Business
Sub-Saharan Africa Becomes Walmart’s New Battleground
Walmart’s strategy
Ever since the 2008 global economic crisis, Walmart began to rely more heavily on international markets. In fact, according to estimates by Forbes, its international segment is currently contributing about 40 percent to the company’s stock price.
Two years ago, Walmart acquired 51 percent of South Africa´s Massmart for about $2.4 billion. As sales in South Africa dwindle and Massmart loses terrain against strong competitors like Shoprite, the chain targets sub-Saharan expansion, with plans to open 90 new stores across the region over the next three years.
When the company’s Chief Executive Grant Pattinson presented Massmart´s first-half results for 2013, he made the company’s intentions very clear; “we want to slightly shift our focus away from South Africa and put more resources into African growth.” Some of the most attractive markets for this expansion are Nigeria and the dynamic, post-civil war Angola.
If Massmart, with the extra boost of being now partially owned by the world’s largest retailer, wants to compete with Shoprite, it needs to move fast; while Massmart currently runs a mere 29 stores in 11 African countries outside South Africa, which account for eight percent of its sales, Shoprite runs 153 supermarkets, a figure that might easily double over the next four years, according to the grocery chain’s Chief Executive Whitey Basson.
A hurdle in Wal-Mart’s expansion plans
As it did with the acquisition of a majority stake in Massmart, Walmart is pursuing the same strategy across the continent, trying to gain control over successful local retailers in growth economies. In October, Kenyan retailer Naivas, which was reportedly going to sell a similar controlling stake to Massmart, backed out of the deal.
Just a few month earlier Naivas’s chairman seemed quite eager to let the acquisition go through, when he referred to the positive impact a merger with Walmart would have on his company, in terms of bringing in fresh blood and ideas.
It now seems that this was a strategic move from Naivas, as a spokesperson told Reuters, “we are fattening our cow. As and when we are ready we will do that (sell) but as it is now we are not.” At a press conference, Pattinson said that this doesn’t in any way deter Massmart from expanding into Kenya and that the company is still shopping for a suitable local partner.
