Retail possibilities in Africa increase

This includes the world's biggest retailer, Wal-Mart's recent bid for of over 50% of Massmart, the South African retailer, which incorporates amongst others, Makro, Game and Dion stores. Originally looking to buy up all of the South African retailer, Wal-Mart scaled the bid back to more than 50% in October. This would however still make it the first major international retailer to enter South Africa.

This, in light of the widespread protest against the acquisition, shows the giant's determination for the acquisition. Wal-Mart has indicated that it would honour pre-existing union relationships and abide by South African law with the purchase of a controlling stake in Massmart. A 51% stake in the company will give Wal-Mart control of Massmart and keep it listed on the JSE, which may very well have been critical in getting the nod from South African authorities.

The acquisition shows a strong confidence in the long term retail sector and comes on the back of recent international bids for SA companies, such as the recent government vetoed tie-up between India's Bharti Airtel and MTN, Vodafone's interest to increase its shareholding in Vodacom and the recent interest from HSBC to buy Nedbank.

Increasing retail occupancy

Growth in overseas markets has become a priority for the NYSE listed company, as consumers in the US struggle to raise their spending levels. This confidence in the South African consumer spend will also bring hope to beleaguered property development groups who oversubscribed during the boom period and now find themselves struggling to keep shop space filled.

The international retail sector has been hit hard by the recession, and the effects continue to impact on the South African retail sector. Many retail landlords are experiencing high levels of renter default and store vacancies.

The South African Chamber of Commerce and Industry (SACCI) said its business confidence index (BCI) moved up to 84.2 points from 83.2 in March 2010 but the latest figures from the South African Property Review show that only 49% percent of South African retailers paid rent on time and in full, whereas 25% paid late for the previous month and 11% could not meet their rental obligations.

The confidence from international firms is promising for the future, however, there are still a few shorter term hurdles for local retailers to overcome and retailers are increasingly looking for some reprieve through agreements with landlords.

South Africa entry point for Africa

South Africa has a rapidly growing banking customer base, as well as a rapidly growing middle class population with expendable incoming, indicating promising growth in the future of consumer

spending. This is where the primary interest for the larger international groups lie, in an attempt to get a foot hold in Africa and its growing consumer base.

African households with incomes above R5000 and therefore higher food expenditure is set to rise from 35% to 52% by 2020, predicts the research arm of consultancy McKinsey.

The opportunity for retail is huge in the growing economy of South Africa and the African continent as a whole which has a current population of close on 1 billion and that is expected to grow to 2 billion by 2050. This means South Africa presents the perfect stepping stone for retail giants to launch into Africa.