Retailers chase reward in booming but volatile AfricaComment on this story
Kano, Nigeria - Opening a modern supermarket in a city under threat from an Islamist insurgency, with the added uncertainty of wobbly public power supplies, may sound like a retailer's nightmare.
But what if that city stands on one of the oldest trade crossroads in Africa, offering a major chunk of one of the largest and fastest-growing retail markets on the continent?
Small wonder then that major retail investors like South African grocer Shoprite and Wal-Mart unit Massmart Holdings are opening stores in Nigeria's second city of Kano, the northern commercial hub of Africa's No. 1 oil producer and, since Sunday, its largest economy.
“I always want to be bold enough to say, you can't be in Nigeria without being in Kano,” Massmart Holdings' Africa Director Mark Turner told Reuters in Johannesburg at the Reuters Africa Summit this week. Nigeria, along with Angola and Kenya, is a strategic target market for the Wal-Mart subsidiary.
Kano is a dusty centuries-old Sahel belt metropolis that once offered gold, salt, slaves, leather and famed indigo-dyed textiles in its teeming markets at the end of an ancient caravan route linking Libya to black Africa south of the Sahara.
Now, amid banner signs proclaiming “lower prices you can trust”, Kano consumers can wheel their carts between shelves replete with commercial brands from across the globe in a brand-new, air-conditioned Shoprite supermarket, anchoring a larger $85 million shopping mall development in the city.
In the coming weeks, Massmart will join Shoprite by opening one of its Game household appliance stores in the same Ado Bayero mall, named after the local Kano emir.
The mall is designed to house 85 shops and will be among Nigeria's biggest.
But the presence of armed and uniformed guards searching vehicles - opening boots, checking the underside for explosives with mirrors - and frisking all shoppers is a sign that this particular mall location faces unusual security challenges.
Despite being 600 km (375 miles) distant from Maiduguri, the epicentre of a bloody five-year insurrection against the Nigerian state waged by Islamist sect Boko Haram mostly in the northeast, Kano has also suffered the insurgency's impact.
Bombings and shootings by Boko Haram militants killed at least 185 people, mostly Muslim civilians, in Kano in January, 2012.
Explosions in July last year killed 11 people, and police and military roadblocks are now a feature of life in the city.
“We cannot wish away the fact that there are security concerns,” Mohammed Hayatu-Deen, the Maiduguri-born entrepreneur and banker who chairs the group developing the Kano mall, said.
The hulking power plant standing alongside the mall building - capable of producing 6,000 megawatts - is testimony to another challenge: guaranteeing uninterrupted electricity in a country whose power deficit is notorious and where the rumble of the generator starting up is as familiar as the roar of traffic.
SECURITY, ELECTRICITY “LIKE FOOD AND WATER”
“Power and security are just like food and water, you can't survive without them,” said another local businessman working on the mall.
He asked not to be named, but his words encapsulate problems that are some of the biggest brakes to investment and growth not just in Nigeria, but in Africa as a whole.
“Trading in Africa is not easy, it comes with challenges, whether it be power, whether it be infrastructure. But it's really about how you gear up to keep trading as consistently as you can through all these challenges,” said Massmart's Turner.
“But the risk reward is there,” added Turner, whose company operates in 12 African states.
But few deny that with the risks, such as civil conflicts currently gripping South Sudan and Central African Republic and an Ebola epidemic afflicting Guinea, Sub-Saharan Africa offers potentially substantial commercial rewards as it snaps at the heels of Asia among the fastest growing regions on the planet.
The continent's expanding population rapidly approaching one billion includes an emerging middle class of consumers eagerly embracing Western brands, products and lifestyles.
“Africa is brimming with potential for global retailers,” consultancy A.T. Kearney said in its first African Retail Development Index report issued last month, which ranked African states in terms of their attractiveness for retail investors.
It placed Nigeria, Africa's most populous country with 170 million people, second on its list, citing its rapid urbanisation, youthful population and rising middle class.
But it ranked tiny Rwanda with its 11.5 million people, first, for its economic reforms and business-friendly agenda.
Turner said investors foraying into Africa with its mosaic of ethnicities and cultures should avoid a “cookie-cutter” approach, but consider each market carefully on its own merits.
Reflecting Kano State's demographic draw for retailers, its population alone almost rivals that of Rwanda, and investment bank Renaissance Capital ranks the northern territory as Nigeria's second wealthiest local economy after Lagos State.
In a 2013 report, Renaissance estimated Kano State's economy at $17 billion, equivalent in size to the economy of Botswana.
Retailers like Shoprite had “clearly recognised the size of the market and the demographics,” said developer Hayatu-Deen.
“It's a boldness that comes from rational calculation,” he added.
“NOTHING SUCCEEDS LIKE SUCCESS”
Local people visiting the mall said the arrival of foreign investors like Shoprite and Massmart would help to dispel the indiscriminating perception that all of Nigeria's arid north is a no-go zone racked by violence and underdevelopment.
“People think the whole place is in turmoil, and it is not so,” said local teacher Hussein Alhassan, 55, as he and a friend inspected the well-stocked shelves of the Shoprite supermarket, which includes local produce such as meat, fruit and vegetables.
“God willing, everyone will realise that, with peace, prosperity will come,” said another customer, Sani Bala Beli, as he walked around with his wife and small son.
Nigerian Finance Minister Ngozi Okonjo-Iweala believes her country suffers unjustly from a poor image, which she says belies the existence of a buoyant economy receiving billions of dollars of foreign and domestic direct investment in power, petrochemicals, agriculture and consumer goods.
She cited Unilever Plc, Proctor & Gamble Co and Colgate-Palmolive Co among major investors either doing business in Nigeria or showing interest in doing so.
But she acknowledged Nigeria needed to grow faster than the around 7 percent forecast for this year to reduce persistent poverty. The World Bank sees Sub-Saharan Africa's GDP accelerating in 2014 to 5.2 percent, from 4.7 percent last year.
In a move that elevated it past South Africa as Africa's largest economy, Nigeria on Sunday announced a rebasing of its 2013 GDP, nearly doubling it to $510 billion.
But despite the resilient optimism, Kano's commerce and industry have suffered from the Boko Haram insurgency and from restrictions to combat it like curfews and roadblocks. Tourist visitors to the city's historic sites have also dwindled.
Foreign souvenir-seekers are rare now at the five centuries old Kofar Mata indigo dye pits, famed for the distinctive blue cloth that was a feature of the trans-Sahara trade.
“We have no capital to develop,” said one of the dyers, Haruna Baffa, 30.
But Hayatu-Deen was confident the arrival of more tenants at the Ado Bayero mall would have a dynamiting effect.
“Nothing succeeds like success,” he said. - Reuters