Ghana is next stop in TFG’s African plans
bdlive.co.za - Aug 5th 2014, 13:33
The Foschini Group’s (TFG’s) Africa agenda is on track, with five store openings in Ghana on the cards for October, as it eyes the continents other high-growth markets such as Kenya, Angola, and Mozambique.
The retail group — whose brands include Markham, Totalsports and American Swiss — has 132 shops in countries like Zambia, Botswana and Swaziland.
"Africa for us is long-term…. It isn’t going to drive the needle on our profits in the next two to three years," TFG CEO Doug Murray said on Monday.
Setting up an African strategy is de rigueur for retailers looking to diversify their income streams but there is a caveat: Africa is not an easy place to do business. Risks include poor transport and infrastructure, high rentals, corruption and red tape.
Mr Murray said operating in Nigeria, where the group has two stores, "had been tough".
"Woolworths have pulled out … Truworths I think are pulling out as well…. It is a compelling story, but for the long term… we have got to be there. We will keep Markham in Nigeria, and introduce Fabiani and G-Star, but we may pull Foschini out," he said.
Nigeria has just four malls, compared with South Africa’s more than 500. The market is also fragmented, and shopping behaviour and spending power varies.
Truworths, which has four stores in Nigeria, did not respond by the time of going to print. Last month, however, Truworths CEO Michael Mark told Bloomberg the group would not follow Woolworths out of Nigeria. "We were making losses, but I don’t think we will in the future." He said the retailer would reduce the size of its stores in the country and reconsider its merchandise offering to appeal more to local customers.
TFG has also looked at expanding into other markets such as Brazil and Australia.
"We went to Brazil three years ago, and we went back a year later and met with retailers and merchant banks, but at the end of the day it just wasn’t doable. They have many regional legislation and tax laws. There are many family-owned companies, which are not easy to buy because you have to get all the family members to agree. The CEOs tend to speak English, but one layer below that and it is Portuguese only. On top of that there’s a time difference and corruption is big in Brazil," Mr Murray said.
Brazil’s high barriers to entry also deterred Woolworths, which went on to buy Australia’s David Jones for R23.3bn.
Mr Murray was not "an Australian retail fan", he said. "It is dog-eat-dog there. Rentals and salaries are high, most of the retailers battle to make money, in a way they are overtraded, and e-commerce is having a huge impact (there).
"I wouldn’t even have dared consider David Jones, it’s far too big a transaction, and you’re betting the farm … I’m not good at going to the casino. You have to get size-appropriate businesses. (For us), David Jones would be far too high risk."From DFM Publishers (Pty) Ltd
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