HomeInternational NewsWal-Mart Takes On Africa With Massmart

Wal-Mart Takes On Africa With Massmart

Nigeria, with a population size of over 150 million people, is too big a market to ignore. And the world’s largest retail chain has taken note, expressing an interest to launch new stores in this African nation.
Wal-Mart executives recently paid a visit to the Nigerian Embassy in Washington D.C. and met with its Ambassador to the U.S., Professor Ade Adefuye, where they discussed such possibilities. For Professor Adefuye, Wal-Mart’s planned entry into Nigeria is a welcomed development. Speaking on Wednesday to Empowered Newswire, an independent Nigerian news agency, he said the retail giant’s planned foray into his country is an indication of the “growing confidence in Nigeria’s economy.” The Ambassador is currently briefing the Wal-Mart executives on the requirements of doing business in Nigeria.

Late last year, the Bentonville, Arkansas-based company made a $2.3 billion offer to acquire South Africa’s Massmart Holdings. The JSE-listed company is the 3rd largest retailer in Africa, controlling such popular brands like Game, Makro, and Jumbo. Despite objections from labor unions and smaller retail operators, the acquisition got the go-ahead from South-Africa’s Competition tribunal; as of June 16, Wal-Mart now has a 51% stake in the retailer.

With its South African acquisition and its signaled interest to open up outlets in Nigeria, Wal-Mart may well be gearing up to conquer Africa much as it once did America.

Wal-Mart, the world’s largest retailer, gained its first foothold in Africa through the approval of its $2.4 billion bid for Massmart. Under the terms of the deal, Wal-Mart bought a 51% stake in Massmart on condition that it does not lay off any workers for two years. Wal-Mart competes with other big-name retailers like Target,CostcoAmazon and Best Buy.

African Expansion Plans

Massmart runs nine wholesale and retail chains with approximately 288 stores in 14 African countries. Wal-Mart believes that South Africa is a key market for growth and it accounts for roughly 20% of consumer spending on the African continent.

Africa could act as a crucial base for Wal-Mart to target other local countries in the region. Countries like Nigeria are gaining greater appeal due to rising affluence levels and increasing size of the middle class across Africa.

Wal-Mart intends to support plans laid out by Massmart, involving constructing 140 stores during the next three years within South Africa, and another ten elsewhere in the region. This will add to an existing 263 Massmart branches across South Africa, 11 in Botswana, 3 in Namibia, 2 in Lesotho and single sites in eight other countries including Nigeria and Uganda.

The foray into Africa could help Wal-Mart increase its market share in emerging countries. Of late, the emerging countries have been driving profits as U.S. retail sales have slowed.

However, to be successful in emerging countries like Africa, Wal-Mart needs to address the problems created by fledgling transport links and bureaucratic issues.

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