Rwanda is Africa’s most attractive market for retailers looking to expand in the fast-growing continent, according to a report by consultancy A.T. Kearney that hails the small east African state’s economic reforms and business-friendly agenda.
Under President Paul Kagame, Rwanda has made great leaps in rebuilding after the 1994 genocide by building roads and making it easy to start or register a new business.
“Rwanda has an efficient government and strong macroeconomic indicators that reveal many opportunities for international retailers that can offer basic packaged goods,” said Marieke Witjes, co-author of A.T. Kearney’s first African Retail Development Index, released on Monday.
The index, which will be compiled annually, ranks the 20 African countries identified as having the best potential for retailers.
Rwanda’s 11.5 million people are currently served by two Kenyan supermarket chains, both owned by unlisted retailer Nakumatt Holdings, and a slew of informal traders. A.T. Kearney ranked Nigeria, Africa’s most populous country and its second-biggest economy, second in the index, citing its rapid urbanisation, youthful population and rising middle class.
But the think-tank said the west African giant was the toughest market in the index to master due to its opaque regulations, congestion at its ports and a lack of land on which to build shopping malls.
“These are all the serious hurdles and roadblocks that will require time and effort to overcome,” Witjes said.
South African retailer Woolworths pulled the plug on its Nigerian business late last year, citing high rents and duties as well as the difficulty of marketing to consumers in the country of 170 million people.
Other countries that made it into the top 10 included Namibia, Ghana, Ethiopia and Tanzania. South Africa, Africa’s biggest economy and consumer market, came in at seventh, with the report’s authors saying the market was already well-penetrated.
African growth prospects for retailers were highlighted in 2011 when U.S. giant Wal-Mart bought a majority stake in South Africa’s Massmart, giving it a foothold in several frontier African countries.
Even though African per capita incomes are among the lowest in the world, a decade of robust economic growth and rapid population expansion have attracted the attention of international retail investors.
Coupled with relative political stability, a rising middle class, rapid urbanisation, and slower growth in Europe and South Africa, the logic of setting up shop in Africa is not in doubt – provided companies do their homework, the report said.
“It is essential that retailers understand where African countries are in the evolution of the retail landscape and the stages of market development to craft their expansion strategies for Africa,” report co-author Mirko Warschun said.
By Tiisetso Motsoeneng JOHANNESBURG (Reuters)