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SA no longer seen as African retail gateway

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South Africa is no longer seen as the only gateway for international retailers to the African retail market, according to Jaco Prinsloo of global management consulting firm AT Kearney

He spoke to Fin24 about AT Kearney's 2015 African Retail Development Index (Ardi) released this week, which reconfirms the retail potential of many nations throughout Africa.

"Historically international retailers always saw SA as the only gateway to Africa and to some extent it is still true, but we also see international retailers entering other African countries directly," explained Prinsloo.

The Ardi identifies the 15 countries in Africa most attractive for retail expansion currently and which also offer the most potential. Gabon, with a developing retail market, came out tops, followed by Botswana (regardless of the fact that its retail market is already mature). Angola, whose retail market is described as "basic" is in third place followed by Nigeria (developing retail market) and Tanzania (basic retail market).

South Africa, with its mature retail market, came in at sixth place - actually a higher position it held than in the previous index. Mature retail markets are characterised by having a formal shopping culture, international and growing private label exposure, innovation, and stable and transparent pricing. In this market, the key purchase drivers are convenience and quality.

Prinsloo pointed out that Gabon's gross domestic product (GDP) per capita is almost twice that of SA. In addition Gabon has a high urbanisation rate (over 86%), a high income base with a strong middle class and a good income distribution rate. Prinsloo reckoned the country, with its 1.8 million people, would be a good market to explore for a retailer with a specialty offering.

"The SA retail industry is not doing anything wrong - the economy is not growing as fast as it used to, the market is saturated and the rand is weakening. So SA need not feel bad about not being the rising star in Africa anymore," said Prinsloo.

"On the other hand, in some other African countries the retail markets are opening up and people are keen to go out and buy brands."

Prinsloo said AT Kearney still believes Africa is the next big thing compared to other emerging markets, offering a lot of opportunities to grow.

"We always say you need a long breath to be successful in Africa, but the rewards are plentiful," he said.

Bart Van Dijk, AT Kearney partner and leader of the firm’s consumer industries and retail practice in Africa, said that it was instructive to think of Africa as a set of opportunities that can be augmented and added onto one another, rather than just a single opportunity.

“How you pick among the opportunities depends on your offering. Retailers with a basic offering should target the large cities and countries, because scale will be important, while retailers with a wider assortment should target higher average income countries, including the smaller ones,” said Van Dijk.

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