Cyril Ramaphosa sells SA Inc
Deputy President Cyril Ramaphosa this week highlighted the investment potential of the country and the continent as he welcomed some of the world’s biggest retailers and manufacturers to a conference in Cape Town.
The international companies included Coca-Cola, Colgate, Nestlé, Procter & Gamble, Unilever and Walmart.
“We in South Africa are ideally placed as a gateway for international investors wishing to venture into the continent,” Ramaphosa told delegates in Cape Town this week at the global summit of the Consumer Goods Forum.
While Ramaphosa was upbeat about the country, delegates noted that South Africa’s growth had slowed – the country is expected to grow by just 0.5% this year.
Nestlé CEO Paul Bulcke said that to ensure long-term growth, South Africa needed to focus on education, infrastructure, stability and the right policies.
Nestlé has 26 factories in Africa, including eight factories in South Africa, where it employs 3 500 people directly.
On the infrastructure front, Ramaphosa said that over the next two decades, the South African government planned to spend more than R4 trillion to end infrastructure bottlenecks.
“Many corporate players have been playing a supportive role to our country over many years ... We thank you for investing in our country and for the positive role you’ve been playing since the end of apartheid to develop our country and its people,” Ramaphosa said.
Ramaphosa himself has served on the international advisory boards of Unilever and Coca-Cola.
Muhtar Kent, Coca-Cola CEO, said his company was investing $17 billion (R259 billion) in Africa.
Turning to Africa, Ramaphosa said that Africa was on a new growth trajectory.
“Africa is an enormous market of more than 1 billion people,” he said.
“Seven of the 10 fastest-growing national economies globally are in Africa,” Ramaphosa said.
“Africa is open for business but, more importantly, for the consumer sector. A study has revealed that Africa’s consumer-facing industries are expected to grow by $400 billion by 2020, representing the continent’s largest business opportunity.”
Nestlé’s Bulcke said that Africa was a continent of opportunity for those with the right mind-set.
Ramaphosa warned that Africa was a complex, nuanced market of 54 countries and more than 2 000 languages.
“Consumers in the north have very different preferences and needs than those in sub-Saharan countries. Africa is therefore not only rising, it is consuming,” he said.
A key theme that the delegates addressed was the effect of the internet on consumers and the retail sector.
Steve Matthesen, Nielsen’s global president of retail, said the emergence of digital opportunities greatly increased the complexity of running retail companies.
The growth of online trade would change the role of physical stores, he said.
On the topic of the internet, Daniel Zhang, CEO of Chinese e-commerce giant Alibaba, said the company was looking to double its annual transaction volume to more than $1 trillion within four years.
Matthesen also said that emerging markets would be key areas of economic growth in the years ahead.
In emerging markets, consumers were using more mobile commerce than the web, he added.
Another trend that Matthesen identified was that traditional trade remained key in emerging markets, especially in Africa, where this sort of trade makes up 42% of all retail value.
Walmart is keeping the faith for now, despite the value of its Massmart stake having dwindled.
Doug McMillon, Walmart CEO, said that the world’s largest retail company was “very happy” with its 51% stake in Massmart, which has stores in South Africa and 12 other sub-Saharan countries.
“We have a lot of optimism about our future. We have a strong management team. We have terrific brands and store formats. I enjoyed being here this week,” he said on the sidelines of the Consumer Goods Forum in Cape Town.
McMillon’s comments come amid speculation that Walmart might disinvest from its stake in Massmart, which owns Game, DionWired, Builders Warehouse and Makro.
When Walmart, which has a market value of $221 billion, bought its stake in Massmart in 2011, that stake was worth $2.4 billion.
By this week, the value of that investment had reduced to less than $860 million – a 64% drop due to the combined effect of the decline in Massmart’s share price and the sharp depreciation in the rand.
“We don’t think about currency adjustments as much as you might guess.
“We focus on constant currency operations,” McMillon said.
When Walmart bought into Massmart, the rand was at about R7 to the dollar. It was trading at R15.21 to the dollar on Friday. – Justin Brown
Pick n Pay chair Gareth Ackerman, who is also a Consumer Goods Forum co-chair, said the fact that the summit was taking place in South Africa was significant for the country, given the huge amount of foreign direct investment in the consumer goods sector.
“The CEOs of some of the biggest companies in the world have attended this event and seen the country. There are a number of suppliers and potential manufacturers that are actually interested in investing in the country and region. Hopefully, some of that will turn into investment,” he said.
Ackerman said he didn’t see much scope for foreign direct investment in the local supermarket sector because of “very strong domestic retail”.
Some of the local firms represented at the Consumer Goods Forum included Pick n Pay, Shoprite, Tiger Brands and Woolworths.
“Lots of our retail investment is outward rather than inward,” he said. There was an opportunity to use South Africa as a base for African manufacturing distribution. “To make that happen, logistics logjams need to resolved.
“There needs to be a better visa regime in the region,” Ackerman added. Ackerman said local low growth was largely a result of the drop in commodity prices.
South African billionaire Christo Wiese, who is also chair of Shoprite and Pepkor, said at the forum that he was “an African optimist”.
A key issue that Wiese identified was that Africa was not trading with itself – only 20% of trade in Africa is between African countries.
Wiese said Shoprite entered the greater African market 20 years ago and the company saw the continent as its future.
“We are getting higher returns from the rest of Africa than in South Africa,” he added.
Wiese warned that investors needed to ensure that, if they invested in Africa, it was a place they wanted to be because staying power was needed to be successful on the continent.
Pick n Pay’s Ackerman said that the company was focused on Africa, with 1 400 stores in six countries, and it had plans to open shops in Nigeria and Ghana.
“There is a huge opportunity in Africa. As Pick n Pay, we are sticking in Africa,” he added. “Modern retail is only starting to penetrate in West Africa,” Ackerman said.
In contrast, east Africa had a fairly developed market.
Richard Brasher, Pick n Pay CEO, said that, like Wiese, he was an African optimist.
“Africa is about the people, not the spreadsheets. It is very exciting to be in Africa,” Brasher said.
He said Pick n Pay had access to 300 million people thanks to its presence in Africa.