Shoprite shifts investment focus to Africa

As local growth continues to stall, supermarket retailer Shoprite has shifted its investment focus from South Africa to the rest of Africa.

The group plans to invest R1.5 billion in opening 30 new stores and strengthening distribution infrastructure in Africa’s fastest growing economies, taking its store base on the continent to 200 stores in 2015.

Nigeria, Mozambique, Angola and Zambia are Africa’s fastest growing economies, and Shoprite plans to focus its investment in these resource-rich countries – where GDP growth averages 6.5%.

In comparison, the group will invest R697 million in opening 50 stores in South Africa – which has seen GDP growth rates fall to below 2% this year. This is much slower than the 86 stores opened in the last financial year.

“South Africa is growing so badly,” said CEO Whitey Basson (pictured) at the results presentation. “To maintain reasonable growth for the group we have had to increase our African expansion.”

Africa’s growth story is well documented, but Basson notes that Nigeria’s consumption expenditure of $100 billion almost matches South Africa’s of $127 billion. South Africa has 2 703 supermarkets, and Nigeria has less than 20. The opportunity seems evident.

He adds that by 2080, 85% of the world’s population will live in Nigeria and Asia. “You will all be dead by then so you don’t have to worry, and as long as your grandchildren have Shoprite shares they will also be okay,” he quips.

Shoprite’s expansion plans comes on the back of lackluster results for the year to June, which triggered a 5.7% fall in the share price on the day.

Shoprite increased turnover by 10.5% to R102 billion and realised a trading profit of R5.7 billion, 6% up on last year’s figure.

Trading margins fell slightly from 5.8% to 5.6%, partly as a result of the low real growth in turnover and higher expenses incurred by higher levels of investment…..

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