expansion, is to be believed.

The Sebele Shopping Centre in Botswana's capital Gaborone.

Botswana, which did not even make the top 30 last year, is positioned 20th on the index, making it the leading African country and the only sub-Saharan African nation on the list.

A.T. Kearney’s index is a list of developing countries that have the most potential and opportunities for multinational retailers to expand to.

The top 30 are scored and ranked according to four variables. The first is country risk which measures political and economic factors that could affect business. The second variable is market attractiveness and looks at factors such as retail sales per capita and urban population sizes. Next is market saturation which includes factors such as the share of modern retail, the number of international retailers operating in the country, and the market share of leading retailers. The final variable is time pressure, which indicates whether the country holds a short-term opportunity or whether retailers would have to wait longer to see the potential returns.

Botswana leads Africa

A.T. Kearney gives a number of reasons why Botswana ranks highest in Africa. “The country has become a middle-income nation over the past three decades and is projected to have 7% GDP growth for 2012 – well above sub-Saharan Africa’s expected growth rate,” states the report.

“Botswana’s government is dedicated to shifting away from a dependence on diamonds to increasing investment in the private retail sector. Most retail expansion has been from regional players, primarily based in neighbouring South Africa.”

With a small population of slightly over 2 million and a relatively developed retail sector compared to the rest of the continent, some stakeholders would be hard-pressed to agree with A.T. Kearney’s findings.

Brett Abrahamse, director at Johannesburg-based real estate consultancy Terrace Africa, reckons that although Botswana still holds some potential for retailers, the sector has seen strong growth over the past three to five years, and that many of the opportunities have already been exploited.

In its 2011 annual report, PrimeTime, a Botswana Stock Exchange (BSE) listed property investment company and developer of shopping malls, pointed to a “looming oversupply” of retail space, especially in the capital Gaborone.

PrimeTime is, however, confident that a recovery in the diamond industry will spill over to the rest of the economy. “Our country’s economy is showing very strong signs of recovery and with diamond sales producing close to 2008 levels coupled with fiscal discipline, a close to balanced budget could be achieved. The move of the Diamond Trading Company (DTC) to Botswana and the diamond sales process being centred here will bring significant activity to the economy.”

Rest of Africa

“In coming years, we expect global retailers to evaluate many other African nations as Nigeria, Ethiopia, and the Democratic Republic of Congo (DRC) are expected to be among the most populous countries in the world by 2050,” says A.T. Kearney.

The report also points out that expansion into Africa can be challenging for retailers because their competition is a “long-established, active, and informal trading sector that African consumers are accustomed to”.

Morocco is the next African country on the list, positioned in 27th place, making it the second top African country for international retailers to expand to. However, it fell from 20th place in last year’s GRDI due to political instability that increased the risk for retailers.

Tunisia, in 30th position, is the final African country to make the list, but has also fallen since the 2011 GRDI. The 12 place fall is said to have followed the Arab Spring protests. “Before the Arab Spring, per capita income was on the rise, and a growing middle class was forming more sophisticated purchasing patterns,” says the report. “The political unrest of the early 2011 led to GDP growth of only 1.1%. While the government still supports a favourable environment for foreign investment, international retailers are hesitant to enter this recovering market.”

Additional reporting by Jaco Maritz




Related articles:
  • Botswana to become major diamond trading hub
  • Retail report highlights African countries as “hidden heroes”
  • Four things you should know about Africa’s retail environment