South Africa-based pan-African retailer Shoprite Holdings plans to open its first store in the Democratic Republic of Congo (DRC) before June 2012.
Shoprite, which has a presence in 15 African countries outside South Africa, has up to now stayed away from the DRC, a country notorious for its difficult business environment. In their Doing Business 2012 report, the World Bank and IFC ranks the DRC in position 178 out of a total of 183 economies.
Jeremy Wiley, a well-known South African businessman who recently established a property services firm, CongoProp, in the south-eastern city of Lubumbashi, says the DRC “is not an easy environment . . . but if you do your homework systematically, then I believe you can identify very good opportunities“.
Rob Curle, MD of South African glass retailer PG Africa, says that transporting goods into the DRC via road is extremely challenging. “The logistics to get goods there is a nightmare. To transport your products through the Kasumbalesa border post is just a disaster. Not only getting the trucks through the border post, but the red tape and the taxation that you have to pay.” He says tax rates are often inconsistent.
In addition to the DRC, Shoprite will open 11 new stores outside South Africa before June 2012.
Strong potential in Nigeria
Despite Nigeria’s population of over 160 million, it is estimated that 61% of Nigerians live on less than US$1 a day. Shoprite CEO Whitey Basson, however, doesn’t seem too concerned. “Even if you have 60% of the population living in poverty, 40% of the Nigerian population is still bigger than the South African population,” he told Reuters.
South African retailer Massmart, which was last year acquired by Walmart, also wants to add to its current two Game (a seller of general merchandise) outlets in Nigeria. TimesLive reports that Massmart could open up to 20 Game stores in the west African country. “Nigeria has the potential to be larger [in retailing] than South Africa but it has some way to go in terms of infrastructure and political stability,” said Massmart CEO Grant Pattison.
“The majority of challenges being faced in Nigeria are endemic to the sub-Saharan Africa region, yet like the rest of the region, Nigeria is transforming, its business environment is significantly improving,” said Imara Africa Securities in a recent note to investors.
“[Nigeria’s] population and biggest asset, is not only expanding fast, but urbanising rapidly while getting relatively richer at the same time. McKinsey, in its analysis on the sub-Saharan African consumers showed how discretionary income is set to rise … It forecasts that [Africa’s] 1 billion strong population will have 128 million households with discretionary income compared to 59 million as of the year 2000. This transformation will also be mirrored in the Nigerian market, hence despite the backdrop of poverty, Massmart and its peers who are taking the plunge into the Nigerian market stand to benefit in the long run,” Imara added.