SA is said to be losing advantage
SOUTH Africa’s advantage as the gateway into Africa is being eroded — even as there is an increasing appetite from overseas retailers to invest in the continent.
This was the key message from the inaugural World Retail Congress Africa in Sandton this week.
Though South Africa is still seen as the main portal into the continent because of its transport and logistics networks, it’s no longer the only option. Other Brics members — Brazil, Russia, India and China — have taken a co-ordinated approach to investing in Africa, said Absa Investments analyst Chris Gilmour at the congress.
“And by the turn of the next decade, Nigeria will surpass South Africa as the largest African economy.”
At the moment, African retail is a story of fragmented informal retailers — in contrast to South Africa, where most retailing is highly concentrated in the hands of a few large retailers.
Gilmour said manufacturing and especially hi-tech manufacturing, is conspicuous by its absence in Africa. “And without a large and growing industrial base, Africa’s current spurt in economic activity may not be sustainable.”
Africa enjoys economic advantage in terms of GDP growth at a time when many other competitor emerging economies are struggling or are experiencing declining growth.
It’s a high-stakes game, as the risks of doing business include a lack of infrastructure, huge logistical challenges, and poor energy sources.
Foreign retailers might be keen, but they’re taking their time.
The chief economist at London’s Planet Retail Boris Planer said foreign retailers would not enter the African market in a significant way within the next 10 years.
This suggests that local companies still have a window of opportunity to move in and grab market share.
Not that it’s always easy. This week, Woolworths said it would pull out of its three stores in Nigeria because of high rentals, duties and complex supply chain processes.
Earlier this week, it said it would be regaining control of all 33 of its franchised stores in Namibia, Swaziland, Botswana and Ghana. CEO Ian Moir said Woolworths’ Africa strategy remained unaffected, and the remaining 59 stores in 11 African countries would continue to operate as normal.
Africa has much to lure companies exposed to slowing developed markets. A McKinsey report says Africa’s consumer-facing industries are expected to grow by more than $400billion by 2020. Apparel, consumer goods and food are expected to account for $185-billion or 45% of that amount.
Africa has the world’s fastest-growing population, and is projected to account for more than 40% of global population growth in 2030, according to the UN. And thanks to declining fertility rates elsewhere, its workingage population will have the highest growth, according to McKinsey.
Africa also has the world’s youngest population — more than half its inhabitants are under 20 years compared with 28% in China.
By 2020, more than half of African households are projected to have discretionary income, rising from 85 million households to almost 130 million in 2020.
It’s a young market, but chairman of the Free Market Foundation and CEO of Leswikeng Investments Herman Mashaba spoke of the importance of encouraging and supporting entrepreneurs in Africa.
He said SA’s central bargaining labour legislation was arguably one of the most anti-business pieces of legislation.