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Pick n Pay to seek African expansion via Ghana

20 Oct 2014

South African grocer Pick n Pay (PWK) will open stores in Ghana next year as the continent's booming economies attract the attention of retailers searching for higher yields and untapped consumer spending potential.

Pick n Pay to seek African expansion via Ghana

The West African nation is forecast to grow 6.9% this year‚ way ahead of SA's less than 2% projection. With unemployment hovering at about 25.5%‚ strikes‚ a lack of policy coherence and stunted consumer spending have hindered SA's growth.

Local retailers including The Foschini Group (TFG)‚ Mr Price (MPC)‚ Truworths (TRU) and Shoprite (SHP) have a presence in Ghana.

Pick n Pay CEO Richard Brasher said last week that Africa was emerging as the company's second engine of growth. The company's like-for-like sales in Africa‚ outside its home market‚ rose 7.8% in its half-year to August.

"Ghana ... has a lot of the similarities to the business we're developing in Zambia. I think Pick n Pay can add value to that marketplace. We have signed leases. The developers are building during the course of the year. We will get there as quick as we can‚" he said.

According to Nielsen‚ Ghana's solid growth was driven by political stability‚ sound macroeconomic policies‚ high gold and cocoa prices‚ and oil revenue.

The media insights firm said this made Ghana an enticing destination for global companies to invest in‚ and in comparison to other African countries‚ Ghanaian consumers were more willing to try new brands‚ better connected with the media and were more receptive to advertising.

Ghana is the sixth-easiest place in Africa to conduct business‚ according to the World Bank. Trading in African countries is‚ however‚ not risk-free‚ and exorbitant rental costs‚ corruption‚ bureaucracy and supply-chain issues arise.

Broll Property Group CEO Malcolm Horne said last week that South African retailers looking to expand into Africa needed to understand the consumer market first because a "copy and paste" of what works in SA does not work in other African countries.

Woolworths (WHL) pulled out of Nigeria‚ a notoriously tough market‚ last year.

"There is the potential to do business in Nigeria. It is complicated but there are 190-million people and it's growing‚ and therefore we'll continue to keep both East and West Africa on watch‚" Pick n Pay's Brasher said.

Source: BDpro via I-Net Bridge

Source: I-Net Bridge

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