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SA retailers look to rest of Africa
SA retailers look to rest of Africa

SA retailers look to rest of Africa

MARKETING NEWS

Business Day - Dec 20th 2011, 09:18

As competition intensifies in SA, local retailers have looked offshore for growth and many have also understandably set their eyes on the rest of Africa.  

Ernst & Young’s 2011 Africa Attractiveness Survey shows that the continent provides growth opportunities lacking in more developed and mature markets.

Africa has a population of about 1-billion, set to more than double by 2050, while consumer spending is expected to hit

$1,4-trillion by 2020.

Sian Browne, Africa supply chain head at Ernst & Young, says companies are also attracted by the likelihood of lower costs in areas such as land, equipment and labour.

Shoprite, Africa’s largest food retailer, operates 1246 corporate and 274 franchise outlets in 16 countries across Africa and the Indian Ocean islands.

Shoprite says it will continue to expand its operations in Africa as competition intensifies in SA. It intends to open 74 stores next year, 16 of which would be in the rest of Africa.

"Our push has always been in Africa. It is accelerating at the moment but it was always the plan," Shoprite CEO Whitey Basson says.

Tiger Brands CEO Peter Matlare says the company will be searching for more acquisitions in Africa after spen ding R2,1bn on the continent last year.

Mr Price CEO Stuart Bird said in May the group would focus on the "internationalisation" of its business and would aggressively look for space in the rest of Africa, including in Nigeria, Angola and Ghana.

Famous Brands , the owners of Steers and Mugg & Bean, says it will concentrate on Zambia and Mauritius.

Ms Browne says companies entering the Africa market will confront major supply chain challenges unlike any they may have experienced in more developed markets.

"Many companies, in particular those with perishable goods, that have time-sensitive supply chains, have difficulty understanding some of the issues with border crossings in Africa, both in respect of infrastructure and bureaucracy," Ms Browne says.

Establishing partnerships with third-party distribution and logistics companies and leveraging off their existing capacity and experience are important.

She says companies also need to consider making the best use of local suppliers, as organisations that use domestic suppliers are viewed in a positive light. Both Woolworths and Pick n Pay have chosen to go the joint venture route.

Woolworths plans to open 16 new stores in the 2012 financial year, bringing its full African footprint to 60 stores.

"Joint ventures with local partners is the new business model for our expansion plans in other African countries. We have moved away from the franchise model we had in some African countries. It’s not only a better profit model for Woolworths, but it’s also better for customers," Woolworths divisional executive John Fraser says.

SA’s second-largest supermarket chain, Pick n Pay, has grown its African footprint with stores in Mauritius, Zambia and Mozambique this year.

"We plan to open stores in Malawi and Angola in the future. We are set to continue along this expansion path in a planned and deliberate way," group enterprises head Dallas Langman says. Pick n Pay also has retail operations in Namibia, Botswana and Lesotho.

Environmental and sustainability issues also need to be at the forefront of supply chain planning, Ms Browne says.

One of the major lessons existing operators have learnt is the extent of the skills challenge in Africa.

Tax and regulatory frameworks in Africa tend to differ from one jurisdiction to another — unlike markets such as the European Union, where there is greater uniformity for companies, Ms Browne says.

 

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