A Speculative look at a possible international investment in a SA Retailer

There is much speculation that various international retailers are considering possible investment in South African based retailers. South Africa as a market is too small to warrant significant investment by an international retailer. However, Africa presents the second largest growth opportunity behind Asia and when investors ask CEO’s where growth is going to come from they only have two places to point at. It’s most likely that an international will target an established African retailer as a platform to launch its operation.

Shoprite have been very successful in Africa and they have certainly positioned themselves as the retailer most likely to capitalize on Africa’s inevitable progression toward formal retail. It may be more accurate to say that they have been driving that progression, either way Shoprite now has an experienced team in Africa and consensus is that growth of their African operations will accelerate quickly toward “continental domination”.

Pick n Pay appears to have devised a plan to develop its African footprint. The response to the question on the subject is usually met with one of the following phases, “surprise move”, “at last” or “well timed” and in some cases all three are used in the opening sentence. The fact is, timing will play little part Pick n Pay’s strategy and there management style indicates that African projects will receive the time, attention and investment they require to succeed. There is plenty of ground to be made up so one can only assume that the plan will be an aggressive one.

Massmart has been active in Africa for some time now, all be it at fluctuating degrees of intensity. This team has successfully attracted international investment in the past and by all accounts investors have been satisfied with the returns. There is a track record and they have built a business based on an “American large format model” which is an added attraction for the worlds largest retailer.

Who will be at the top of the shopping list?

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