South African retailers have been some of the first-movers into key African markets. For example, grocer Shoprite began its expansion into the rest of Africa in 1995, and has since grown into one of the continent’s leading supermarkets. A number of other retailers have since followed, partnering with shopping mall developers to secure quality retail space to target Africa’s emerging middle class.
How we made it in Africa looks at how three South African retailers – Truworths, Shoprite and Massmart – are faring in the rest of Africa in light of the current economic headwinds.
Truworths exits Nigeria
Truworths International is listed on both the Johannesburg Stock Exchange and the Namibian Stock Exchange and is mostly involved in fashion sales led by its main retail brand, Truworths. The company has over 600 stores in South Africa, and more than 40 in eight other African markets. It has also recently commenced its European expansion with the acquisition of the shoe chain Office Retail Group, which has a presence in the UK, Ireland and Germany.
However, it announced at that the beginning of the year that it has decided to close its remaining two stores in Nigeria and exit the country. Sales in Nigeria declined by around 29% in the year ending December 2015, which the company stated was due to regulatory limitations that prevented it from importing merchandise into Nigeria.
Foreign exchange controls also made it difficult for the company to get cash out of the country, while its US dollar rental bill added to rising costs as the South African rand weakened against the US currency.
Shoprite increases Nigerian footprint
While Truworths exits, Shoprite looks at increasing its operations in Nigeria, as well as other African countries. The group has a presence in 14 markets outside of South Africa, operating around 200 stores – 16 of which are in Nigeria.
In its interim financial results, Shoprite CEO Whitey Basson stated Nigeria’s economy “showed surprising resilience” in the six months ending December 2015, despite challenges. During the period the group opened four new outlets in the country and plans to add another four by mid-2016.
Although import and currency restrictions have affected product availability in the country, Shoprite has focused on new supplier development and 76% of products are now sourced locally from 250 suppliers and farmers.
The group is also seeing strong growth from oil exporting Angola, despite the country’s economic woes due to the fall in the crude price. According to its interim financial results, Angola was the biggest contributor to turnover from countries outside South Africa, replacing Zambia.
Massmart continues to view Africa as a “strategic priority”
Massmart is the South African subsidiary of US retailer Walmart, and owns brands such as Makro, Game, Builders Warehouse, Dion Wired, and Jumbo Cash & Carry. The group has 38 stores in 13 African countries outside of South Africa, which makes up 8.4% of total sales. In the second half of last year Massmart opened new Game stores in Mozambique’s Matola and Nigeria’s Abuja, as well as a Builders Warehouse store in the Zambian capital Lusaka.
According to Massmart’s commentary in its latest financial results for the year ending 27 December 2015, its expansion into Africa remains a strategic priority.
“We still see growth opportunities in Africa. We anticipate increasing space growth by 8.6% in 2016 and 2017, but this often involves securing real estate.”
SPONSORED: Business opportunities in Africa
Sahara Games: Everything you need to start an online gaming business