South African clothing and food retailer Woolworths sees its operations in the rest of the continent as an important source for future growth. In addition to South Africa, the company currently has a presence in 12 African countries.
During a recent conference in Cape Town, John Fraser, Woolworths’ executive for international business, revealed what the company looks at before it decides to enter a new country on the continent.
Fraser said that the size of the market for Woolworths’ products in a specific country is of critical importance, more important than macroeconomic data or ease of doing business scores. He added that reliable consumer spending data is hard to come by in most African countries.
The low number of modern shopping malls in many African countries has been a major challenge for retailers looking to grow their African operations. Fraser said that for Woolworths it is important that shopping malls are being developed in the countries where they invest. “We need to know that real estate is being developed – proper shops, proper malls, proper security. “
A country’s import tariffs and restrictions are also critical. Although Woolworths is building local supply chains, it still imports a large percentage of the merchandise stocked in its African stores. “If your duties in a country are 40%-plus and you can’t land something that is affordable for the customer, don’t bother,” Fraser noted.
He added that congested ports in many African countries are also a significant challenge for Woolworths.
The company is, however, not only opening retail outlets, but also sourcing clothing and agricultural produce from other African countries. For example, 10% of Woolworths’ clothing comes from Mauritius and Madagascar. In Tanzania, the company has partnered with a group of farmers on the slopes of Mount Kilimanjaro to grow organic coffee.
Fraser noted that in the future South Africa will not be able to meet all Woolworths’ food needs, and that it is therefore important for the company to develop local suppliers in other parts of Africa.