As Africa Matures, South Africa Is No Longer The Only Option For Business Expansion

As Africa Matures, South Africa Is No Longer The Only Option For Business Expansion

Once seen as the exclusive gateway to the African retail market, South Africa is starting to lose its place. According to global management consulting firm AT Kearney (ATK), “Historically international retailers always saw SA as the only gateway to Africa and to some extent it is still true, but we also see international retailers entering other African countries directly.”

The African Retail Development Index (Ardi) identifies the 15 African countries that are most attractive for retail expansion, where both size of market and potential for growth were taken into consideration. Gabon came in first place, followed by Botswana, Angola, Nigeria, and Tanzania rounding out the top five.

The retail market in South Africa was surprisingly only good for sixth place. South Africa was cited as having a mature retail market. A mature retail market is characterized by possessing a formal shopping culture, international private label exposure, innovation in the marketplace, and consistent pricing. In such a market, convenience and quality are the key purchase drivers. There is also more limited opportunity for growth, as the market is established.

The per capita gross domestic product (GDP) of Gabon is almost double of that of South Africa. Furthermore, Gabon maintains a high urbanization rate of over 86%, a high income base, a strong middle class, and a solid rate of income distribution. The country, with its population of 1.8 million people, represents a good market for a retailer with a specialty offering.

However, ATK is not down on South Africa. It stated that “The South African retail industry is not doing anything wrong. The economy is not growing as fast as it used to, the market is saturated, and the rand is weakening. So South Africa need not feel bad about not being the rising star in Africa anymore.”

The company still believes Africa is the next big thing compared to other emerging markets, offering a lot of opportunities to grow. A spokesperson added, “We always say you need a long breath to be successful in Africa, but the rewards are plentiful.”

AT Kearney partner and leader of the firm’s consumer industries and retail practice in Africa Bart Van Dijk said that it was critical to consider Africa as a set of multiple opportunities that can be augmented and added together, as opposed to just one single opportunity. He explained, “How you pick among the opportunities depends on your offering. Retailers with a basic offering should target the large cities and countries, because scale will be important, while retailers with a wider assortment should target higher average income countries, including the smaller ones.”

It seems that Africa has well and truly outgrown South Africa as its hub and is instead now a collection or smaller yet faster growing centers that offer numerous opportunities to international businesses, including retail. As China’s growth slows it could well be Africa’s turn to lead global growth and industrialization.

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