AFRICANGLOBE – East Africa growing power house, Rwanda has been singled out as the fastest place for multinational retailers to grow their business, beating the likes of South Africa, Nigeria and Kenya who are tagged Africa’s fastest growing economies in their respective regions.
Global consultancy AT Kearney in its African Retail Development Index (ARDI) released on Monday said “Rwanda ranks at the top thanks to its focus on reforming the business climate and seeking to attract foreign investment.”
The result, which is based on Market Size, Market Saturation, Country Risk and Time Pressure, is designed to help large, organized retailers as well as other industry sectors that offer communications and telecoms, financial services and infrastructural services to identify the most attractive African markets for retail expansion.
It identified Rwanda, Nigeria, Namibia, Tanzania, Gabon, Ghana, South Africa, Botswana, Mozambique and Ethiopia as top places for retail expansion in Africa, respectively.
Mirko Warschun, A.T. Kearney partner and ARDI co-author however said that while the top 10 countries in the Index are diverse in terms of scale and growth potential, retailers must understand where “ African countries are in the evolution of the retail landscape and the stages of market development to craft their expansion strategies for Africa.”
While Africa’s largest economy, South Africa ranked seventh as a result of the developed nature of its retail market, where Shoprite, Woolworths and Pick n Pay enjoy a large market share; Africa’s second largest economy, Nigeria came second, but was noted as one of the “toughest” markets to master because of its regulations, import restrictions and land availability.
On the “very consolidated’ South African retail market, AT Kearney partner and ARDI co-author, Bart van Dijk, warned that as a global retailer, coming in with a non differentiated approach will (make it) very hard to build up market share as the local players will be very aggressive in keeping you out because it’s a convenient situation that they’re in.
According to Boston Consulting Group partner, Stefano Niavas, global retailers wanting to expand in South Africa “would have to put up a fight and a lot of money.
“The South African market is very established. It’s a difficult market to operate in, it will not make your life easy to establish your business. (The country) is also quite insular, you won’t have embedded in South Africa the knowledge of the rest of the continent.”
Continentally, van Dijk noted that “There are wide differences in infrastructure and supply chain development across African countries. Understanding the opportunities and limitations from country to country is a critical element of the retail expansion decision.”
As disposable incomes continues to rise and consumer spending increases to unprecedented figures, the retial opportunity in Africa’s emerging markets will be impossible to ignore.
Last year, the world’s second-largest retailer, Carrefour, entered the continent’s burgeoning retail market through a joint venture with African distribution company CFAO.
Nevertheless, A.T. Kearney partner and ARDI co-author Mike Moriarty said; “Although there are many challenges, Africa has reached a point in its economic development where global retailers must evaluate the significant potential for growth in this market.”
By: Oluwabusayo Sotunde