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From News
01 May 2013
Standard Bank optimistic on Africa's food retail sector
By Adam Green
A high retail-to-GDP ratio suggests Africa could be on the verge of a supermarket boom
Africa is on the verge of a supermarket boom thanks to the freewheeling spending habits of its citizens, according to Mohit Arora, director of agricultural banking at Standard Bank.
Retail spend as a proportion of GDP in Africa is "unusually high" for emerging markets, says Mr Arora. "Even though savings levels may not be up to India or China, people like to live a good lifestyle and associate themselves with more Western markets”.
Producer and processor companies, as well as food retailers and even Brazilian and American farmers, have cottoned on. The first signal came in 2011, with the $2.4 billion purchase of South African retail giant Massmart - which had operations in over a dozen African countries - by Walmart, the world‘s largest retailer.
South African mega retailers have been carrying out acquisitions and greenfield investments in several countries, and regional players likes Kenya’s Uchumi are expanding too. Excluding Massmart, the deals are large in number, but remain small in size. “In terms of ticket size, if you look at M&A activity [in agriculture and food retail] over 2010 and 2011, there was something like $5bn over 100 deals. Take out the Massmart deal, and that is over $2 billion, with an average ticket size of $25 million,” he explains. “It’s a big flow of small stuff”.
That may be a result of the still small and fragmented markets. But this can’t be characterised as a wild frontier. In fact, anybody not looking at Africa might already have missed the boat, says Mr Arora. “When I look at the momentum, in some countries things are already getting expensive and mature - with asset prices increasing and cash flows stabilising or decreasing, reflecting a mature market dynamic. If somebody isn't already there, I would worry for them”.
Standard Bank optimistic on Africa's food retail sector
By Adam Green
A high retail-to-GDP ratio suggests Africa could be on the verge of a supermarket boom
Africa is on the verge of a supermarket boom thanks to the freewheeling spending habits of its citizens, according to Mohit Arora, director of agricultural banking at Standard Bank.
Retail spend as a proportion of GDP in Africa is "unusually high" for emerging markets, says Mr Arora. "Even though savings levels may not be up to India or China, people like to live a good lifestyle and associate themselves with more Western markets”.
Producer and processor companies, as well as food retailers and even Brazilian and American farmers, have cottoned on. The first signal came in 2011, with the $2.4 billion purchase of South African retail giant Massmart - which had operations in over a dozen African countries - by Walmart, the world‘s largest retailer.
South African mega retailers have been carrying out acquisitions and greenfield investments in several countries, and regional players likes Kenya’s Uchumi are expanding too. Excluding Massmart, the deals are large in number, but remain small in size. “In terms of ticket size, if you look at M&A activity [in agriculture and food retail] over 2010 and 2011, there was something like $5bn over 100 deals. Take out the Massmart deal, and that is over $2 billion, with an average ticket size of $25 million,” he explains. “It’s a big flow of small stuff”.
That may be a result of the still small and fragmented markets. But this can’t be characterised as a wild frontier. In fact, anybody not looking at Africa might already have missed the boat, says Mr Arora. “When I look at the momentum, in some countries things are already getting expensive and mature - with asset prices increasing and cash flows stabilising or decreasing, reflecting a mature market dynamic. If somebody isn't already there, I would worry for them”.
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