PoliticsNews & AnalysisSouth African shopping trolleys roll out across the continent

Wed,23Apr2014

Posted on Tuesday, 19 February 2013 13:42

South African shopping trolleys roll out across the continent

Business analysts estimate Africa’s consumer-focused industries will grow by $410bn by 2020/Photo©JEAN-CLAUDE COUTAUSSE/FEDEPHOTOConstruction companies and retailers have focused their expansion plans on Africa's booming economies, particularly those in the south.

 

Jason McCormick's father built his property empire by constructing malls in black communities during apartheid.

"He went where angels fear to tread and fought against political resistance to take shopping to the people, rather than the people having to drive 100km to the nearest white town," says McCormick.

McCormick Property Development already has 52 malls spread throughout South Africa and is deep in the planning phase of four large developments in Southern Africa, representing an investment of $1bn.

McCormick is developing two malls in Mozambique (one in Matola and one in the coal mining town of Tete), the Luanda Mall in the Angolan capital and the Mall of Zimbabwe in Harare.

Property developers and construction companies are following South Africa's retail expansion into Africa in search of burgeoning middle classes.

In a November report on the rise of the African consumer, consultants McKinsey & Company estimated consumer-focused industries would grow by $410bn across the continent by 2020, with 45 percent of the growth coming from apparel, consumer goods and food.

It pointed to the gradual formalisation of the retail space, led by South African retailers such as Shoprite, Massmart and Woolworths.

Shoprite has operated outside South Africa for over 20 years but only 10.9 percent of its total sales come from outside its home market, according to Mike McLeod, a retail analyst at Avior Research.

"It takes a long time to gain traction," he says, adding that it is happening.

Shoprite's supermarket sales growth in the rest of Africa was 19.7 percent in the 2012 financial year, compared to 12.9 percent in South Africa.

The retailer announced plans to open 21 supermarkets in Angola and nine in NI- geria in 2013, plus distribution centres in each.

Other retailers, such as Pick n Pay, are racing to catch up abroad.

In 2011 it increased its shareholding to 49 percent in Zimbabwean retailer TM Supermarkets.

Massmart, which was purchased in a $2.4bn takeover from US giant Walmart in March 2012, is still a way off a full African expansion effort and is mainly present through its Game stores in East Africa.

Ringing tills

Pick n Pay is one of the anchor clients of the 65,000m2 Mall of Zimbabwe, alongside Shoprite and Woolworths.

Using the same model they employ in South Africa, they are partnering with a local landowner West Group, owned by entrepreneur Ken Sharpe.

Mike Van Blerk, chief executive of West Properties Group, the Zimbabwean arm of the joint venture, says the mall is a "first of its type in Zimbabwe" and will have an entertainment centre.

The consortium will award construction contracts in 2013. The mall – the first phase of which should cost $75m – will open in October 2014.

South African construction firms are already winning new contracts.

Group Five, in partnership with a local firm, won most of the construction work on the $157m Levy Junction business park in Lusaka.

But South African constructors face stiff competition.

McCormick says it is looking "very seriously" at Portuguese construction companies scouting for contracts in Angola.

"The same goes for tenants. Our hope is to actually bring in a lot of European retailers too," he says.

European and US chains are already testing the waters in South Africa.

Clothing store Gap is entering the market, following the UK's Topshop, which opened its first South Africa store in November after Spain's Zara arrived in late 2011●



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