Business
Sub-Saharan Africa Becomes Walmart’s New Battleground
With the general instability of the global economy, corporations like to play it safe; Walmart is an example of a multinational which is making a bold move. Acquiring South African grocery chain Massmart offered Walmart a safe foothold to prepare for the next step, which is continental expansion. South Africa is arguably the most westernized country in Africa. Western companies in general perceive it as easier to do business there than in other African nations.
South Africa is also the continent’s largest economy and considered No. 1 for technological readiness, financial market development, and business sophistication according to African Development Bank´s Competitiveness Report 2013.
The Grocery Chain Boom
South African grocery chains are leading the way when it comes to expansion, but many large retailers from around the continent have expanded beyond borders or are planning to do so. Some of the biggest challenges for expansion relate to land transportation, infrastructure, and facilities.
Because companies are willing to expand and conquer, regardless of these difficulties, stores may look very different from one country to the next, or even from one city to the next. For example, in Zambia – one of the most attractive markets for retail stores today -a Shoprite store (South African) in the copper mining region may carry only a quarter of the product range of the same store in a rich neighborhood of the country’s capital.
If grocery chains are to succeed in some of these emerging economies, they will have to adapt to cater to the needs of very different populations. Intermittent supplies and lack of demand for pricey imported goods are some of the dangers they must be ready to face. Other significant risks of this type of investment include the fact that many of the most promising economies, such as Angola or Zambia, rely heavily on mineral resource exports subject to international price changes.
When consulted about how Shoprite deals with these risks, the company´s spokesperson Sarita von Wyk referred to Shoprite´s last annual results announcement where Shoprite, “achieved a higher percentage turnover on its non-(South Africa) division than in the (South Africa) division. The strong growth was assisted by the continued weakening of the rand against the U.S. dollar and certain African currencies, making imports from South Africa more affordable,” which offers a new perspective on expansion, as a way of minimizing the risks posed by each particular local economy.
