Johannesburg - Global auditing firm PwC is optimistic about the prospects for retail in sub-Saharan Africa over the next five years, according to its maiden report on retail, released yesterday.
Presenting the report, “More in Store for African retail & consumer business – prospects remain positive”, PwC Africa retail and consumer industry leader Anton Hugo said there was reason to be optimistic because some sub-Saharan countries were among the world’s fastest growing.
For example, from 2000 to 2014, the gross domestic product in Angola, Ethiopia and Nigeria grew at an annual average of 9.2 percent, 8.8 percent and 7.7 percent, respectively.
“Sub-Saharan Africa remains one of the fastest growing regions in the world and the successful expansion of a number of global and African retailers and consumer goods companies across the region speaks to the opportunities that exist,” Hugo said .
Although PwC was positive, investors in some markets in the region have been rocked by several problems. Clothing retailers Woolworths and Truworths recently pulled out of Nigeria, blaming high costs and stringent controls among others for their exit.
Edafe Erhie, PwC partner in Nigeria and leader for consumer, industrial products and services, said that investors risked failure if they did not get their strategies right before going into African markets.
“If investors get their strategy right, they will reap the rewards,” Erhie said.
According to the report, constructing shopping malls in Nigeria is difficult and costly.
“Securing land is complicated because of unchecked urbanisation, competing claims to title, litigation and unrealistic prices in the absence of standard valuation practices”.
“Developers need to provide power back-up, boreholes, waste treatment plants, parking and other features standard in such malls. Importing professional skills and quality building materials adds to the cost,” the report said.
The research analysed 10 African economies including South Africa, Ethiopia, Zambia, Kenya and Nigeria, which PwC believed offered some of the best opportunities for retail and consumer businesses looking to expand in Africa.
It noted that the continent’s fortunes were tied into those of the global economy.
“The fall in oil and other commodity prices has seen pressure on government revenues and the ability of governments to increase social expenditure and wages in the public sector,” the report said.
In particular, Angola, Nigeria and South Africa felt the pinch and could see slower growth in the consumer market.
The reported noted that African countries had made progress on the governance and political front, with many countries moving towards better administration and deepening democracy.
The improved governance, coupled with urbanisation and an increasingly connected and demanding consumer class, have given investors a lot to be positive about.