African allure set to entice global investors

The continent's steady growth and infrastructure developments have its economic pulse stirring and the often-quoted one billion African consumers ripe for picking has global investors casting a beady eye in its direction.

Greatest opportunities

Africa's consumer-facing sectors - consumer goods, telecoms and banking, among others present the largest opportunity and are already growing two to three times faster than those in countries belonging to the Organisation for Economic Co-operation and Development (OECD).

The recent economic meltdown has stunted growth in developed economies triggering multinationals to turn their attention to the next big thing.

"There was Asia and India, now Africa is seen as the place to be. Huge potential exists. South Africa is seen by many as the springboard to bigger and better things in Africa," said a retail analyst.

Wal-Mart's bid for Massmart

US giant Wal-Mart's 16.5 billion rand cash offer to acquire 51% of Massmart (MSM) has thrust South Africa into the spotlight as the gateway to Africa for foreign investors seeking growth opportunity outside of developed countries.

Andy Bond, Wal-Mart's executive vice-president responsible for Africa said that South Africa presents a compelling growth opportunity for the global retailer and offers a platform for growth and expansion in other African countries.

It's been a vote of confidence for South Africa and other international retailers will no doubt sit up and take notice. The Wal-Mart deal will be a very good story for us going forward, a retail analyst said.

SA retail throughout Africa

South African retailers already have a marked presence in the rest of Africa.

Shoprite Holdings trades in Angola, Botswana, Ghana, Lesotho, Madagascar, Nigeria, Zambia, Nambia, Zimbabawe, Uganda, Tanzania, Swaziland, Mozambique, Mauritius and Malawi. And plans to open another 85 stores in the new financial year, to add to its existing 1,015 in SA and 151 outside its borders.

Chief executive Whitey Basson said its Africa expansion - with 13 new stores planned in the new financial year would mainly focus on West Africa - particularly Nigeria and Angola.

Pick n Pay too, following a successful store opening in Zambia this year bought 24% of Zimbabwe operation TM Supermarkets, bringing its total shareholding to 49%. The group also signed a franchise territorial agreement with retail franchising group Retail Masters in Mozambique and plans to open four more stores in Zambia during the next year, while also expanding into Malawi, Mozambique, Mauritius and Angola.

Mr Price eyes Nigeria

Clothing retailers also want a slice of the African pie - Mr Price has made its intentions for Nigeria known.

"The big one we need to open up in is Nigeria. The market could support up to 100 stores with their population," chairman Alistair McArthur said after a results presentation in Johannesburg.

According to Anthony Lopes Pinto, general manager for Imara Securities Angola, Nigeria has the potential to become the largest economy in Africa by 2025.

Nigeria is one of the most commodity-rich nations in Africa, with the largest oil and gas reserves on the continent but the continent's most populous nation is also trying to diversify its mineral economy from being too oil production oriented.

"Nigeria is strongly growing a non-oil economy. Rising FDI into non-oil sectors such as telecoms are starting to pick up," Lopes Pinto noted.

Long-term potential

According to McKinsey & Company, Africa's long-term growth prospects are strong - collective gross domestic product will reach an estimated 2.6 trillion dollars in 2020.

With both the Asian and European ponds already fished out - Africa, a continent long shrouded in scepticism and tension by international bidders is being touted as the next big thing and a deal making destination for international players wanting to expand their global footprint.