Wal-Mart and what it means for Africa

Wal-Mart, the world’s largest retailer, recently made an offer to buy Massmart, a South African company with operations throughout Africa. Jaco Maritz looks at how Wal-Mart’s entry might affect Africa’s retail landscape

A billboard for Massmart's Game store in Accra, Ghana

A billboard for Massmart's Game store in Accra, Ghana

US-based retailer Wal-Mart Stores at the end of September announced that it has made a preliminary, non-binding proposal to acquire South Africa‘s Massmart for about US$4.3 billion.

Wal-Mart has over 4,300 outlets in the US as well as more than 4,200 stores in 14 other countries, including China, Japan, the United Kingdom, Brazil and India.

Andy Bond, Wal-Mart’s executive vice president for Africa, said: “South Africa presents a compelling growth opportunity for Wal-Mart and offers a platform for growth and expansion in other African countries. South Africa possesses attractive market dynamics, favourable demographic trends and a growing economy.”

Massmart, headquartered in Johannesburg, is a distributor of consumer goods on the African continent and a retailer of general merchandise, home improvement equipment and supplies. Massmart is also a retailer of basic foods in the region. The company runs 290 stores in 13 countries in Africa, with the vast majority of its stores in South Africa, and manages eight wholesale and retail chains operating under a variety of different brand names.

If the deal goes ahead, The Palms Shopping Centre in Lagos (Nigeria), Lugogo Mall in Kampala (Uganda), Menlyn Park shopping centre in Pretoria (South Africa) and the Accra Mall in Accra (Ghana), together with numerous other locations, would each have a store that is “part of the Wal-Mart family”.

According to Massmart’s website, the company currently has 232 stores in South Africa and 24 outlets in other African countries. Outside of South Africa, the group has operations in Ghana, Malawi, Mauritius, Mozambique, Nigeria, Tanzania, Uganda, Zambia, Zimbabwe, Lesotho, Namibia and Botswana.

Massmart’s major brands include:

  • Game (discount retailer of general merchandise and non-perishable groceries for home, leisure and business use)
  • Dion Wired (middle- to upper-end electronics and appliances)
  • Makro (large warehouse stores selling food, liquor and general merchandise to retail and wholesale customers)
  • Builders Warehouse (offering home owners, DIY enthusiasts and building and maintenance contractors a comprehensive range of competitively priced products)
  • Builders Express (products for home-owners, integrated into Builders Warehouse)
  • Builders Trade Depot (catering mostly for medium- to large-sized contractors and tradesmen engaged in building, maintenance and renovation projects)
  • CBW (wholesaler of food, liquor, groceries and cosmetics in bulk to independent general dealers, government feeding schemes, franchise members, small traders and hawkers in peri-urban and rural areas)
  • Jumbo (sells cosmetics, toiletries and hair-care products to individual consumers and independent general dealers)
  • Shield (voluntary association that buys products in bulk on behalf of over 470 members who own wholesale or retail food businesses)
Massmart's African footprint

Massmart's footprint outside South Africa

Outside of South Africa, Massmart’s footprint mainly comprises the Game stores, as well as Makro and CBW outlets in a few countries.

Jeanine van Zyl, a retail analyst at Old Mutual says that Massmart’s presence in Africa, outside of South Africa, is one of the major drawcards for Wal-Mart.

There has been speculation in the media that Wal-Mart also looked at pan-African supermarket group, Shoprite, as a possible take-over target.


Wal-Mart’s entry into Africa could potentially have a big effect on the continent’s exisiting retailers, from large supermarkets to street hawkers.

“There are certain categories where Wal-Mart will certainly be more competive than the established retailers,” says Van Zyl. “I think Wal-Mart will be able to bring down prices of general merchandise products such as electronics, basic clothing and sport equipment because they are able to procure from their global suppliers.

“They are one of the biggest clothing retailers in the world and have access to enormous buying power. But because Massmart doesn’t have a very good clothing footprint, I don’t see that as an immediate threat. It could be if Wal-Mart expands that category. We are, however, talking basic clothing not fashion clothing. So I don’t see any threat to [South African] fashion retailers such as Truworths or Foschini,” Van Zyl explains.

She says that in the food category it will take Wal-Mart some years to significantly bring down prices. “With food, in time they could improve what Massmart is currently doing and also maybe bring down margins. This will, however, only happen in time because what they would have to do to make that happen is to bring in their way of doing supply chain which could take a number of years.”

In an earlier comment on the Moneyweb radio programme, when Wal-Mart’s entry into Africa was still mere speculation, Shoprite Holdings CEO, Whitey Basson, said: “Why would they want to come to South Africa when [there is] China, India, Brazil? These countries are there with billions of people and probably much easier . . . If you look at how we battle to get . . . stores up in Africa with just logistical problems, I think it would be silly to waste too much time on it.”

Some also fear the impact Wal-Mart could have on small businesses and street traders. The African Co-operative for Hawkers and Informal Businesses (Achib), which represents about 130,000 hawkers and spaza-shop owners across South Africa, says it is against the takeover bid. Achib’s secretary-general, Mlungisi Ngwenya, told Fin24 that “a culture has been developing where big retailers move into townships, oppress and then kill small traders instead of helping them to grow.”

Informal trading plays a large role in Africa and will probably continue to do so for some time. In an interview with How we made it in Africa about Nigeria’s retail sector, Yinka Ogunsulire, managing director of Lagos-based ARM Properties, said that informal trading is an important feature of Nigeria’s everyday life because of the significant infrastructure deficit as well as the limited use of electronic payment systems.

“Informal trading thrives well in countries like Nigeria simply because alternatives do not really exist and even where they do, they do not offer the ‘convenience’ that informal street trading offers; such as, bringing commodities directly to people, whether they are in traffic or simply going for a walk,” she explains.

Looking at how Wal-Mart currently operates in India, however, suggests that it is able to adapt to local realities. TIME magazine reports that when Wal-Mart opened its first store in India last year, trading as BestPrice Modern Wholesale, it partnered with its competition – the mom-and-pop stores – through luring them as wholesale customers. In the BestPrice store there is even a “model store” where small shop owners are taught various methods to increase their profits.


Wal-Mart has over the years attracted significant criticism for the low wages it pays its bottom-end workers as well as its dislike for labour unions. Any animosity towards unions are sure to go down hard in South Africa, where labour unions wield enormous power.

Mike Abrahams, the spokesperson for the South African Commercial Catering and Allied Workers Union (Saccawu) told Moneyweb that his organisation would oppose the deal. “If you look at the history of Wal-Mart, not only on the question of how it relates to workers but also what it has done to local [economies], local procurement, to local retailers, and things like that. So surely at the point where we are trying to improve and encourage local procurement and furthering and developing the local manufacturing sector that can . . . it’s going to be increasingly difficult if we have someone like Wal-Mart moving in, who actually buys from the cheapest.”

Gavin Brown, a labour lawyer, was recently quoted in the Financial Times, saying that the idea of Wal-Mart being against unions is “out of date”.

“Wal-Mart, when it was founded, had a reputation of being anti-union – but that was in the context of American law, where it was perfectly okay to be anti-union,” he says. “That’s now become an urban legend – it’s been complying with labour laws in the places where it’s been operating.”

Wal-Mart itself has also stated that it is prepared to work with the unions in South Africa. “We respect and honour pre-existing union relationships and are committed to abiding by South African labour laws. We also look forward to serving communities and working with the leaders to support the continued development and momentum in the region,” Doug McMillon, president and CEO of Wal-Mart International said in a statement.